05/29/2007 Council Packet - Laserfiche WebLink

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City of Lino Lakes, Minnesota May 23, 2007 (b) Rebate Requirements (c) Bona Fide Debt Service Fund (d) Economic Life (e) Federal Reimbursement Regulations 11. Continuing Disclosure All tax- exempt issues are subject to the federal arbitrage and rebate requirements, which require all excess eamings created by the financing to be rebated to the U.S. Treasury. The requirements generally cover two categories: bond proceeds and debt service funds. There are exemptions from rebate that may apply in both of these categories. There is an exemption from rebate for municipalities that issue $5 million or Tess of tax - exempt obligations in a calendar year. Since the City does not expect to issue more than $5 million in tax - exempt obligations in 2007, the City qualifies as a "small issuer" and will be exempt from rebating excess eamings on Bond proceeds to the federal govemment. Although exempt from rebate, the City must still comply with the arbitrage regulations which require yield restriction of any proceeds remaining after the three year temporary period expires. The City must maintain a bona fide debt service fund for the Bonds or be subject to yield restriction. This requires restricting the investments held in the debt service fund to the yield on the Bonds. A bona fide debt service fund is a fund for which there is an equal matching of revenue to debt service expense, with carry over permitted equal to the greater of the investment earnings in the fund for the prior year or 1/12 the debt service of the prior year. The average life of the Bonds cannot exceed 120% of the economic fife of the projects to be financed. The economic life of the projects to be financed with the Bonds is 20 years. The average life of the Bonds is 9.187 years, therefore within the economic fife requirements. Federal reimbursement regulations require the City to make a declaration, within 60 days of the actual payment, of its intent to reimburse itself from expenses paid prior to the receipt of Bond proceeds. It is our understanding the City has taken whatever actions are necessary to comply with the federal reimbursement regulations in regards to the Bonds. The Bonds are subject to continuing disclosure requirements set forth by the Securities and Exchange Commission. The SEC rules require the City to undertake - 4 1 - Page 3