HomeMy WebLinkAbout247-12 RESOLUTIONRESOLUTION NO. 247-12
A RESOLUTION TO AUTHORIZE AND ADOPT POST -ISSUANCE TAX
COMPLIANCE PROCEDURES TO BE FOLLOWED IN CONNECTION
WITH EACII ISSUE OF TAX-EXEMPT BONDS BY THE CITY
WHEREAS, the City of Fayetteville has previously issued and will in the future issue
series of bonds (the "Tax -Exempt Bonds") the interest on which is excluded I:rom gross income
of the owners thereol'pursuant to Section 103 of the Internal Revenue Code of 1986, as amended
(the "Code"), and the regulations promulgated thereunder (the "Regulations"); and
WHEREAS, in connection with the issuance of each series of Tax -Exempt Bonds, the
City has executed or will execute covenants and certificates wherein the City represents that it
expects and intends to be able to comply with and will, to the extent permitted by Iaw, comply
with the provisions and procedures set forth in such covenants and certificates and will do and
perform all acts and things necessary or desirable in order to assure that the interest on the series
of Tax -Exempt bonds to which such covenants and certificates relate will be excluded from
gross income of the owners thereof for federal income tax purposes; and
WHEREAS, upon the advice of the City's .Bond Counsel Gordon Wilbourn of Kutak
Rock, thc City has determined that it is advantageous and in the best interests of the City and the
owners of the Tax-F.xempt Bonds to adopt certain post -issuance compliance procedures
substantially in the form attached hereto as Exhibit A and made a part hereof (the "Post -Issuance
Tax Compliance Procedures");
NOW, THEREFORE BE IT RESOLVED BY THE CiTYY COUNCIL OF TIME
CITY OF FAYF.TTEVILLE, ARKANSAS:
Section 1: That the City Council of the City of Fayetteville, Arkansas hereby
approves and adopts the Post -Issuance Tax Compliance Procedures in thc form attached hereto
as Exhibit A, and said Posl-issuance Tax Compliance Procedures shall be applicable to all Tax-
l3xempt Bonds now or hereafter issued by the City.
Section 2; That the City Council hereby authorizes and directs the Compliance
Officer listed in the Post -Issuance Tax Compliance Procedures (City Finance Director) to take
such actions as such Compliance Officer, after appropriate consultation with Bond Counsel to
the City, deems necessary, appropriate or desirable to effect the implementation of the Post -
issuance Tax Compliance Procedures.
PASSED and APPROVED this 18`h day of December, 20 12.
APPROVED: ATLEST:
By:
Page 2
Resolution No. 247-12
13y:
). Lll.IO Mayor SONDRAE.SMITH, City Clcrkfl'rcasurcr
2
CITY OF FAYETTEVILLE ARKANSAS
POST-ISSITAIiCE TAX COMPLIANCE PROC.EDURI:S
The purpose of these Post -Issuance Tax Compliance Procedures (the "Procedures") is to
establish procedures in connection with tax-exempt bonds issued by the City of Fayetteville,
Arkansas (the "City") so as to ensure that all applicable post -issuance requirements of federal
income tax law needed to preserve the tax-exempt status of such bonds are met.
Central
In connection with the issuance of any issue of tax-exempt bonds by the City, the
Mayor will execute a tax regulatory agreement or tax compliance certificate (either, a "Tax
Certificate") that describes the requirements and provisions of the Internal Revenue Code that
must be followed in order to maintain the tax exempt status of interest on such bonds. In
addition, the 'fax Certificate will contain the reasonable expectations of the City at the time of
issuance of such bonds with respect to the use of the gross proceeds of such bonds and the
assets to be financed or refinanced with their proceeds. These Procedures supplement and
support the covenants and representations made by the City in each such 'fax Certificate with
respect to the corresponding issue of tax-exempt bonds. In order to comply with the covenants
and representations set forth in the bond documents and in the Tax Certificate, the City,
through its Finance and Internal Services Department, will track and monitor the actual use of
the proceeds of the corresponding issue of bonds, the investment and expenditure of the bond
proceeds and the assets financed or refinanced with the proceeds of such bonds over the life of
such bonds. in the event the City acts as a conduit issuer to issue tax-exempt bonds for the
benefit of a third -party borrower or other third -party beneficiary (each a "Beneficiary"), certain
of the tasks set forth herein may be performed by the Beneficiary pursuant to a written
agreement with the City.
Designation of Responsible Person
Mr, Paul Recker, Senior Director of the City's Finance and Internal Services
Department, or his successor (the "Compliance Officer"), shall maintain an inventory of bonds
and assets financed which contains the pertinent data to satisfy the City's monitoring
responsibilities with respect to its tax-exempt bonds. Other individuals may be responsible for
implementing certain portions of these Procedures under the auspices of the Compliance
Officer as described herein. Any transfer, sale or other disposition of bond -financed assets
must be reviewed and approved by the Compliance Officer.
