Municipal Officials: Do You Know Your Annual Report Date?Spring 1997
Ask most municipal officials their birthdate or anniversary date and chances are they will recite those dates without hesitation. Ask them what their annual report date is for compliance with the Securities and Exchange Commission’s Rule 15c2-12 on continuing disclosure and you may get a long pause before any response. While your annual report date is not one that you may readily know now, after 1997 it should rank up with the more familiar dates mentioned above. 1997 is the first year that many Wisconsin municipalities will be filing their first annual reports to comply with the SEC’s continuing disclosure rule.
Review of the Rule. In response to what it determined to be a lack of current information in the municipal marketplace, the SEC promulgated Rule 15c2-12(b)(5) on November 10, 1994. The Rule applies to all municipal obligations issued on or after July 3, 1995. The Rule requires issuers of municipal obligations to undertake to provide material event notices and annual financial information and operating data with respect to the municipal obligations they are proposing to issue. The Rule divides issuers into two groups—"small issuers" and all other issuers—regarding the requirement to provide annual financial information and operating data.
"Small Issuers," Issuers that have less than $10 million of outstanding municipal obligations, are treated more leniently under the Rule in terms of providing annual financial information and operating data. The Rule requires small issuers to provide, upon request, financial information and operating data which is "customarily prepared" by the issuer and is publicly available. To date we have seen municipalities undertake to provide some or all of the following: the annual audit, the adopted budget, and, for school districts, the report presented at the district’s annual meeting.
"Large Issuers," Issuers that have more than $10 million of outstanding municipal obligations, have a more burdensome duty under the Rule regarding continuing disclosure. Large issuers must "update" financial information and operating data contained in the Official Statement prepared in connection with the issuance of the municipal obligations and file that updated information along with their most recent audited financial statements (together, the "annual report") on an annual basis. These annual reports must be filed with each of the six nationally recognized municipal securities information repositories (or NRMSIR).
Annual Report Date. The Rule requires the issuer to identify the date on, or before, which the issuer will provide its annual report to the NRMSIR. The Rule, in regard to the filing of annual reports, is effective for fiscal years ending on or after January 1, 1996. For most Wisconsin municipalities, except school districts and technical colleges, the first fiscal year to which the Rule is effective is the fiscal year ending December 31, 1996; for Wisconsin school districts and technical colleges, it is the one ending June 30, 1996. Most Wisconsin municipalities have chosen an Annual Report date between April 1 and December 31.
If your municipality has issued long-term debt after July 3, 1995, and was a large issuer at that time, you probably have an Annual Report date in 1997 which may be looming in the near future. It is extremely important that you file your annual report on a timely basis, otherwise, you will be required to notify the NRMSIR of your failure to timely file and your municipality will have to disclose that fact in the Official Statement for each subsequent debt issuance by the municipality.
If you do not know your Annual Report date, it is time to call your financial advisor and/or bond attorney to make sure that your municipality complies with this important requirement. Also, mark your calendar for next year.