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HomeMy WebLinkAboutCity Council Resolution 2012-089CITY OF PLYMOUTH RESOLUTION NO. 2012-089 RESOLUTION APPROVING POST -ISSUANCE DEBT COMPLIANCE POLICY AND POST -ISSUANCE DEBT COMPLIANCE PROCEDURES WHEREAS, the Internal Revenue Service (IRS) enforces compliance Nvith IRS code and treasury regulations governing certain bond obligations; and WHEREAS, issuers and beneficiaries of these bond obligations are expected to adopt and implement post -issuance debt compliance policy and procedures to safeguard against any post -issuance violations, NOW, THEREFORE, BE IT RESOLVED BY THE MAYOR AND CITY COUNCIL OF THE CITY OF PLYMOUTH, MINNESOTA that it the attached Post -Issuance Debt Compliance Policy and Post -Issuance Debt Compliance Procedures are hereby adopted. Approved this 1-I day of March 2012. City of Plymouth, Minnesota Post -Issuance Debt Compliance Policy The City Council (the "Counsel") of the City of Plymouth, Minnesota (the "City") has chosen, by policy, to take steps to help ensure that all obligations will be in compliance with all applicable 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 regulations promulgated thereunder ("Treasury 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 a post -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 Code and Treasury Regulations. 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 Manager of the City is designated as the City's agent who is responsible for post -issuance compliance of these obligations. The Finance Manager 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 obligation proceeds and obligation -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 Manager shall apply the Post -Issuance Debt Compliance Procedures to each qualifying obligation and maintain a record of the results. Further, the Finance Manager will ensure that the Post -Issuance Debt Compliance Policy and Procedures are updated on a regular and as needed basis. The Finance Manager or any other individuals responsible for assisting the Finance Manager in maintaining records needed to ensure post -issuance debt compliance, are authorized to expend fiends 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 taxable governmental obligations unless there is a reasonable possibility that the City may refund their taxable governmental obligation, in whole or in part, with the proceeds of a tax-exempt governmental obligation. If this refunding possibility exists, then the Finance Manager shall treat the taxable governmental obligation as if such issue were an issue of tax-exempt governmental obligations and comply with the requirements of this Post - Issuance Debt Compliance Policy. The City may issue tax-exempt obligations as "qualified 501(c)(3) bonds" that are not governmental obligations or conduit bonds where the proceeds are loaned to a qualifying party. Prior to the issuance of qualified 501(c)(3) bonds, the Finance Manager shall take steps necessary to ensure that such obligations will remain in compliance with the requirements of this Post -Issuance Debt Compliance Policy. In a case where compliance activities are reasonably within the control of a qualifying party, the Finance Manager may determine that all or some portion of compliance responsibilities described in this Post - Issuance Debt Compliance Policy shall be assigned to the relevant qualifying party. In a case where the Finance Manager is concerned about the compliance ability of a qualifying party, the Finance Manager may require that a Trustee be retained for the obligation and that the Trustee be responsible for all or some portion of the compliance responsibilities. The Finance Manager is additionally authorized to seek the advice, as necessary, of bond counsel and/or its financial advisor to ensure the City is in compliance with this Post - Issuance Debt Compliance Policy. City of Plymouth, Minnesota Post -Issuance Debt Compliance Procedures The City Council (the "Counsel") of the City of PIN -mouth, Minnesota (the "City") has adopted the attached Post -Issuance Debt Compliance Policy dated March 13, 2012. The Post -Issuance Debt Compliance Policy applies to qualifying debt obligations issued by the City. As directed by the adoption of the Post -Issuance Debt Compliance Policy, the Finance Manager Nvill perform the folloNving Post -Issuance Debt Compliance Procedures for all of the City's outstanding debt. 7. General Post -Issuance Compliance a. Ensure written procedures and/or guidelines have been put in place for individuals to follow when more than one person is responsible for ensuring compliance Nvith Post -Issuance Debt Compliance Procedures. b. Ensure training and/or educational resources for post -issuance compliance have been approved and obtained. c. The Finance Manager of the City understands that that there are options for voluntarily correcting failures to comply Nvith post -issuance compliance requirements (such as remedial actions under Section 1.141-12 of the Treasury Regulations and the ability to enter into a closing agreement under the Tax - Exempt Bonds Voluntary Closing Agreement Program described in Notice 2008-31). 