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HomeMy WebLinkAboutResolution No. 15-03 EDALINO LAKES ECONOMIC DEVELOPMENT AUTHORITY RESOLUTION NO. 15-03 RESOLUTION APPROVING POST -ISSUANCE COMPLIANCE PROCEDURE AND POLICY FOR TAX-EXEMPT GOVERNMENTAL BONDS BE IT RESOLVED By the Board of Commissioners (the "Board of Commissioners") of the Lino Lakes Economic Development Authority, a body corporate and politic and political subdivision of the State of Minnesota (the "Authority"), as follows: Section 1. Recitals. 1.01. The Authority from time to time issues tax-exempt governmental bonds to finance various public capital improvements. 1.02. Under Sections 103 and 140 to 150 of the Internal Revenue Code of 1986, as amended (the "Code") and related regulations, the Authority is required to take certain actions after the issuance of such bonds to ensure that interest on those bonds remains tax-exempt. 1.03. The Authority has determined to adopt written procedures regarding how the Authority will carry out its bond compliance responsibilities, and to that end has caused to be prepared a document titled Post -Issuance Compliance Procedure and Policy for Tax -Exempt Governmental Bonds (the "Policy"). 1.04. The Board of Commissioners has reviewed the Policy has determined that it is in the best interest of the Authority to adopt the Policy. Section 2. Policy Approved. 2.01. The Board of Commissioners approves the Policy in substantially the form on file with the Executive Director. 2.02. Authority staff are authorized to take all actions necessary to carry out the Policy. Adopted by the Board of Commissioners of the Lino Lakes Economic Development Authority this 11th day of May, 2015. ATTEST: c iv irector 460517v1 JAE LN140-112 President �... LINO LAKES ECONOMIC DEVELOPMENT AUTHORITY AGENDA ITEM 4A(ii) STAFF ORIGINATOR: Al Rolek MEETING DATE: May 11, 2015 TOPIC: Consider Resolution 15-03 Approving Post -Issuance Compliance Procedure and Policy for Tax -Exempt Governmental Bonds VOTE REQUIRED: Simple Majority INTRODUCTION The EDA's Bond Counsel has determined that for purposes of reporting bond sale information to the Internal Revenue Service (IRS) and for ongoing reporting requirements it would be prudent for the EDA to adopt a formal post -issuance compliance procedure and policy for Authority -issued tax exempt bonds. This policy is identical to the policy adopted by the Lino Lakes City Council on October 22, 2012. BACKGROUND In order for the EDA Lease -Revenue Series 2015 Bonds to retain their tax-exempt status, the EDA is required to comply with various rules after the bonds have closed. In a letter to staff, Bond Counsel Julie Eddington of Kennedy and Graven points out two key rules as follows: 1. Issuers must ensure that the facilities financed with proceeds of the bonds continue to be used for public purposes. If the use is later changed to a private use (or certain other things happen that would render the bonds taxable), the issuer must take a "remedial action" to prevent the bonds from losing their tax-exempt status. Usually, this means all or a portion of the bonds must be redeemed or defeased. 2. Issuer must also ensure that proceeds of the bonds are used in a way that complies with complex rules under Section 148 of the Code governing "arbitrage." Arbitrage is the term for what happens if the City invests proceeds of tax-exempt bonds at a higher rate than the interest payable on the bonds. In some cases, the City may in fact earn this arbitrage, but still must rebate the amounts earned to the federal government. While the EDA is not technically required to have written procedures on these matters, the new IRS Form 8038-G provides strong incentive to adopt such procedures, as it will not be in the Authority's interest to file the new form without checking "yes" in these two boxes. The procedures help show the IRS that the City has a strategy for compliance with the rules described above. The draft Policy responds to the IRS concerns. It generally designates the Executive Director as the EDA staff person responsible to oversee compliance with the various post -issuance rules. The Policy recognizes that the EDA's financial advisor and bond counsel will play significant roles in these efforts, both assisting staff, and in some cases undertaking certain tasks directly. The Policy simply puts in writing what the Authority has done (and should do) as a matter of practice. This does not represent a significant Policy change, but merely formalizes how the City will ensure the continued tax-exempt status of the governmental bonds it issues. RECOMMENDATION Staff is recommending approval of Resolution No. 15-03. ATTACHMENTS Resolution 15-03 Post -Issuance Compliance Procedure and Policy for Tax-exempt Governmental Bonds L. Lino Lakes Economic Development Authority POST -ISSUANCE COMPLIANCE PROCEDURE AND POLICY FOR TAX-EXEMPT GOVERNMENTAL BONDS May 11, 2015 460516v1 JAE LNI40-112 �.,., Post -Issuance Compliance Procedure and Policy for Tax -Exempt Governmental Bonds The Lino Lakes Economic Development Authority (the "Authority") issues tax-exempt governmental bonds to finance capital improvements. As an issuer of tax-exempt