Post -Issuance Compliance Requirements
External Advisors/Documentation
The Compliance Officer shall consult with bond counsel and other legal counsel and
advisors, as needed, throughout the bond. issuance process to identify requirements and to
establish procedures necessary or appropriate so that the bonds will continue to qualify for
lax -exempt status. Those requirements and procedures shall be documented in the Tax
Certificate and/or other documents finalized at or before issuance of the bonds. Those
requirements and procedures shall include future compliance with applicable arbitrage rebate
requirements and all other applicable post -issuance requirements of federal lax law throughout
(and in some cases beyond) the term of the bonds.
The Compliance Officer also shall consult with bond counsel and other legal counsel
and advisors, as needed, following issuance of the bonds to ensure that till applicable
post -issuance requirements in fact are met. This shall include, without limitation, consultation
in connection with future COMM? Is with respect to the use of bond -financed or refinanced
assets.
The City shall engage an export advisor (a "Rebate Service Provider") to assist in the
calculation of arbitrage rebate payable in respect of the investment of bond proceeds, unless the
Tax Certificate documents that arbitrage rebate will not be applicable to an issue of bonds.
Unless otherwise provided by the applicable Tax Certificate providing for the issuance
of a series of bonds, unexpended bond proceeds shall be held in a segregated account and the
investment of bond proceeds shall be managed by the City. The City shall prepare regular,
periodic suuements regarding the investments and transactions involving bond proceeds.
Arbitrage Rebate and Yield
Unless the Tax Certificate documents that arbitrage rebate will not be applicable to an
issue of tax-exempt bonds, the Compliance Officer or his or her designee shall be responsible
for:
• engaging the services of the Rebate Service Provider and, prior to each rebate calculation date,
causing the trustee or other account holder to deliver periodic statements concerning the
investment of bond proceeds to the Rebate Service Provider;
• providing to the Rebate Service Provider additional documents and information reasonably
requested by the Rebate Service Provider;
• monitoring eftirrts of the Rebate Service Provider;
• assuring payment of required rebate amounts, if any, no later than 60 days after each 5 -year
aumiversary of the issue date of the bonds, and no later than 60 days alter the last bond of each
issue is redeemed;
• during the construction period of each capital project financed in whole or in part by bonds,
monitoring the investment and expenditure of bond proceeds and consulting with the Rebate
Service Provider to determine compliance with any applicable exceptions from the arbitrage
rebate requirements during each 6 -month spending period up to 6 months, 18 months or
24 months, as applicable, following the issue date of the bonds; and
• retaining copies of all arbitrage reports and account statements as described below under
"Record Keeping Requirement."
The City, in the Tax Certificate and/or other documents finalized at or before the issuance
of each issue of tax-exempt bonds, has agreed or will agree to undertake the tasks listed above
(unless the Tax Certificate documents that arbitrage rebate will not be applicable to an issue of
bonds).
Use of Bond Proceeds and l3ond-Financed or Refinanced Assets:
The Compliance Officer or his or her designee shall be responsible lir:
• monitoring the use of bond proceeds and the use of bond -financed or refinanced assets (e.g.,
facilities, furnishings or equipment) throughout the term of the bonds to ensure compliance
with covenants and restrictions set forth in the Tax Certificate;
• maintaining an inventory of bonds and records identifying the assets or portion of assets that
arc financed or refinanced with proceeds of the bonds, including a final allocation of bond
pmceeds as described below under "Record Keeping Requirement;"
• consulting with bond counsel and other legal counsel and advisers as necessary in the review of
any contracts or arrangements involving use of bond -financed or refinanced assets to ensure
compliance with all covenants and restrictions set forth in the fax Certificate;
• maintaining records for any contracts or arrangements involving the use of bond -financed or
refinanced assets as described below under "Record Keeping Requirement;"
• conferring at least annually with personnel responsible for bond -financed or refinanced assets
to identify and discuss any existing or planned use of bond -financed or refinanced assets, to
ensure that those uses arc consistent with all covenants and restrictions set forth in the Tax
Certificate; and
• to the extent that the City discovers that any applicable tax restrictions regarding use of bond
proceeds and bond -financed or refinanced assets will or may be violated, consulting promptly
witli bond counsel and other legal counsel and advisers to determine a course of action to
remediate all nonqualified bonds, if such counsel advises that a remedial action is necessary.
The City, in the Tax Certificate and/or other documents finalized at or before the
issuance of each series of tax-exempt bonds, has agreed or will agree to undertake the tasks
listed above.
All relevant records and contracts shall be maintained as described below.
