4.5. SR 02-06-2012E~ REQUEST FOR ACTION
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Rive
TO ITEM NUMBER
Ma or and Ci Council 4.5
AGENDA SECTION MEETING DATE PREPARED BY
Consent Februa 6, 2012 Tim Simon, Finance Director
ITEM DESCRIPTION REVIEWED By
Post-Issuance Debt Compliance Policy Cal Portner, Ci Administrator
REVIEWED BY
ACTION REQUESTED
City Council is requested to approve the Post-Issuance Debt Compliance Policy.
BACKGROUND/DISCUSSION
All issuers of tax-exempt bonds are required to file Internal Revenue Service (IRS) Form 8038-G (see
sample attached). Last September, the IRS added three additional lines (43, 44, and 45 A&B). The most
significant change was asking if issuers have written procedures to ensure compliance with the Internal
Revenue Code. The IRS expects issuers and beneficiaries of these obligations to adopt and implement a
post-issuance debt compliance policy and procedures to safeguard against post-issuance violations. These
are procedures the city has been doing but is now asked to be in writing. Many governmental entities are
currently adopting a policy.
The attached policy has been reviewed by Ehlers and our bond attorney. As finance director, I will have
to maintain a checklist on all the bond issues. This policy will cover Elk River Municipal Utilities so no
additional polity will need to be adopted by the Utilities Commission. The Economic Development
Authority will need to adopt a similar policy since on occasion we issue Lease Revenue Bonds.
The Post-Issuance Debt Compliance Procedures will address the following:
1. General post-issuance compliance.
2. Proper and timely use of bond proceeds and bond-financed property.
3. Arbitrage yield restriction and rebate.
4. Timely filings and other general requirements.
5. Additional undertakings or activities that support points 1 through 4 above.
6. Other requirements that become necessary in the future.
FINANCIAL IMPACT
No additional financial impact as all required post-compliance debt procedures will be complete.
ATTACHMENTS
Post-Issuance Debt Compliance Policy
Sample IRS form 8038-G (Information Return for Tax-Exempt Governmental Obligations)
Action Motion by Second by Vote
'®ILE1E~ IIT
N:\Public Bodies\City Council\Council RCA\Agenda Packet\02-OG-2012\Post Issuance Compliance.docx ~~
City of Elk River, Minnesota
Post-Issuance Debt Compliance Policy
The City Council (the "Council") of the City of Elk River, Minnesota (the "City") has
chosen, by policy, to take steps to help ensure that all obligations will be in compliance
with all applicable state and federal regulations. This policy may be amended, as necessary,
in the future.
Background
The Internal Revenue Service (IRS) is responsible for enforcing compliance with the
Internal Revenue Code (the "Code") and related regulations governing certain obligations
(for example: tax-exempt obligations, Build America Bonds, Recovery Zone Development
Bonds and various "Tax Credit" Bonds). The IRS expects issuers and beneficiaries of
these obligations to adopt and implement apost-issuance debt compliance policy and
procedures to safeguard against post-issuance violations.
Post-Issuance Debt Compliance Policy Objective
The City desires to monitor these obligations to ensure compliance with the IRS Code and
related regulations governing such obligations. To help ensure compliance, the City has
developed the following policy (the "Post-Issuance Debt Compliance Policy"). The Post-
Issuance Debt Compliance Policy shall apply to the obligations mentioned above, including
bonds, notes, loans, lease purchase contracts, lines of credit, commercial paper or any other
form of debt that is subject to compliance.
Post-Issuance Debt Compliance Policy
The Finance Director of the City is designated as the City's agent who is responsible for
post-issuance compliance of these obligations. However, to the extent obligations are
issued for municipal utility purposes, the Finance Director/Office Manager of Elk River
Municipal Utilities assumes the duties ofpost-issuance debt compliance as described in this
Post-Issuance Debt Compliance Policy instead of the Finance Director.
The Finance Director shall assemble all relevant documentation, records and activities
required to ensure post-issuance debt compliance as further detailed in corresponding
procedures (the "Post-issuance Debt Compliance Procedures"). At a minimum, the Post-
Issuance Debt Compliance Procedures for each qualifying obligation will address the
following:
1. General post-issuance compliance;
2. Proper and timely use of bond proceeds and bond-financed property;
3. Arbitrage yield restriction and rebate;
4. Timely filings and other general requirements;
5. Additional undertakings or activities that support points 1 through 4 above;
6. Other requirements that become necessary in the future.
The Finance Director shall apply the Post-Issuance Debt Compliance Procedures to each
qualifying obligation and maintain a record of the results. Further, the Finance Director
will ensure that the Post-Issuance Debt Compliance Policy and Procedures are updated on a
regular and as needed basis.
