Board of Finance Regular Meeting Materials (linked)

BOARD OF FINANCE
POLCIY NUMBERING
1 — General Policies
© BOF 1.01 — Policy regarding Submission of Agenda Items
e BOF 1.02 — Fund Balance Policy
e BOF 1.03 — Investment Policy
e BOF 1.04 — Post-lssuance Compliance Procedures
2 — Policies on Expenditures
e BOF 2.01 — Expenditure of Funds for Services or Items Not Disclosed in Annual Budgets
3 — Capital Project Policies
e BOF 3.01 — Annual Capital Project Review —
e BOF 3.02 — Requesting New Capital Project Approval Outside the Budget Cycle
4— Board of Education Policies
@ BOF 4.01 — Non-Lapsing Account
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BOF 1.01
BOARD OF FINANCE
POLICY REGARDING SUBMISSION OF AGENDA ITEMS
The Board of Finance agenda is typically issued one (1) week before the meeting. Agenda items
and supporting documentation should be sent to the Board of Finance Secretary by noon one
week prior to the meeting date.
On the rare occasion that a late agenda submission is unavoidable, the Board of Finance may
vote to add the item to the regular meeting agenda or defer the item to the next scheduled
meeting. The request to add the item to the agenda must be accompanied by an explanation as
to why the submission was late. Please note that State Statute Section 1-225 (c) requires an
affirmative vote of2/3 of the Board members present.
If there is a need to provide additional information to the Board after the agenda has been
sent, please send or give it to the Board of Finance Secretary. Do not distribute the information
to the members prior to the start of the meeting as this does not allow for review of the .
information.
If you are requested to provide additional information by the Board, please send that
information to the Board of Finance secretary who will distribute the information to the
members. Do not send the information directly to the Board of Finance members.
Adopted: May 18, 2016 |

BOF 1.02
TOWN OF WATERFORD
FUND BALANCE POLICY
OBJECTIVE
The Town of Waterford feels it necessary to maintain an adequate unrestricted fund balance in the
General Fund to provide for a sound financial base for current and future budgets as well as mitigating
risks such as revenue shortfalls or unexpected expenditures. An adequate level of unrestricted fund
balance will also assist the Town in maintaining its bond rating.
DISCUSSION
Waterford recognizes the new Fund Balance components below in accordance with Government
Accounting Standards Board (GASB) Pronouncement #54.
e¢ Non Spendable Fund Balance-Amounts that cannot be spent because they are either:
O Not in a spendable form such as long-term receivables, inventory, or prepaid expenses
O Legally or contractually required to be maintained intact, such as an endowment fond
e Restricted Fund Balance - Amounts that have legally enforceable constraints placed on their use
by external parties or external laws and regulations.
« Committed Fund Balance -Amounts that can only be used for specific purposes pursuant to
constraints imposed by formal action of the government's highest level of decision-making
authority (R.TM)
e Assigned Fund Balance - Amounts intended to be used for specific purposes, but are neither
restricted nor committed
e Unassigned Fund Balance-Amounts that do not fall within any other classification.
POLICY
The Town will maintain an unassigned fund balance as sof June 301 ft of each year between 10% and 13%
of the subsequent fiscal years budgeted General Fund revenue.
’ The use of General Fund Unassigned Fund balance in excess of the maximum level shall be limited to
one-time, non-recurring purposes. Examples include Capital Projects, transfer to Capital Non-recurring
fund, emergency/storm response, debt service mitigation, land acquisition, and other one-time,
nonrecurring uses determined to be in the best financial interest of the Town.
[he General Fund Unassigned Fund Balance may be appropriated as authorized by the RT upon approval
by the Board of Finance.
General Fund Unassigned Fund Balance in excess of the maximum level will not be allocated to ongoing
operations to avoid a revenue gap in subsequent budget years.
For purposes of fund balance classification, expenditures are to be spent from restricted fund balance
first, followed in order by committed fund balance, assigned fund balance and lastly, unassigned fund
balance.
If Unassigned Fund Balance falls below the minimum level, the Board of Finance will propose a plan to
restore it to the minimum 10% level within three years.
APPROVED: November 18, 2015

BOF 1.03
TOWN OF WATERFORD:
INVESTMENT POLICY.
1. Introduction:
The purpose of this investment policy is to provide a written document that discusses
the guidelines governing the short-term investing procedures and best practices for the
Town of Waterford (“The Town”). This investment policy is designed to conform to:
standards set by the Government Finance Officers Association and the requirements of
the Government Accounting Standards Board.
+ Governing Authority:
addressed
Consolidation (though no co-mingling) of funds for investment purposes shall occur
except for cash in certain restricted and special funds. The purpose of this is to
maximize earnings potential, increase efficiencies with regard to investment pricing,
safekeeping and administration. Investment income is allocated to various funds
dependent on their respective and proportional participation and in accordance with
general accepted accounting principles (GAAP).
The Town of Waterford segregates individual endowments made to the Town over time
to distinguish them from Town operating and administrative funds. The Town has the
option to choose an outside investment manager to handle these funds or may handle
them internally.
