December 1999 Board Meeting - Item...

MetropolitanTransportation

Authority

One Gateway PlazaLosAngeles, CA

90012-2932

(213) 922-2000

29 29EXECUTIVE MANAGEMENT COMMITTEE

November 18, 1999

SUBJECT: DEBT POLICY

ACTION: ADOPT ANNUAL UPDATE TO MTA DEBT POLICY

RECOMMENDATION

Adopt the updated MTA Debt Policy as described in Attachment 1.

BACKGROUND

The MTA Debt Policy governs the issuance and management of all debt and leasefinancing from capital markets including the investment of bond proceeds nototherwise covered by the MTA Investment Policy. The goal of the policy is toachieve the lowest possible cost of capital within prudent risk and affordabilityparameters. The Debt Policy requires an annual review and update.

This update makes general improvements which clarify language regardingconcepts and implementation. Additionally, language specifying thedocumentation of various decisions and selections of services and products isstrengthened.

When adopting the policy, it should have been noted there were existing debtobligations in several categories where the debt affordability policy limit was set at"no debt issuance." The following is a listing of those pre-existing debtobligations that should have been exempted from the Debt Affordability section ofthe policy.

Catego~Prop A 40% DiscretionaryFarebox Revenues

Federal Grant RevenuesTransportation Development Act (TDA)

DescriptionGrand Central BondsWorkers Compensation COPsGateway Headquarters BondsBus Acquisition COPsBus Acquisition COPs

Attachment 2 is marked to show the updates.

Attachments

Prepared by:

Terry ~ & TreasurerE~ Officer, Finance

Michael J. Smith, Debt Manager

Alla~i Lipsky \ Office of the Chief Executive Officer

Richard BrumbaughChief Financial Officer

Attachment I

MTADEBT POLICY

II.

Introduction

The purpose of the Debt Policy of the Los Angeles Metropolitan TransportationAuthority (MTA) is to establish guidelines for the issuance and management of theagency’s debt. This Debt Policy confirms the commitment of the Board, management,staff, advisors and other decision makers to adhere to sound financial managementpractices, including full and timely repayment of all borrowings, and achieving the lowestpossible cost of capital within prudent risk parameters.

Scope and Authority

This policy shall govem the issuance and management of all debt and lease financingsfunded from the capital markets, and shall include all obligations and ancillary facilitiesrelated to those debt and lease financings, including investment of bond proceeds nototherwise covered by the MTA Investment Policy.

While adherence to this Policy is required in applicable circumstances, the MTArecognizes that changes in the capital markets, agency programs and other unforeseencircumstances will produce situations which are not covered by the Policy or whichrequire modifications or exceptions to achieve Policy goals. In these cases, managementflexibility is appropriate provided specific authorization from the Board is obtained.

The MTA’s Debt Policy shall be reviewed and updated at least annually and presented tothe Board for approval by the Chief Financial Officer. The Chief Executive Officer,Chief Financial Officer and Executive Officer - Finance are the designated administratorsof the MTA’s debt policy. The Treasurer shall have the day-to-day responsibility andauthority for structuring, implementing, and managing the MTA debt and financeprogram, including the issuance of commercial paper in accordance with the Boardauthorized programs This Debt Policy requires that each debt or lease financing bespecifically authorized by the MTA Board

III. Appropriate Uses for Debt

A. Capital Budgeting

The Capital Plan. The Chief Financial Officer shall develop a CapitalImprovement Plan (the "CIP") for consideration and ultimate adoption by theBoard. The CIP should be for at least a 5-year period and shall be updated atleast annually. In addition to capital project costs, the CIP will include the

Effective November 1999 Page 1 of

Bo

following elements:

a) Description and availability of all sources of fundsb) Timing of capital projectsc) Effect of capital projects on MTA debt burdend) Debt service requirements

Authorization for Issuance. Debt issuance for capital shall not be authorizedby the Board unless such issuance has been incorporated into the CIP or untilthe CIP is modified and adopted by the Board to incorporate or amend a debtor financing option not previously authorized. The Board’s adoption of theCIP does not, in and of itself, constitute authorization for debt issuance ofproposed capital projects. Each financing shall be presented to the Board inthe context of the CIP or other separately approved capital project.

Review of Capital Plan. Modifications to the CIP shall be preceded with areport from the Chief Financial Officer which discusses the impact of theproposed borrowing on the CIP. The CIP is to be reviewed and presentedto the Board at least annually.

Debt Financing

1. Appropriate Use of Long-Term Debt

Purpose for Long-Term Debt: Debt should be used to finance essentialcapital facilities, projects and certain equipment where it is costeffective and fiscally prudent. The scope, requirements, and demandsof the CIP, and the ability or need to expedite or maintain theprogrammed schedule of approved capital projects should also befactors in the decision to issue long term debt. Inherent in its long-term debt policies, the MTA recognizes that future taxpayers who willbenefit from the capital investment will pay a share of its cost.. Long-term debt will not be used to fund MTA operations.

b) Lease Financing: Lease obligations are a routine and appropriatemeans of financing capital equipment. These types of obligationshould be considered for equipment and assets that are not financedunder the sales tax revenue based financing program. The usefullife of the capital equipment, the terms and conditions of the lease,and the direct impact on debt capacity and budget flexibility willbe evaluated prior to the implementation of a lease program.Efforts will be made to fund capital equipment with pay-as-you-gofinancing where feasible. Cashflow sufficiency, capital programrequirements, lease program structures and cost, and market factorswill be considered in conjunction with a pay-as-you-go strategy in


lieu of lease financing. Short-term equipment leases that do notaccess the capital markets are not covered by this policy.

2. Use of Short-Term and Variable Rate Debt

c)

Tax and Revenue Anticipation Notes: Borrowing for cash flowpurposes through the use of tax and revenue anticipation notes maybe used bridge temporary cash flow deficits within a fiscal year.Grant Anticipation Notes: The MTA may issue short-term notes tobe repaid with the proceeds of State or Federal grants if appropriatefor the project and in the best interests of the MTA. Generally,grant anticipation notes will only be issued if there is no otherviable source of up-front cash for the project.Variable Rate Debt: It is often appropriate to issue variable ratedebt to diversify the debt portfolio, provide interim funding forcapital projects and improve the match of assets to liabilities.Variable rate debt could also provide interest cost savings.. Theamount of unhedged variable rate debt will generally not exceed20% of all outstanding debt. Under no circumstances will theMTA issue variable rate debt for arbitrage purposes. If variable ratedebt is used, the MTA will periodically, but at least annually,determine whether it is appropriate to convert the debt to fixedinterest rates. The MTA may issue commercial paper, or otherforms of related variable rate debt, from time to time, but its usewill generally be restricted to providing interim financing forcapital projects programmed for long term debt funding

IV. Debt Affordability Targets and Policy Limits

Target and policy maximum amounts of revenues to be used to pay debt service arelisted below as percentages of the respective revenue sources. These limits incombination with the CIP and multi-year planning document will ensure that the MTAwill be able to continue providing its essential operational services while planning forreplacement, rehabilitation and expansion of its capital investments.