3
Record Keeping Requirement
The Compliance Officer or his or her designee shall be responsible for maintaining the
following documents for the term of each issue o.0 tax-exempt honds (including refunding
bonds, if any) plus at least three years:
• a copy of the bond closing transcript(s) and other relevant documentation delivered to the City
at or in connection with closing of the issue of bonds, including any elections made by the City
in connection therewith;
a copy of all material documents relating to capital expenditures financed or refinanced by
bond proceeds, including (without limitation) construction contracts, purchase orders, invoices,
and payment records, draw requests for bond proceeds and evidence as to the amount and date
for each draw down of bond proceeds, as well as documents relating to costs paid or
reimbursed with bond proceeds and records identifying the assets or portion of assets that are
financed or refinanced with bond proceeds, including a final allocation of bond proceeds
(although the responsibilities of the City to perform the tasks set forth above may be satisfied
by obtaining the written agreement of a Beneficiary to perform such tasks);
• once a project has been completed and placed in service, maintain copies of all prospective
contracts and arrangements, if any, involving the use of bond -financed or refinanced assets
(although the responsibilities of the City to perform the tasks set forth above may be satisfied
by obtaining the written agreement of a Beneficiary to perform such tasks);
• copies of all statements and reports, including arbitrage reports, prepared with respect to City
bonds; and
• a copy of all records oC investments, arbitrage reports and underlying documents, including
statements in connection with any investment agreements, and copies of all bidding
documents, if any.
Conduit Bond issue Compliance Requirements
Any Beneficiary of an issue of tax-exempt bonds by the City must complete the Written
Procedures for Ongoing Compliance for a Bererary/Borrower in substantially the form
attached to these Procedures as Exhibit A. Such Written Procedures must be included in the
transcript of closing documents for said tax-exempt bonds.
EXHIBIT
[This form to be completed by the Borrower/Beneficiary and bond counsel prior to
closing and included in the transcript of closing documents for the Bunds.]
Written Procedures for Ongoing Compliance for a Borrower/Beneficiary
Of Bonds issued by the City of Fayetteville, Arkansas
The following procedures apply to the [Name of Bond Issue] (the "Bonds") issued by
the City of Fayetteville, Arkansas (the "City"). These procedures are hereby approved and
adopted by the [Title of Authorized Official] of the [Name of the Borrower] (the
"Borrower") and will not be amended or rescinded by the Borrower after the issuance of the
Bonds without prior written notice to the Mayor and the Senior Diroctor of the City's Finance
and Internal Services Department.
These procedures are intended to supplement the procedures evidenced in writing by the
[Name of Federal Tax Agreement] (the "Tax Agreement"), IRS Form 8038 filed in
connection with the Bonds, and the instructions to IRS Form 8038.
A. Responsible Person. the Borrower has assigned to 'insert name], who is
currently the ]insert position' of the Borrower (the "Rcsponsiblc Person"), the responsibility
for ensuring compliance with the requirements of the Tax Agreement and the other covenants
of the Borrower in the bond documents, including the dissemination to the City of the
Borrower's annual Financial inlbrmation and copies of any continuing disclosure filings the
Borrower makes. This responsibility is included in the- job description for [insert position] and
the Responsible Person has or will review these procedures, the Tax Agreement, Form 8038,
and the instructions for Form 14038, and be trained as follows:
[Training procedures to be filled in.]
B. Succession Planning. The Borrower has established the following procedures to
ensure that, when [insert name] leaves the position of 'insert position], the responsibility for
bond covenant compliance will be explained in detail to his/her successor, his/her successor
will be provided compliance training in the same manner as the original Responsible Person,
and that notice of any succession will be given in writing to the Mayor and the Senior Director
of the City's Finance and Internal Services Department:
[Succession procedures to be filled in.]
C. Procedures for the Timely Expenditure of Bond Proceeds. The Borrower
understands that it must spend at least 85% of the net salt proceeds of the Bonds to carry out
the projects financed with the proceeds of the Bonds within three years .from the dale of
issuance of the Bonds. The Borrower will treat as "sale proceeds" any amounts actually or
constructively received by the Borrower from the sale of the Bonds, including amounts used to
A-1
pay underwriter's or purchaser's discount or compensation and accrued interest other than pre -
issuance accrued interest. "Net sale proceeds" means the sale proceeds, less any amount
deposited into a reasonably required reserve or replacement fund. The Borrower has
established the following procedures for tracking and reporting to the Responsible Person the
expenditure of net sale proceeds:
]Expenditure monitoring procedures to be filled in.]
D. Procedures for the Assuring Compliance with Arbitrage Yield Restriction and
Rebate Requirements. The Responsible Person will create a system to ensure that, not less than
six months prior to each five year anniversary of the closing date, the Borrower will retain an
arbitrage rebate consultant to prepare a report deteminting the yield of the Bonds under the
Internal Revenue Code of 1986, as amended (the "Code"), and whether there is any amount
owed to the IRS under Section 148 of the Code. The Responsible Person will submit to the
Bond trustee and the Mayor and the Senior Director of the City's Finance and Internal Services
Department the completed arbitrage rebate report no later than 30 days prior to each five year
anniversary of the closing date.
