On January 8, 2021, Governor Newsom released his Proposed Budget for Fiscal Year 2021–22, which painted a substantially rosier picture of the State’s finances than was envisioned by the 2020 Budget Act. Many California educational entities previously preparing for payment deferrals during the current and future fiscal years were pleased to see that at least some of these deferrals may not be necessary. While many districts have already begun to manage and plan for these deferrals through temporary borrowing measures or the issuance of tax and revenue anticipation notes (TRANs), others are still evaluating whether, or to what extent, they will need to take such measures. Nixon Peabody is able to assist in the event your district needs assistance with temporary borrowing, issuance of TRANs, or other methods of financing during periods of uncertainty.
Disclosure of the effects of COVID-19 continues to prompt questions
A common question has been whether certain effects of COVID-19 require disclosure to the marketplace. For issuers who are not currently engaged in a primary offering, most obligations are governed by continuing disclosure undertakings entered into pursuant to the requirements of Rule 15c2-12. Most continuing disclosure undertakings contain certain enumerated events, which if occur, require disclosure. These rules have not been altered due to COVID-19; as such, if one of these events is triggered (due to COVID-19 or otherwise as noted in the undertaking), disclosure would be warranted.
For issuers considering entering into a primary offering, wherein an offering document is being supplied to potential investors, the SEC has released some guidance as to what topics an issuer may want to cover when discussing the impact of COVID-19, including information regarding (i) their current operational and financial status, including decreases in revenues and delays in collection of revenues; (ii) how their COVID-19 response, including efforts to protect the health and well-being of residents and employees, has impacted their operational and financial condition, including un-budgeted costs; and (iii) how their operational and financial condition may change as efforts to fight COVID-19 evolve. Additional insights regarding this guidance is available here.