8. General Recordkeeping a. Retain records and documents for the obligation for a period of at least seven Nears folloNving the final payment or the date in Nvhich the obligation is redeemed unless otherwise directed by Bond Counsel. b. Retain both paper and electronic versions of records and documents for the obligation. c. General records and documentation to be assembled and retained i. Description of the purpose of the obligation (referred to as the project) and the state statute authorizing the project. ii. Record of tai -exempt status or revocation of tai -exempt status, if applicable. iii. Any correspondence between the City and the IRS. iv. Audited financial statements. v. Bond transcripts, official statements and other offering documents of the obligation. vi. Minutes and resolutions authorizing the issuance of the obligation. vii. Certifications of the issue price of the obligation. viii. Anv formal elections for the obligation (i.e. election to employ an accounting methodology other than the specific tracing method). ix. Appraisals, demand surveys, or feasibility studies for property financed by the obligation. x. Documents related to governmental grants, associated Nvith construction, renovation or purchase of property financed Nvith the obligation. xi. Reports of any prior IRS examinations of the City or the City s obligation. Arbitrage Yield Restriction and Rebate Recordkeeping a. Investment and arbitrage documentation to be assembled and retained i. An accounting of all deposits, expenditures, interest income and asset balances associated Nvith each fund established in connection Nvith the obligation. This includes an accounting of all monies deposited to the Debt Service Account to make debt service payments on the obligation, regardless of the source derived. Accounting for expenditures and assets is described in further detail in Section 4. ii. Statements prepared by Trustee or Investment Provider. iii. Documentation of at least quarterly allocations of investments and investment earnings to each obligation (i.e. uncommingling analysis). iv. Documentation for investments made Nvith obligation proceeds such as: 1. Investment contracts (i.e. guaranteed investment contracts). 2. Credit enhancement transactions (i.e. bond insurance contracts). 3. Financial derivatives (swaps, caps, etc). 4. Bidding of financial products. • Investments acquired Nvith obligation proceeds are purchased at fair market value (i.e. three bids for open market securities needed in advance refunding escrows). b. Computations of the arbitrage yield. c. Computations of yield restriction and rebate amounts including but not limited to: i. Compliance in meeting the "Temporary Period from Yield Restriction Exception" and limiting the investment of funds after the temporary period expires. ii. Compliance in meeting the "Rebate Exception". 1.Qualifying for the "Small Issuer Exception" 2. Qualifying for a "Spending Exception" • 6 Month Spending Exception • 18 Month Spending Exception • 24 Month Spending Exception 3.Qualifying for the "Bona Fide Debt Service Fund Exception" 4.Quantifying arbitrage on all funds established in connection Nvith the obligation in lieu of satisfying arbitrage exceptions (including Reserve Funds and Debt Service Funds) d. Computations of yield restriction and rebate payments. e. Timer* Tax Form 8038-T filing, if applicable. i. Remit any arbitrage liability associated Nvith the obligation to the IRS at each five Near anniversary date of the obligation, and the date in which the obligation is no longer outstanding (redemption or maturity date), whichever comes sooner, Nvithin 60 days of said date. f. Timer* Tax Form 8038-R filing, if applicable. g. Procedures or guidelines for monitoring instances where compliance Nvith applicable yield restriction requirements depends on subsequent reinvestment of obligation proceeds in loNver yielding investments (for example: reinvestment in zero coupon SLGS). 10. Expenditure and Asset Documentation to be Assembled and Retained a. Documentation of allocations of obligation proceeds to expenditures (i.e. allocation of proceeds to expenditures for the construction, renovation or purchase of facilities owned and used in the performance of exempt purposes). 1. Such allocation Nvill be done not later than the earlier of: eighteen (18) months after the later of the date the expenditure is paid, or the date the project, if any, that is financed by the tax-exempt bond issue is placed in service; or the date sixty (60) days after the earlier of the fifth anniversary of the issue date of the tax-exempt bond issue, or the date sixty (60) days after the retirement of the tax-exempt bond issue. b. Documentation of allocations of obligation proceeds to issuance costs. c. Copies of requisitions, draw schedules, draw requests, invoices, bills and cancelled checks related to obligation proceed expenditures during the construction period. d. Copies of all contracts entered into for the construction, renovation or purchase of facilities financed Nvith obligation proceeds. e. Records of expenditure reimbursements incurred prior to issuing bonds for facilities financed Nvith obligation proceeds (Declaration of Official Intent/Reimbursement Resolutions including all modifications). f. List of all facilities and equipment financed Nvith obligation proceeds. g. Depreciation schedules for depreciable property financed Nvith obligation proceeds. h. Documentation that tracks the purchase and sale of assets financed Nvith obligation proceeds. i. Documentation of timely payment of principal and interest payments on the obligation. J. Tracking of all issue proceeds and the transfer of proceeds into the debt service fund as appropriate. k. Documentation that excess earnings from a Reserve Fund is transferred to the Debt Service Fund on an annual basis. Excess earnings are balances in a Reserve Fund that exceed the Reserve Fund requirement. 