R-02-01-24-9B3 - 1/24/2002RESOLUTION NO. R- 02- 01- 24 -9B3
WHEREAS, the City of Round Rock desires to retain professional
services for federal arbitrage rebate calculation services, and
WHEREAS,First Southwest Asset Management, Inc. has submitted an
Agreement for Arbitrage Rebate Compliance Services to provide said
services, and
WHEREAS, the City Council desires to enter into said Contract
with First Southwest Asset Management, Inc., Now Therefore
BE IT RESOLVED BY THE COUNCIL OF THE CITY OF ROUND ROCK, TEXAS,
That the Mayor is hereby authorized and directed to execute on
behalf of the City an Agreement for Arbitrage Rebate Compliance
Services with First Southwest Asset Management, Inc. for federal
arbitrage rebate calculation services, a copy of said Agreement being
attached hereto as Exhibit "A" and incorporated herein for all
purposes.
The City Council hereby finds and declares that written notice of
the date, hour, place and subject of the meeting at which this
Resolution was adopted was posted and that such meeting was open to the
public as required by law at all times during which this Resolution and
the subject matter hereof were discussed, considered and formally acted
upon, all as required by the Open Meetings Act, Chapter 551, Texas
Government Code.
:: ODMA\ WOR LDOX\ OA \WDOX \RESOLUTI \R201240].WPD /sc
RESOLVED this 24th day of January, 2002.
CHRISTINE R. MARTINEZ, City Secretary
2
ROB' A. STLUKA, JR. / Mayor
City of Round Rock, Texas
Form No. 148(f); Rev'd 04/30 /2001
AGREEMENT FOR
ARBITRAGE REBATE COMPLIANCE SERVICES
CITY OF ROUND ROCK, TEXAS
(Hereinafter Referred to as the "Issuer")
AND
FIRST SOUTHWEST ASSET MANAGEMENT, INC.
(Hereinafter Referred to as "First Southwest ")
It is understood and agreed that the Issuer, in connection with the sale and delivery of certain bonds, notes, certificates, or
other tax - exempt obligations (the "Bonds"), will have the need to determine to what extent, if any, it will be required to
rebate certain investment earnings (the amount of such rebate being referred to herein as the `Arbitrage Amount ") from the
proceeds of the Bonds to the United States of America pursuant to the provisions of Section 148(0(2) of the Internal
Revenue Code of 1986, as amended (the "Code"). For purposes of this Agreement, the term "Arbitrage Amount" includes
payments made under the election to pay penalty in lieu of rebate for a qualified construction issue under Section 148(0(4)
of the Code.
We are pleased to submit the following proposal for consideration; and if the proposal is accepted by the Issuer, it shall
become the agreement (the Agreement') between the Issuer and First Southwest effective at the date of its acceptance as
provided for herein below.
1. This Agreement shall apply to all issues of tax-exempt Bonds delivered subsequent to the effective date of the
rebate requirements under the Code, except for (i) issues which qualify for exceptions to the rebate requirements in
accordance with Section 148 of the Code and related Treasury regulations, or (ii) issues excluded by the Issuer in
writing in accordance with the further provisions hereof.
Covenants of First Southwest
2. We agree to provide our professional services in determining the Arbitrage Amount with regard to the Bonds. The
Issuer will assume and pay the fee of First Southwest as such fee is set out in Appendix A attached hereto. First
Southwest shall not be responsible for any extraordinary expenses incurred on behalf of Issuer in connection with
providing such professional services, including any costs incident to litigation, mandamus action, test case or other
similar legal actions.
3. We agree to perform the following duties in connection with providing arbitrage rebate compliance services:
a. To cooperate fully with the Issuer in reviewing the schedule of investments made by the Issuer with (i)
proceeds from the Bonds, and (ii) proceeds of other funds of the Issuer which, under Treasury Regulations
Section 1.148, or any successor regulations thereto, are subject to the rebate requirements of the Corte;
b. To perform, or cause to be performed, consistent with the Code and the regulations promulgated
thereunder, calculations to determine the Arbitrage Amount under Section 148(0(2) of the Code; and
c. To provide a report to the Issuer specifying the Arbitrage Amount based upon the investment schedule,
the calculations of bond yield and investment yield, and other information deemed relevant by First
Southwest. In undertaking to provide the services set forth in paragraph 2 and this paragraph 3, First
Southwest does not assume any responsibility for any record retention requirements which the Issuer may
have under the Code or other applicable laws, it being understood that the Issuer shall remain responsible
for compliance with any such record retention requirements.
