06/01/1992 Park Board Packet - Laserfiche WebLink

Home Search

City of Inver Grove Heights, Minnesota August 16, 1990 the use of other City monies, up to and including a property tax levy within the limitations permitted by Minnesota law. 3. Under the terms of the resolution, the City is agreeing to operate the golf course as long as bonds of this issue or any additional issues are outstanding. Section 4.06 of the resolution provides that whenever a deficiency in the Operating Account exists which cannot be restored from other golf course monies, that other available City funds will be appropriated for that purpose, the City Council will include in its next annual budget an amount sufficient to restore the deficiency, and that if necessary to pay current cost of operation and maintenance, the City will levy an ad valorem tax within the limitations prescribed by law for general purpose taxes levied by the City. This provision Is consistent with materials we presented to you when you discussed this issue earlier this year. 4. While all of the provisions of the proposed bond resolution are important, I also refer you to several specific items which I believe will be of greater interest to you. They Include the rate convenant under Section 5.02 and the earnings test for additional parity bonds as outlined in Section 6.03. Arbitrage Rebate The 1986 Tax Reform Act and the 1989 amendments modified rebating arbitrage profits to the Treasury. Generally speaking, all arbitrage profits (the yield difference between the 'PIN earnings on the investments and the yield on the bonds) must be rebated to the Treasury. There are some exemptions to this rebate requirement, one of which may be applicable to this issue. A two-year expenditure exemption test is available if at least 75%of the proceeds of an issue are used for construction and if 10% is expended within six months, 45%within 12 months, 75% within 18 months and 100% spent within two years. If it is reasonably required that a retainage be maintained to enforce the completion of a contract, up to 5% of the proceeds may be retained for an additional 12 months. Net proceeds subject to these expenditure tests include investment earnings on the original bond proceeds. The expenditure test is an absolute requirement, not reasonable expectations. At present we believe the City can meet the two-year expenditure exemption and that selection of the penalty option may be in your best interests, unless construction of the course is delayed and payment of all costs are not made by approximately mid-October, 1992. We recommend City staff review this matter closely, and if more than a 5% retainage on contractor payments may be held after mid-October, 1992, that they re-examine the penalty option. If funds in excess of the expenditure requirement outlined hereinbefore remain,the City will have to pay a 1 1/2%semiannual penalty on any excess amounts. As indicated, a member of our firm will be in attendance at your meeting on Monday, August 27, at which time you will be asked to adopt a resolution establishing the sale date for these bonds and establishing their general terms and conditions. Hopefully, any concerns you have for this issue can be resolved at that time. We look forward to meeting with you on this matter and to a successful sale of these obligations. Respectfully submitted, r. 14 SPRINGSTED Incorporate mjh Page 4