Category

Prop A Rail 35%

Allowable Uses &Status

Rail Operations &Capital. Is currentlycommitted to debtservice in an amount

Debt PolicyMaximum87% of Prop A35% Railrevenues.


close to the PolicyMaximum.

Discretionary 40%

Local Return 25%

Any transit purpose.Current Board policydirects these funds tomunicipal bus subsidiesand incentives.Any transit purpose.Distributed to localitiesbased on population.

No DebtIssuance.

Category

Discretionary 40% -All Liens

Highway 25% - AllLiens

Commuter Rail 10%

Allowable Uses &StatusBus & Rail, Capital &Operating.

Rail Operations &Capital Is currentlycommitted to debtservice in an amountclose to the PolicyMaximum.Commuter Rail andPark and Ride.Operations or capital.

Policy Maximum40% of Prop C 40%Discretionaryrevenues.

40% of Prop C 25%Highway

40% of Prop C 10%Commuter Rail

Security 5% Transit Security. No Debt Issuance.Operations or capital.

Local Return 20% Any transit purpose. N/ADistributed to localitiesbased on population.


Category

Fare BoxRevenue

Allowable Uses &StatusAny transit purpose.

Federal Grant In accordance withRevenues grant.State Grant In accordance withRevenues grant.Benefit Typically toAssessment Levies support rail construction.TDA Various transit

purposes.Lease Revenues Any transit purpose.

Any transit purpose.Other SystemRevenues

Policy MaximumNo Debt Issuance.

No Debt Issuance.

No Debt Issuance.

100% of Levies

No Debt Issuance.

Limited issuancefor special projectsLimited issuancefor special projects

go Purpose of Financing

For each financing, documentation will be prepared and retained in a permanent "dealfile" regarding the various vendor selections, the decision process for sizing and structure,the method of bond sale, and investment decisions.

A. New Money Financing

New money issues are those financings which generate additional funding to beavailable for expenditure on capital projects. These funds will be used foracquisition, construction and major rehabilitation of capital assets. New moneybond proceeds may not be used to fund operational activities. The fundingrequirement by sales tax ordinance category is determined in the context of theCIP and annual budget. The structure for the financing is recommended by theFinancial Advisor based on market conditions at the time of the sale forcompetitive issuances.

MTA plans to utilize its commercial paper programs to provide interim newmoney funding. The commercial paper is retired upon issuance of a long-termbond or receipt of grant reimbursements.


B. Refunding Bonds

A present value analysis must be prepared that identifies the economic effects ofany refunding to be proposed to the Board. It is acknowledged that somerefundings may be executed for other than economic purposes, such as torestructure debt, change the type of debt instruments being used, or to retire abond issue and indenture in order to remove undesirable covenants.

Target savings amount shall be measured using a call option pricing model. Thesavings from any particular refunding candidate shall be in the range of 90 - 95%of the expected value of the call option, net of all transaction expenses. TheTreasurer shall have discretion in making the final determination to includeindividual refunding candidates.

Alternatively, the more traditional methodology of measuring the net presentvalue savings as a percentage of the refunded par amount may be used with aminimum average savings of 3% for any one refunding transaction.

VI. Types of Products

A. Current Coupon Bonds

Current coupon bonds are bonds that pay interest periodically and principal atmaturity. They may be used for both new money and refunding transactions..Current coupon bonds may be structured to meet the demands of the investor and,thereby, reduce the cost of borrowing. Features such as annual principalmaturities, the use of discounts, maturity of the debt, the parameters of the callprovisions, bond insurance and cash funded or surety DSRF are adjusted to themarket conditions at the time of sale.

B Zero Coupon and Capital Appreciation Bonds

Zero coupon bonds and capital appreciation have principal amortization that ismuch slower than level debt service resulting in increased interest expenditureover the life of the bond and, therefore, shall only be recommended in limitedsituations

C. Lease Purchase Financing

Lease purchase financing represents a long term financing lease which is suitablefor financing capital equipment or the acquisition and construction of realproperty.


Do

Equipment. It has been the MTA’s practice to purchase equipment andbuses on a pay-as-you-go basis; however, the MTA shall have the abilityto consider lease purchase debt, including certificates of participation as analternative to long-term vendor leases, including the ability to implement amaster lease program. Only the highest priority equipment purchases willbe lease purchased. Financing of equipment will be limited to contracts ofat least $20,000 and a useful life which is greater than 3 years. The finalmaturity of equipment lease financings will be limited to the averageuseful life of the equipment.

Real Property. The final maturity shall not exceed the estimated usefullife of the facility. In no case will the final maturity exceed 30 years.Principal payments related to real property acquisition or construction is tobe amortized such that it results in level debt service payments althoughthe MTA may consider rapid amortization to meet its repaymentobjectives.

Derivative Products

Derivative products will be considered where appropriate in the issuance ormanagement of debt only in instances where it has been demonstrated that thederivative product will either provide a hedge which reduces risk of fluctuationsin expense or revenue, or alternatively, where it will reduce total project cost. Ananalysis of early termination costs and other conditional terms will also beperformed given certain financing and marketing assumptions. Such analysis willdocument the risks and benefits associated with the use of the particular derivativeproduct. Derivative products will only be utilized with prior Board approval.

Structural Features

A. Maturity of Debt

The final maturity of the debt shall be equal to or less than the useful life of theassets being financed, and the average life of the financing shall not exceed 120%of the average life of the assets being financed.

B. Debt Service Structure

Aggregate debt service principal and interest payments within each lien shouldresult in approximately level debt service. Individual new bond issues maydeviate from level debt service to the extent their debt service structure results inaggregate level debt service within the lien, an example could be a refundingbond.


When refunding debt for economic savings, the previously existing debt serviceand amortization may be matched, but generally should not be exceeded.However, certain circumstances may require MTA to deviate from this objective,such as to update inefficient covenants, restructure debt service payments or alterbond payment dates.

C. Lien Levels

Senior and Junior Liens for each revenue source will be utilized in a mannerwhich will maximize the most critical constraint, typically either cost or capacity;Allowing for the most beneficial use of the revenue source securing the bond.

D. Capitalized Interest

Unless otherwise required, MTA will avoid the use of capitalized interest. Certaintypes of financings such as certificates of participation, lease-secured financings,and certain revenue bond projects may require that interest on the bonds be paidfrom capitalized interest until the issuer has constructive use of the project. Toavoid unnecessarily increasing the bond size MTA will minimize its use ofcapitalized interest.