1
EXHIBIT
”An
Covenants of the Issuer
In connection with the performance of the aforesaid duties, the Issuer agrees to the following:
a. The fees due to First Southwest in providing arbitrage rebate compliance services shall be calculated in
accordance with Appendix A attached hereto. The fees will be payable upon delivery of the report
prepared by First Southwest for each issue of Bonds during the term of this Agreement.
b. The Issuer will provide First Southwest all information regarding the issuance of the Bonds and the
investment of the proceeds therefrom, and any other information necessary in connection with calculating
the Arbitrage Amount. First Southwest will rely on the information supplied by the Issuer without inquiry,
it being understood that First Southwest will not conduct an audit or take any other steps to verify the
accuracy or authenticity of the information provided by the Issuer
c. The Issuer will notify First Southwest in writing of the retirement, prior to the scheduled maturity, of any
Bonds included under the scope of this Agreement within 30 days of such retirement. This notification is
required to provide sufficient time to comply with Treasury Regulations Section 1.148 -3(g) which requires
final payment of any Arbitrage Amount within 60 days of the final retirement of the Bonds. In the event
the Issuer fails to notify First Southwest in a timely manner as provided hereinabove, First Southwest shall
have no further obligation or responsibility to provide any services under this Agreement with respect to
such retired Bonds.
5. In providing the services set forth in this Agreement, it is agreed that First Southwest shall not incur any liability
for any error of judgment made in good faith by a responsible officer or officers thereof and, except to the limited
extent set forth in this paragraph, shall not incur any liability for any other errors or omissions, unless it shall be
proved that such error or omission was a result of the gross negligence or willful misconduct of said officer or
officers. In the event a payment is assessed by the Internal Revenue Service due to an error by First Southwest, the
Issuer will be responsible for paying the correct Arbitrage Amount and First Southwest's liability shall not exceed
the amount of any penalty or interest imposed on the Arbitrage Amount as a result of such error.
Bonds Issued Subsequent to Initial Contract
The services contracted for under this Agreement will automatically extend to any additional Bonds (including
financing lease obligations) issued during the term of this Agreement, if such Bonds are subject to the rebate
requirements under Section 148(fx2) of the Code. In connection with the issuance of additional Bonds, the Issuer
agrees to the following:
a. The Issuer will notify First Southwest of any tax-exempt financing (including financing lease obligations)
issued by the Issuer during any calendar year of this Agreement, and will provide First Southwest with
such information regarding such Bonds as First Southwest may request in connection with its
performance of the arbitrage rebate services contracted for hereunder. If such notice is not provided to
First Southwest with regard to a particular issue, First Southwest shall have no obligation to provide any
services hereunder with respect to such issue.
b. At the option of the Issuer, any additional Bonds to be issued subsequent to the execution of this
Agreement may be excluded from the services provided for herein. In order to exclude an issue, the Issuer
must notify First Southwest in writing of their intent to exclude any specific Bonds from the scope of this
Agreement, which exclusion shall be permanent for the full life of the Bonds; and after receipt of such
notice, First Southwest shall have m obligation to provide any services under this Agreement with respect
to such excluded Bonds .
2
Effective Date of Agreement
7. This Agreement shall become effective at the date of acceptance by the Issuer as set out herein below and remain in
effect thereafter for a period of five (5) years from the date of acceptance, provided, however, that this Agreement
may be terminated with or without cause by the Issuer or First Southwest upon thirty (30) days' written notice to
the other party. In the event of such termination, it is understood and agreed that only the amounts due to First
Southwest for services provided and extraordinary expenses incurred to and including the date of termination will
be due and payable. No penalty will be assessed for termination of this Agreement. In the event this Agreement is
terminated prior to the completion of its stated term, all records provided to First Southwest with respect to the
investment of monies by the Issuer shall be returned to the Issuer as soon as practicable following written request
therefor by Issuer. In addition, the parties hereto agree that upon termination of this Agreement, First Southwest
shall have no continuing obligation to the Issuer regarding any services contemplated herein, regardless of whether
such services have previously been undertaken, completed or performed.