IV. General Objectives:
The primary objectives of the Town of Waterford Investment activities shall be safety,
liquidity and yield. There may be other factors, which can influence investing
decisions but none that would violate the inherent principles of safety, liquidity and
yield.
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BOF 1.03
1. Safety:
Safety of principal is the top objective of the Town of Waterford’ s investment program.
Preservation of capital is the foremost objective in the overall portfolio. The methods of
preserving capital are through limiting credit risk and interest rate risk.
A. Credit Risk including Concentration Risk:
Credit risk can be defined as the potential loss due to failure of the security issuer or
backer. Pre-qualifying institutions with which the Town may do business limit credit risk.
This authorization process will be defined in a later section.
1) Credit risk is also lessened by limiting the type of acceptable investments by type
2)
es having too much ae type of security or one institutional i issuer. or a -
B. interest Rate Risk:
1)
of financial vehicle or security, which the Town is authorized to invest in. This is
governed by Connecticut General Statutes.
Credit Risk can also be limited by avoiding concentration risk in a portfolio e.g.
credit/concentrati ’
business with in a ‘separate docu ent. Those credit
from time to time. : ue /
Credit. ‘risk also involves
brokier/dealers, intermediaries and advisors who do bu ness with the Town.
The Town of Waterford will minimize interest rate risk, which is the risk that
the market value of the securities will fall due to changes in the market interest
rates by structuring the investment portfolio so that the securities mature to
meet cash requirements for ongoing operations, avoiding the need to sell
securities on the open market prior to maturity.
Investing in short-term securities, money market funds or similar investment
pools and limiting the average maturity in the portfolio in accordance with this
policy will minimize interest Rate Risk.
This policy does not expressly state when the Treasurer may move the
portfolio into fixed or floating rate securities that would be impacted by
interest rates, as that is a market condition or trend left to the expertise and
discretion of the Treasurer. The Treasurer would be expected, in strategizing,
to react to market conditions to make investments that are prudent and
without incurring unnecessary interest rate swings. Further, the Treasurer
must adjust investments due to the seasonal nature of the Town’s cash flow
needs.
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BOF 1.03
2. Liquidity:
The investment portfolio shall remain sufficiently liquid to meet all operating
requirements that may be reasonably anticipated, including express seasonal needs.
This is accomplished by structuring the portfolio so that securities mature concurrent
with cash needs to meet anticipated demands. Further, since all cash demands cannot
always be anticipated, the portfolio should consist of securities with active secondary or
. resale markets. Alternatively, a portfolio in parts or its entirety may be invested in
money market mutual funds or local government investment pools that offer same-day
liquidity for short-term funds. It is a pre-requisite that all investment vehicles meet
Connecticut General Statute standards, regardless of liquidity.
3. Yield:
The investment portfolio shall be designed with the objective of attaining a market rate
of return throughout budgetary and economic cycles, taking into account the
investment risk constraints and liquidity needs. Return on investment: is. of secondary 4
importance to the pr ) —
portfolio should be |
oer relative to the
: product. . vatives. are not |
3) Unforeseen liquidity needs .
the portfolio requiring that the security be
4, Maximum Maturities:
The maximum maturity value of all investments exceeding 2 years shall not be more
than 5% of the total budget for current Fiscal Year. The average weighted maturily of all
investments exceeding 2 years shall not be more than 5 years and no more than 50% of
“the maturity value of those investments may exceed 5 years in duration.
5. Foreign Currency Risk:
The Town does not and will not invest in any foreign investment pursuant to statute.
The Town does not accept payment for Town services in any foreign currency, only US
dollars. The Town of Waterford will not engage in any foreign currency risk.
6. Local Considerations:
Where possible, funds may be invested for the betterment of the local economy or that
of local entities within the State. The Town of Waterford may accept a proposal from an
eligible institution, which provides for a reduced rate of interest provided that such
institution documents the use of deposited funds for community development projects.
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BOF 1.03
This type of proposal would require the express approval of relevant Boards (both
Selectmen and Finance Boards). In addition, the Treasurer would take into
consideration any advice of the Director of Finance.
V. Standards of Care:
1. Prudence
The standard to be used by investment officials shall be the “uniform prudent investor
act” standard and shall be applied in the context of managing an overall portfolio.
Investment officers acting in accordance with written procedures and this investment
policy and exercising due diligence shall be relieved of personal responsibility for an
individual security’s credit risk or market price changes, provided deviations from
expectations are reported in a timely fashion and the liquidity and the sale of securities
are carried out in accordance with the terms of this policy.
S Ethics os Conflicts a Interest
to the Treasurer of the Town of
Waterford by provision of the following CT General Statutes: CGS 7-400. The Treasurer
(Investment Officer) shall act in accordance with established written procedures and
internal controls for the operation of the investment program consistent with the
~ Town’s inveslment policy. Procedures should Include references to: safekeeping,
delivery vs. payment, investment accounting, repurchase agreements, wire transfer
agreements and collateral/ depository agreements. No person may engage in an
investment transaction except as provided under the terms of this policy and the
procedures. The investment officer shall be responsible for all investment transactions
undertaken and shall establish a system of controls with the cooperation of the Director
of Finance of the Town of Waterford to regulate the activities of subordinate officials.