E. Discount Bonds

While discount and deep discount bonds may reduce the interest cost of the bondsbelow that of non-discount bonds, they should only be recommended in limitedsituations as they reduce the potential for savings from refunding of the bonds.

F. Debt Service Reserve Fund

Cash Funded Reserve Funds and Surety Bonds. The debt service reserve fund(the "DSRF") is generally cash funded with bond proceeds. The DSRF maintained by the MTA’s trustee throughout the life of the bonds. A cash fundedDSRF is invested pursuant to investment of proceeds guidelines within therespective indenture and interest earnings are generally used to offset debt servicepayments. In the final year of the bond issue, the cash available in the DSRF isusually used to make the final debt service payment. Since a cash funded DSRFgenerates interest income, the MTA would have the potential to be in a financiallyneutral position if the interest earnings equal or exceed the interest rate of thebonds.

An alternative to having a cash funded DSRF is to use a DSRF surety policywhich would be obtained from a bond insurer. The surety policy requires anup-front fee payment to the insurer and results in a loss of future income to theDSRF. There may be a cost for using a surety. The Treasurer will evaluate anddocument the DSRF funding decision. Factors to be considered in this evaluation


include: arbitrage yield restrictions, current interest rates, availability and cost ofa surety policy, and, oppommities for the use of the funds withdrawn from theDSRF including additional capital projects or investment opportunities.

G. Amortization

The MTA will amortize its debt within each lien to achieve overall level debtservice or, alternatively, may utilize more accelerated repayment schedules aftergiving consideration to bonding capacity constraints. The MTA shall avoid theuse of bullet and balloon maturities except to achieve wrapped debt service so asto level outstanding debt service.

H. Financial and Risk Analysis of Issuance

Net present value cost analysis, assessment of structural risks and complexities,and consideration of restrictions to future financing flexibility will be assessedand documented to determine the most efficient bond type and structuringfeatures. The MTA’s long-term pooled investment rate will be used as thediscount rate when comparing alternatives.

I. Call Provisions

In general, MTA securities will not include a call feature which is longer than 10years. Prior to use of any non-call provision the MTA will evaluate expectedinterest savings in relation to the expected savings from a refunding, as based onthe theoretical value of the call option.

J. Credit Enhancement

Bond insurance. Bond insurance will be used when it provides aneconomic advantage to a particular bond maturity or entire issue. Bondinsurance provides improved credit quality for the bonds as a result of theinsurance provider’s guarantee of the payment of principal and interest onthe bonds. Because of the decreased risk, investors are willing to purchasebonds with lower yields than uninsured bonds, thus providing the issuerwith interest cost savings.

Benefit analysis. The decision to use bond insurance is aneconomic decision. The analysis compares the present value of theinterest savings to the cost of the insurance premium. Insurancewill be purchased when the premium cost is less than the projectedinterest savings.

h) Provider selection. The Treasurer will solicit quotes for bondinsurance from at least three providers, or in the case of a


competitive sale submit application for pre-qualification ofinsurance. MTA recognizes that all providers may not beinterested in providing bids to the MTA or pre-qualifying the issue.The winning underwriter in a competitive sale will determinewhether it will purchase insurance for the issue. For a negotiatedsale, the Treasurer shall have the authority to purchase bondinsurance when deemed advantageous and the terms and conditionsgoverning the guarantee are satisfactory

Lines and letters of credit ("LOC’~) represent a bank’s promise to payprincipal and interest when due for a defined period of time, and subject tocertain conditions. In the case of a direct pay LOC, the trustee can draw

upon the letter of cred!t to make debt service payments; under a stand-byLOC, the LOC can be used to cover the MTA’s default or bankruptcy. Iraletter of credit is to be used, the Treasurer shall prepare and distribute toqualified banks as described in paragraph (b) below, a request forqualifications which includes terms and conditions which are acceptable tothe MTA;

Liquidity Facility. The issuance of variable rate debt, includingvariable rate bonds and commercial paper requires the use of aliquidity facility. The Treasurer is hereby authorized to appoint abank(s) to ensure the availability of liquidity support should thebonds or commercial paper be tendered or not remarketed.

b) Provider selection. Only those banks with long term ratingsgreater than or equal to that of the MTA, and short-term ratings ofP-I/A-1÷, by Moody’s Investors Service and Standard & Poor’s,respectively may be solicited.

c) Selection criteria will include, but not be limited to the following:

(1) long-term ratings at least equal to or better than the MTA’s;(2) short-term ratings of P-I/A-l÷;(3) terms and conditions acceptable to the MTA; the MTA will

provide a term sheet along with the request forqualifications to which the banks will highlightmodifications;

(4) representative list of clients for whom the bank hasprovided liquidity facilities;

(5) fees; specifically, cost of LOC, draws, bank counsel andother administrative charges and estimate of tradingdifferential cost.

VIII. Documentation of Transactions


The decision processes used in each financing process will be fully documented. Thedocumentation will capture information regarding, selection of the financing team,decisions on product selection and structuring features, selection of vendors providingancillary services and selection of investment securities or products. This informationwill be compiled into a post-pricing book, "deal file", which will be retained for eachfinancing.

IX. Credit Objectives

The MTA will actively seek to maintain and improve the credit ratings of itsoutstanding bonds.Adherence to benchmarks, overall debt ratios and affordability targets.Frequent communications with the credit rating agencies.

X. Method of Bond Sale

The MTA will utilize a competitive sale process when it will provide the lowestinterest cost for the bond. However, there are three methods of sale: competitive,negotiated and private placement. Each type of bond sale has the potential toprovide the lowest cost given the right conditions. The conditions under whicheach type of bond sale is best used are provided below.

1. Competitive Salea)b)

c)

d)e)0

g)h)i)

Bond prices are stable and/or demand is strong.Market timing and interest rate sensitivity are not critical to thepricing.Participation from DBE / SBE firms is best efforts only and notrequired for winning bid.Issuer has a strong credit rating.Issuer is well known to investors.There are no complex explanations required during marketing,regarding: issuer’s projects, media coverage, political structure,political support, funding, or credit quality.The bond type and structural features are conventional.Bond insurance is included or pre-qualified (available).Manageable transaction size.

