HomeMy WebLinkAbout2012-12-03-Resolutions 12-267_Post Issuance Compliance PolicyRESOLUTION 12-267
RESOLUTION APPROVING POST-ISSUANCE
COMPLIANCE POLICY
WHEREAS,the City of Waukee,sometimes hereinafter referred to as the "City",
is a municipal corporation duly incorporated,organized and existing under and by virtue
of the Constitution and laws of the State ofIowa;and
WHEREAS,various requirements apply under the Internal Revenue Code and
Income Tax Regulations (hereinafter "IRS Requirements")including information filing
and other requirements related to issuance,the proper and timely use of bond-financed
property,and arbitrage yield restriction and rebate requirements;and
WHEREAS,to comply with the IRS Requirements,govemmental bond issuers
must ensure that the rules are met at the time the bonds,capital loan notes or lease-
purchase obligations (hereinafter "bonds")are issued and throughout the term of the
bonds;and
WHEREAS,this includes the continued review of post-issuance obligations and
maintenance of records:
NOW THEREFORE,BE IT RESOLVED,BY THE CITY COUNCIL OF THE
CITY OF WAUKEE,STATE OF IOWA,THAT THE FOLLOWING WRITTEN
PROCEDURES ARE ADOPTED WHICH SHALL APPLY WITH RESPECT TO ALL
TAX EXEMPT OBLIGATIONS INCURRED BY THE CITY:
Section 1.The "Tax Compliance and Record Retention for Tax-Exempt
Governmental Bonds Policy"(hereinafter "Policy")attached hereto as Exhibit A is
hereby adopted and approved.
Section 2.The official designated in said policy shall take any and all action
necessary to properly implement the policy.
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PASSED AND APPROVED this 3rd day of December,2012.
ATTEST:
Interim ci~dministrator
ROLL CALL VOTE
Shane Blanchard
Dan Dutcher
Casey L.Harvey
Shelly Hughes
Mike Watts
AYE
X
X
X
X
X
NAY ABSENT
-2-
ABSTAIN
Waukee,Iowa
Tax Compliance and Record Retention for Tax-Exempt Governmental Bonds
Effective Date:December 3,2012
Definitions
"Advisors"means the Issuer's bond counsel,financial advisor,paying agent,and rebate
analyst.
"Bonds"mean bonds,notes or other obligations subject to the Code,Rules and applicable
securities regulations.
"Code"means the Internal Revenue Code of 1986,as amended.
"Governing Body"means the City Council of the Issuer.
"Issuer"means the City of Waukee,in the County of Dallas,State ofIowa.
"Rules"means Sections 103 and 141 through 150 of the Internal Revenue Code of 1986,
as amended,and the U.S.Treasury Regulations promulgated thereunder.
Purpose
Issuers of tax-exempt governmental Bonds must comply with federal tax rules pertaining
to expenditure of proceeds for qualified costs,Tate of expenditure,use of bond financed
property,investment of proceeds in compliance with arbitrage TIlles,and retention of
records.
As an issuer of such Bonds,the Governing Body,is required by Rules to take certain
actions subsequent to the issuance of the Bonds to ensure the continuing tax-exempt
status of such Bonds.Further,Section 6001 ofthe Code and Section 1.6001-1(a)of the
Treasury Regulations impose record retention requirements on the Issuer with respect to
its tax-exempt governmental Bonds.
The procedures encompassed herein,which to the best knowledge and belief of the Issuer
and administrative staff have heretofore been followed although not set forth in formal
written operating procedures,are intended to assure that the Issuer shall meet its
compliance obligations as an issuer of tax-exempt bonds and particularly with respect to
the expenditure of proceeds for qualified costs,Tate of expenditure,use of bond financed
property,investment of proceeds in compliance with arbitrage rules,and retention of
records.
Effective Date and Term
The effective date of this policy shall be the date of approval by the Goveming Body,and
shall remain in effect until superseded or terminated by action of the Goveming
Body.The Issuer shall comply with this policy upon issuance of Bonds and as long as
the Bonds remain outstanding.This policy may be revised to comply with amendments
to the Rules during the period the Bonds are outstanding.
Responsible Parties
The Finance Director shall be the party primarily responsible for ensuring that the Issuer
successfully carries out its tax compliance requirements under applicable provisions of
the Rules with regard to all obligations of the Issuer.The Finance Director is referred to
as the "Compliance Officer"for purposes of this policy.The Compliance Officer shall be
assisted by other staff and officials when appropriate and at the Compliance Officer's
discretion.The Compliance Officer shall also be authorized to retain and consult with the
Advisors during the time the Bonds are outstanding for assistance in carrying out post-
issuance tax compliance requirements.