In the event of an absence, the Treasurer may expressly transfer specific powers and.
responsibilities to an appropriate person in the Finance Office, either the Director or
Staff Accountant. However, that transfer must be made in writing (or electronically) and
state specifically the time and duration of the transfer powers. The Director and Staff
Accountant during that period would be bound by all the same rules and standards to
which the Treasurer would be subject en absentia. Further, the Director of Finance and
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BOF 1.03
Staff Accountant must report all actions and transactions to the Treasurer upon the
Treasurer’s return.
Vi. Authorized Financial Institutions, Depositories and Broker/Dealers
1. Authorized Financial Institutions, Depositories and Broker/Dealers
A list will be maintained of financial institutions and depositories authorized to provide
investment services. In addition, a list will be maintained of approved security
broker/dealers selected by creditworthiness (e.g. a minimum capital requirement of
$10,000,000 and at least five years of operation). These may include “primary” dealers
or regional dealers that qualify under the Securities and Exchange Commission (SEC)
Rule 15C3-1 (uniform net capital rule). All financial institutions and broker/dealers who
desire to become qualified for investment transactions must supply the following as
appropriate:
An annual review of the financial condition and registration of all qualified financial
institutions and broker/dealers will be conducted by the Treasurer in coordination with
the Director of Finance.
2. Minority and Community Financial Institutions:
From time to time, the Treasurer may choose to invest in instruments offered by
minority and community financial institutions. In such situations, a waiver to certain
parts of the criteria listed above may be granted. All terms and relationships will be fully
disclosed prior to purchase and will be reported to the appropriate entity on a
consistent basis and should be consistent with state or local law. These types of
investment purchases would require the express approval of relevant Boards (both
Selectmen and Finance Boards). In addition, the Treasurer would take into account any
advice of the Director of Finance.
VII. Safekeeping and Custody
1. Delivery vs. Payment
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BOF 1.03
All trades of marketable securities will be executed by delivery vs. payment (DVP) to
ensure that securities are deposited in an eligible financial institution prior to release of
funds.
2. Safekeeping
Securities will be held by an independent third party custodian selected by the Town or
accepted by the Town, evidenced by safekeeping receipts in the Town of Waterford’s
name. The safekeeping institution shall annually provide a copy of their most recent
report on internal controls.
3. Internal Controls
The Treasurer/Investment Officer is responsible for establishing and maintaining an
internal control structure designed to ensure that the assets of the Town of Waterford
are protected from loss, theft or misuse. Details of the internal control system are
Gocumented in this investment procedures policy which shall:be: reviewed and updated.
Clear delegation of authority to subordinate staff members
e Printed confirmation of transactions for investments and wire transfers
authorizations of wire transfers
e The wire transfer agreement with the lead bank and third- party custodian which
is usually required by the bank.
The Director of Finance shall establish a process for an annual independent review by an
external auditor to assure compliance with policiés and procedures or alternatively,
compliance should be assured through Town of Waterford’s annual independent audit.
VI. Suitable and Authorized Investment
Investment Types:
The Town of Waterford investments are consistent with and in accordance with
Connecticut General Statutes Please refer to the CGS 7-400, 403a, 362, which
delineates the parameters of the Town of Waterford’s investment activities.
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BOF 1.03
Collateralization: .
Collateralization for Town of Waterford investments is consistent and in accordance
with Connecticut General Statute 36a-336.
Repurchase Agreements:
Repurchase agreements for the Town of Waterford should be consistent and in
accordance with Connecticut General Statute 7-400. Additionally, repurchase
agreements should follow the required need for collateral that is put aside to back up
any repurchase agreement. The amount of collateral depends on the type of collateral
that is pledged (Treasuries, Ginny Mae’s etc.). .
VII. Investment Parameters
Diversification:
Investments shall.conform to state statute and further be diversified by:
ough to meet on
ing
ake into account the
ted to complement that
os sonality of the Town of W i
“cash cycle. ~~
Maturity:
e All maturities must conform to state statute.
e With the exception of the U.S. Treasury or the Connecticut Short-Term
Investment Fund, no issuer of a securities or money fund may make up more
than 15% of the Town’s portfolio at any given time and perceived concentrations
of risk should be avoided.
e There must always be funds invested on a daily basis to ensure liquidity since
cash forecasting cannot always accurately predict all calls on the Town’s financial
needs. -
e When contemplating an investment, the Treasurer must look at two or more
_ sources (institutions) before placing money.
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BOF 1.03
IX. Reporting
Methods
The Treasurer shall prepare an investment report at least quarterly including a
management summary that provides an analysis of the status of the current investment
portfolio. This management summary will be prepared in a timely manner and will be
prepared in a way that will allow comparison to the Town’s investment policy. The
report should be provided to the Board of Selectmen of the Town of Waterford, the
Board of Finance and the Representative Town Meeting as well as others upon request.
The report should show where the portfolio is currently placed (by institution) and the
revenue generated during the quarterly period. Individual transactions will be available
for audit.