Negotiated Salea) Bond prices are volatile and/or demand is weak or supply of

b)c)d)e)

competing bonds is high.Market timing is important, such as for refundings.Coordination of multiple components of the financing are required.Participation from DBE / SBE firms is enhanced.Issuer has lower or weakening credit rating.


g)

i)J)k)l)m)

Issuer is not well known to investors.Sale and marketing of the bonds will require complex explanationsabout the issuer’s projects, media coverage, political structure,political support, funding, or credit quality.The bond type and/or structural features are non-standard, such asfor a forward bond sale, issuance of variable rate bonds or wherethere is use of derivative products.Bond insurance is not available or not offered.Early structuring and market participation by underwriters desired.Pre-qualified underwriters pool.Large transaction size.Expected high retail demand.

Private Placement is a sale which is structured specifically for onepurchaser such as a bank. While the MTA has not previously used thismethod of sale, the MTA reserves to the right to privately place itssecurities if the need arises.

XI. Investment of Bond Proceeds

Purchase of Investments. The MTA shall competitively bid the purchase ofsecurities, investment agreements, float contracts, forward purchase contracts andany other investment products used to invest bond proceeds. The MTA shallcomply with all applicable Federal, State, and contractual restrictions regardingthe use and investment of bond proceeds. This includes compliance withrestrictions on the types of investment securities allowed, restrictions on theallowable yield of some invested funds as well as restrictions on the time periodover which some bond proceeds may be invested. Each bidding process andresult shall be documented.

Diversification. The MTA shall diversify invested proceeds in order to reduce "risk exposure to providers, types of investment products and types of securitiesheld.

Disclosure. The MTA will require that all fees resulting from investment servicesor sale of products to the MTA be fully disclosed to ensure that there are noconflicts of interest and investments are being purchased at a fair market price.Underwriters of the bonds, but not the financial advisor, may bid on the sale ofinvest products for the proceeds. The financial advisor shall document thebidding process and results and shall certify in writing that the MTA received acompetitive and fair market price on the investments based on the biddingprocess.

XII. Market Relationships


Ao Rating Agencies and Investors: The Deputy Chief Executive Officer and theChief Financial Officer shall be primarily responsible, along with the ExecutiveOfficer, Finance and Treasurer for maintaining the MTA’s relationships withMoody’s Investors Service, Standard & Poor’s and Fitch IBCA. In addition togeneral communications, the Deputy Chief Executive Officer and the ChiefFinancial Officer, or their appropriate designees, shall: 1) meet with eachagency’s credit analyst at least once each fiscal year, and 2) communicate witheach agency’s analysts prior to each competitive or negotiated sale.

Board Communication: As a means of providing feedback from rating agenciesand/or investors regarding the MTA’s financial strengths and weaknesses asperceived by the market place, the Chief Financial Officer, or the appropriatedesignee, will provide a report to the Board at least once annually which alsoincludes recommendations for addressing any weaknesses

XIII. Continuing Disclosure

It is the policy of the MTA to remain in compliance with Rule 15c2-12 by filing itsannual financial statements and other financial and operating data for the benefit of itsbondholders within 180 days of the close of the fiscal year.

XIV. Consultants

The MTA will select its financial advisors and its bond counsel by competitive processthrough a Request for Proposals (RFP). The MTA’s contracting policies which are effect at the time will apply to all contracts with finance professionals. Selection may bebased on a best value approach for professional services or the lowest responsive costeffective bid based upon pre-determined criteria.

Financial Advisor. The MTA will select a financial advisor (or advisors) to assistin the debt issuance and debt administration processes. Selection of the MTA’sfinancial advisor(s) should be based on the following:

2.3.4.

experience in providing consulting services to complex issuers;knowledge and experience in structuring and analyzing complex issuesexperience and reputation of assigned personnel; and,fees and expenses

Financial advisory services provided to the MTA shall include, but shall not belimited to the following:

evaluate risks and opportunities associated with debt issuancemonitor marketing opportunitiesevaluation of proposals submitted to the MTA by investment banking


firms

structuring and pricing of bond issues.preparation of requests for proposals for other financial services (trusteeand paying agent services, printing, credit facilities, remarketing agentservices etc.)providing advise, assistance and preparation for presentations with ratingagencies and investors

Bond Counsel. MTA debt will include a written opinion by legal counselaffirming that the MTA is authorized to issue the proposed debt, that the MTA hasmet all constitutional and statutory requirements necessary for issuance, and adetemlination of the proposed debt’s federal income tax status. This approvingopinion and other documents relating to the issuance of debt will be prepared by anationally recognized bond counsel firm counsel with extensive experience inpublic finance and tax issues. The counsel will be selected from the pool of bondcounsel firms.

Disclosure Counsel. The MTA will hire Disclosure Counsel to prepare officialstatements in the event of a competitive sale.Disclosure Counsel will beresponsible for ensuring that the official statement complies with all applicablerules regulations and guidelines. Disclosure Counsel will be a nationallyrecognized firm with extensive experience in public finance. The counsel will beselected from the pool of bond counsel firms.

Disclosure bv Financing Team Members

The MTA expects that all of its financial advisory team will at all times providethe MTA with objective advice and analysis, maintain the confidentiality of MTAfinancial plans, and be free from any conflicts of interest. All financing teammembers will be required to provide full and complete disclosure, under penaltyof perjury, relative to any and all agreements with other financing team membersand outside parties that could compromise any firm’s ability to provideindependent advice that is solely in the best interests of the MTA or that could beperceived as a conflict of interest.. The extent of disclosure may vary dependingon the nature of the transaction.


Attachment 2

MTADEBT POLICY

I. Introduction

The purpose of the Debt Policy of the Los Angeles Metropolitan TransportationAuthority (LACMTA) is to establish guidelines for the issuance and management of theagency’s debt. This Debt Policy confirms the commitment of the Board, management,staff, financia! advisors and other decision makers to adhere to sound financialmanagement practices, including full and timely repayment of all borrowings, andachieving the lowest possible cost of capital within prudent risk parameters.