Acceptance of Agreement
8. This Agreement is submitted in duplicate originals. When accepted by the Issuer, it together with Appendix A
attached hereto, will constitute the entire Agreement between the Issuer and First Southwest for the purposes and
the consideration herein specified.
Governing Law
9. This Agreement will be governed by and construed in accordance with the laws of the State of Texas, without
regard to its principles of conflicts of laws.
Acceptance will be indicated on both copies and the return of one executed copy to First Southwest.
Respectfully submitted, -
FIRST SOUTHWEST ASSET MANAGEMENT, INC.
By
Authorized Representative
Printed Name: Randee R. Wilson
Date
ISSUER'S ACCEPTANCE CLAUSE
The above and foregoing is hereby in all things accepted and approved by
, on this the day of
By
Authorized Representative
Title
Printed Name
3
Description
Annual Fees Per Issue
Per Computation
Year (1)
Base Fee Per Computation Year:
$2,000
Additional Charges foe Special Services Related to:
Debt Service Reserve Funds
$500
Commingled Funds
$500
Transferred Proceeds
$500
Debt Service Fund Residual Calculations (Excess Tax Collections)
$500
$100,000 Test for Debt Service Funds
$500
Variable/Floating Rate Bond Issue
$1,000
Yield Restriction Analysis/Yield Reduction Computation
$500
Premium for Quick Turnaround (21 days or less)
$500
Commercial Paper:
Per allocated issue to perform arbitrage rebate computation
$ 4,000
Penalty Calculations:
Semiannual fee for each issue of Bonds, regardless of issue size_
$1,000
APPENDIX A - FEES
The Bonds to be covered initially under this contract include all issues of tax -exempt bonds delivered subsequent to the effective
dates of the rebate requirements, under the Code, except for issues which qualify for exceptions to the rebate requirements in
accordance with Section 148 of the Code and related Treasury regulations. The fee for each of the Bonds included in this con tract
shall be:
(1) A "Computation Year" represents a one year period from the delivery date of the issue to the date that is one calendar
year after the delivery date, and each subsequent one-year period thereafter. Therefore, if a calculation is required that
covers more than one "computation year," the annual fee is multiplied by the number of computation years contained in
the calculation being performed. For example, if the first calculation performed for an issue covers three computation
years, the fee for that calculation would be three times the annual fees stated above.
EXPLANATION OF ADJUSTMENTS TO BASE FEE
1. Debt Service Reserve Funds. The authorizing documents for many revenue bond issues require that a separate fund
be established (the "Reserve Fund") into which either bond proceeds or revenues are deposited in an amount equal to
some designated level, such as average annual debt service on all parity bonds. This Reserve Fund is established for the
benefit of the bondholders as additional security for payment on the debt. In most instances, the balance in the Reserve
Fund remains stable throughout the life of the bond issue. Reserve Funds, whether funded with bond proceeds or
revenues, must be included in any calculations of rebate.
2. Commingled Fund Allocations. By definition, a commingled fiord means that the proceeds of any particular bond
issue have been deposited in a fund that contains amounts that are not part of that bond issue. It is common for issuers
to commingle bond proceeds with either operating revenues or other bond proceeds. The arbitrage regulations, while
permitting the commingling of funds, require that bond proceeds be "carved -out" for purposes of calculating rebate.
Interest must be allocated to the portion of the commingled fund that represents bond proceeds of the issue in question.
4
3. Transferred Proceeds Calculations. When a bond issue is refinanced (refunded) by another issue, special services
relating to "transferred proceeds" calculations may have to be performed Under the regulations, when proceeds of a
refunding issue are used to pay principal on a prior issue, a pro rata portion of the refunded bond proceeds are treated
as "transferred" to the refunding issue. Although no funds are physically transferred from one issue to another, it is
often necessary to perform these calculations for rebate purposes.
4. Debt Service Fund Residual Calculations. Because tax rates are established using an estimated collection percentage,
the balance in the debt service fund (often iefeued to as the Interest & Sinking Fund) may exceed the amount necessary
to pay the current year's debt service requirements. Any such excess amounts in a debt service fund must be treated as
a "reserve fund," thereby subjecting the excess balance to the rebate requirements. To the extent that any amounts
deposited in the debt service fund remain for more than thirteen months on a first -in, first -out basis, that excess is
classified as a "reserve fund portion" until used for payment of debt service. Special services are required to complete
these debt service fund residual calculations.
