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Impacts of the Coronavirus on School Bond Issues

Added by Nicholas G. Miller in Articles & Publications, News on April 9, 2020

The Coronavirus has upended school district operations and finances in dramatic ways. We understand what you are going through at this difficult time. The good news is that we believe the Coronavirus has little impact on school district bond issues, but here are a couple of thoughts to consider.

1. Disclosure to the Marketplace

You may see some advisories suggesting that Districts make a filing on the continuous disclosure platform for bonds (EMMA) to describe impacts on the District of the coronavirus, for example the State holdbacks, etc.. We do not believe this is necessary. The contract with EMMA provides for disclosure of specific events like a change in bond rating or nonpayment; there is no obligation for a disclosure of “anything material.”

2. Bond Projects Underway

If your District currently has a bond project underway and the timeline is going to be delayed, there is no concern that bond funds will remain unspent within three years of the issue date. There is a common misunderstanding that funds are somehow “lost” if not spent within three years. The IRS requires only that unspent funds after three years are not invested at a higher yield than the yield on the bond issue, and given forecasted interest rates, that is not likely to occur.

3. Levy Planning

We recommend you consult with your financial advisor to assess expected changes in market values that may affect how the District wishes to certify its mix of bond, plant and supplemental levies. Perhaps too soon to predict, and so another reason there is no immediate action needed by Districts in response to Coronavirus.

Of course, reach out to us if you have any questions. In the meantime, thank you for your service in education and keeping students, families and staff safe in this extraordinary time.

This Client Update has been prepared by Hawley Troxell Ennis & Hawley, LLP for informational purposes only and is not legal advice, a legal opinion or counsel. Readers receiving information through this Client Update should not act on or rely on it without consulting professional legal counsel. Any such opinions, advice or counsel are dependent upon the application of the law to the particular facts and circumstances of any given situation, and should be given by a licensed attorney in the exercise of his or her professional judgment only after the establishment of an attorney-client relationship and based upon the exercise of the attorney’s professional judgment after consideration of such facts and circumstances. The furnishing of this Client Update does not constitute or give rise to an attorney client relationship.