The Compliance Officer shall be responsible for assigning post-issuance tax compliance
responsibilities to other staff.The Compliance Officer shall consult Advisors or such
other professional service organizations as are necessary to ensure compliance with the
post-issuance tax compliance requirements of the Issuer.The Compliance Officer shall
provide training and educational resources to staff responsible for ensuring compliance
with any portion of the tax compliance requirements of this policy.
Expenditure of Bond Proceeds --Review Process:
The Compliance Officer shall review the resolution authorizing issuance for each tax-
exempt obligation,and shall:
a)obtain a computation of the yield on such issue from the Issuer's financial advisor;
b)create a separate Project Fund (with as many sub-funds as shall be necessary to
allocate proceeds among the projects being funded by the issue)into which the
proceeds of issue shall be deposited;
c)review all requisitions,draw schedules,draw requests,invoices and bills
requesting payment from the Project Fund;
d)determine whether payment from the Project Fund is appropriate,and if so,make
payment from the Project Fund (and appropriate sub-fund if applicable);
e)maintain records of the payment requests and corresponding evidence of payment;
f)maintain records showing the earnings on,and investment of,the Project Fund;
g)ensure that investments acquired with proceeds are purchased at fair market value;
h)identify bond proceeds or applicable debt service allocations that must be invested
with a yield-restriction and monitor the investments of any yield-restricted funds
to ensure that the yield on such investments does not exceed the yield to which
such investments are restricted;
i)in the event the Issuer seeks to utilize bond proceeds for costs that were incurred
prior to the issuance of the Bonds,the Compliance Officer shall consult with the
Advisors to ensure that such expenditures are within the sixty (60)day period
prior to the date in which the Issuer made a "declaration of intent"to reimburse
such costs or are preliminary expenditures under the Code.Ifproceeds are used
for such reimbursement,a copy of the declaration of intent shall be obtained and
included in the records for the Bonds if not already part of the transcript;and
j)if not otherwise provided for in the Tax Exemption Certificate executed by the
officers of the Issuer at closing,the Compliance Officer shall prepare an
"allocation memorandum"for each issue of Bonds that accounts for the allocation
of the proceeds of the Bonds to expenditures not later than the earlier of:
1.Eighteen (18)months after the later of (i)the date the expenditure is paid,
or (ii)the date the project that is financed by the Bonds is placed in service;
or
11.Sixty (60)days after the earlier of (i)the fifth (5th)anniversary of the issue
date of the Bonds,or (ii)the date sixty (60)days after the retirement of the
Bonds.
Rate of Expenditure:
The Compliance Officer shall ensure that the expenditure of bond proceeds will be
monitored against the expenditure expectations represented in the tax exemption
certificate for such bond issue to ensure that:
•Five percent (5%)of the net sale proceeds were spent or committed within six (6)
months of the issue date;
•Eighty-five percent (85%)of the net sale proceeds were spent within three (3)
years of the issue date;and
•the Issuer proceeded with due diligence to complete the project and fully spend the
net sale proceeds;or
•One hundred percent (100%)of proceeds used for current refunding within ninety
(90)days of issuance.
Failure to meet the expected expenditure expectations represented in the tax exemption
certificate for such bond issue shall be documented and retained by the Compliance
Officer in the records for the bond issue.
Arbitrage Rules and Rebate Requirements
The Compliance Officer shall review the Tax-Exemption Certificate for each tax-exempt
obligation,and the expenditure records,and shall:
a)monitor and ensure that proceeds of each such issue are spent within the
temporary period set forth in such certificate;
b)if the "small issuer"exception does not apply (not more than $5 million issued in a
calendar year),monitor and ensure that the proceeds are spent in accordance with
one or more of the applicable exceptions to rebate as set forth in such certificate
(e.g.six month exception,eighteen month exception,two year "construction issue"
exception);
c)not less than sixty (60)days prior to a required expenditure date within applicable
rebate exception(s),confer with bond counsel if it appears expenditures will fail to
meet the applicable temporary period or rebate exception expenditure
requirements of the Tax-Exemption Certificate;
d)in the event of failure to meet a temporary period or rebate exception:
1.procure a timely computation of any rebate liability and,if rebate is due,
file a Form 8038-T and arrange for payment of such rebate liability;
n.arrange for timely computation and payment of "yield reduction payments"
(as such term is defined in the Code and Treasury Regulations),if
applicable;
e)ensure that the investment of bond proceeds is made only in permitted investments
of the Issuer as outlined in Iowa Code chapters 12B and 12C,and any official
policy;
f)consult with the Advisors to ensure that the investment of bond proceeds is
performed in compliance with the arbitrage rules and rebate requirements;
g)consult with the Advisors to identify bond proceeds that must be yield-restricted
and shall monitor the investments of any yield-restricted funds to ensure that the
yield on such investments does not exceed the yield to which such investments are
restricted;
h)contact the rebate analyst (and,if appropriate,bond counsel)prior to the fifth
anniversary of the date of issuance of each issue of bonds of the Issuer and each
fifth anniversary thereafter to arrange for calculations and reports of the rebate
requirements with respect to such bonds;
i)if a rebate payment is required to be paid by the Issuer,the Compliance Officer
shall prepare or cause to be prepared the appropriate form to be filed with the IRS
(Form 8038-T);
j)The Compliance Officer shall ensure that guaranteed investment contracts (GIC)
will be purchased only using the three-bid "safe harbor"of applicable Treasury
regulations,in compliance with fee limitations on GIC brokers in the regulations.