Performance Standards:
ihn this policy. T
‘the market/economi
XI. “xpptovel of Investment Polit ie
The investment policy shall be formally approved by the Board of Finance and Treasurer
and reviewed annually. The opinions and advice of the Director of Finance will be
included in the review.
Adopted: November 12, 2008
Revision Draft: July 12, 2022
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BOF 1.04
Town of Waterford
Post-Issuance Compliance Procedures
For Bonds, Notes and Other Debt Obligations
L INTRODUCTION
These post-issuance compliance procedures of the Town of Waterford, Connecticut (the “Town”)
are designed to provide for the effective management of the Town’s post-issuance compliance
program related to bonds, notes, financing leases, or other debt obligations (collectively referred
to herein as “bonds’’) of the Town under federal tax laws and federal securities laws, to the extent
applicable to a particular issue of bonds. _
The Director of Finance of the Town will be the primary bond compliance officer responsible for
each issuance of bonds and for overseeing the Town’s post-issuance compliance program through
the implementation of these procedures. All information related to each bond issue and the
facilities, equipment and other assets financed by such issue shall be maintained by or on behalf
of the Director of Finance. The Director of Finance shall review these procedures on at least an
annual basis and will update them as necessary to accurately reflect compliance responsibilities in
consultation with bond counsel.
The Town will contract with a municipal advisor to advise the Town and assist with
administering various responsibilities related to the Town’s bonds, including certain aspects of
post-issuance compliance with federal tax and securities laws. The town will retain the services
of a bond counsel firm to serve as bond counsel and provide legal advice related to the Town’s
bonds, including advising on post-issuance compliance with federal tax and securities laws. In
carrying out these post-issuance compliance procedures, the Director of Finance will consult with
and seek assistance from the town’s bond counsel and municipal advisor to the extent appropriate.
Il. POST-ISSUANCE TAX COMPLIANCE
The following procedures are applicable to any bonds issued by the Town the interest on which is
excluded from federal income taxes.
A. Tax Certificate and Continuing Education
I. Tax Certificate - A Tax Certificate is prepared for each issuance of bonds. Immediately
‘ upon issuing any bonds, the Director of Finance, in consultation with bond counsel and
municipal advisor, shall review the Tax Certificate and make notes regarding specific
compliance issues for such bond issue on the Post-Issuance Compliance Notes form,
which is attached hereto as Exhibit A (the “Notes’”). The Tax Certificate and Notes shall
clearly define the roles and responsibilities relating to the ongoing compliance activities
for each bond issue and will identify specific compliance requirements. The Director of
Finance will review the Tax Certificate and Post-Issuance Compliance Notes for each

issue of outstanding bonds on at least an annual basis to ensure that the specific -
compliance issues for such bonds are being monitored and addressed.
2. Continuing Education - The Director of Finance will actively seek out advice of bond
counsel on any matters that appear to raise ongoing tax law compliance concerns and may ~
attend or participate or direct other Town personnel to attend or participate in seminars,
teleconferences, etc. that address federal tax law compliance issues and developments in
the public finance arena.
B. Tax-Exempt Bonds Compliance Monitoring
I. Ownership of Bond-Financed Property — One of the requirements with respect to tax-
exempt bonds issued for the benefit of issuers like the Town is that the bond-financed
property generally must be owned by a State or local governmental unit throughout the
lesser of (i) the term of the bonds (and of any refunding bonds subsequently issued to
refinance the property) or (ii) the useful life of the property. Any proposed sale,
exchange, trade-in, or other disposition of ownership of or title to bond-financed property
(other than a sale for salvage value or the disposal of such property as waste at the end of
its useful life to the Town) should be reviewed in advance with bond counsel so that
appropriate, timely “remedial action” can be taken to protect the tax-advantaged status of
the bonds, if required.
2. Restrictions against other Private Use — The Director of Finance will continuously
monitor the expenditure of bond proceeds and the use of facilities or equipment financed
with bonds to ensure compliance with Section 141 of the Internal Revenue Code (the ~
“Code”), which establishes limitations on the use of bond-financed property by persons or
entities that are not units of State or local government. These limitations apply, for
example, to individuals using bond-financed assets on a basis other than as a member of
the general public, to corporations and partnerships and to the federal government and its
agencies and instrumentalities.
a. Use of Bond Proceeds — The Director of Finance will monitor and maintain records
with respect to expenditures to ensure that “new money” bond proceeds are being used
on capital expenditures for exempt purposes in accordance with the governing bond
legal documents (and also to facilitate the wacking of such expenditures will respect
to refunding issues that refinance such “new money” bonds) and will document the
allocation of all bond proceeds including “new money” and refunding purposes.
b. Use of the Bond-Financed Facility or Equipment
i. Equipment assets financed or refinanced with bonds will be listed in a
schedule for each bond issue. The Director of Finance will maintain (4) a list
of all bond-financed equipment allocable to each bond issue and (ii) a record of
such equipment’s expected useful life. Equipment assets generally are not to
be sold or disposed of prior to the earlier of (a) the date the “new money”
bonds and all subsequent refundings of such bonds are fully paid or (b) the end
of the useful life of such equipment.
