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~ <br />;c ' . ' ~' <br />OVERALL REQUIREMENTS <br />FOR BOND FINANCING <br />1. Basic Issues: <br />a. Legal Lssue: Must provide full disclosure in the official statement (prospectus) <br />regazding all risks associated witti the Project and the Project participants <br />b. FinancialIssues: <br />i. Uacertainty: The more uncertainty there is as to any material aspect of <br />the Project or the Project financing, the higher the cost <br />(1) Ultimately, too much uncertainty can result in the bonds being <br />unsalable <br />ii. Complicated Story: The more complicated the story that needs to be told <br />in the official statement, the higher the cost <br />(1) In its simplest form, this Project is already a complicated story, <br />and thus we need to do everything possible to simplify it in every <br />respect <br />(2) Unavoidable complications are: <br />(a) Participation of a private party <br />(b) FTA funding for transit <br />~ (i) Note: this a story that has been told, and is not <br />problematic in itself, but adds to the problem when <br />~ added to other complications <br />(c) Bonds subject to annual appropriation . <br />(i) Note: again, this a story thr~tt has been told, and is <br />not problematic in itself, but adds to the problem <br />when added to other complications <br />2. Requirements to sell bonds on favorable terms: <br />a. Construction Risks: eliminate as many construction risks as possible prior to <br />marketing bonds <br />i. Ideal situation: detailed plans and specs to the point where the General <br />Contractor can get firm bids from subcontractors and provide the owners <br />with a Fixed Price Contract <br />ii. Second Best Situation: plans and specs developed to the point where the <br />General Contractor can give a refined Guaranteed Maximum Price that <br />eliminates significant contingencies <br />iii. Worst Situation: construction begins without the Ideal Situation or the <br />Second Best Situation having been attained <br />b. F'inancing Risks: eliminate as many financing risks and uncertainties as possible <br />prior to marketing bonds <br />i. Basic Goal: at the time the bonds are marketed must assure investors that <br />all the funds required to complete the Project are: <br />~ (1) In hand; and <br />~ (2) Available to be expended on Project Costs without contingency <br />