The Compliance Officer shall ensure that all other investments will be purchased
only in market transactions.
Filings with Internal Revenue Service
The Compliance Officer,with assistance from bond counsel,shall ensure that each
issuance of Bonds is properly reported with the Internal Revenue Service (IRS)as
required by Section 149(e)of the Code.On the issue date of each series of Bonds,the
Compliance Officer shall consult with the Advisors to identify the deadline to file the
requisite IRS form for such issue.
If a bond issue consists of tax-exempt Bonds,the Issuer must report the tax-exempt
portion on Form 8038-G or 8038-GC.
Reporting the Issuance of Tax-Exempt Bonds
The original issuance of a tax-exempt bond issue with an issue price of one-hundred
thousand dollars ($100,000)or greater shall be reported on Form 8038-G.The original
issuance of a tax-exempt bond issue with an issue price less than one-hundred thousand
dollars ($100,000)shall be reported on Form 8038-GC.
•Forms 8038-G and 8038-GC shall be filed by the Compliance Officer or bond
counsel no later than the 15th day of the 2nd calendar month following the quarter
in which the Bonds were issued.
•The Compliance Officer shall consult with the Advisors to ensure the Form 8038-
G is accurately filled out.
Rebate Reporting Requirements
The Compliance Officer shall contact the rebate analyst prior to the 5th anniversary of the
issue date on each series of Bonds and each 5th anniversary thereafter to arrange for
calculations of the rebate requirements with respect to such Bonds.If a rebate payment is
required to be paid,the Compliance Officer shall prepare or cause to be prepared a Form
8038-T,and submit such Form 8038-T to the IRS with the required rebate payment.
If the Issuer is authorized to recover a rebate payment previously paid,the Compliance
Officer shall prepare or cause to be prepared a Form 8038-R,with respect to such rebate
recovery,and submit such Form 8038-R to the IRS.
Use of Bond-Financed Property
The Compliance Officer shall monitor the use of all bond-financed facilities in order to
determine whether private business uses of bond-financed facilities have exceeded the de
minimis limits set forth in Section 141(b)of the Code (generally 10%of bond proceeds)
as a result ofleases and subleases,licenses,management contracts,research contracts,
naming rights agreements or other arrangements that provide special legal entitlements to
nongovernmental persons.Prior to entering into such leases or other contracts,the
Compliance Officer shall consult with bond counsel to ensure appropriate action is taken
with respect to the bond-financed facilities.
To tills end,the Compliance Officer shall:
a)maintain appropriate records and a list of all bond financed assets.Such records
shall include the actual amount of proceeds (including investment eamings)spent
on each of the bond financed assets;
b)with respect to each bond financed asset,the Compliance Officer will monitor and
confer with bond counsel with respect to all proposed:
1.management contracts,
11.service agreements,
111.research contracts,
IV.naming rights contracts,
v.leases or sub-leases,
VI.j oint venture,limited liability or partnership arrangements,
Vll.sale of property;
V111.any other change in use of such asset;or
IX.output contracts (including retail and wholesale requirements contracts);
c)maintain a copy of the proposed agreement,contract,lease or arrangement,
together with the response by bond counsel with respect to the proposal for at least
three (3)years after retirement of all tax-exempt obligations issued to fund all or
any portion of bond financed assets,or obligations issued to refund those
obligations;
d)provide training and educational resources to any staff member that has the
primary responsibility for the operation,maintenance,or inspection of bond-
financed facilities with regard to the limitations on the private business use and on
the private security or payments with respect to bond-financed facilities;
e)ensure that no item of bond-financed property will be sold or transferred to a
nonexempt party without advance arrangement of a "remedial action"under the
applicable Treasury Regulations and the Compliance Officer shall consult with
bond counsel prior to the sale or transfer of any bond-financed property;and
f)In the event of an action with respect to a bond financed asset,which may cause
the private business tests or private loan financing test to be met,the Compliance
Officer shall contact bond counsel for advice and ensure timely remedial action
under IRS Regulation Sections 1.141-12.