ii. Constructed, renovated or acquired assets financed or refinanced with
bonds — In order to ensure that assets constructed, renovated or acquired using
61533406 v1

bond proceeds, such as buildings, real property improvements and other
infrastructure assets, are not leased, sold or disposed of prior to the end of the
term of the applicable bonds and of all subsequent refundings of such bonds:
e Any asset constructed, renovated or acquired with bond proceeds shall be
flagged in the Town’s records, and
. @ All uses of these assets will be monitored by the Director of Finance.
iii. Change of Use — If there is any proposal to change the use of a bond-financed
facility from a qualified purpose to a use in which a private (or federal
government) entity may have the use or benefit of such a facility, the Director
of Finance will consult with bond counsel prior to the occurrence of the
proposed change in use to determine what impact, if any, the proposed change
may have on the tax-exempt status of the applicable bonds. Examples of
changes in use that can affect the tax-exempt status of bonds include
management contracts with third parties for the management or operation of
bond-financed assets and leases of buildings or other property to third parties.
3. Qualification for Initial Temporary Periods and Compliance with Restrictions against
Hedge Bonds
a. Expectations as to Expenditure of Bond Proceeds
i. Inorder to qualify under the arbitrage rules of Code Section 148 for an initial
temporary period, usually for three (3) years, with respect to a new money
bond financing—during which bond proceeds can be invested without regard
to yield (but potentially subject to rebate)—the Town must reasonably expect
to spend at least 85% of “net sale proceeds” of the bonds by the end of the
temporary period. Additionally, under Code Section 149, in order to avoid
classification of an issue of bonds as “hedge bonds,” the Town must both (i)
reasonably expect to spend 85% of the “net sale proceeds” of the bonds within
the three-year period beginning on the issuance date of the bonds and (ii)
invest not more than 50% of the proceeds of the issue in investments having a
substantially guaranteed yield for four (4) years or more. These expectations
will be documented for Ue Town's oulstanding botid issues in the [ax
Certificate executed in connection with each new money bond issue.
ii. If, for any reason, the Town’s expectations concerning the period over which
the bond proceeds are to be expended change from what was documented in
the applicable Tax Certificate, such that the length of expenditure period is
expected to be extend beyond three years from the issuance date of a new
money bond issue, the Director of Finance will consult with bond counsel.
b. Bond Proceeds Spending Schedule Compliance Monitoring — For as long as there are
unspent “new money” proceeds of a bond issue, the Director of Finance will compare
and analyze the original anticipated capital project spending schedule and the actual
payouts and reimbursements on each bond-financed project, on an annual or more
frequent basis. The purpose of this analysis is to identify variances from the original
spending schedule for each project and to document the reasons for these variances (to
the extent they reflect delays in the expenditure of bond proceeds) to provide a
61533406 v1

_ continual record on the spending progress for each bond-financed project. Generally,
if there are delays in expending new money bond proceeds, the tax-exempt status of
the bonds under either the temporary period rules or the hedge bond rules should not
be adversely affected, unless circumstances surrounding actual events relating to
project development cast doubt on the reasonableness of the stated expectations
regarding expenditures that were documented on the issuance date in the applicable
Tax Certificate on the issuance date. Therefore, it is important for the Director of
Finance to update the progress of each project at least quarterly, and consult with bond
counsel as to any substantial delays from the original expenditure schedule.
Investment Earnings Monitoring — As part of the monitoring process described in
Section II.B:3.b above, the Director of Finance will track the actual investment
eamings accruing on unexpended bond proceeds on an annual or more frequent basis
and will track the expenditure of all such earnings (which are treated for tax law
purposes as additional proceeds of the bonds) on project costs.
4, Arbitrage and Rebate Compliance
a.
In General. Bonds may lose their tax-favored status, retroactive to the date of
- issuance, if they do not comply with the arbitrage restrictions of Section 148 of the ~
Code. Two sets of requirements under the Code generally must be applied in order to
determine whether bonds satisfy Section 148 of the Code: (1) the yield restriction
requirements of Section 148(a) and (2) the rebate requirements of Section 148(f).
Yield Restriction Requirements. The yield restriction requirements provide, in
general terms, that the “gross proceeds” of a bond issue may not be invested in
investments generating a yield higher than the yield of the bond issue, except for
investments (i) during one of the temporary periods permitted under the arbitrage rules
(including the initial three year temporary period described in Section I.B.3.a.ii
above, a 90-day temporary period for current refundings and another temporary period
for moneys expected to be used on a current basis to pay debt service on the bonds),
(ii) in a reasonably required reserve or replacement fund or (iii) In an amount not in
excess of the lesser of 5% of the sale proceeds of the issue or $100,000 (the so-called
“minor portion”). Under limited circumstances, the yield on investments subject to
yield restriction can be reduced through payments to the IRS known as “yield
reduction payments.” The Tax Certificate will identify those funds and accounts
associated with a particular issue of bonds known, as of the date of issuance, to be
subject to yield restriction.