The Finance Director or any other individuals responsible for assisting the Finance Director
in maintaining records needed to ensure post-issuance debt compliance, are authorized to
expend funds as needed to attend training or secure use of other educational resources for
ensuring compliance such as consulting, publications, and compliance assistance.
Most of the provisions of this Post-Issuance Debt Compliance Policy are not applicable to
governmental bonds, the interest on which is includable in gross income for federal income
tax purposes. On the other hand, if an issue of taxable governmental bonds is later
refunded with the proceeds of an issue oftax-exempt governmental refunding 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 will be relevant to the tax-
exempt status of the governmental 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 oftax-exempt governmental bonds then, for purposes of
this Post-Issuance Debt Compliance Policy, the Finance Director shall treat the issue of
taxable governmental bonds as if such issue were an issue oftax-exempt governmental
bonds and shall carry out and comply with the requirements of this Post-Issuance Debt
Compliance Policy with respect to such taxable governmental bonds. The Finance Director
shall seek the advice of bond counsel and its financial advisor as to whether there is any
reasonable possibility of issuing tax-exempt governmental bonds to refund an issue of
taxable governmental bonds.
If the City issues bonds to finance a facility to be owned by the City but which may be
used, in whole or in substantial part, by a nongovernmental organization that is exempt
from federal income taxation under Section 501(a) of the Code as a result of the application
of Section 501(c)(3) of the Code (the "501(c)(3) Organization"), the City may elect to
issue the bonds as "qualified 501(c)(3) bonds" the interest on which is exempt from federal
income Nation under Sections 103 and 145 of the Code and applicable Treasury
Regulations. Although such qualified 501(c)(3) bonds are not governmental bonds, at the
election of the Finance Director, for purposes of this Post-Issuance Debt Compliance
Policy, the Finance Director shall treat such issue of qualified 501(c)(3) bonds as if such
issue were an issue oftax-exempt governmental bonds and shall carry out and comply with
the requirements of this Post-Issuance Debt Compliance Policy with respect to such
qualified 501(c)(3) bonds. Alternatively, in cases where compliance activities are
reasonably within the control of the relevant 501(c)(3) Organization, the Finance Director
may determine that all or some portion of compliance responsibilities described in this
Post-Issuance Debt Compliance Policy shall be assigned to the relevant organization.
The City may also .issue tax-exempt bonds, the proceeds of which are loaned to certain
private entities, including qualified 501(c)(3) organizations (referred to as "conduit
bonds"). The City will require, as part of approval of any conduit bonds, that the borrower
assumes the duties ofpost-issuance debt compliance as described in this Post-Issuance
Debt Compliance Policy, including provisions for reporting to the City.
Adopted this date by the City Council of the City of Elk River,
Minnesota
Form 80~ V ~ N
(Rev. September 2011}
Department of the Treasury
Internal Revenue Service
Information Return for Tax-Exempt Governmental Obligations
- Under Internal Revenue Code section 149(e) OMB No. 1545-0720
- See separate instructions.
Caution: if the issue price is under $100, 000, use Form 8038-GC.
t2annrliein errfhrtrity If Amended Return: check here - i_~
t issuer's name 2 Issuer's employer identification number (EIN)
3a Name of person (other than issuer] with whom the IRS may communicate about this return (see instructions) 3b Telephone number of other person shown on 3a
~.......
4 Number and street (or P,O. box if mail is not delivered to street address}
Room/suite
5 Report number (For IRS Use Only)
~3
.._
6 City, town, or post office, state, and ZIP code.
7 Date of issue
8 Name of issue ~~~ ~ ~~ ~
1
E
3
c 9 CUSIP number
_ .__....... ...__ ...................................»_
10a Name and title of officer or other emp eyee of the issuer whom the IRS may call for more information (see r tOb Telephone number of officer or other
instructions} ~ employee shown on t0a
Type of Issue (enter the issue price). See the instructions and attach schetlule.