E. Procedures to comply with Remediation Requirements. The Borrower agrees
that the Responsible Person will establish a system for tracking and monitoring the use of the
facilities financed with the proceeds of the Bonds to ensure that.the use of those facilities will
not violate the private business tests or the private loan financing test under Section 141 of the
Code. If after the issuance of the Bonds, the use of the facilities financed with the proceeds of
the Bonds changes so that the private business tests or the private loan financing test would be
met, or if another violation of these procedures occurs which requires correction, the Borrower
will notify the Mayor and the Senior Director of the City's Finance and Internal Services
Department and, in connection with consulting bond counsel, undertake a closing ageetnent
through the Tax -Exempt Bonds Voluntary Closing Agreement Program or take one of the
actions permitted by the Code and associated regulations.
F. Ongoing Procedures. The Responsible Person will review these procedures, the
Tax Agreement, the Form 8038, the instructions Int Form 8038, and the status and use of the
Bond &tuned facilities on at least an annual basis and at the following intervals: (i) six
months prior to each five-year anniversary of the issue date oI'the Bonds; (ii) within 30 days of
the date the last Bond is retired, defeased or refunded; (iii) when any rebate payment is made;
(iv) when a facility financed with proceeds of the Bonds is placed in service; (v) i.f.' the
Borrower determines that a facility planned to be financed with proceeds of the Bonds will not
be completed; and (vi) if any of the representations, statements, circumstances or expectations
of the Borrower that are set forth in the Tax Agreement are no longer true, have changed, or
have not come to pass as described in the Tax Agreement. This review will be made for the
purposes of identifying any possible violation of federal tax requirements related to the Bonds,
and to ensure the timely correction of those violations pursuant to the remedial action
provisions outlined above or through the Tax -Exempt Bonds Voluntary Closing Agreement
Program. if any possible violation is identified, the Responsible Person will notify the Mayor,
the Senior Director of the City's Finance and Internal Services Department and the City
Attorney so that any existing or expected violation can be corrected.
A-2
0. kccordkeeping. The Responsible Person will develop and implement a system
I'or maintaining records relating to the procedures outlined above. Such records shall be kept
and maintained I'or the life of the Bonds, and any bonds that refund the Bonds, plus four years.
These records may be maintained on paper, by electronic media, or by any combination
thereof.
H. Compliance Meeting. The Borrower agrees to attend a. post -closing meeting
between the authorized official executing these procedures, the Responsible Person, the Mayor
and the Senior Director of the City's Finance and Internal Services Department, and bond
counsel. At such meeting, the Borrower and the City will review and discuss these procedures
and the Borrower's responsibility for maintaining the status of the Bonds as tax-exempt bonds.
Adopted [insert closing date].
(Authorized Official]
[Responsible Party]
A-3
Paul A Becker
Submitted By
City of Fayetteville Staff Review Form
City Councll Agenda Items
and
Contracts, Leases or Agreements
12/18/2012
City CoundE Meeting Date
Agenda Items Onty
Finance and Internal Services Finance and Internal Services
Division
Action Required:
Department
The City's Bond Counsel has reconmmendes that Fayetteville formally adopt a set of Post -Issuance Compliance
Policies and Procedures relating to bond issues.lt is requested the City Council adopt the attached policies and
proceedures for the reasond specified by Kutak Rock LLP in the attached correspondence.
N/A
Cost of this request
Account Number
Project Number
Category! Project Budget
$
Program Category / Project Name
Funds Used to Date Program 1 Project Category Name
Remaining Balance Fund Name
Budgeted Item (� Budget Adjustment Attached
11-30 -AWL Previous Ordinance or Resolution li
Department Director i Date
City Attorney
'Ciets1 a .
Finance and Internal Services Director
(Z -3 -tole
Date
•+.max
Date
Date
tot
Original Contract Date:
Original Contract Number:
Comments:
Revised January 15, 2009
' ete NiA: e
ARKh
CITY COUNCIL AGENDA MEMO
THE CITY OF FAYETTEVILLE, ARKANSAS
DEPARTMENTCOKPESPONDENCE
To: Mayor Lioncld Jordan, and Members of the City Council
Thru: Don Marr, Chief of Staff
From: Paul A Becker, Finance and Internal Services Director
Date: 11/30/2012
Subject: Adoption of Post -issuance Compliance Policies and Procedures
PROPOSAL: Our Bond Counsel has recommended that the City Council adopt Post -Issuance Compliance
Policies and Procedures relating to previously issued bonds. They have, in fact, sent recommended policies and
procedures to us for consideration. My accounting staff and I have carefully reviewed those recommendations
and feel that it would be appropriate to adopt them. Essentially we are performing the required tasks, but this
would forma]ire that practice.