c. Rebate Requirements
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i. _ If, consistent with the yield restriction requirements of the arbitrage rules,
amounts treated as bond proceeds are permitted to be invested at a yield in
excess of the yield on the bonds pursuant to one of the three exceptions to yield
restriction referred to above, rebate payments-may be required to be made to
the U.S. Treasury. Under the arbitrage rules, the aggregate rebate liability is
generally the present value of the excess of the amount actually earned on bond
funded investments over the amount that would have been earned on such
investments had they been invested at the yield on the bonds. At least 90% of
the rebate amount calculated for the first computation period must be paid no

ii.
later than 60 days after the end of the first computation period. The amount of
rebate payments required for subsequent computation periods (other than the
_ final period) is that amount which, when added to the future value of prior
rebate payments, equals at least 90% of the rebate amount. For the final
computation period, 100% of the calculated amount must be paid. Available
exceptions to the rebate requirement, and related expectations, are generally
documented for each bond issue in the applicable Tax Certificate, although
rebate liability and compliance is generally based on actual facts established |
after bond closing.
As required, the Town will have their municipal advisor calculate, or engage
another experienced independent rebate analyst to calculate, the cumulative
rebate liability (positive or negative) that has accrued with respect to the bonds
and provide a written rebate report to the Director of Finance documenting the
rebate analyst’s methodology and conclusions. Bond counsel can assist with
referrals to qualified rebate analysts.
d. Timing of Rebate Payments
The Director of Finance will ensure the proper calculation and payment of any rebate
payment (and/or yield-reduction payment) within the following time frames:
i.
ii
ili.
The first installment with respect to a bond issue is due no later than 60 days
after the end of the fifth (5) anniversary of each bond issuance;
Succeeding installments are due at least every fifth (Sth) following anniversary
date;
The final installment with respect to a bond issue is due no later than 60 days
after retirement of the last bond of the issue (whether at final maturity or
earlier, on an optional bond redemption date or when bonds are purchased or
otherwise acquired for retirement or cancellation); generally, a final rebate
installment will be due not later than 60 days after early retirement of the last
bond in the issue in connection with a refunding of that issue.
Rebate (and/or yield reduction) payments are accompanied by returns filed on IRS Form
8038-T.
I. General
Record Retention
Section 6001 of the Code provides the general rule for the proper retention of records for
federal tax purposes. The IRS regularly advises taxpayers to maintain sufficient records to
support their tax deductions, credits and exclusions. In the case of a tax-exempt bond
transaction, the primary taxpayers are the bondholders. In order to ensure the continued
tax-exempt treatment of interest on its bonds, it is important, in all cases, that the Town
retain sufficient records to support characterization of the bonds as tax-exempt.
2. Storage of Records
61533406 v1

a. All records associated with any bond issue shall be stored electronically or in hard
copy form at the Town’s main offices or at another location conveniently accessible to
the Town:
The Director of Finance will ensure that the Town provides for appropriate storage of
these records.
If storing documents electronically, the Town shall conform with IRS Revenue
Procedure 97-22, 1997-1 C.B. 652 (as the same may be amended, supplemented or
superseded), which provides guidance on maintaining books and records by using an
electronic storage system. - Bond counsel can furnish a copy of this Revenue Procedure
if needed.
' 3. Bond-Related Records
The Town shall maintain bond records as identified in this Section II.C.3 for the longer of
(i) the life of the bonds plus six (6) years or (ii) the life of refunding bonds (or the series of
refunding bonds) that refinance the bonds plus six (6) years. Bond records shall include
the following documents:
a. Pre-Issuance Documents
61533406 v1
1.
ii.
ili.
iv.
Guaranteed Investment Contracts (“GICs”) and Other Investments
(including Treasury State and Local Government Series obligations
(“SLGS”)) — if applicable, the Director of Finance shall retain all
documentation regarding the procurement of each GIC or other investment
acquired prior to bond issuance in anticipation of the issuance of the bonds,
including if applicable the request for bids, bid sheets, documentation of
procurement method (1.e., competitive vs. negotiated), etc. If investments
other than SLGS are used for a defeasance escrow, the documentation should
include an explanation of the reason for the purchase of such non-SLGS
securities and documentation establishing the fair value of the securities at the
time of acquisition and compliance with safe harbor bidding rules. If SLGS
are purchased, documentation relating to all preliminary and/or final SLGS
subscriptions shall be inaittlained.
Anticipated Capital Spending Schedule — the Director of Finance shall retain
all documentation and calculations relating to the anticipated capital spending
schedule used to meet the “reasonable expectations” test and use of proceeds
tests, as well as copies of contracts with general and sub-contractors or
summaries thereof. .
Issue Sizing — the Director of Finance shall maintain a copy of all bond
structuring proposals and information furnished in connection with the bond
issue.
Bond Insurance or Other Credit Enhancement — if applicable, the Director of
Finance shall maintain a copy of insurer and credit provider premium or fee
quotes and calculations supporting the cost benefit of acquiring bond insurance
or other credit enhancement with respect to the bonds.

Vi.
Forward Starting Swaps or Other Hedge Documentation — if applicable, the
Director of Finance shall retain all documentation regarding any interest rate
swap or other hedge agreement entered into on or before the date of bond
issuance relating to the bonds, including any “swap identification”
documentation prepared with respect thereto in order to facilitate the treatment
of such agreement as a “qualified hedge” under the arbitrage rules of Code
‘Section 148.