5. Variable/Floating Rate Bond Issues. Special services are also required to perform the arbitrage rebate calculations for
variable rate bonds. A bond is a variable rate bond if the interest rate paid on the bond is dependent upon an index
which is subject to changes subsequent to the issuance of the bonds. The computational requirements of a variable rate
issue are more complex than those of a fixed rate issue and, accordingly, require significantly more time to calculate.
For example, it is necessary to evaluate both a five-year yield as well as one-year yield increments to determine which
yield is most beneficial to the issuer.
6. Yield Restriction Analysis/Yield Reduction Computations. The Code provides that proceeds of a bond issue may not
be invested above the yield on the bond unless an applicable exception applies which provides a temporary period
during which proceeds are not yield restricted. First Southwest provides analysis to determine the amount of proceeds
which must be yield restricted and provides computations to verify that the proceeds have been properly restricted. In
addition, the 1993 Treasury Regulations provide that a yield reduction payment may be made in lieu of yield restricting
proceeds. First Southwest will provide the necessary computations to determine the amount of yield reduction payment
which must be made.
The fee for any Bonds under this contract shall only be payable if a computation is required under Section 148(0(2) of the
Code. In the event that any of the Bonds, fall within an exclusion to the computation requirement as defined by Section 148
of the Code or related regulations and no calculations were required by First Southwest to make that determination, no fee
will be charged for such issue. For example, certain bonds are excluded from the rebate computation requirement if the
proceeds are spent within specific time periods. In the event a particular issue of Bonds fulfills the exclusion requirements
of the Code or related regulations, the specified fee will be waived by First Southwest if no calculations were required to
make the determination.
5
Recognizing that computational complexities are reduced when all or the majority of the gross proceeds of an issue are
expended, it is First Southwest's policy to reduce fees to the following levels, as appropriate:
Per issue fees for each circumstance itemized below shall be:
❑ Proceeds expended in prior year. Liability updated and report issued. $500
❑ Debt Service Residual Calculation only. $1,250
❑ Reserve Fund calculation only $1,250
❑ Escrow Fund only. $500
❑ Rebate Fund only $500
❑ Preparation of IRS refund request. **
❑ Yield Restriction/Yield Reduction Computation only. $2,000
** Fee based upon complexities involved and estimated time to complete request.
First Southwest's fees are payable upon delivery of the report prepared by First Southwest, the first report to be made
following one year from the date of delivery of the Bonds and on each computation date thereafter during the term of the
Agreement.
The fees for computations of the Arbitrage Amount which encompass more, or less, than one Computation Year of
investment data performed during the same computation period shall be prorated to reflect the longer, or shorter, period of
work performed during that period For example, the fee to perform an arbitrage rebate computation through August 31,
1999, on an issue with commingled funds that delivered May 4, 1994, and was spent on March 15, 1997, would be $8,500,
determined as follows:
1$2,000 (base fee) + $500 (commingled funds charge)] x 3 years (May 4, 1994 through March 15, 1997) = $7,500; plus, for
the years 1998 and 1999, $500 per year for updating liability and issuing reports after proceeds were expended.
SAREBATE\ SHARED \CON7RAC1W Diebaledoc
6
DATE: January 17, 2002
SUBJECT: City Council Meeting — January 24, 2002
ITEM: *9.B.3. Consider a resolution authorizing the Mayor to execute an
Agreement for Arbitrage Rebate Compliance Services with First
Southwest Asset Management, Inc. for Federal Arbitrage Rebate
Calculation Services.
Resource: David Kautz, Finance Director
History: This resolution renews the agreement between the City and First Southwest Co.
for the excess investment earnings rebate calculations as required by the Federal
Regulations. The calculations are required for tax - exempt bond issues in order
to determine whether investment earnings have exceeded levels allowed by law,
thus becoming subject to rebate to the federal government.
The five -year agreement provides expert assistant to the City in complying with
the Federal arbitrage regulations. In addition to performing the calculations for
applicable City bond issues, First Southwest also provides expert assistant in
interpreting Internal Revenue Service rules and developing strategies for
incurring the minimal arbitrage liability.