A key element in the policy would be that 1 would be named as the responsible officer to insure
the policy and procedures were followed. I feel that is currently my responsibility anyway. The adoption of
formal policies and procedures will help demonstrate a positive internal control enviromnent over issued bonds
in the event of an IRS bond audit.
RECOMMENDATION: It is recommended that the Council adopt the attached Post -Issuance Compliance
Polices and Pmcedures
BUDGET IMPACT: None
KUTAK ROCK LLP
SUITE 2000
124 WEST CAPITOL AVENUE
NORTHWEST ARKANSAS OFFICE LITTLE ROCK, AR 7?'01-3708
SUITn 490
2O$ FAST MILI.BAP ROA,
FAYETTEVILLE. ARKANSAS 72708,4008
470-978-4200
GORDON M. WILBOURH
gol*awiIboum kidaktockcom
(6011976.a1a1
City of Fayetteville, Arkansas
113 West Ivlountain
-Fayetteville, AR 72701
ao1-075-3000
FACSIMILE 601-975.5001
www.kutakrock.com
September 10, 2012
Re: Adoption of Trost -issuance Compliance Policies and Proccdtnes
Ladies and Gentlemen:
ATLANTA
crtcAOO
DENVER
FAYETTEVILLE
IRVINE
KANSAO any
LITTLE nocK
LO6 ANGOLLS
MINNEAPOLIS
O KLAHOMA CITY
O MAHA
PHILADELPHIA
RICHEIONb
LCOTTSOALc
wAcHINOTON
vICRITA
The Internal Revenue Service has recently been focusing on the need for issuers of tax-
exempt and tax credit obligations to adopt writtan policies and procedures dealing with post -
issuance diligence and compliance. The need for written policies and procedures applies to
issuers of all types, from the issuers of the smallest or most straightforward of governmental
deals, to Targe State issuers, to issuers of conduit loan programs and sophisticated structured
financings.
Asstated in its most recent interact publication on post -issuance compliance for the tax-
exempt bond community(http:liwww.irs.govitaxexemptbondr'article/0.,id-2r13503,00,hlml), the
IRS indicates that these written procedures must
"..- go beyond reliance on tax certificates included in bond
documents provided at closing. Sole reliance on the closing bond
documents may result in procedures insufficiently detailed or not
incorporated into an issuer's operations. Written procedures
should contain certain key characteristics, including making
provision for: • .
• Due diligence review at regular intervals;
• Identifying the official or employee
responsible for review;
• Training of the responsible official or
employee;
• Retention of adequate records to substantiate
compliance (e.g., records relating to
expenditure of proceeds);
4829.6110-2861.2
KUTAK ROCK LLP
September 10, 2012
Page 2
• Procedures reasonably expected to timely
identify noncompliance; and
• Procedures ensuring that the issuer will take
steps to timely correct noncompliance.
The goal of establishing and following written procedures is to
identify and resolve noncompliance, on a timely basis, to
preserve the preferential status of tax -advantaged bonds.
Generally, an issuer that has established and followed
comprehensive written procedures to promote post -issuance
compliance is less likely than an issuer that does not have such
procedures, to violate the federal tax requirements related to its
bonds."
The IRS has further stated that any issuer who identifies a violation in accordance with
the implementation of its written post -issuance compliance procedures can generally expect to
receive more favorable treatment in resolving its tax violation under IRS's voluntary compliance
program (VCAP) than if the issuer has not implemented such procedures.
Kutak Rock is of the view that this last statement, more than any other set forth on the
IRS's website, together with revisions to Forms 8038 and 8038-0 in 2011 that specifically
require an issuer to report whether it has adopted post -issuance compliance procedures, represent
a significant change in tone in the IRS's approach to post -issuance compliance and can be read to
be imposing an affirmative duty on issuers and conduit borrowers to adopt such procedures as
soon as possible.
To explain further the concept of and requirement for written policies and procedures
concerning post -issuance compliance for federal tax purposes, we have attached a memorandum
entitled "A Bond Issuer's and Conduit Borrower's Procedures for Post -Issuance Compliance" as
Exhibit I that answers some frequently asked questions.
Kutak Rock recommends that all issuers of governmental bonds adopt and implement
written post -issuance compliance policies and procedures as soon as practicable and, if at all
possible, prior to issuance of your next issue of tax -advantaged bonds. To facilitate adoption and
implementation, also attached are forms of a resolution and procedures documentation that may
be used or tailored by issuers to establish and implement written policies and procedures.