Costs of Issuance documentation — the Director of Finance shall retain all
invoices, payments and certificates related to costs of issuance of the bonds.
b. Issuance Documents
i.
The Director of Finance shall retain a physical bond transcript and/or a digital
copy of the bond transcript.
c. Post-Issuance Documents
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Iv.
Post-Issuance Guaranteed Investment Contracts and Investments (including
SLGS) — the Director of Finance shall retain all documentation regarding the
procurement of any GIC or other investment acquired with bond proceeds after
bond issuance, including as applicable the request for bids, bid sheets,
documentation of procurement method (i.e., competitive vs. negotiated), etc. If
investments other than SLGS are used for a refunding defeasance escrow, the
documentation should include an explanation of the reason for the purchase of
such non-SLGS securities and documentation establishing the fair value of the
securities and compliance with safe harbor bidding rules. If SLGS are
purchased, documentation relating to all preliminary and/or final SLGS
subscriptions shall be maintained.
Post-Issuance Swap or Other Hedge Documentation — the Director of
Finance shall retain all documentation regarding any interest rate swap or other
hedge agreement entered into after date of bond issuance relating to the bonds,
including any “swap identification” documentation prepared with respect
thereto in order to facilitate the treatment of such agreement as a “qualified
hedge” under the arbitrage rules of Code Section 148.
Interest Rate Resets — for bonds bearing interest at variable rates, records of
each interest rate reset.
Records of Investments — statements of earnings and any other documentation
regarding investments acquired with bond proceeds shall be retained by the
Director of Finance.
Investment and Expenditure Activity Statements — the Director of Finance
shall maintain or shall cause to be maintained all invoices and other spending
records relating to expenditures of bond proceeds for equipment purchases and
constructed, renovated or acquired projects or for any other purpose, as well as
all records relating to the investment of such proceeds prior to expenditure.
Such records may be maintained either electronically or in hard copy form.

vi. Records of Compliance
d. General
Qualification for Initial Temporary Periods and Compliance with
Restrictions Against Hedge Bond Documentation — the Director of
Finance shall prepare the annual analysis described in Section II.B.3 of this
document and maintain these records. .
Arbitrage Rebate Reports — may be prepared by the Director of Finance or
a third party as described in Section II.B.4.c.ii of this document, and copies
of all such reports will be retained by the Director of Finance.
Rebate Returns and Payment — shall be prepared at the direction of the
Director of Finance and filed as described in Section II.B.4.d of this
document, and copies of all such returns and payments will be retained by
the Director of Finance.
Contracts under which any bond proceeds are spent (consulting
engineering, acquisition, construction, etc.) - the Director of Finance shall
obtain copies of these contracts and retain them in the bond files.
i. Audited Financial Statements — the Director of Finance will maintain copies
of the Town’s annual audited financial statements.
ii. Reports of any prior IRS Examinations — the Director of Finance will
maintain copies of any written materials pertaining to any IRS examination of
the Town’s bonds.
D. . Voluntarily Correcting Failures to Comply with Post-Issuance Compliance
Requirements
If, in the course of monitoring compliance with applicable federal tax laws, a potential federal tax
law violation is discovered in connection with an issue of its bonds, the Town may be able to
address the violation through one of the methods listed below. The Town should work with bond
counsel to determine the best way to proceed if a violation is discovered or suspected.
L. Taking remedial actions permitted under the Treasury Regulations
Depending upon the nature of the potential violation and the timing of the discovery of the
potential violation, it may be possible for the Town to take “remedial action” under
applicable Treasury Regulations to protect the tax-advantaged status of the bonds through
timely action. Depending upon the facts, such remedial action might involve a prompt
redemption or defeasance of all or a portion of the outstanding bonds or, in some cases,
the tracing of sale or other disposition proceeds to the acquisition of other tax law
compliant assets, or the tracing of the bond-financed assets themselves to another tax law
compliant use. It is essential, however, that the potential violation be brought to the
attention of bond counsel as soon as possible because the remedial action rules are subject
to strict timing limitations.
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2. Utilizing the Voluntary Closing Agreement Program
The Internal Revenue Manual establishes a voluntary closing agreement program (VCAP)
for tax-exempt bonds whereby bond borrowers can disclose and resolve tax law violations
through closing agreements with the Internal Revenue Service in a manner that preserves
the tax-exempt status of the bonds.
Wl. Post-ISSUANCE CONTINUING DISCLOSURE COMPLIANCE
Federal securities laws prohibit making any untrue statement of a material fact or omitting any
material fact necessary in order to make disclosure statements, in the light of the circumstances
under which they were made, not misleading. The Director of Finance will take primary
responsibility to ensure that the Town complies with each obligation included in its continuing
disclosure agreements or certificates executed in connection with each of its outstanding bond
issues for which a continuing disclosure agreement was required and entered into by the Town,
’ both as to (A) the timeliness and content of continuing disclosure filings, and (B) the accuracy of
disclosure regarding such filings in the Town’s official statements. In furtherance of this
responsibility, the Director of Finance will take primary responsibility for ensuring that the Town
carefully reviews its continuing disclosure obligations, submits timely and complete filings in
accordance with such obligations and submits disclosure filings that are accurate, complete and
not misleading.
