RES 94-28 COMMENT ON PROPOSED SEC RULE 15C2-12RESOLUTION No. 94 - 28
A RESOLUTION OF THE CITY OF BAINBRIDGE ISLAND,
WASHINGTON COMMENTING ON PROPOSED SECURITIES
AND EXCHANGE COMMISSION RULE 15c2-12.
WHEREAS, the City of Bainbridge Island, Washington, is a small (population
17,500), fiscally sound city with the lowest property tax rate in the State of Washington
for any city with a population of over 3,500, one of only two cities with a population of
over 1,000 and no city tax on utilities, a city which has outstanding debt of less than
1.0 percent of its statutory limit, and a city whose bonds trade at rates significantly
better than its unrated condition would indicate; and
WHEREAS, the Securities and Exchange Commission (SEC) has proposed
amendments to its Rule 15c2-12; and
WHEREAS, The City of Bainbridge Island wishes to express its appreciation
to the SEC for proposing its changes to Rule 15c2-12 in a format that encourages
public comment and, further, wishes to comment on those changes; now, therefore,
DOES
THE CITY COUNCIL OF THE CITY OF BAINBRIDGE ISLAND, WASHINGTON,
RESOLVE AS FOLLOWS:
The City of Bainbridge Island favors the clear disclosure of information
relative to the condition of any bond issuer but strongly recommends that
such disclosure be voluntary.
If the SEC feels that compulsory disclosure is necessary, disclosure should
be made at the time securities are issued and should allow the issuer to
specify which disclosures it will and also which it will not make. The bond
market will evaluate the disclosures and will penalize the issuers making
inadequate disclosure in the eyes of the investment community.
The requirement for secondary market disclosure of information not required
at the time the securities were issued comes perilously close to being an
ex post facto law.
The City of Bainbridge Island, Washington, wishes to formally protest the
proposed requirement that all financial reporting be made in accordance with
Generally Accepted Accounting Principles (GAAP). When statements are not
prepared in accordance with GAAP, such variance must now clearly be reported.
However, GAAP requires the valuation of fixed assets, including roads, on the
basis of historical cost. The City of Bainbridge Island does not know and
cannot determine the historical cost of its roads. An evaluation sufficient
to satisfy the requirements of GAAP will cost our taxpayers at least $75,000.
That amount represents 1.4 % of total general fund revenues. The proposed
requirement that we use a method of accounting which increases our cost
and provides absolutely no benefit to either our citizens or to potential bond-
holders constitutes an "unfunded mandate."
The assertion that these changes do not create new disclosure obligations is
incorrect. The proposals have the effect of establishing a regimented, bureau-
cratic process for all to minimize material risks for only a few.
In general, the proposed rule changes make good sense for larger issuers. For
that reason, many of the disclosure requirements are already included as
recommendations by the Government Finance Officers Association's Disclosure
Guidelines for State and Local Government Securities. Requiring small issuers
to comply with requirements designed for large issuers is neither desirable nor
cost- effective.
PASSED by the City Council this 23rd day of June, 1994
APPROVED by the Mayor this 24th day of June, 1994.
ATTEST/AUTHENTICATE:
JANET K. WEST, Mayor
FILED WITH THE CITY CLERK:
PASSED BY THE CITY COUNCIL:
RESOLUTION 94 - 28
June 22,1994
June 23,1994
Amended June 24, 1994