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10-03-05
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10-03-05
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1/12/2009 8:24:55 AM
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10/27/2005 3:18:23 PM
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City Council
City Council - Type
CC Packets
Date
10/27/2005
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<br />City of Hastings, Minnesota <br />September 26, 2005 <br /> <br />exemption periods. If all of the proceeds are <br />expended during one of those exemption periods, the <br />issuer is exempt from rebate and may retain the <br />excess earnings. The financing is expected to meet <br />one of the spend down exemptions, in which case no <br />rebate of construction fund interest earnings will be <br />required. The City should be aware that this test is an <br />"actual" test, not one of "reasonable expectations" and <br />will need to determine if the spend down was met or if <br />rebate may be required. In any event, Project Portion <br />Bond proceeds, if any, not set aside for project <br />expenditures may still be subject to rebate. <br /> <br />Proceeds of the Refunding Portion of the Series 2005A <br />Bonds and the Series 2005B Bonds will be expended <br />within 90 days of closing, thereby meeting the six- <br />month expenditure exception to rebate. <br /> <br />Springsted currently provides arbitrage rebate services <br />for the City under a separate contract. An amendment <br />to that contract adding the Series 2005A Bonds has <br />been provided to City staff. <br /> <br />(c) Bona Fide Debt Service Fund <br /> <br />The City must maintain a bona fide debt service fund <br />for the Bonds or be subject to yield restriction. This <br />requires restricting the investments held in the debt <br />service fund to the yield on the Bonds and/or paying <br />back excess investment earnings in the debt service <br />fund to the federal government. A bona fide debt <br />service fund is a fund for which there is an equal <br />matching of revenue to debt service expense, with <br />carry over permitted equal to the greater of the <br />investment earnings in the fund during that year or <br />1/12 the debt service ofthat year. <br /> <br />With improvement bonds, such as the Project Portion <br />of the Series 200SA Bonds, additional diligence should <br />be exercised in monitoring the debt service fund due to <br />the potential accumulation of assessment <br />prepayments which could cause the fund to become <br />non-bona fide. <br /> <br />(d) Economic Life <br /> <br />The average life of the Bonds cannot exceed 120% of <br />the economic life of the projects to be financed. <br /> <br />Page 4 <br />
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