A. The Obligations of the Town
Under the provisions of Rule 15c2-12 adopted by the Securities and Exchange Commission under
the Securities Exchange Act of 1934 (the “Rule”), Participating Underwriters (as defined in the
Rule) are required to determine that issuers have entered into written continuing disclosure
agreements to make ongoing disclosure in connection with bonds subject to the Rule. Unless a
bond issue of the Town is exempt from compliance with the Rule or the continuing disclosure
provisions of the Rule as a result of certain permitted exceptions, the Town will enter into such a
continuing disclosure agreement upon the issuance of the bonds.
Pursuant to any continuing disclosure agreement entered into by the Town in connection with an
_ issue of bonds, the Town agrees to provide certain information for the benefit of the owners of the
Town’s bonds and to assist the purchasers of the Town’s bonds in complying with the Rule. The
information required to be provided will be specified in each continuing disclosure agreement and
may include annual reports and/or notice of certain significant events, depending on the term of
the bonds. Compliance with the filing requirements may be satisfied by filing the information
with the Municipal Securities Rulemaking Board through its Electronic Municipal Market Access
(“EMMA”) website.
Annual reports required to be filed will include audited financial statements of the Town and
certain financial and operating data specified in the continuing disclosure agreement. The annual
reports are required to be filed on an annual basis on or before a date specified in the continuing
disclosure agreement.
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Continuing disclosure agreements also require the Town to file notice of the occurrence of certain
significant events by a certain number of days specified in the agreement from the occurrence of
the event (typically 10 business days from the occurrence of the event). Although the list of
significant events in a particular continuing disclosure agreement may differ based on the list that
existed in the Rule at the time of the particular bond issue, the current list of significant events
that must be included in a continuing disclosure agreement for which a filing is required is as
follows:
1. Principal and interest payment delinquencies.
2. Non-payment related defaults, if material.
3. Unscheduled draws on debt service reserves reflecting financial difficulties. .
4. Unscheduled draws on credit enhancements reflecting financial difficulties.
5. Substitution of credit or liquidity providers, or their failure to perform.
6. Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or
final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other
material notices or determinations with respect to the tax status of the bonds, or other material
events affecting the tax status of any of the Town’s bonds or notes.
7. Modifications to rights of the registered owners, including beneficial owners, of the
Town’s bonds and notes, if material.
8. Bond calls, if material, and tender offers.
9. Defeasances.
10. Release, substitution or sale of property securing repayment of any of the Town’s
bonds or notes, if material.
11. Rating changes.
12. Bankruptcy, insolvency, receivership or similar event of the lown.”
13. The consummation of a merger, consolidation, or acquisition involving the Town or
the sale of all or substantially all of the assets of the Town, other than in the ordinary course of
business, the entry into a definitive agreement to undertake such an action or the termination of
a definitive agreement relating to any such actions, other than pursuant to its terms, if material.
* As noted in the Rule, this event is considered to occur when any of the following occur: (i) the appointment ofa
receiver, fiscal agent or similar officer for the Town in a proceeding under the U.S. Bankruptcy Code or in any
proceeding under state or federal law in which a court or governmental Town has assumed jurisdiction over
substantially all of the assets or business of the Town, or if such jurisdiction has been assumed by leaving the existing
governing body and officials or officers in possession but subject to the supervision and orders of a court or
governmental Town, or (ii) the entry of an order confirming a plan of reorganization, arrangement or liquidation by a
court or governmental Town having supervision or jurisdiction over substantially all of the assets or business of the
Town.
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14. Appointment of a successor or additional trustee or the change of name of a trustee,
if material.
15. Incurrence of a financial obligation of the Town, if material, or agreement to
covenants, events of default, remedies, priority rights, or other similar terms of a financial
obligation of the Town, any of which affect the registered owners, including beneficial owners,
of the bonds, if material.
16. Default, event of acceleration, termination event, modification of terms, or other
similar events under the terms of a financial obligation of the Town, any of which reflect
financial difficulties.!
The Director of Finance will compile and maintain a set of all currently effective continuing
disclosure agreements of the Town for bonds that are currently outstanding, each of which will
have been included in the closing transcript for the related bond issue. As bonds are completely
paid or redeemed, the Director of Finance will remove the related continuing disclosure
agreement from the set of currently effective continuing disclosure agreements. The following
procedures are required for and shall apply to only the currently effective continuing disclosure
agreements for which continued compliance is required.
B. Timeliness and Content of Continuing Disclosure Filings
J. Annual Reports
The Director of Finance will take primary responsibility for ensuring that the Town’s Annual
Reports are assembled to include the information required by its continuing disclosure agreements
and are filed on EMMA within the period of time after the end of the Town’s fiscal year specified
in the applicable continuing disclosure agreement. The Town’s Annual Report will be posted on
EMMA by the town’s municipal advisor. To ensure the Town’s Annual Reports are complete,
accurate and not misleading, the Town agrees to take the following steps:
1. The Director of Finance sh