governmental bonds, the Authority is required by the terms of Sections 103 and 141-150 of the Internal Revenue Code of 1986, as amended (the "Code"), and the Treasury Regulations promulgated thereunder (the "Treasury Regulations"), to take certain actions subsequent to the issuance of such bonds to ensure the continuing tax-exempt status of such bonds. In addition, Section 6001 of the Code and Section 1.6001-1(a) of the Treasury Regulations, impose record retention requirements on the Authority with respect to its tax- exempt governmental bonds. This Post -Issuance Compliance Procedure and Policy for Tax -Exempt Governmental Bonds (the "Policy") has been approved and adopted by the Authority to ensure that the Authority complies with its post -issuance compliance obligations under applicable provisions of the Code and Treasury Regulations. 1. Effective Date and Term. The effective date of this Policy is May 11, 2015, and shall remain in effect until superseded or terminated by the Authority. 2. Responsible Parties. The Executive Director of the Authority shall be the party primarily responsible for ensuring that the Authority successfully carries out its post -issuance compliance requirements under applicable provisions of the Code and Treasury Regulations. The Executive Director will be assisted by the staff of the Finance Department (the "Finance Department") of the City of Lino Lakes, Minnesota (the "City") and by Authority staff and officials when appropriate. The Executive Director of the Authority will also be assisted in carrying out post -issuance compliance requirements by the following organizations: (a) Bond Counsel (the law firm primarily responsible for providing bond counsel services for the Authority); (b) Municipal Advisor (the organization utilized from time to time for providing financial advisor services to the Authority); (c) Paying Agent (the person, organization, or Authority officer primarily responsible for providing paying agent services for the Authority); and (d) Rebate Analyst (the organization primarily responsible for providing rebate analyst services for the Authority). The Executive Director shall be responsible for assigning post -issuance compliance responsibilities to members of the Finance Department, staff of the Authority, Bond Counsel, Municipal Advisor, Paying Agent, and Rebate Analyst. The Executive Director shall utilize such other professional service organizations as are necessary to ensure compliance with the post -issuance compliance requirements of the Authority. The Executive Director shall provide training and educational resources to Authority staff who are responsible for ensuring compliance with any portion of the post -issuance compliance requirements of this Policy. 3. Post -Issuance Compliance Actions. The Executive Director shall take the following post - issuance compliance actions or shall verify that the following post -issuance compliance actions have been taken on behalf of the Authority with respect to each issue of tax-exempt governmental bonds issued by the Authority: 460516v1 JAE LN140-112 (a) The Executive Director shall prepare a transcript of principal documents (this action will be the primary responsibility of Bond Counsel). (b) The Executive Director shall file with the Internal Revenue Service (the "IRS"), within the time limit imposed by Section 149(e) of the Code and applicable Treasury Regulations, an Information Return for Tax -Exempt Governmental Obligations, Form 8038-G (this action will be the primary responsibility of Bond Counsel). (c) The Executive Director shall prepare an "allocation memorandum" for each issue of tax-exempt governmental bonds in accordance with the provisions of Treasury Regulations, Section 1.148-6(d)(1), that accounts for the allocation of the proceeds of the tax-exempt bonds to expenditures not later than the earlier of: (i) eighteen (18) months after the later of (A) the date the expenditure is paid, or (B) the date the project, if any, that is financed by the tax-exempt bond issue is placed in service; or (ii) the date sixty (60) days after the earlier of (A) the fifth anniversary of the issue date of the tax-exempt bond issue, or (B) the date sixty (60) days after the retirement of the tax-exempt bond issue. Preparation of the allocation memorandum will be the primary responsibility of the Executive Director (in consultation with Bond Counsel, and, if employed with respect to the tax-exempt issue, the Municipal Advisor). (d) The Executive Director, in consultation with Bond Counsel, shall identify proceeds of tax-exempt governmental bonds that must be yield -restricted and shall monitor the investments of any yield -restricted funds to ensure that the yield on such investments does not exceed the yield to which such investments are restricted. (e) In consultation with Bond Counsel, the Executive Director shall determine whether the Authority is subject to the rebate requirements of Section 148(0 of the Code with respect to each issue of tax-exempt governmental bonds. In consultation with Bond Counsel, the Executive Director shall determine, with respect to each issue of tax-exempt governmental bonds of the