Management Report and Recommendations 12/31/1991

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City of Lino Lakes, Minnesota Management Report, Page 25 1991A Temporary Improvement Bonds The City issued these bonds to finance various projects and to retire the 1988 Temporary Improvement Bonds as follows: White Tail Ridge $50,600 Brandywood Estates 790,015 Pheasant Hills 620,747 Pine Ridge Addition 630,326 Reshanau Lake Sanitary Sewer Trunk 1,080,676 Wenzel Farms 973,800 Subtotal 4,146,164 1988 Temporary Bond Refinancing 84,045 Total $4,230,209 The remaining assets of the 1988 Temporary Improvement Debt Service Fund have been pledged for retirement of the 1991A issue. The White Tail Ridge and Brandywood Estates assessments were adopted in 1991. Arbitrage Regulations Federal law prohibits excess earnings on bond proceeds maintained in construction or debt service funds. The regulations are complex and for "large issuers" (over $5 million of bonds issued in one year) there are rebate requirements. If the City of Lino Lakes issues over $5 million of bonds in one year, they will be required to comply with arbitrage regulations. • Measuring investment interest earned on tax exempt bond proceeds. • Determining the yield of such investment earnings. • Comparing the yield earned with the yield of the tax exempt bonds. • Calculating the amount (if any) of excess earnings. • Reporting the excess earnings to the Internal Revenue Service annually. • Rebating such excess earnings at least every five years. Our firm has assisted another Minnesota city in seeking a ruling request from the Internal Revenue Service which will reduce the administrative complexities of complying with the arbitrage regulations. We recommend that the City continue efforts to monitor arbitrage compliance.