Funding:
Cost: Fees are per bond issue and are attached to the agreement
Source of funds: Investment eamings
Outside Resources: N/A
Impact/Benefit: The company provides expert assistance to the City with their knowledge of
complex interpretation of U.S. Treasury and Internal Revenue Service codes
and strategies for minimizing rebate liability.
Public Comment: N/A
Sponsor: N/A
t �
Form No. 148(1); Rev'd 04/30/2001
AGREEMENT FOR
ARBITRAGE REBATE COMPLIANCE SERVICES
CITY OF ROUND ROCK. TEXAS
(Hereinafter Referred to as the "Issuer ")
AND
FIRST SOUTHWEST ASSET MANAGEMENT, INC.
(Hereinafter Referred to as "First Southwest ")
ORIGINAL
It is understood and agreed that the Issuer, in connection with the sale and delivery of certain bonds, notes, certificates, or
other tax- exempt obligations (the "Bonds "), will have the need to determine to what extent, if any, it will be required to
rebate certain investment earnings (the amount of such rebate being referred to herein as the Arbitrage Amount') from the
proceeds of the Bonds to the United States of America pursuant to the provisions of Section 148(f)(2) of the Internal
Revenue Code of 1986, as amended (the "Code "). For purposes of this Agreement, the term "Arbitrage Amount" includes
payments made under the election to pay penalty in lieu of rebate for a qualified construction issue under Section 148(1)(4)
of the Code.
We are pleased to submit the following proposal for consideration; and if the proposal is accepted by the Issuer, it shall
become the agreement (the `Agreement') between the Issuer and First Southwest effective at the date of its acceptance as
provided for herein below.
1. This Agreement shall apply to all issues of tax -exempt Bonds delivered subsequent to the effective date of the
rebate requirements under the Code, except for (i) issues which qualify for exceptions to the rebate requirements in
accordance with Section 148 of the Code and related Treasury regulations, or (ii) issues excluded by the Issuer in
writing in accordance with the further provisions hereof.
Covenants of First Southwest
2. We agree to provide our professional services in determining the Arbitrage Amount with regard to the Bonds. The
Issuer will assume and pay the fee of First Southwest as such fee is set out in Appendix A attached hereto. First
Southwest shall not be responsible for any extraordinary expenses incurred on behalf of Issuer in connection with
providing such professional services, including any costs incident to litigation, mandamus action, test case or other
similar legal actions.
3. We agree to perform the following duties in connection with providing arbitrage rebate compliance services:
a. To cooperate fully with the Issuer in reviewing the schedule of investments made by the Issuer with (i)
proceeds from the Bonds, and (ii) proceeds of other funds of the Issuer which, under Treasury Regulations
Section 1.148, or any successor regulations thereto, are subject to the rebate requirements of the Code;
b. To perform, or cause to be performed, consistent with the Code and the regulations promulgated
thereunder, calculations to determine the Arbitrage Amount under Section 148(1)(2) of the Code; and
c. To provide a report to the Issuer specifying the Arbitrage Amount based upon the investment schedule,
the calculations of bond yield and investment yield, and other information deemed relevant by First
Southwest. In undertaking to provide the services set forth in paragraph 2 and this paragraph 3, First
Southwest does not assume any responsibility for any record retention requirements which the Issuer may
have under the Code or other applicable laws, it being understood that the Issuer shall remain responsible
for compliance with any such record retention requirements.
1
Covenants of the Issuer
4. In connection with the performance of the aforesaid duties, the Issuer agrees to the following:
a. The fees due to First Southwest in providing arbitrage rebate compliance services shall be calculated in
accordance with Appendix A attached hereto. The fees will be payable upon delivery of the report
prepared by First Southwest for each issue of Bonds during the term of this Agreement.
b. The Issuer will provide First Southwest all information regarding the issuance of the Bonds and the
investment of the proceeds therefrom, and any other information necessary in connection with calculating
the Arbitrage Amount. First Southwest will rely on the information supplied by the Issuer without inquiry,
it being understood that First Southwest will not conduct an audit or take any other steps to verify the
accuracy or authenticity of the information provided by the Issuer.
c. The Issuer will notify First Southwest in writing of the retirement, prior to the scheduled maturity, of any
Bonds included under the scope of this Agreement within 30 days of such retirement. This notification is
required to provide sufficient time to comply with Treasury Regulations Section 1.148 -3(g) which requires
final payment of any Arbitrage Amount within 60 days of the final retirement of the Bonds. In the event
the Issuer fails to notify First Southwest in a timely manner as provided hereinabove, First Southwest shall
have no further obligation or responsibility to provide any services under this Agreement with respect to
such retired Bonds.