Authority, whether the Authority is eligible for any of the temporary periods for unrestricted investments and is eligible for any of the spending exceptions to the rebate requirements. The Executive Director shall contact the Rebate Analyst (and, if appropriate, Bond Counsel) prior to the fifth anniversary of the date of issuance of each issue of tax-exempt governmental bonds of the Authority and each fifth anniversary thereafter to arrange for calculations of the rebate requirements with respect to such tax-exempt governmental bonds. If a rebate payment is required to be paid by the Authority, the Executive Director shall prepare or cause to be prepared the Arbitrage Rebate, Yield Reduction and Penalty in Lieu of Arbitrage Rebate, Form 8038-T, and submit such Form 8038-T to the IRS with the required rebate payment. If the Authority is authorized to recover a rebate payment previously paid, the Executive Director shall prepare or cause to be prepared the Request for Recovery of Overpayments Under Arbitrage Rebate Provisions, Form 8038-R, with respect to such rebate recovery, and submit such Form 8038-R to the IRS. 4. Procedures for Monitoring, Verification, and Inspections. The Executive Director shall institute such procedures as the Executive Director shall deem necessary and appropriate to monitor the 460516v1 JAE LN140-112 2 use of the proceeds of tax-exempt governmental bonds issued by the Authority, to verify that certain post - issuance compliance actions have been taken by the Authority, and to provide for the inspection of the facilities financed with the proceeds of such bonds. At a minimum, the Executive Director shall establish the following procedures: (a) The Executive Director shall monitor the use of the proceeds of tax-exempt governmental bonds to: (i) ensure compliance with the expenditure and investment requirements under the temporary period provisions set forth in Treasury Regulations, Section 1.148-2(e); (ii) ensure compliance with the safe harbor restrictions on the acquisition of investments set forth in Treasury Regulations, Section 1.148-5(d); (iii) ensure that the investments of any yield - restricted funds do not exceed the yield to which such investments are restricted; and (iv) determine whether there has been compliance with the spend -down requirements under the spending exceptions to the rebate requirements set forth in Treasury Regulations, Section 1.148-7. (b) The Executive Director shall monitor the use of all bond -financed facilities in order to: (i) determine whether private business uses of bond -financed facilities have exceeded the de minimus limits set forth in Section 141(b) of the Code as a result of leases and subleases, licenses, management contracts, research contracts, naming rights agreements, or other arrangements that provide special legal entitlements to nongovernmental persons; and (ii) determine whether 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 with respect to such bond -financed facilities. The Executive Director shall provide training and educational resources to any Authority staff who have the primary responsibility for the operation, maintenance, or inspection of bond -financed facilities with regard to the limitations on the private business use of bond -financed facilities and as to the limitations on the private security or payments with respect to bond -financed facilities. (c) The Executive Director shall undertake the following with respect to each outstanding issue of tax-exempt governmental bonds of the Authority: (i) an annual review of the books and records maintained by the Authority with respect to such bonds; and (ii) an annual physical inspection of the facilities financed with the proceeds of such bonds, conducted by the Executive Director with the assistance of any Authority staff who have the primary responsibility for the operation, maintenance, or inspection of such bond -financed facilities. 5. Record Retention Requirements. The Executive Director shall collect and retain the following records with respect to each issue of tax-exempt governmental bonds of the Authority and with respect to the facilities financed with the proceeds of such bonds: (i) audited financial statements of the Authority; (ii) appraisals, demand surveys, or feasibility studies with respect to the facilities to be financed with the proceeds of such bonds; (iii) publications, brochures, and newspaper articles related to the bond financing; (iv) trustee or paying agent statements; (v) records of all investments and the gains (or losses) from such investments; (vi) paying agent or trustee statements regarding investments and investment earnings; (vii) reimbursement resolutions and expenditures reimbursed with the proceeds of such bonds; (viii) allocations of proceeds to expenditures (including costs of issuance) and the dates and amounts of such expenditures (including requisitions, draw schedules, draw requests, invoices, bills, and cancelled checks with respect to such expenditures); (ix) contracts entered into for the construction, renovation, or purchase of bond -financed facilities; (x) an asset list or schedule of all bond -financed depreciable property