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702.9 Post-Issuance Compliance Policy for Tax-Exempt Obligations

Code 702.9

Post-Issuance Compliance Policy for Tax-Exempt Obligations

1.         Compliance Coordinator:

a)         The Treasurer ("Coordinator") shall be responsible for monitoring post-issuance compliance.

b)         The Coordinator will maintain a copy of the transcript of proceedings in connection with the issuance of any tax-exempt obligations.  Coordinator will obtain such records as are necessary to meet the requirements of this policy.

c)         The Coordinator shall consult with bond counsel, IRS publications and such other resources as are necessary to understand and meet the requirements of this policy.

d)         Training and education of Coordinator will be sought and implemented upon the occurrence of new developments and upon the hiring of new personnel to implement this policy.

2.         Financing Transcripts.  The Coordinator shall confirm the proper filing of an 8038 Series return, and maintain a transcript of proceedings for all tax-exempt obligations issued by the School District, including but not limited to all tax-exempt bonds, notes and lease-purchase contracts.  Each transcript shall be maintained until eleven (11) years after the tax-exempt obligation it documents has been retired.

3.         Proper Use of Proceeds.  The Coordinator shall review the resolution authorizing issuance for each tax-exempt obligation issued by the School District, and shall:

a)         obtain a computation of the yield on such issue from the School District’s financial advisor; 

b)         create a separate Project Fund (with as many sub-funds as shall be necessary to allocate proceeds among the projects being funded by the issue) into which the proceeds of issue shall be deposited;

c)         review all requisitions, draw schedules, draw requests, invoices and bills requesting payment from the Project Fund;

d)         determine whether payment from the Project Fund is appropriate, and if so, make payment from the Project Fund (and appropriate sub-fund if applicable);

e)         maintain records of the payment requests and corresponding records showing payment;

f)         maintain records showing the earnings on, and investment of, the Project Fund;

g)         ensure that investments acquired with proceeds are purchased at fair market value;

h)         identify bond proceeds or applicable debt service allocations that must be invested with a yield-restriction and 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.

i.          maintain records related to any investment contracts, credit enhancement transactions, and the bidding of financial products related to the proceeds.

            4.  Timely Expenditure and Arbitrage/Rebate Compliance.  The Coordinator shall review the Tax-Exemption Certificate (or equivalent) for each tax-exempt obligation issued by the School District and the expenditure records provided in Section 2 of this policy, above, and shall:

a)         monitor and ensure that proceeds of each such issue are spent within the temporary period set forth in such certificate;

b)         if the School District does not meet the "small issuer" exception for said obligation, monitor and ensure that the proceeds are spent in accordance with one or more of the applicable exceptions to rebate as set forth in such certificate;

c)         not less than 60 days prior to a required expenditure date confer with bond counsel if the School District will fail to meet the applicable temporary period or rebate exception expenditure requirements of the Tax-Exemption Certificate; and

d)         in the event the School District fails to meet a temporary period or rebate exception:

i.          procure a timely computation of any rebate liability and, if rebate is due, file a Form 8038-T and arrange for payment of such rebate liability;

ii.         arrange for timely computation and payment of "yield reduction payments" (as such term is defined in the Code and Treasury Regulations), if applicable.

5.         Proper Use of Bond Financed Assets.  The Coordinator shall: 

a)         maintain appropriate records and a list of all bond financed assets.  Such records shall include the actual amount of proceeds (including investment earnings) spent on each of the bond financed assets;

b)         with respect to each bond financed asset, the Coordinator will monitor and confer with bond counsel with respect to all proposed:

             i.         management contracts,

             ii.        service agreements,

            iii.        research contracts,

            iv.        naming rights contracts,

             v.        leases or sub-leases,

            vi.        joint venture, limited liability or partnership arrangements,

            vii.       sale of property; or

            viii.      any other change in use of such asset;

c)         maintain a copy of the proposed agreement, contract, lease or arrangement, together with the response by bond counsel with respect to the proposal for at least three (3) years after retirement of all tax-exempt obligations issued to fund all or any portion of bond financed assets; and

d)         In the event the School District takes an action with respect to a bond financed asset, which causes the private business tests or private loan financing test to be met, the Coordinator shall contact bond counsel and ensure timely remedial action under IRS Regulation Sections 1.141-12.