_~.__~
11 . . . .
Education ii ~
12 .
Health and hospital . . ~
12 .
13 Transportation a . . - - 13
14 . : . .
Public safety 14
15 .
Environment (including sewage bonds} . : 15
_
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_._
16 Housing . . ___._
16
- _._e.._-
_
__
17 Utilities . . 17
18 Other. Describe - '~$
19
20 If obligations are TANs or RANs, check only box i 9a . - ^
If obligations are BANs, check only box 19b . - ^
If obligations are in the form of a lease or installment sale, check box - ^
• . Description of t,~bli ations. Complete for the entire issue for which this form is being fi
~ )ed.
a Final maturit date
O y (b) Issue rice
p
~ (c) Stated redemption
price at maturity (d} Weighted
average maturity (e) Yield
21 I $ ears ;'o
• . Uses of Proceeds of G~ond tsstae (including underwriters' dsscount)
22 Proceeds used for accrued interest . 22
23 Issue price of entire issue (enter amount from line 21, column (b)) . 23
24 Proceeds used for bond issuance costs (including underwriters' discount} . 24
25 Proceeds used for credit enhancement 25
26 Proceeds allocated to reasonably required reserve or replacement fund 26
27 Proceeds used to currently refund prior issues 27
28 Proceeds used to advance refund prior issues 28
29 Total (add Ilnes 24 through 28} 29
30 Nonrefunding proceeds of the issue (subtract line 29 from line 23 and enter amount here} 30
• . Descrip#on of Refunded Bonds. Complete this art onf for refundin bonds.
_......_ , .s__...
31
32
33
34 Enter the remaining weighted average maturity of the bonds to be currently refunded . -
Enter the remaining weighted average maturity of the bonds to be advance refunded . -
Enter the last date on which the refunded bonds will be called (MM/DD/YYYY) -
Enter the data s the refunded bonds were issued - (n>jnarDD~vv~v} ears
__ years_
For Paperwork Reduction Act Notice, see separate instructions. Cat. No. 63773S Form S03(3-G (Rev. 9-2017)
Form 9038-G {Rev, 9-2011)
35
36a
b
c
37
38a
b
G
d
39
40
41a
b
c
d
42
°~ 43
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45a
b
Page 2
aneous
Enter the amount of the state volume cap allocated to the issue under section 141(b)(5) 35
Enter the amount of gross proceeds invested or to be invested in a guaranteed investment contract
(GIC) (see instructions) 36a
Enter the final maturity date of the GIC -
Enter the name of the GIG pravider -
Pooled financings: Enter the amount of the proceeds of this issue that are to be used to make loans
to other governmental units • 37 _
If this issue is a loan made from the proceeds of another tax-exempt issue, check box - ^ and enter the following information:
Enter the date of the master pool obligation - __
Enter the EIN of the Issuer of the master pool obligation -
Enter the name of the issuer of the master pool obligation -
If the issuer has designated the issue under section 265(b}{3)(B)(i}(III) (small issuer exception), check box M
If the issuer has elected to pay a penalty in lieu of arbitrage rebate, check box -
If the issuer has identified a hedge, check here - ^ and enter the following information:
Name of hedge provider- ~~, _,,,,_-
Type of hedge - __._~_
Term of hedge -
If the issuer has superintegrated the hedge, check box . -
If the issuer has established written procedures to ensure that all nonqualified bonds of this issue are remediated
according to the requirements under the Code and Regulations (see instructions), check box -
if the Issuer has established written procedures to monitor the requirements of section 148, check box . -
If some portion of the proceeds was used to reimburse expenditures, check here - ^ and enter the amount
of reimbursement . - -.,,o_,
Enter the date the official intent was adopted - m
Under penakies of penury, I declare that I have examined this return and accompanying schedules and statements, and to the best ofmy knowledge
Signature and belief, they are true, correct, and complete. I further declare that I consent to the IRS's disclosure of the issuer's return information, as necessary to
and process this return, to the person that 1 have authorized above.
Consent \ ~. ______________..__
Signature of issuer's authorized representative Date ~ T'ype or print' name and title
Paid Print/Type preparer's name Preparer's signature Date PTIN
Check ^ if
Preparer self-employed
Use Onl Firm s name - ! Firm s EIN -
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Form t3U:iti-(9 (Rev, 9-2011)