11. Miscellaneous Documentation to be Assembled and Retained a. Ensure that the project, while the obligation is outstanding, Nvill avoid IRS private activity concerns. i. The Finance Manager shall monitor the use of all obligation -financed facilities in order to: determine Nvhether private business uses of obligation -financed facilities have exceeded the de minimus limits set forth in Section 141(b) of the Code as a result of sale of the facilities (including sale of capacity rights, leases and subleases of facilities (including easements or use arrangements for areas outside the four Nvalls, e.g., hosting of cell phone toNvers), leasehold improvement contracts, licenses, management contracts (in which the City authorizes a third party to operate a facility, e.g. cafeteria), research contracts, preference arrangements (in Nvhich the City permits a third party preference, such as parking in a public parking lot), joint ventures, limited liability companies or partnership arrangements, output contracts or other contracts for use of utility facilities (including contracts Nvith large utility users), development agreements which provide for guaranteed payments or property values from a developer, grants or loans made to private entities (including special assessment agreements), naming rights agreements, or other arrangements that provide special legal entitlements to nongovernmental persons; and determine Nvhether private security or payments that exceed the de minimus limits set forth in Section 141(b) of the Code have been provided by nongovernmental persons Nvith respect to such obligation -financed facilities. ii. The Finance Manager shall provide training and educational resources to anv City staff that have the primary responsibility for the operation, maintenance, or inspection of obligation -financed facilities Nvith regard to the limitations on the private business use of obligation -financed facilities and as to the limitations on the private security or payments Nvith respect to obligation -financed facilities. b. The Finance Manager shall undertake the folloNving Nvith respect to the obligations: i. an annual review of the books and records maintained by the Citv Nvith respect to such obligations; and ii. an annual plivsical inspection of the facilities financed Nvith the proceeds of such obligations, conducted by the Finance Manager Nvith the assistance of anv City staff who have the primary responsibility for the operation, maintenance, or inspection of such obligation -financed facilities. c. Changes in the project that impact the terms or commitments of the obligation are properly documented and necessary certificates or opinions are on file. 12. Additional Undertakings and Activities that Support Sections 1 through 5 above: i. The Finance Manager Nvill notify the City s bond counsel, financial advisor and arbitrage provider of any survey or inquiry by the IRS immediately upon receipt (Usually responses to IRS inquiries are due Nvithin 21 days of receipt. Such IRS responses require the review of the above mentioned data and must be in Nvriting. As much time as possible is helpful in preparing the response). ii. The Finance Manager Nvill consult Nvith the City s bond counsel, financial advisor and arbitrage provider before engaging in post -issuance credit enhancement transactions (i.e. bond insurance, letter of credit, or hedging transactions (i.e. interest rate swap, cap). iii. The Finance Manager will monitor all "qualified tai -exempt debt obligations" Nvithin the first calendar Near to determine if the limit is exceeded, and if exceeded, Nvill address accordingly. For tax-exempt debt obligations issued during Nears 2009 and 2010, the limit is $30,000,000 (The limit Nvas $10,000,000 prior to 2009. In 2011 and thereafter it Nvill remain at $10,000,000 unless changed by Congress). During this period, the limit also applies to pooled financings of the governing body and provides a separate $30,000,000 for each 501 (c)(3) conduit borroNver. iv. Comply Nvith Continuing Disclosure Requirements. L If applicable, the timely filing of annual information agreed to in the Continuing Disclosure Certificate. ii. Give notice of anv Material Event. V. Identify any post -issuance change to terms of bonds Nvhich could be treated as a current refunding of "old" bonds by "new" bonds, often referred to as a "reissuance". f. Confirm Nvhether anv "remedial action" in connection Nvith a "change of use" must be treated as a "reissuance". g. The Finance Manager Nvill ensure that the appropriate tax form for federal subsidy payments is prepared and filed in a timely fashion for applicable obligations (i.e. Build America Bonds). 13. Compliance Nvith Future Requirements Take measures to comply Nvith any future requirements issued beyond the date of these Post -Issuance Debt Compliance Procedures which are essential to ensuring compliance Nvith the applicable state and federal regulations.