5. In providing the services set forth in this Agreement, it is agreed that First Southwest shall not incur any liability
for any error of judgment made in good faith by a responsible officer or officers thereof and, except to the limited
extent set forth in this paragraph, shall not incur any liability for any other errors or omissions, unless it shall be
proved that such error or omission was a result of the gross negligence or willful misconduct of said officer or
officers. In the event a payment is assessed by the Internal Revenue Service due to an error by First Southwest, the
Issuer will be responsible for paying the correct Arbitrage Amount and First Southwest's liability shall not exceed
the amount of any penalty or interest imposed on the Arbitrage Amount as a result of such error.
Bonds Issued Subsequent to Initial Contract
6. The services contracted for under this Agreement will automatically extend to any additional Bonds (including
financing lease obligations) issued during the term of this Agreement, if such Bonds are subject to the rebate
requirements under Section 148(f)(2) of the Code. In connection with the issuance of additional Bonds, the Issuer
agrees to the following:
a. The Issuer will notify First Southwest of any tax - exempt financing (including financing lease obligations)
issued by the Issuer during any calendar year of this Agreement, and will provide First Southwest with
such information regarding such Bonds as First Southwest may request in connection with its
performance of the arbitrage rebate services contracted for hereunder. If such notice is not provided to
First Southwest with regard to a particular issue, First Southwest shall have no obligation to provide any
services hereunder with respect to such issue.
b. At the option of the Issuer, any additional Bonds to be issued subsequent to the execution of this
Agreement may be excluded from the services provided for herein. In order to exclude an issue, the Issuer
must notify First Southwest in writing of their intent to exclude any specific Bonds from thc scope of this
Agreement, which exclusion shall be permanent for the full life of the Bonds; and after receipt of such
notice, First Southwest shall have no obligation to provide any services under this Agreement with respect
to such excluded Bonds .
2
Effective Date of Agreement
7. This Agreement shall become effective at the date of acceptance by the Issuer as set out herein below and remain in
effect thereafter for a period of five (5) years from the date of acceptance, provided, however, that this Agreement
may be terminated with or without cause by the Issuer or First Southwest upon thirty (30) days' written notice to
the other party. In the event of such termination, it is understood and agreed that only the amounts due to First
Southwest for services provided and extraordinary expenses incurred to and including the date of termination will
be due and payable. No penalty will be assessed for termination of this Agreement. In the event this Agreement is
terminated prior to the completion of its stated term, all records provided to First Southwest with respect to the
investment of monies by the Issuer shall be returned to the Issuer as soon as practicable following written request
therefor by Issuer. In addition, the parties hereto agree that, upon termination of this Agreement, First Southwest
shall have no continuing obligation to the Issuer regarding any services contemplated herein, regardless of whether
such services have previously been undertaken, completed or performed.
Acceptance of Agreement
8. This Agreement is submitted in duplicate originals. When accepted by the Issuer, it, together with Appendix A
attached hereto, will constitute the entire Agreement between the Issuer and First Southwest for the purposes and
the consideration herein specified.
Governing Law
9. This Agreement will bc governed by and construed in accordance with the laws of the State of Texas, without
regard to its principles of conflicts of laws.
Acceptance will be indicated on both copies and the return of one executed copy to First Southwest.
Respectfully submitted,
FIR UTHWEST ASS: T • AGEMENT, INC.
♦ 1 i Il►
Authorized Representative
Printed Name: Randee R. Wilson
Date ✓
ISSUER'S ACCEPTANCE CLAUSE
The above and foregoing is hereby in all things accepted and approved by
A/L Q / eo e edry C/4 a on this t day of
,Aft, iRy
Title
3
resentative
NUA
4002.J
D /Z � - /� Un
Printed Name R.066.e / /7 • 6TLIIM, ( e .
Description
Annual Fees Per Issue
Per Computation
Year (1)
Base Fee Per Computation Year.