II. Scope and Authority

This policy shall govern the issuance and management of all debt and lease financingsfunded from the capital markets, and shall include all obligations and ancillary facilitiesrelated to those debt and lease financings, including investment of bond proceeds nototherwise covered by the MTA Investment Policy¯

While adherence to this Policy is required in applicable circumstances, the MTArecognizes that changes in the capital markets, agency programs and other unforeseencircumstances will produce situations which are not covered by the Policy or whichrequire modifications or exceptions to achieve Policy goals. In these cases, managementflexibility is appropriate provided specific authorization from the Board is obtained¯

The MTA’s Debt Policy shall be reviewed and updated at least annually and presented tothe Board for approval by the Chief Financial Officer. The Chief Executive Officer,Chief Financial Officer and Executive Officer - Finance are the designated administratorsof the MTA’s debt policy. The Treasurer shall have the day-to-day responsibility.andauthority for ~ff- structuring, implementingat!c=, and managing ~m~ntovzrzightv."~" ~..~,...~,;-" the MTA debt and finance program, including the issuance ofcommercial paper in accordance with the Board authorized pro~rams.~ This Debt Policyrequires that each debt or lease financing be specifically authorized by the MTA Board

III. Appropriate Uses for Debt

A. Capital Budgeting

1. The Capital Plan. The Chief Financial Officer shall develop a mu!d yearCapital Improvement Plan (the "CIP") for consideration and ultimate adoptionby the Board ..- The CIP should be for at least a -5-year period and shall beupdated at least annually. In addition to capital project costs, the CIP will

Effective-_ ....... ~November 1999 --Page I;~ of 4-3

a) Description and availability of all sources of fundsb) Timing of capital proiects A;’ai!abi!ity ~ ...... + .......... ~

c) Effect of capital projects on MTA debt burden Timizg ~f c-@ita!prcj~ctz

d) d) Debt service requirements

e) De~t c~r:ic~ requirements

2. Au~ofization for Issu~ce. Debt issu~ce for capital shall not beau~orized by the_-Bo~d ~less pe!icicc an~.~ ~.~,~,~o-";~;-"~ for such issu~ce hasbeen inco~orated into the CIP or ~til the CIP is modified and adopted by theBo~d to inco~orNe or amend a debt or fin~cin~ option not previouslyau~orized.. However, T~he Bond’s adoption of~e CIP does not, in ~d ofitself, constitute authorization for debt issu~ce of proposed capital projects¯Each financin~ shall be presented to the Board in the context of the CIP orother separately approved capital proiect.

o Review of Capital Plan. Modifications to the CIP shall be preceded with areport from the Chief Financial Officer which discusses the impact of theproposed borrowing on the CIP. _The CIP is to be reviewed and presentedto the Board at least annually.

B. Debt Financing

1. Appropriate Use of Long-Term Debt

a) Purpose for Long-Term Debt: Debt should be used to financeessential capital facilities, projects and certain equipment where it isa~rcFr~ate cost effective and fiscally prudent. The scope,requirements, and demands of the CIP, and the ability or need toexpedite or maintain the programmed schedule of approved capitalproiects should also be factors in the decision to issue long termdebt.re SFXead the cezt sfthe capita! !nveztment c:’er mere tkan erie~,oo~I ...... *., .... ............. ~ ~^ ~^~-~,, Inherent in its long-term_ debt policies, the

MTA recognizes that future taxpayers who will benefit from thecapital investment will pay a share of its cost.. Long-term debt willnot be used to fund MTA operations.

b) Lease Financing: Lease obligations are a routine and appropriatemeans of financing capital equipment¯ These types of obligationshould be considered for equipment and assets that are not financedunder the sales tax revenue based financing program. The usefullife of the capital equipment, the terms and conditions of the lease~and the However !ca~e cb!igatien~ a!~v 5a’:e ~..direct -impact on

¯ 1 ¢~I’~"~113Q --Effective-_ ....... oNovember 1999 ---Page 2;~ of 4-3-

debt capacity and budget flexibility will be evaluated prior to theimplementation of a lease program..- ~Eefforts will bemade to fund capital equipment with pay-as-you-go financingwhere feasiblea Cashflow sufficiency, capital programrequirements, lease program structures and cost, and market factorswill be considered in conjunction with a pay-as-you-go strategy inlieu of lease financing.cn!y the ~’~m’~ ~+,, ¯

........ f~,- Short-term equipment leases (d:fi:z!ti~n?)solicitatic= v .........that do not access the capital markets are not covered by thispolicy.] ~.~.~;’ net?

2. Use of Short-Term and Variable Rate Debt

b)

c)

Tax and Revenue Anticipation Notes: Borrowing for cash flowpurposes through the use of tax and revenue anticipation notes maybe used bridge temporary cash flow deficits within a fiscal year.Grant Anticipation Notes: The MTA may issue short-term notes tobe repaid with the proceeds of State or Federal grants if appropriatefor the project and in the best interests of the MTA. Generally,grant anticipation notes will only be issued if there is no otherviable source of up-front cash for the project.Variable Rate Debt: It is often appropriate to issue variable ratedebt to diversify the debt portfolio, provide interim funding forcapital projects and improve the match of assets to liabilities.Variable rate debt could also provide interest cost savings. T~e

debt ~em time t~ time, but ire use will gezera!!y be rectricted te

~-- +~ ~’+ ~"’-~- The amount ofunhed~ed variable ratedebt will generally not exceed 20% of all outstanding debt. Underno circumstances will the MTA issue variable rate debt forarbitrage purposes. -If variable rate debt is used, the MTA willperiodically, but at least annually, determine whether it isappropriate to convert the debt to fixed interest rates. The MTAmay issue commercial paper, or other forms of related variable ratedebt, from time to time, but its use will generally be restricted toproviding interim financing for capital projects programmed forlong term debt funding

IV. Debt Affordability Targets and Policy Limits

1. Re ...... c .......

Effective-_l 0/22/98November 1999 I-Page 3_g- of 4--3-

~Target and policy maximum amounts of revenues to be used to pay debt serviceare listed below as percentages of the respective revenue sources. These limits incombination with the CIP and multi-year planning document will ensure that the MTAwill be able to continue providing its essential operational services while planning forreplacement, rehabilitation and expansion of its capital investments¯

Categor~

Prop A Rail 35% -

Discretionary 40%

Local Return 25%

Allowable Uses &StatusRail Operations &Capital Is currentlycommitted to debtservice in an amountclose to the PolicyMaximum.

Any transit purpose.Current Board policydirects these funds tomunicipal bus subsidiesand incentives.Any transit purpose.Distributed to localitiesbased on population.

Covcrag~ of

0%, No Is: .......

.Debt PolicyMaximum87% ofProp A 35% Railrevenues.

No DebtIssuance. Or100% ???

N/A100%

Category

Discretionary 40% -All Liens

Allowable Uses &StatusBus & Rail, Capital &Operating.

Highway 25% - AllLiens

Rail Operations &Capital Is currentlycommitted to debtservice in an amountclose to the PolicyMaximum.

d00,4D1 ............ ~

3t°,4 of Prep C25°,4 Highv,’a-,"

, Covcra~~ of 3.2 :: ,

Policy Maximum40% of Prop C 40%Discretionaryrevenues.

40% of Prop C 25%Highway

¯ 1/~/~’~ ICIQ --Effective-_ ....... oNovember 1999 --.Page 4-3- of 4-3-

Commuter Rail 10%

Security 5%

Local Return 20%

Commuter Rail andPark and Ride.Operations or capital.

Transit Security.Operations or capital¯Any transit purpose¯Distributed to localitiesbased on population.