Advance Refundings
The Compliance Officer shall be responsible for the following current,post issuance and
record retention procedures with respect to advance refunding bonds:
a)Identify and select bonds to be advance refunded with advice from internal
financial personnel,and/or the Issuer's financial advisor;
b)Identify,with advice from Advisors,any possible federal tax compliance
issues prior to structuring any advance refunding:
c)Review the structure with the input of the Advisors,of advance refunding
issues prior to the issuance to ensure (i)that the proposed refunding is permitted
pursuant to applicable federal tax requirements if there has been a prior refunding
of the original bond issue;(ii)that the proposed issuance complies with federal
income tax requirements which might impose restrictions on the redemption date
ofthe refunded bonds;(iii)that the proposed issuance complies with federal
income tax requirements which allow for the proceeds and replacement proceeds
of an issue to be invested temporarily in higher yielding investments without
causing the advance refunding bonds to become "arbitrage bonds";and (iv)that
the proposed issuance will not result in the Issuer's exploitation of the difference
between tax exempt and taxable interest rates to obtain an financial advantage nor
overburden the tax exempt market in a way that right be considered an abusive
transaction for federal tax purposes.
d)Collect and review data related to arbitrage yield restriction and rebate
requirements for advance refunding bonds.To ensure such compliance,the
Compliance Officer shall engage a rebate consultant to prepare a verification
report in connection with the advance refunding issuance.Said report shall ensure
said requirements are satisfied.
e)Ensure,whenever possible,the purchase of demand deposit Treasury
securities from the State and Local Governmental Series ("SLGS")to size each
advance refunding escrow.The financial advisor shall be included in the process
of subscribing SLGS.To the extent SLGS are not available for purchase,the
Compliance Officer shall,in consultation with bond counsel and the financial
advisor,comply with IRS regulations.
f)To the extent as Issuer elects to the purchase a guaranteed investment
contract,the Compliance Officer shall ensure,after input from bond counsel,
compliance with any bidding requirements set forth by the IRS regulations.
g)In determining the issue price for any advance refunding issuance,the
Compliance Officer shall obtain and retain issue price certification by the
purchasing underwriter at closing.
h)After the issuance of an advance refunding issue,the Compliance Officer
shall ensure timely identification of violations of any federal tax requirements and
engage bond counsel in attempt to remediate same in accordance with IRS
regulations.
Record Retention
Management and retention of records related to the Issuer's bond issues shall be
supervised by the Compliance Officer.Records and documents pertaining to
cancellation,transfer,redemption or replacement ofIssuer bonds shall be preserved by
the Issuer or its agent for a period of not less than 11 years,as set forth in Iowa Code
Section 76.10.Other records shall be retained during the period in which the bonds
remain outstanding (plus any refunding bonds)plus three (3)years.Records may be in
the form of documents and electronic copies of documents,appropriately indexed to
specific bond issues and compliance functions,
The Compliance Officer shall collect and retain the following records with respect to
each issue of Bonds of the Issuer and with respect to the facilities fmanced with the
proceeds of such Bonds:
•audited financial statements of the Issuer;
•appraisals,demand surveys,or feasibility studies,if any,with respect to the
facilities to be financed with the proceeds of such Bonds;
•publications,brochures,and newspaper articles,if any,related to the bond
financing;
•trustee or paying agent statements;
•records of all investments and the gains (or losses)from such investments;
•paying agent or trustee statements regarding investments and investment earnings;
•reimbursement resolutions,if any,and expenditures reimbursed with the proceeds
of such Bonds;
•allocations of proceeds to expenditures (including costs of issuance)and the dates
and amounts of such expenditures (including any requisitions,expenditure/draw
schedules,expenditure/draw requests,invoices,bills,and cancelled checks with
respect to such expenditures;
•contracts entered into for the construction,renovation,or purchase of bond-
financed facilities;
•an asset list or schedule of all bond financed depreciable property and any
depreciation schedules with respect to such assets or property;
•records of the purchases and sales of bond-financed assets;
•private business uses of bond-financed facilities that arise subsequent to the date
of issue through leases and subleases,licenses,management contracts,research
contracts,naming lights agreements,or other arrangements that provide special
legal entitlements to nongovernmental persons and copies of any such agreements
or instruments;arbitrage rebate reports and records of rebate and yield reduction
payments,if any;resolutions or other actions,if any,taken by the Governing Body
subsequent to the date of issue with respect to such Bonds;
•formal elections authorized by the Code or Treasury Regulations that are taken
with respect to such Bonds
•relevant correspondence relating to such Bonds;
•documents related to guaranteed investment contracts or certificates of deposit,
credit enhancement transactions,and financial derivatives entered into subsequent
to the date of issue;
•copies of any and all forms filed with the IRS for each series of Bonds including,
as applicable,Form 8038-G,Form 8038-GC;and
•the official transcript prepared by bond counsel with respect to each series of
Bonds of the Issuer.