and any depreciation schedules with respect to such assets or property; (xi) records of the purchases and sales of bond -financed assets; (xii) private business uses of bond -financed facilities that arise subsequent to the date of issue through leases and subleases, licenses, management contracts, research contracts, naming rights agreements, or other arrangements that provide special legal 460516v1 JAE LN140-112 entitlements to nongovernmental persons and copies of any such agreements or instruments; (xiii) arbitrage rebate reports and records of rebate and yield reduction payments; (xiv) resolutions or other actions taken by the governing body subsequent to the date of issue with respect to such bonds; (xv) formal elections authorized by the Code or Treasury Regulations that are taken with respect to such bonds; (xvi) relevant correspondence, including letters, faxes or emails, relating to such bonds; (xvii) documents related to guaranteed investment contracts or certificates of deposit, credit enhancement transactions, and financial derivatives entered into subsequent to the date of issue; (xviii) bidding of financial products for investment securities; (xix) copies of all Form 8038 -Ts, Form 8038 -Rs, and Form 8038-CPs filed with the IRS and any other forms or documents filed with the IRS; (xx) the transcript prepared with respect to such tax-exempt governmental bonds, including but not limited to (a) official statements, private placement documents, or other offering documents, (b) minutes and resolutions, orders, or ordinances or other similar authorization for the issuance of such bonds, and (c) certification of the issue price of such bonds; and (xxi) documents related to government grants associated with the construction, renovation, or purchase of bond -financed facilities. The records collected by the Executive Director shall be stored in any format deemed appropriate by the Executive Director and shall be retained for a period equal to the life of the tax-exempt governmental bonds with respect to which the records are collected (which shall include the life of any bonds issued to refund any portion of such tax-exempt governmental bonds or to refund any refunding bonds) plus three (3) years. The Executive Director shall also collect and retain reports of any IRS examination of the Authority or any of its bond financings. 6. Remedies. In consultation with Bond Counsel, the Executive Director shall become acquainted with the remedial actions (including redemption or defeasance) under Treasury Regulations, Section 1.141-12, to be utilized in the event that private business use of bond -financed facilities exceeds the de minimus limits under Section 141(b)(1) of the Code. In consultation with Bond Counsel, the Executive Director shall become acquainted with the Tax Exempt Bonds Voluntary Closing Agreement Program described in Notice 2008-31, 2008-11 I.R.B. 592, to be utilized as a means for an issuer to correct any post -issuance infractions of the Code and Treasury Regulations with respect to outstanding tax-exempt bonds. 7. Continuing Disclosure Obligations. In addition to its post -issuance compliance requirements under applicable provisions of the Code and Treasury Regulations, the Authority has agreed to provide continuing disclosure, such as annual financial information and material event notices, pursuant to a continuing disclosure certificate or similar document (the "Continuing Disclosure Document") prepared by Bond Counsel and made a part of the transcript with respect to each issue of bonds of the Authority that is subject to such continuing disclosure requirements. The Continuing Disclosure Documents are executed by the Authority to assist the underwriters of the Authority's bonds in meeting their obligations under Securities and Exchange Commission Regulation, 17 C.F.R. Section 240.15c2-12, as in effect and interpreted from time to time ("Rule 15c2-12"). The continuing disclosure obligations of the Authority are governed by the Continuing Disclosure Documents and by the terms of Rule 15c2-12. The Executive Director is primarily responsible for undertaking such continuing disclosure obligations and to monitor compliance with such obligations. 8. Other Post -Issuance Actions. If, in consultation with Bond Counsel, Municipal Advisor, Paying Agent, Rebate Analyst, the Executive Director, the Authority Attorney, or the Board of Commissioners, the Executive Director determines that any additional action not identified in this Policy must be taken by the Executive Director to ensure the continuing tax-exempt status of any issue of governmental bonds of the Authority, the Executive Director shall take such action if the Executive Director has the authority to do so. If, after consultation with Bond Counsel, Municipal Advisor, Paying Agent, Rebate Analyst, the Executive Director, the Authority Attorney, or the Board of Commissioners, 460516v1 JAE LN140-112 the Executive Director and the Executive Director determine that this Policy must be amended or supplemented to ensure the continuing tax-exempt status of any issue of governmental bonds of the Authority, the Executive Director shall recommend to the Board of Commissioners that this Policy be so amended or supplemented. 