California Debt and Investment Advisory Commission

Draw on Reserves or Default Reporting Guidelines

Mello-Roos Community Facilities Districts Draw on Reserves or Default Report

Section 53359.5(c) of the Government Code requires that all agencies issuing Mello-Roos Community Facilities District bonds, regardless of when sold, notify the California Debt and Investment Advisory Commission (CDIAC) within ten days if either of the following events occur: (1) the local agency or its trustee fails to pay principal and interest due on any scheduled payment date or (2) funds are withdrawn from a reserve fund to pay principal and interest on the bonds that reduces the reserve fund to less than the reserve requirement (as described in the official bond documents of the sale). The report shall consist of a letter sent to CDIAC stating:

1. the agency’s name;
2. the bond issue title and original date of sale;
3. the project name;
4. the type of event [non-payment of principal and interest (default) or draw on the reserve fund];
5. the date the default or draw on the reserve fund occurred;
6. the amount of the default or draw on the reserve fund; and
7. contact information.

Issuers may include a statement of explanation containing information pertinent to the default or draw on the reserve fund (i.e., how the agency expects to address the issue, etc.). This information may be submitted by mail, postage prepaid, or electronically via CDIAC’s website.

Withdrawals from the reserve fund to make principal and/or interest payments that do not decrease the reserve fund below the reserve required need not be reported. Any agency that draws on the reserve fund below the reserve required or that fails to pay debt service must report to CDIAC each time such an event occurs. All agencies that issue bonds, regardless of when sold, must comply with this reporting requirement.

Marks-Roos Bond Pooling Act Participant Draw on Reserves or Default Report

Section 6599.1(c) of the Government Code requires that all agencies either issuing Marks-Roos bonds or agencies whose issues are purchased with the proceeds of a Marks-Roos bond issue, regardless of when sold, notify CDIAC within ten days if any of the following events occur: (1) the local agency or its trustee fails to pay principal and interest due on any scheduled payment date or (2) funds are withdrawn from a reserve fund to pay principal and interest on the bonds issued by the authority or on any bonds acquired by the authority. The report shall consist of a letter sent to CDIAC stating:

1. the agency’s name;
2. the bond issue title and original date of sale;
3. the project name;
4. the type of event [non-payment of principal and interest (default) or draw on the reserve fund];
5. the date the default or draw on the reserve fund ocurred;
6. the amount of the default or draw on the reserve fund; and
7. contact information.

Issuers may include a statement of explanation containing information pertinent to the default or draw on the reserve fund (i.e., how the agency expects to address the issue, etc.). This information may be submitted by mail, postage prepaid, or electronically via CDIAC’s website.

Withdrawals from the reserve fund to make principal and/or interest payments that do not decrease the reserve fund below the reserve required need not be reported. Any agency that draws on the reserve fund below the reserve required or that fails to pay debt service must report to CDIAC each time such an event occurs. All agencies that issue bonds, regardless of when sold, must comply with this reporting requirement.