CM-12-02-021RECEIVED
FEB 012012
City Manager Approval Form
Item Caption: Consider approving memo addressing Written Procedures for Post Bond Issuance Federal Tax Compliancy
Approval Date: February 3, 2012
Department Name: Finance Department
Project Manager: Cheryl Delaney, Finance Director
Assigned Attorney: Steve Sheets
Item Summary:
This document established a set of protocols that allow for the City to monitor the requirements necessary to maintain the tax
status of bonds the City issues. There has been increased focus on what happens after bonds are issued. The purpose of these
written procedures is to provide the City of Round Rock with an outline that describes actions to be taken in or to comply with
Bond covenants including applicable Internal Revenue Code of 1986, as amended, provisions and regulations.
No. of Originals Submitted:
Project Name:
Cost:
Source of Funds:
N/A
Select Source Fund
Source of Funds (if applicable): Select Source Fund
Account Number: N/A
Finance Director Approval: Cheryl Delaney
Date: 2/1/12
Department Director Approval: Cheryl Delaney Date: 2/1/12
**Electronic signature by the Director is acceptable. Please only submit ONE approval form per item. **
CIP 111 Budget E Purchasing 1 I I Accounting ❑�
N/A OK N/A OK N/A OK N/A OK
ITEMS WILL NOT BE PLACED ON THE COUNCIL OR CM AGENDA W/OUT PRIOR FINANCE AND/OR LEGAL APPROVAL
REV. 6/20/11
ROUND ROCK, TEXAS
PURPOSE. PASSION. PROSPERITY
CITY OF ROUND ROCK
INTEROFFICE MEMORANDUM
TO: Steve Norwood, City Manager
FROM: Cheryl Delaney, Finance Director
DATE: February 3, 2012
SUBJECT: Written Procedures for Post Bond Issuance Federal Tax Compliance for City of
Round Rock, TX
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Round Rock, Texas (the "City") has issued or will issue from time to time bonds, notes or other
tax-exempt obligations (collectively, the "Bonds"). The City is required by the terms of Section
103 and 141 through 150 of the Internal Revenue Code of 1986, as amended ("Code"), and the
U.S. Treasury Regulations promulgated thereunder ("Regulations"), to preserve the tax-exempt
status of its Bonds subsequent to their issuance. Further, the Code and the Regulations impose
record retention requirements on the City with respect to its Bonds.
The purpose of these written procedures is to provide the City with an outline that
describes actions to be taken in order to comply with Bond covenants including applicable Code
provisions and Regulations and also to specify who is responsible for such action. These
procedures shall be effective as of the date of this memorandum.
ARBITRAGE
With respect to the investment and expenditure of the proceeds of the Bonds, the City's
Director of Finance (the "Responsible Person") will instruct the appropriate City staff,
consultant(s) or other appropriate person(s) to:
(a) require that the construction, renovation or acquisition of any facilities to be
financed with the proceeds of the Bonds proceed with due diligence and that binding contracts
for the expenditure of at least five per cent (5%) of the proceeds of the Bonds be entered into
within six (6) months of the date of delivery of the Bonds ("Issue Date");
(b) monitor to ensure that at least eighty-five percent (85%) of the proceeds of the
Bonds to be used for the construction, renovation or acquisition of any facilities are expended
within three (3) years of the Issue Date;
(c) ensure that the yield on the investments of any proceeds of the Bonds be restricted
to the yield on the Bonds for any period beyond three (3) years of the Issue Date;
(d) monitor all amounts deposited into a sinking fund or fund (e.g., the Debt Service
Fund or Interest and Sinking Fund) to assure that the maximum amount invested at a yield higher
than the yield on the Bonds does not exceed an amount equal to the debt service on the Bonds in
the succeeding twelve (12) month period plus a carryover amount equal to one -twelfth (1/12) of
the principal and interest payable on the Bonds for the immediately preceding twelve (12) month
period;
(e) ensure that no more than fifty percent (50%) of the proceeds of the Bonds are
invested in an investment with a guaranteed yield for four (4) years or more;
(f) assure that the maximum amount of any reserve fund for the Bonds invested at a
yield higher than the yield on the Bonds will not exceed the lesser of (i) ten percent (10%) of the
principal amount.of the Bonds, (ii) one hundred twenty-five percent (125%) of the average
annual debt service on the Bonds measured as of the Issue Date, or (iii) one hundred percent
(100%) of the maximum annual debt service on the Bonds as of the Issue Date;
(g) monitor the actions of the escrow agent holding any escrow funded with Bond
proceeds to ensure compliance with the applicable provisions of the escrow agreement, including
with respect to reinvestment of cash balances;
(h) document by official action of the City Council, such as a reimbursement
resolution, any intent of the City to reimburse with the proceeds of the Bonds any amount
expended prior to the Issue Date for the acquisition, renovation or construction of the facilities;
(i) ensure that the applicable information return (e.g., IRS Form 8038-G, or any
successor form) is timely filed with the Internal Revenue Service ("IRS"); and
(j) assure that, unless excepted from rebate and yield restriction under Section 148(0
of the Internal Revenue Code of 1986, excess investment earnings are computed and paid to the
U.S. government at such time and in such manner as directed by the IRS (i) at least every five (5)
years after the Issue Date and (ii) within thirty (30) days after the date the Bonds are retired.
PRIVATE BUSINESS USE
With respect to the use of any facilities financed or refinanced with the proceeds of the
Bonds, the Responsible Person will instruct the appropriate City staff, consultant(s) or other
appropriate person(s) to:
(a) monitor the date on which the facilities are substantially complete and available to
be used for their intended purpose;
(b) monitor whether, at any time during which the Bonds are outstanding, any person,
other than the City, its employees and agents or members of the general public, has any
contractual right (such as a lease, purchase, management or other service agreement) with
respect to any portion of the facilities;
(c) monitor whether, at any time the Bonds are outstanding, any person, other than
the City, its employees and agents or members of the general public, has a right to use the output
of the facilities (e.g., water, gas or electricity);
(d) monitor whether, at any time the Bonds are outstanding, any person, other than
the City, its employees and agents or members of the general public, has a right to use the
facilities to conduct or to direct the conduct of research;
(e) determine whether, at any time the Bonds are outstanding, any person, other than
the City, has a naming right for the facilities or any other contractual right granting an intangible
benefit;
(0 determine whether, at any time the Bonds are outstanding, the facilities are sold or
otherwise disposed of; and
(g) take such action as is necessary to remediate any failure to maintain compliance
with the covenants contained in the Ordinances or Resolutions authorizing issuance of the Bonds
related to the public use of the facilities.
RECORDS RETENTION
The Responsible Person will maintain or cause to be maintained all records relating to the
investment and expenditure of the proceeds of the Bonds and the use of any facilities financed or
refinanced thereby for a period ending three (3) years after the complete extinguishment of the
Bonds. If any portion of the Bonds is refunded with the proceeds of another series of tax-exempt
bonds, the Responsible Person will maintain or cause to be maintained all of such records until
three (3) years after the refunding bonds are completely extinguished. Such records may be
maintained in paper or electronic format.
RESPONSIBLE PERSON
The Responsible Person and designated City staff will receive appropriate training
regarding the City's accounting system, contract intake system, facilities management system and
any other systems necessary to track the investment and expenditure of Bond proceeds and the
use of any facilities financed with Bond proceeds. The Responsible Person will retain such
experienced advisors, consultants and agents as may be necessary to carry out these procedures.
The Responsible Person will review these procedures annually and will revise as determined to
be necessary.
D BY:
Steve Norwood
City Manager