Rail

O%

1°,4

40% of Prop C 10%Commuter Rail

No Debt Issuance.

¯ 1 t-’,/’~0/OQ ; _] Effective-_ ........ Nm ember 1999 ~,Page 5;~ of 4-~

Category"

Fare BoxRevenueFederal GrantRevenuesState GrantRevenues

Allowable Uses &StatusAny transit purpose.

In accordance withgrant.In accordance withgrant.

14°,4

8°,4

0%

Policy Maximum .No Debt Issuance.

No Debt Issuance.

No Debt Issuance.

Benefit Typically to aco/. 100% of LeviesAssessment Levies support rail construction.TDA 1% No Debt Issuance.Various transit

purposes.0°,4

0°,4

Any transit purpose.Lease Revenues

Other SystemRevenues

Any transit purpose.

Limited issuancefor special projectsLimited issuancefor special projects

V. Purpose of Financin~

For each financing, documentation will be prepared and retained in a permanent "dealfile" regarding the various vendor selections, the decision process for sizing and structure,the method of bond sale, and investment decisions.

A. New Money Financin~

New money issues are those financings which generate additional funding to beavailable for expenditure on capital pmiects. These funds will be used foracquisition, construction and maior rehabilitation of capital assets. New moneybond proceeds may not be used to fund operational activities. The fundingrequirement by sales tax ordinance category is determined in the context of theCIP and annual budget. The structure for the finmlcin~ is recommended by theFinancial Advisor based on market conditions at the time of the sale forcompetitive issuances.

MTA plans to utilize its commercial paper programs to provide interim newmoney funding. The commercial paper is retired upon issuance of a lon~o-termbond or receipt of grant reimbursements.

Effective-_ ....... ~November 1999 Page 6;~ of-l--3

B. Refunding Bonds

__A present value analysis must be prepared that identifies the economic effects ofany refunding to be proposed to the Board. It is acknowledged that somerefundings may be executed for other than economic purposes, such as torestructure debt :crv!cc, change the type of debt instruments being used, or toretire a bond issue and indenture in order to remove undesirable covenants.

__Target savings amount shall be measuredz~cciScd using a call option pricingmodel. The savings from any particular refunding candidate shall be in the rangeof 90 - 95% of the expected value of the call option, net of all transactionexpenses. The Treasurer shall have discretion in making the final determinationto include individual refunding candidates.

__Alternatively, the more traditional methodology of measuring the net presentvalue savings as a percentage of the refimded par amount may be used with aminimum average savings of 3% for any one refunding transaction.

VI. Types of Products

A. Current Coupon Bonds

Cul~cent coupon bonds are bonds that pay interest periodically and principal atmaturity. They may be used for both new money and refunding transactions..Current coupon bonds ma7 be structured to meet the demands of the investor and~thereby, reduce the cost of borrowing. Features such as annual principalmaturities, the use of discounts, maturity of the debt, the parameters of the callprovisions, bond insurance and cash funded or suret,/DSRF are adiusted to themarket conditions at the time of sale.

B Zero Coupon and Capital Appreciation Bonds

Zero coupon bonds and capital appreciation have principal amortization that ismuch slower than level debt service resultin~ in increased interest expenditureover the life of the bond and. therefore, shall onb/be recommended in limitedsituations

--.Lease Purchase Financing

__Lease purchase financing represents a long term financing lease which is suitablefor financing capital equipment or the acquisition and construction of realproperty.

Effective-_19/22/98November 1999 --Page 7;~ of 4-3.

E

F

Equipment. It has been the MTA’s practice to_ purchase equipment andbuses on a pay-as-you-go basis; however, the MTA shall have the abilityto consider lease purchase debt, including certificates of participation as analternative to long-term vendor leases, including the ability to implement amaster lease program. Only the highest priority equipment purchases willbe lease purchased. Financing of equipment will be limited to contracts ofat least $20,000 and a useful life which is greater than 3 years. The finalmaturity of equipment lease financings will be limited to the averageuseful life of the equipment.

Real Property. The final maturity shall not exceed the estimated usefullife of the facility. In no case will the final maturity exceed 30 years.Principal payments related to real property acquisition or construction is tobe amortized such that it results in level debt service payments althoughthe MTA may consider rapid amortization to meet its repaymentobjectives.

~Derivative Products

Derivative products will be considered where appropriate wfi! cn!7 be uti!!zed inthe issuance or management of debt witk Frier Ec~d aFFrcva!, and only ininstances where it has been demonstrated that the derivative product will eitherprovide a hedge which reduces risk of fluctuations in expense or revenue, oralternatively, where it will reduce total proiect cost. An analysis of earlytermination costs and other conditional terms -will also be performed givencertain financing and marketing assumptions. Such analysis will document therisks and benefits associated with the use of the particular derivative product._Derivative products, will only be utilized with prior Board approval.

Zcro Coupon azd Capltal AFFreciation Bonds

Discount B~nd°o

__\Vhilc discount and dccF diccvunt bcnd~ mat red’ace the interest eect efthc bcnd~

VII. Structural Features

Effective-_ November 1999 8;~ of 4-3. J

A. Maturity of Debt

Co

__The final maturity of the debt shall be equal to or less than the useful life of theassets being financed, and the average life of the financing shall not exceed 120%of the average life of the assets being financed.

Debt Service Structure

Aggregate debt service principal and interest payments within each lien shouldresult in approximately level debt service._~wi~h principa! a’.=~’xiz°~i~n a!s~a,- ...... ~.~;~ ~ ~ ~c ~ .... ~ ~ ~+ ccr~’~ce. Individual new bond issues may deviate~om level debt se~ice to the extent their debt se~ice structure results inaggregate level debt se~ice within the lien, ~ ex~ple could be a reNndingbond.

__When refunding debt for economic savings, the previously existing debt serviceand amortization may be matched, but generally should not be exceeded.However, certain circumstances may require MTA to deviate from this objective,such as to+ update inefficient covenants, restructure debt service payments or alterbond payment dates.

C. Lien Levels

Senior and Junior Liens for each revenue source will be utilized in a mannerwhich will maximize the most critical constraint, typically either cost or capacity;Allowing for the most beneficial use of the revenue source securing the bond.

D. D. Capitalized Interest

.-Unless otherwise required, MTA will avoid the use of capitalized interest.Certain types of financings such as certificates of participation, lease-securedfinancings, and certain revenue bond projects may require that interest on thebonds be paid from capitalized interest until the issuer has constructive use of theproject. Thuc, T~o avoid unnecessarily increasing the bond size MTA willminimize its use of capitalized interest.

Discount Bonds

While discount m~d deep discount bonds may reduce the interest cost of the bondsbelow that of non-discount bonds, they should only be recommended in limitedsituations as they reduce the potential for savings from refunding of the bonds.