9. Taxable Governmental Bonds. Most of the provisions of this Policy, other than the provisions of Section 7, are not applicable to governmental bonds the interest on which is includable in gross income for federal income tax purposes. However, if an issue of taxable governmental bonds is later refunded with the proceeds of an issue of tax-exempt governmental refunding bonds, then the uses of the proceeds of the taxable governmental bonds and the uses of the facilities financed with the proceeds of the taxable governmental bonds will be relevant to the tax-exempt status of the governmental refunding bonds. Therefore, if there is any reasonable possibility that an issue of taxable governmental bonds may be refunded, in whole or in part, with the proceeds of an issue of tax-exempt governmental bonds, for purposes of this Policy, the Executive Director shall treat the issue of taxable governmental bonds as if such issue were an issue of tax-exempt governmental bonds and shall carry out and comply with the requirements of this Policy with respect to such taxable governmental bonds. The Executive Director shall seek the advice of Bond Counsel as to whether there is any reasonable possibility of issuing tax- exempt governmental bonds to refund an issue of taxable governmental bonds. 10. Qualified 501(c)(3) Bonds. If the Authority issues bonds to finance a facility to be owned by the Authority but which may be used, in whole or in substantial part, by a nongovernmental organization that is exempt from federal income taxation under Section 501(a) of the Code as a result of the application of Section 501(c)(3) of the Code (a "501(c)(3) Organization"), the Authority may elect to issue the bonds as "qualified 501(c)(3) bonds" the interest on which is exempt from federal income taxation under Sections 103 and 145 of the Code and applicable Treasury Regulations. Although such qualified 501(c)(3) bonds are not governmental bonds, at the election of the Executive Director, for purposes of this Policy, the Executive Director shall treat such issue of qualified 501(c)(3) bonds as if such issue were an issue of tax-exempt governmental bonds and shall carry out and comply with the requirements of this Policy with respect to such qualified 501(c)(3) bonds. 460516v1 JAE LN140-112 LINO LAKES ECONOMIC DEVELOPMENT AUTHORITY MEETING Monday, December 28, 2015 6:00 P.M. City Council Chambers AGENDA 1. Call to Order and Roll Call 2. Consideration of Minutes of May 11, 2015 B k-- 3. 3. . Consideration of Resolution No. 15-04 Approving Purchase and Sale Agreement with D.R. Horton Inc. -Minnesota, Legacy at Woods Edge Property 4. Adjourn Checklist for Meeting Notices for: City Council Charter Commission g Other E 04 Meeting: ,A- M -I- Meeting Date: , 1-- 0 1 C (0.00 rein . Task (bolded should be done 3 days before mtg) Person Responsible Done Mayor signs special meeting notice Julie XC Schedule room 7,,, CA,, I, Cc=^ • Julie X Notify and remind all council members and appropriate staff own 0 e Julie ) . Prepare Notice Julie Post on website (3 places) Lisa 110 Post on front "Public Notice" bulletin board Julie Publish to Quad Press — time permitting. *E-mail official notice to legals@,presspubs.com. Cc to: Tracy (for billing), Julie KI., `°�- X The Citizen. Code to: 101-401-4343-000 for City Council; 101-405-4340-000 for Charter Commission. Send to agenda e-mail list 0 C u Julie Notify recording secretary or arrange for minutes (tape recorder) Julie Add to community calendar on agenda and weekly update Julie Add approval of those minutes to future agenda Julie Add meeting dates to Council timesheets Julie �( — S: City Council/Checklist-Meeting Notice I hereby call for a special meeting of the Lino Lakes City Council to be held on Dec. 2 V , 201C -at 6100 M- for the purpose of CoA said meeting having been properly noticed and called. Jeff Reine , yor CITY OF LINO LAKES ECONOMIC DEVELOPMENT AUTHORITY NOTICE OF PUBLIC HEARING NOTICE is hereby given that the Board of Commissioners of the Lino Lakes Economic Development Authority (the "EDA") will meet on Monday, December 28, 2015, at or after 6:00 p.m. at City Hall, located at 600 Town Center Parkway in the City of Lino Lakes, Minnesota (the "City"), to conduct a public hearing on the proposed sale of certain real property owned by the Authority and generally located north the Chain of Lakes YMCA to DR Horton, Inc. -Minnesota, or an affiliate (the "Developer"). The property is legally described as: Outlot B and Outlot D, The Village No. 3 The EDA will consider the sale of the land under Minnesota Statutes, Section 469.105. A summary of the terms and conditions of the land sale is available for public inspection at City Hall. At the hearing, the EDA will meet to decide if the sale is advisable. Any persons wishing to express an opinion on the matters to be considered at the public hearing will be heard orally or in writing. L-- Dated: December 9, 2015 BY ORDER OF THE BOARD OF COMMISSIONERS OF THE LINO LAKES ECONOMIC DEVELOPMENT AUTHORITY /s/ Jeff Karlson Executive Director Lino Lakes Economic Development Authority 471814v1 JAE LN140-99