Yours truly,
ar
Kutak Rock LLP
4829-0 in -28632
KC1TAK ROCK LLP
September 10, 2012
Page 3
Kutak Rock LLP ("Kutak Rock"j is delivering the form of proposed past -issuance compliance
resolution and written policies and procedures attached to this letter as a service to its issuer
and conduit borrower clients or pursuant to a separate written engagement to deliver these
materials. Unless otherwise .specified an writing transmitted by Kutak Rock any responsibilities
with respect to these materials terminates on the date of receipt of these procedures by the
recipient. Unless separately engaged in writing to do so, delivery of these materials does not
constitute an engagement of Kutak Rock with respect w any of the recipient's post -issuance
compliance duties, and the delivery of these materials in and of itself has not involved and does
not involve 0) any affirmation, confirmation adjustment, or other actions taken with respect to
any legal opinions delivered with respect to any obligations of the recipient by Kutak Rock, (ii)
acceptance by .KCuiak Rock of any obligation to monitor the recipient's compliance with post -
issuance compliance duties, or (iiQ any obligation of a continuing nature by Kutak Rock.
48294110.2861.2
RESOLUTION NO.
A RESOLUTION TO AUTIHORIZE AND ADOPT POST -ISSUANCE TAX
COMPLIANCE PROCEDURES TO BE FOLLOWED IN CONNECTION
WITH EACII ISSUE OF TAX-EXEMPT BONDS BY THE CITY
WHEREAS, the City of Fayetteville has previously issued and will in the future issue
series of bonds (the "Tax -Exempt Bonds") the interest on which is excluded from gross income
of the owners thereof pursuant to Section 103 of the internal Revenue Code of 1986, as amended
(the "Code"), and the regulations promulgated thereunder (the "Regulations"); and
WIIEREAS, in connection with the issuance of each series of Tax -Exempt Bonds, the
City has executed or will execute covenants and certificates wherein the City represents that it
expects and intends to be able to comply with and will, to the extent permitted by law, comply
with the provisions and procedures set Ibrth in such covenants and certificates and will do and
perform ail acts and things necessary or desirable in order to assure that the interest on the series
of Tax -Exempt Bonds to which such covenants and certificates relate will be excluded from
gross income of the owners thereof for federal income tax purposes; and
WHEREAS, upon the advice of the City's Bond Counsel Gordon Wilbourn of Kutuk
Rock, the City has determined that it is advantageous and in the best interests of the City and the
owners of the Tax -Exempt Bonds to adopt certain post -issuance compliance procedures
substantially in the form attached hereto as Exhibit A and made a part hereof (the "Post -Issuance
Tax Compliance Procedures");
NOW, THEREFORE BE IT RESOLVED BY THE CITY COUNCIL OF THE
CITY OF FAYETTEVILLE, ARKANSAS:
Section 1: That the City Council of the City of Fayetteville, Arkansas hereby
approves and adopts the Post -Issuance Tax Compliance Procedures in the form attached hereto
as Exhibit A, and said Post -Issuance Tax Compliance Procedures shall be applicable to all Tax -
Exempt Bonds now or hereafter issued by the City.
Section 2: That the City Council hereby authorizes and directs the Compliance
Officer listed in the Post -Issuance Tax Compliance Procedures (City Finance Director) to take
such actions is such Compliance Officer, after appropriate consultation with Bond Counsel to
the City, deems necessary, appropriate or desirable to effect the implementation of the Post -
issuance Tax Compliance Procedures.
PASSED and APPROVED this 15th day of January, 2013.
APPROVED: ATTEST:
By: By:
LIONELD JORDAN, Mayor SONDRA E. SMITH, City Clerk+"Treasurer
CITY OF FAYETTEVILLE ARKANSAS
POST -ISSUANCE TAX COMPLIANCE PROCEDURES
The purpose of these Post -Issuance Tax Compliance Procedures (the "Procedures") is to
establish procedures in connection with tax-exempt bonds issued by the City of Fayetteville,
Arkansas (the "City") so as to ensure that all applicable post -issuance requirements of federal
income tax law needed to preserve the tax-exempt status or such bonds are met.
General
In connection with the issuance of any issue of tax-exempt bonds by the City, the Mayor
will execute a tax regulatory agreement or tax compliance certificate (either, a "'fax Certificate")
that describes the requirements and provisions of the Internal Revenue Code that must be
followed in order to maintain the tax exempt status of interest on such bonds. In addition, the
'fax Certificate will contain the reasonable expectations of the City at the time of issuance of
such bonds with respect to the use of the gross proceeds of such bonds and the assets to be
financed or refinanced with their proceeds. These Procedures supplement and support the
covenants and representations made by the City in each such Tax Certificate with respect to the
corresponding issue of tux -exempt bonds. In order to comply with the covenants and
representations set forth in the bond documents and in the Tax Certificate, the City, through its
Finance and Internal Services Department, will track and monitor the actual use of the proceeds
of the corresponding issue of bonds, the investment and expenditure of the bond proceeds and
the assets financed or refinanced with the proceeds of such bonds over the life of such bonds. In
the event the City acts as a conduit issuer to issue tax-exempt bonds for the benefit of a third -
party borrower or other third -party beneficiary (each a "Beneficiary"), certain of the tasks set
forth herein may be performed by the Beneficiary pursuant to a written agreement with the City.