Identification of Violations and Corrections
If,during the period the Bonds remain outstanding,it is determined that a violation of
federal tax requirements has occurred,the Compliance Officer shall immediately consult
with the Advisors to ensure that corrective or remedial action is taken.In consultation
with bond counsel,the Compliance Officer shall become acquainted with the remedial
actions under Treasury Regulations,Section 1.141-12,to be utilized in the event that
private business use of bond-financed facilities exceeds the de minimus limits under
Section 141(b)(1)of the Code.In consultation with bond counsel,the Compliance Officer
shall become acquainted with the Tax Exempt Bonds Voluntary Closing Agreement
Program,described in Notice 2008-31,2008-11 I.R.B.592,to be utilized as a means for
an issuer to correct any post-issuance infractions of the Rules with respect to its
outstanding Bonds.
Continuing Disclosure Obligations
In addition to its post-issuance compliance requirements under applicable provisions of
the Rules,the Issuer has agreed to provide continuing disclosure,such as annual financial
information and event notices,pursuant to a continuing disclosure certificate or similar
document (the "Continuing Disclosure Certificate")prepared by bond counsel and made a
part of the transcript with respect to each issue of Bonds of the Issuer that is subject to
such continuing disclosure requirements.The Continuing Disclosure Documents shall be
executed by the Issuer to assist the underwriters of the Issuer's Bonds in meeting their
obligations under Securities and Exchange Commission Regulation,17 C.F.R.Section
240.15c2-12,as in effect and interpreted from time to time ("Rule 15c2-12").The
continuing disclosure obligations of the Issuer shall be governed by the Continuing
Disclosure Certificate and by the terms of Rule 15c2-12.The Compliance Officer shall be
primarily responsible for undertaking such continuing disclosure obligations and to
monitor compliance with such obligations.
Other Post-Issuance Actions
If,in consultation with the Advisors,the Compliance Officer determines that any
additional action not identified in this policy must be taken by the Compliance Officer to
ensure the continuing tax-exempt status or "qualified"status of any issue of the Issuer's
Bonds,the Compliance Officer shall take such action if the Compliance Officer has the
authority to do so.If,after consultation with the Advisors,the Compliance Officer
determines that this policy shall be amended or supplemented to ensure the continuing
tax-exempt status or "qualified"status of any issue of the Issuer's Bonds,the Compliance
Officer shall follow the appropriate Issuer policy that this document be so amended or
supplemented.
Taxable Governmental Bonds
Most of the provisions of this policy,other than the provisions Continuing Disclosure
Obligations subsection ofthis policy,are not applicable to governmental Bonds the
interest on which is includable in gross income for federal income tax purposes (i.e.
"taxable governmental Bonds").If an issue of taxable govemmental Bonds is later
refunded with the proceeds of an issue of tax-exempt governmental Bonds,then the uses
of the proceeds of the taxable governmental Bonds and the uses of the facilities financed
with the proceeds of the taxable governmental Bonds shall be relevant to the tax-exempt
status of the refunding Bonds.Therefore,if there is any reasonable possibility that an
issue of taxable governmental Bonds may be refunded,in whole or in part,with the
proceeds of an issue of tax-exempt governmental Bonds then,for purposes of this policy,
the Compliance Officer shall treat the issue of taxable governmental Bonds as if such
issue were an issue of tax-exempt governmental Bonds and shall caI'ry out and comply
with the requirements of this policy with respect to such taxable governmental Bonds.
The Compliance Officer shall seek the advice of bond counsel as to whether there is any
reasonable possibility of issuing tax-exempt governmental Bonds to refund an issue of
taxable governmental Bonds.
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