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.