Designation of Responsible Person
Mr. Paul Becker, Senior Director of the City's Finance and Internal Services Department,
or his successor (the "Compliance Officer"), shall maintain an inventory of bonds and assets
financed which contains the pertinent data to satisfy the City's monitoring responsibilities with
respect to its tax-exempt bonds. Other individuals may be responsible for implementing certain
portions of these Procedures under the auspices of the Compliance Officer as described herein.
Any transfer, sale or other disposition of bond -financed assets must be reviewed and approved
by the Compliance Officer.
Post -Issuance Compliance Requirements
External Advisors/Documentation
The Compliance Officer shall consult with bond counsel and other legal counsel and
advisors, as needed, throughout the bond issuance process to identify requirements and to
establish procedures necessary or appropriate so that the bonds will continue to qualify for
tax-exempt status. Those requirements and procedures shall be documented in the Tax
Certificate and/or other documents finalized at or before issuance of the bonds. Those
requirements and procedures shall include future compliance with applicable arbitrage rebate
requirements and all other applicable post -issuance requirements of federal tax law throughout
(and in some cases beyond) the term of the bonds.
The Compliance Officer also shall consult with bond counsel and other legal counsel and
advisors, as needed, following issuance of the bonds to ensure that all applicable post -issuance
requirements in fact are met. This shall include, without limitation, consultation in connection
with future contracts with respect to the use of bond -financed or refinanced assets.
The City shall engage an expert advisor (a "Rebate Service Provider") to assist in the
calculation of arbitrage rebate payable in respect of the investment of bond proceeds, unless the
Tax Certificate documents that arbitrage rebate will not be applicable to an issue of bonds.
Unless otherwise provided by the applicable Tax Certificate providing for the issuance of
a series of bonds, unexpended bond proceeds shall be held in a segregated account and the
investment of bond proceeds shall be managed by the City. The City shall prepare regular,
periodic statements regarding the investments and transactions involving bond proceeds.
Arbitrage Rebate and Yield
Unless the Tax Certificate documents that arbitrage rebate will not be applicable to an
issue of tax-exempt bonds, the Compliance Officer or his or her designee shall be responsible
for:
• engaging the services of the Rebate Service Provider and, prior to each rebate calculation date,
causing the trustee or other account holder to deliver periodic statements concerning the
investment of bond proceeds to the Rebate Service Provider;
• providing to the Rebate Service Provider additional documents and information reasonably
requested by the Rebate Service Provider;
• monitoring efforts of the Rebate Service Provider;
• assuring payment of required rebate amounts, if any, no Iater than 60 days atter each 5 -year
anniversary of the issue date of the bonds, and no later than 60 days alter the last bond of each
issue is redeemed;
• during the construction period of each capital project financed in whole or in part by bonds,
monitoring the investment and expenditure of bond proceeds and consulting with the Rebate
Service Provider to determine compliance with any applicable exceptions from the arbitrage
rebate requirements during each 6 -month spending period up to 6 months, 18 months or
24 months, as applicable, following the issue date of the bonds; and
• retaining copies of all arbitrage reports and account statements as described below under
"Record Keeping Requirement."
The City, in the Tax Certificate and/or other documents finalized at or before the issuance of
each issue of tax-exempt bonds, has agreed or will agree to undertake the tasks listed above
2
(unless the Tax Certificate documents that arbitrage rebate will not be applicable to an issue oi'
bonds).
Use of Bond Proceeds and Bond -Financed or Refinanced Assets:
The Compliance Officer or his or her designee shall be responsible for:
• monitoring the use of bond proceeds and the use of bond -financed or refinanced assets (e.g.,
facilities, furnishings or equipment) throughout the term of the bonds to ensure compliance with
covenants and restrictions set forth in the Tax Certificate;
• maintaining an inventory oi'bonds and records identifying the assets or portion of assets that arc
financed or refinanced with proceeds of the bonds, including a final allocation of bond proceeds
as described below under "Record Keeping Requirement;"
• consulting with bond counsel and other legal counsel and advisers as necessary in the review of
any contracts or arrangements involving use of bond -financed or refinanced assets to ensure
compliance with all covenants and restrictions set forth in the Tax Certificate;
• maintaining records for any contracts or arrangements involving the use of bond -financed or
refinanced assets as described below under `Record Keeping Requirement;"
• conferring at least annually with personnel responsible for bond -financed or refinanced assets to
identify and discuss any existing or planned use of bond -financed or refinanced assets, to ensure
that those uses are consistent with all covenants and restrictions set forth in the Tax Certificate;
and
• to the extent that the City discovers that any applicable tax restrictions regarding use of bond
proceeds and bond -financed or refinanced assets will or may be violated, consulting promptly
with bond counsel and other legal counsel and advisers to determine a course of action to
remediate all nonqualified bonds, if such counsel advises that a remedial action is necessary.
