As we get to the end of 2025 and the start of 2026, we offer this list of items to keep in mind as you plan for new capital projects and manage your existing projects and financings. Here are a few things to think about at least once a year:
Put your unused financing proceeds to work. Why pay interest on money that’s just sitting there? Once you realize that money you borrowed for a project won’t be needed, review your options and take appropriate action. Keep in mind that your loan documents, State laws, and tax regulations may restrict how you can use these funds, but there is always something useful you can do.
Work on your proposed local legislation. If you have something in mind, don’t wait. It’s never too early to reach out to your local delegation. Legislators need to submit ideas for local bills to the bill drafting office by April 13, and the actual legislation must be filed in the General Assembly by May 5.
Plan for bond referenda. To have a bond election in November, you need to have your formal actions completed by early August – ballot printing and the early voting process have made these deadlines are earlier than they used to be. We recommend beginning the formal process at least by May to have an unhurried pace to the proceedings. And before you can begin formal action, you need to have informally worked out the bond program with your elected officials and had a discussion with our friends at the LGC. (We’re working on a separate piece about the referendum process that we’ll publish by the end of January.)
Check the rules before you sell or lease any financed property. Tax rules and your loan documents will limit what you can do with the proceeds of the sale or lease of financed property, or whether you can even make the sale or lease in the first place. These rules apply whether or not the property is collateral for the loan.
Hold an annual meeting for your authorities and controlled nonprofits. Many local governments have established nonprofit corporations to participate in financings or in economic development projects, and most localities have a housing authority that may or may not be active. If any of these entities fall out of good legal order, it can be an awkward process to get them back on track. The governing board of the nonprofit or authority should meet at least annually to take care of necessary business, such as filling board vacancies. Here’s a related blog post on “legal housekeeping.”
Review compliance with your financing covenants. If you have any borrowings that are not LGC-controlled general obligation bonds, your financing documents probably require you to do certain things (and to avoid other things). For example, you might be required to send annual insurance certifications to your lender. Review your financing documents at least annually to help ensure your compliance with financing covenants. Here’s a related blog post about continuing compliance.
Watch out for the reimbursement rules. For years, IRS rules have required local governments to follow certain steps to be able to reimburse themselves out of financing proceeds for project expenses paid before the loan closing. Nevertheless, governmental entities are still having to change their plans because they missed these steps. Here’s a related blog post on the reimbursement rules.
Stay on top of your 15c2-12 continuing disclosure obligations. If you have a publicly offered financing that is still outstanding, including general obligation bonds sold through the LGC, you likely have an annual obligation to send your financial statements and certain other information to the “EMMA” information service by January 31. There’s a bit of a twist this year since many of you won’t have your complete, final audit in hand in time to make a January 31 posting. In that case, you must post unaudited statements by January 31, and then do a follow-up posting within 15 days of your receipt of the audited statements.
Don’t forget to post about special events, too. For any financing subject to the EMMA rules, the rules also require you to post notice of certain special events (such as refunding’s, new loans or prepayments) to EMMA. These special events won’t always line up with other financing activities, so check your financing contracts or Board actions for your requirements.
Think about using your “two-thirds” bonds. Each fiscal year a local government can issue general obligation bonds – without the need for voter approval – to the extent of two-thirds of the amount by which it reduced general obligation debt in the previous fiscal year. This may not be a huge amount, but sometimes these bonds can be just what you need. Here’s a related blog post about two-thirds bonds.
Calculate and pay any arbitrage rebate or “excess earnings” penalties might owe. If 2026 marks any five-year anniversary for one of your financings (that is, financings closed in 2011, 2016 2021 and so on), this year you may need to calculate and pay a rebate for that financing to the IRS. Also, you are usually required to make a rebate calculation and payment promptly after paying off a financing, even if you retire the financing by a refinancing. You may also need to make a calculation and payment if you have had your original financing proceeds on hand for more than three years. Whether or not you actually owe any money – and required payments are happening more frequently now — you may have a contractual obligation with your lender to make a calculation anyway, and you may find peace of mind in having it done.
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