52,000
Additional Charges for Special Services Related to:
Debt Service Reserve Funds
$500
Commingled Funds
$500
Transferred Proceeds
$500
Debt Service Fund Residual Calculations (Excess Tax Collections)
$500
$100,000 Test for Debt Service Funds
$500
Variable/Floating Rate Bond Issue
$1,000
Yield Restriction Analysis/Yield Reduction Computation
$500
Premium for Quick Turnaround (21 days or less)
$500
Commercial Paper
Per allocated issue to perform arbitrage rebate computation
$4,000
Penalty Calculations:
Semiannual fee for each issue of Bonds, regardless of issue size.
$1,000
APPENDIX A - FEES
The Bonds to be covered initially under this contract include all issues of tax -exempt bonds delivered subsequent to the effective
dates of the rebate requirements, under the Code, except for issues which qualify for exceptions to the rebate requirements in
accordance with Section 148 of the Code and related Treasury regulations. The fee for each of the Bonds included in this contract
shall be:
(1) A "Computation Year" represents a one year period from the delivery date of the issue to the date that is one calendar
year after the delivery date, and each subsequent one-year period thereafter. Therefore, if a calculation is required that
covers more than one "computation year," the annual fee is multiplied by the number of computation years contained in
the calculation being performed. For example, if the first calculation performed for an issue covers three computation
years, the fee for that calculation would be three times the annual fees stated above.
EXPLANATION OF ADJUSTMENTS TO BASE FEE
1. Debt Service Reserve Funds The authorizing documents for many revenue bond issues require that a separate fund
be established (the "Reserve Fund ") into which either bond proceeds or revenues are deposited in an amount equal to
some designated level, such as average annual debt service on all parity bonds. This Reserve Fund is established for the
benefit of the bondholders as additional security for payment on the debt. In most instances, the balance in the Reserve
Fund remains stable throughout the life of the bond issue. Reserve Funds, whether funded with bond proceeds or
revenues, must be included in any calculations of rebate.
2. Commingled Fund Allocations. By definition, a commingled fund means that the proceeds of any particular bond
issue have been deposited in a fund that contains amounts that are not part of that bond issue. It is common for issuers
to commingle bond proccolc with either operating revenues or other bond proceeds. The arbitrage regulations, while
permitting the commingling of funds, require that bond proceeds be "carved -out" for purposes of calculating rebate.
Interest must be allocated to the portion of the commingled find that represents bond proceeds of the issue in question.
4
3. Transferred Proceeds Calculations. When a bond issue is refinanced (refunded) by another issue, special services
relating to "transferred proceeds" calculations may have to be performed. Under the regulations, when proceeds of a
refunding issue are used to pay principal on a prior issue, a pro rata portion of the refunded bond proceeds are treated
as "transferred" to the refunding issue. Although no funds are physically transferred from one issue to another, it is
often necessary to perform these calculations for rebate purposes.
4. Debt Service Fund Residual Calculations. Because tax rates are established using an estimated collection percentage,
the balance in the debt service fund (often referred to as the Interest & Sinking Fund) may exceed the amount necessary
to pay the current year's debt service requirements. Any such excess amounts in a debt service fund must be treated as
a "reserve fund," thereby subjecting the excess balance to the rebate requirements. To the extent that any amounts
deposited in the debt service fund remain for more than thirteen months on a first -in, first -out basis, that excess is
classified as a "reserve fund portion" until used for payment of debt service. Special services are required to complete
these debt service fund residual calculations.
5 Variable(Floating Rate Bond Issues. Special services are also required to perform the arbitrage rebate calculations for
variable rate bonds. A bond is a variable rate bond if the interest rate paid on the bond is dependent upon an index
which is subject to changes subsequent to the issuance of the bonds. The computational requirements of a variable rate
issue are more complex than those of a fixed rate issue and, accordingly, require significantly more time to calculate.
For example, it is necessary to evaluate both a five -year yield as well as one -year yield increments to determine which
yield is most beneficial to the issuer.
6. Yield Restriction Analysis/Yield Reduction Computations. The Code provides that proceeds of a bond issue may not
be invested above the yield on the bond unless an applicable exception applies which provides a temporary period
during which proceeds are not yield restricted. First Southwest provides analysis to determine the amount of proceeds
which must be yield restricted and provides computations to verify that the proceeds have been properly restricted. In
addition, the 1993 Treasury Regulations provide that a yield reduction payment may be made in lieu of yield restricting
proceeds. First Southwest will provide the necessary computations to determine the amount of yield reduction payment
which must be made.