E. Debt Service Reserve Fund

Effective-_ ........ November 1999 ~Page

Cash Funded Reserve Funds and Surety Bonds. The debt service reserve fund(the "DSRF") is generally cash funded with bond proceeds. The DSRF maintained by the MTA’s trustee throughout the life of the bonds. A cash fimdedDSRF is invested pursuant to investment of proceeds guidelines within therespective indenture and interest earnings are generally used to offset debt servicepayments.__; and iln the final year of the bond issue, the cash available in theDSRF is usually used to make the final debt service payment. Since a cashfunded DSRF generates interest income, the MTA would have the potential to bein a financially neutral position if the interest earnings equal or exceed the interestrate of the bonds.

......... , ~An alternative to having a-a cash funded DSRF is to use a DSRFsurety policy which would be obtained from cnc efa~ bond insurers. Thesurety policy requires an up-front fee payment to the insurer and results in a lossof future income to the DSRF.

A~ tkcre is There may be a cost for using a surety._ _T~he Treasurerwill evaluate and document the DSRF funding decision._ Factors to be consideredin this evaluation include: arbitrage yield restrictions, current interest rates,availability and cost of a surety policy, and, opportunities for the use of the fundswithdrawn from the DSRF including additional capital prqiects or investmentopportunities.

.... ~o rw-~ ..... + .... ~; ...... ;n ..... ;"~ +~" .... *~^~;~’~+;~ efthe Dep’~’ty ChiefExccutiv: Of.qcer er the ChiefFinancia! ONcc’:.

G__~. Amortization,

The MTA will amortize its debt within each lien to achieve overall level debtservice or, alternatively, may utilize more accelerated repayment schedules aftergiving consideration to bonding capacity constraints. The MTA shall avoid theuse of bullet and balloon maturities except to achieve wrapped debt service so asto level outstanding debt service.

_H_No._,Financial and Risk Analysis of Issuance,

Net present value cost analysis, assessment of structural risks and complexities,and consideration of restrictions to future financing flexibility will be assessedand documented to determine the most efficient bond type and structuringfeatures. The MTA’s long-term pooled investment rate will be used as thediscount rate when comparing alternatives.

I_t4. Call Provisions,

In general, MTA securities will not include a call feature which is longer than 10years. Prior to use of any non-call provision the MTA will evaluate expected

¯ 1 (I/")")/(3¢’--Effective-_ ........ November 1999 --Page 10;-of-14

interest savings in relation to the expected savings from a refunding, as based onthe theoretical value of the call option.

J.__~. Credit Enhancement

Bond insurance. Bond insurance will be used when it provides aneconomic advantage to a particular bond maturity or entire issue. Bondinsurance provides improved credit quality for the bonds as a result of theinsurance provider’s guarantee of the payment of principal and interest onthe bonds. Because of the decreased risk, investors are willing to purchasebonds with lower yields than uninsured bonds, thus providing the issuerwith interest cost savings.

a) Benefit analysis. The decision to use bond insurance is aneconomic decision. The analysis compares the present value ofthe interest savings to the cost of the insurance premium.Insurance will be purchased when the premium cost is less than theprojected interest savings.

b) Provider selection. The Treasurer will solicit quotes for bondinsurance from at least three providers, or in the case of acompetitive sale submit application for pre-qualification ofinsurance. MTA recognizes that all providers may not beinterested in providing bids to the MTA or pre-qualifying the issue.The winnin~ underva’iter in a competitive sale will determinewhether it ~vill purchase insurance for the issue. For a negotiatedsale,- t_ZtZhe Treasurer shall have the authority to purchase bondinsurance when deemed advantageousr and the terms andconditions governing the guarantee are satisfactory, for a

Lines and letters of credit ("LOC") represent a bank’s promise to payprincipal and interest when due for a defined period of time, and subject tocertain conditions. In the case of a direct pay LOC, the trustee can drawupon the letter of credit to make debt service payments; under a stand-byLOC, the LOC can be used to cover the MTA’s default or bankruptcy. Iraletter of credit is to be used, the Treasurer shall prepare and distribute toqualified banks as described in paragraph (b) below, a request forqualifications which includes terms and conditions which are acceptable tothe MTA;

a) Liquidity Facility. The issuance of variable rate debt, includingvariable rate bonds and commercial paper requires the use of aliquidity facility. The Treasurer is hereby authorized to appoint a

Effective-_ ....... ~No\ ember 1999 Page 1 l__g of 4-~-

bank(s) to ensure the availability of liquidity support should thebonds or commercial paper -be tendered or not remarketed.

b) Provider selection. Only those banks with long term ratingsgreater than or equal to that of the MTA-, and short-term ratings ofP-I/A-1+, by Moody’s Investors Service and Standard & Poor’s,respectively may be solicited.

c) Selection criteria will include dictribution of a requestqualificat!cn ~,;’hic~ will include, but not be limited to thefollowing:

(1) long-term ratings at least equal to or better than the MTA’s;(2) short-term ratings of P-I/A-l+;(3) terms and conditions acceptable to the MTA; the MTA will

provide a term sheet along with the request forqualifications to which the banks will highlightmodifications;

(4) representative list of clients for whom the bank hasprovided liquidity facilities;

(5) fees; specifically, cost of LOC, draws, bank counsel andother administrative charges and estimate of tradingdifferential cost.

VIII. Documentation of Transactions

The decision processes used in each financing process will be fully documented. Thedocumentation wilt capture information regarding, selection of the financing team,decisions on product selection and structuring features, selection of vendors providin~ancillary services and selection of investment securities or products. This informationwill be compiled into a post-pricing book, deal fil , which will be retained for eachfinancing.

~,~IX. Credit Objectives

The MTA will actively seek to maintaincnance and improvement the creditratings of its outstanding bonds.Adherence to bgenchmarks, oOverall dg~ebt rl~atios and _a~ffordability tT-argets.Frequent communications with the _clgredit rl~ating a~gencies.

VH!X. Method of Bond Sale

No The MTA will utilize a competitive sale process when it will provide the lowestinterest cost for the bond. However, there are three methods of sale: _competitive,negotiated and private placement. Each type of bond sale has the potential to

Effectxve-_ ........ November 1999 Page 12___~ of-!--3.

provide the lowest cost given the right conditions. The conditions under whicheach type of bond sale is best used are provided below.