The City, in the Tax Certificate and/or other documents finalized at or before the issuance
of each series of tax-exempt bonds, has agreed or will agree to undertake the tasks listed above.
All relevant records and contracts shall be maintained as described below.
Record Keeping Requirement
The Compliance Officer or his or her designee shall be responsible for maintaining the
following documents for the term of each issue of tax-exempt bonds (including refunding bonds,
if any) plus at least three years:
• a copy of the bond closing transcript(s) and other relevant documentation delivered to the City at
or in connection with closing of the issue of bonds, including any elections made by the City in
connection therewith;
• a copy of all material documents relating to capital expenditures financed or refinanced by bond
proceeds, including (without limitation) construction contracts, purchase orders, invoices, and
3
payment records, draw requests for bond proceeds and evidence as to the amount and date for
each draw down of bond proceeds, as well as documents relating to costs paid or reimbursed
with bond proceeds and records identifying the assets or portion of assets that are financed or
refinanced with bond proceeds, including a final allocation of bond proceeds (although the
responsibilities of the City to perforin the tasks set forth above may he satisfied by obtaining the
written agreement of a Bee ticiary to perform such tasks);
• once a project has been completed and placed in service, maintain copies of all prospective
contracts and arrangements, if any, involving the use of bond -financed or refinanced assets
(although the responsibilities of the City to perform the tasks set forth above may be satisfied by
obtaining the written agreement of a Beneficiary to perform such tasks);
• copies of all statements and reports, including arbitrage reports, prepared with respect to City
bonds; and
• a copy of all records of investments, arbitrage reports and underlying documents, including
statements in connection with any investment agreements, and copies of all bidding documents,
if any.
Conduit Bond Issue Compliance Requirements
Any Beneficiary of an issue of tax-exempt bonds by the City must complete the Written
Procedures for Ongoing Compliance for a Benefiary/Bonower in substantially the form attached
to these Procedures as Exhibit A. Such Written Procedures must be included in the transcript of
closing documents for said tax-exempt bonds.
4
1XIIIBIT A
]This form to be completed by the Borrower/Beneficiary and bond counsel prior to
closing and included in the transcript of closing documents for the Bonds.]
Written Procedures for Ongoing Compliance for a Borrower/Beneficiary
Of Bonds issued by the Citv of Fayetteville. Arkansas
The following procedures apply to the [Name of Bond Issue] (the "Bonds") issued by
the City of Fayetteville, Arkansas (the "City"). These procedures are hereby approved and
adopted by the (Title of Authorized Official] of the [Name of the Borrower) (the "Borrower")
and will not be amended or rescinded by the Borrower after the issuance of the Bonds without
prior written notice to the Mayor and the Senior Director of the City's Finance and Internal
Services Department.
These procedures are intended to supplement the procedures evidenced in writing by the
[Name of Federal Tax Agreement] (the "Tax Agreement"), 1RS Form 8038 filed in connection
with the Bonds, and the instructions to IRS form 8038.
A. Responsible Person. The Borrower has assigned to [insert name], who is
currently the [insert position) of the Borrower (the "Responsible Person"), the responsibility for
ensuring compliance with the requirements of the Tax Agreement and the other covenants of the
Borrower in the bond documents, including the dissemination to the City of the Borrower's
annual financial information and copies of any continuing disclosure filings the Borrower makes.
This responsibility is included in the job description for [insert position] and the Responsible
Person has or will review these procedures, the fax Agreement, Form 8038, and the instructions
for Form 8038, and be trained as follows:
[Training procedures to be filled in.]
B. Succession Planning. The Borrower has established the following procedures to
ensure that, when [insert name) leaves the position of [insert position], the responsibility for
bond covenant compliance will be explained in detail to his/her successor, his/her successor will
be provided compliance training in the same manner as the original Responsible Person, and that
notice of any stwcession will be given in writing to the Mayor and the Senior Director of the
City's Finance and Internal Services Department:
[Succession procedures to be filled in.]
C. Procedures for the Timely Expenditure of Bond Proceeds. The Borrower
understands that it must spend at least 85% of the net sale proceeds ol'the Bonds to carry out the
projects financed with the proceeds of the Bonds within three years from the date of issuance of
the Bonds. The Borrower will treat as "sale proceeds" any amounts actually or constructively
received by the Borrower from the sale of the Bonds, including amounts used to pay
A-1