The fee for any Bonds under this contract shall only be payable if a computation is required under Section 148(0(2) of the
Code. In the event that any of the Bonds, fall within an exclusion to the computation requirement as defined by Section 148
of the Code or related regulations and no calculations were required by First Southwest to make that determination, no fee
will be charged for such issue. For example, certain bonds are excluded from the rebate computation requirement if the
proc'ls are spent within specific time periods. In the event a particular issue of Bonds fulfills the exclusion requirements
of the Code or related regulations, the specified fee will be waived by First Southwest if no calculations were required to
make the determination.
5
Recognizing that computational complexities are reduced when all or the majority of the gross proceeds of an issue are
expended, it is First Southwest's policy to reduce fees to the following levels, as appropriate:
Per issue fees for each circumstance itemized below shall be:
❑ Proceeds expended in prior year. Liability updated and report issued. $500
❑ Debt Service Residual Calculation only. $1,250
❑ Reserve Fund calculation only. $1,250
❑ Escrow Fund only. $500
❑ Rebate Fund only. $500
❑ Preparation of IRS refund request. **
❑ Yield Restriction/Yield Reduction Computation only $2,000
** Fee based upon complexities involved and estimated time to complete request.
First Southwest's fees are payable upon delivery of the report prepared by First Southwest, the first report to be made
following one year from the date of delivery of the Bonds and 011 each computation date thereafter during the term of the
Agreement.
The fees for computations of the Arbitrage Amount which encompass more, or less, than one Computation Year of
investment data performed during the same computation period shall be prorated to reflect the longer, or shorter, period of
work performed during that period. For example, the fee to perform an arbitrage rebate computation through August 31,
1999, on an issue with commingled funds that delivered May 4, 1994, and was spent on March 15, 1997, would be $8,500,
determined as follows:
[$2,000 (base fee) + $500 (commingled funds charge)] x 3 years (May 4, 1994 through March 15, 1997) = $7,500; plus, for
the years 1998 and 1999, $500 per year for updating liability and issuing reports after proceeds were expended.
S RBBATC \SHARED \CONTRACTWOrobele .doe
6
Mayor
Robert A. Stluka, Jr.
Mayor Pro -tem
Tom Nielson
Co, neit Members
Alan McCraw •
Carrie Pitt
Earl Paliner
Isabel Callahan
Gary Coe
City Manager
Robert L. Bennett, Jr.
City Attorney
Stephan L Sheets
4 CITY OF ROUND ROCK
May 9, 2002
Mr. Randee Wilson
First Southwest Asset Management, Inc.
1700 Pacific Avenue, Suite 1300
Dallas, Texas 75201
RE: Agreement for Arbitrage Rebate Compliance Services
Dear Mr. Wilson:
The Round Rock City Council approved Resolution No. R- 02- 01- 24 -9B3 at
their January 24, 2002 Council meeting. This resolution approved the
agreement for arbitrage rebate compliance services. Enclosed is a copy of the
resolution and original agreement. Please execute the agreement and return it
to my attention. If you have any questions, please do not hesitate to contact
Cindy Demers at 218 -5435.
incerely,
Christine R. Martinez
City Secretary
Fax: 512- 218 -7097
1.800- 735 -2989 TDD 1-800-735-2988 Voice
www.ci.round- rock.oc.us - -
221 East Main Street
Round Rock, Texas 78664
512- 218 -5400
Greg L. Rowan
Associate
September 28, 2001
Mr. David Kautz
Director of Finance
City of Round Rock
221 East Main Street
Round Rock, TX 78664
Dear David:
■4FIR57 ' Sall-NEST ASSET MANAGEMENT,INC.
I would like to begin working on the September 30, 2001 arbitrage rebate calculation for
the City's bond issue(s). Please forward the information requested on the following
page(s) as soon as possible. Also, please advise us of any issues not listed that may be
subject to rebate.
I appreciate your assistance in gathering this information. If you have any questions,
please do not hesitate to contact me at 1- 800 - 678 -3792 or directly at (214) 953 -4125. In
addition, my e-mail address is growanrstsw.com.
Sincerely,
Greg Rowan
1700 Pacific Avenue • Suite 1300 • Dallas, Texas 7520!) 214- 9.534125 • 1- 800 -678 -3792 • Fax 214-953-4111