1. Competitive Salea)b)

c)

d)e)0

g)h)i)

Bond prices are stable and/or demand is strong.Market timing and interest rate sensitivity are not critical to thepricing.Participation from DBE / SBE firms is gbest ~efforts oOnly andnot required for winning bid.nct rcquireg.Issuer has a strong credit rating.Issuer is well known to investors.There are no complex explanations required during marketing,regarding: issuer’s projects, media coverage, political structure,political support, funding, or -credit quality.The bond type and structural features are conventional.h) Bond insurance is included or pre-qualified (available).Manageable transaction size.

o Negotiated Salea) Bond prices are volatile and/or demand is weak or supply of

b)c)d)e)f)g)

i)J)k)1)m)

competing bonds is high.Market timing is important, such as for refundings.Coordination of multiple components of the financing are required.Participation from DBE / SBE firms is enhanceddc~!rc~.Issuer has lower or weakening credit rating.Issuer is not well known to investors.Sale and marketing of the bonds will require complex explanationsabout the issuer’s projects, media coverage, political structure,political support, funding, or -credit quality.The bond type and/or structural features are non-standard, such asfor a forward bond sale, issuance of variable rate bonds or wherethere is use of-derivative products.Bond insurance is not available or not offered.Early structuring and market participation by underwriters desired.k) Pre-qualified underwriters pool.Large transaction size.Expected high retail demand.

Private Placement is a sale which is structured specifically for onepurchaser such as a bank. While the MTA has not previously used thismethod of sale, the MTA -reserves to the right to privately place itssecurities if the need arises.

$X_I. Investment of Bond Proceeds

Effective-_10/22/98November 1999 ---Page 13;- of 4-2-

A. Purchase of Investments. The MTA shall competitively bid the purchaseof securities, investment agreements, float contracts, forward purchase contractsand any other investment products used to invest bond proceeds. The MTA shallcomply with all applicable Federal, State, and contractual restrictions regardingthe use and investment of bond proceeds. This includes compliance withrestrictions on the types of investment securities allowed, restrictions on theallowable yield of some invested funds as well as restrictions on the time periodover which some bond proceeds may be invested. Each bidding process andresult shall be documented.

No B. Diversification. The MTA shall diversify invested proceeds in order toreduce risk exposure to providers, types of investment products and types ofsecurities held.

Disclosure. The MTA will require that all fees resulting from investment servicesor sale of products to the MTA be fully disclosed to ensure that there are noconflicts of interest and investments are being purchased at a fair market price.Underwriters of the bonds, but not the financial advisor, may bid on the sale ofinvest products for the proceeds. The financial advisor shall document thebidding process and results and shall certif~’:’cr’if~’ in writing that the MTA-i~receiveding a competitive and fair market price on the investments based on thebidding process.

XlI. Market Relationships

A. Rating Agencies and Investors: The Deputy Chief Executive Officer andthe Chief Financial Officer shall be primarily responsible, along with theExecutive Officer, Finance and the Treasurer for maintaining the MTA’srelationships with Moody’s Investors Service, Standard & Poor’s and Fitch IBCA.In addition to general communications, the Deputy Chief Executive Officer andthe Chief Financial Officer, or their appropriate designees, shall:_ t~1) meet witheach agency’s credit analyst at least once each fiscal year, and ~2) communicatewith each agency’s anal~,sts prior to each competitive or negotiated sale,-effcr te

talc.

Board Communication: As a means of providing feedback from rating agenciesand/or investors regarding the MTA’s financial strengths and weaknesses asperceived by the market place, the Chief Financial Officer, or the appropriatedesignee, will provide an era! report to the Board at least once annually whichalso includes recommendations for addressing any weaknesses. Th~ f~rma~

Effective-_ ........ November 1999 --Page ~4~ of-~

XIII. Continuing Disclosure

A. It is the policy of the MTA to remain in compliance with Rule 15c2-12 by filingits annual financial statements and other financial and operating data for the benefit of itsbondholders within 180 days of the close of the fiscal year.

XIV_~. Consultants

__The MTA will select its financial advisors and its bond counsel by competitive processthrough a Request for Proposals (RFP). The MTA’s contracting policies which are effect at the time will apply to all contracts with finance professionals. Selection may bebased on a best value approach for professional services or using the lowest responsivecost effective bid based upon pre-determined criteria.

Financial Advisor. The MTA will select a financial advisor (or advisors) to assistin the debt issuance and debt administration processes. Selection of the MTA’sfinancial advisor(s) should be based on the following:

2.3.4.

experience in providing consulting services to complex issuers;knowledge and experience in structuring and analyzing complex issuesexperience and reputation of assigned personnel; and,fees and expenses

A. Financial advisory services provided to the MTA shall include, but shallnot be limited to the following:.

o

evaluate risks and opportunities associated with debt issuancemonitor marketing opportunitiesevaluation of proposals submitted to the MTA by investment bankingfirmsstructuring and pricing of bond issues.preparation of requests for proposals for other financial services (trusteeand paying agent services, printing, credit facilities, remarketing agentservices etc.)providing advise, assistance and preparation for presentations with ratingagencies and investors

Effective-_ ........ November 1999 ~.Page l~5g of-14

go

and bc frcc fi’cm any ccnfi~cts of h~tercst.

Bond Counsel. MTA debt will include a written opinion by legal counselaffirming that the MTA is authorized to issue the proposed debt, that the MTA hasmet all constitutional and statutory requirements necessary for issuance, and adetermination of the proposed debt’s federal income tax status. This approvingopinion and other documents relating to the issuance of debt will be prepared by anationally recognized bond counsel firm counsel with extensive experience inpublic finance and tax issues. The counsel will be selected s~!cct~d by tkc Ck~cfF’~nancia! Officer cr Treasurer from the pool of bond counsel firms.

ccm~!cx!ty cf the trnnsacficn.

Disclosure Counsel. The MTA will hire Disclosure Counsel to prepare officialstatements in the event of a competitive sale. (Mere tc come)Disclosure Counselwill be responsible for ensurin~ that the official statement complies with allapplicable rules regulations and guidelines. Disclosure Counsel will be ~nationally recognized firm with extensive experience in public finance. Thecounsel will be selected fi’om the pool of bond counsel firms.

E. Disclosure by Financin~ Team Members

The MTA expects that all of its financial advisory team will at all times providethe MTA with objective advice and analysis, maintain the confidentiality of MTAfinancial plans, and be free from any conflicts of interest. ,-All financing teammembers will be required to provide full and complete disclosure, under penaltyof perjury, relative to any and all agreements with other financing team membersand outside parties that could compromise any mns ability to provtdeindependent advice that is solely in the best interests of the MTA or that could be,perceived as a conflict of interest.. The extent of disclosure may vary dependingon the nature of the transaction. ~ ......... , ~ ......... ~ ~ .................. + .... m

Effectxve-_ ........ November 1999 Page ~6g of q4 [

December 1999 Board Meeting - Item...

Documents

Transcript of December 1999 Board Meeting - Item...