6.         General Project Records.  For each project financed with tax-exempt obligations, the Coordinator shall maintain, until three (3) years after retirement of the tax-exempt obligations or obligations issued to refund those obligations, the following:

            a)         appraisals, demand surveys or feasibility studies,

            b)         applications, approvals and other documentation of grants,

            c)         depreciation schedules,

            d)         contracts respecting the project.

7.         Advance Refundings

The board treasurer shall be responsible for the following current, post issuance and record retention procedures with respect to advance refunding bonds.  The board treasurer shall:

            a)         identify and select bonds to be advance refunded with advice from internal financial personnel and a financial advisor:

            b)         identify, with advice from the financial advisor and bond counsel, any possible federal tax compliance issues prior to structuring any advance refunding;

            c)         review the structure with the input of the financial advisor and bond counsel, of advance refunding issues prior to the issuance to ensure:

                        (1)       that the proposed refunding is permitted pursuant to applicable federal tax requirements if there has been a prior refunding of the original bond issue;

                        (2)       that the proposed issuance complies with federal income tax requirements which might impose restrictions on the redemption date of the refunded bonds;

                        (3)        that the proposed issuance complies with federal income tax requirements which allow for the proceeds and replacement proceeds of an issue to be invested temporarily in higher yielding investments without causing the advance refunding bonds to become "arbitrage bonds"; and

                        (4)        that the proposed issuance will not result in the issuer's exploitation of the difference between tax exempt and taxable interest rates to obtain an financial advantage nor overburden the tax exempt market in a way that might be considered an abusive transaction for federal tax purposes;

d)         Collect and review data related to arbitrage yield restriction and rebate requirements for advance refunding bonds. To ensure such compliance, the board treasurer shall engage a rebate consultant to prepare a verification report in connection with the advance refunding issuance. Said report shall ensure said requirements are satisfied;

            e)         Whenever possible, purchase State and Local Government Series (SLGS) to size each advance refunding escrow. The financial advisor shall be included in the process of subscribing SLGS. To the extent SLGS are not available for purchase, the Board treasurer shall, in consultation with bond counsel and the financial advisor, comply with IRS regulations;

f)          Ensure, after input from bond counsel, compliance with any bidding requirements set forth by the IRS regulations to the extent as issuer elects to the purchase of a guaranteed investment contract;

g)         In determining the issue price for any advance refunding issuance, obtain and retain issue price certification by the purchasing underwriter at closing;

h)         After the issuance of an advance refunding issue, ensure timely identification of violations of any federal tax requirements and engage bond counsel in attempt to remediate same in accordance with IRS regulations.

8.         Continuing Disclosure.           The Coordinator shall assure compliance with each continuing disclosure certificate and annually, per continuing disclosure agreements, file audited annual financial statements and other information required by each continuing disclosure agreement.  The Coordinator will monitor material events as described in each continuing disclosure agreement and assure compliance with material event disclosure.  Events to be reported shall be reported promptly, but in no event not later than ten (10) Business Days after the day of the occurrence of the event, and shall include, but not be limited to:

            a)         Principal and interest payment delinquencies;

            b)         Non-payment related defaults, if material;

            c)         Unscheduled draws on debt service reserves reflecting financial difficulties;

            d)         Unscheduled draws on credit enhancements relating to the bonds reflecting financial difficulties;

            e)         Substitution of credit or liquidity providers, or their failure to perform;

            f)         Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax-exempt status of the bonds, or material events affecting the tax-exempt status of the bonds;

            g)         Modifications to rights of Holders of the Bonds, if material;

            h)         Bond calls (excluding sinking fund mandatory redemptions), if material, and tender offers;

            i)          Defeasances of the bonds;

            j)          Release, substitution, or sale of property securing repayment of the bonds, if material;

            k)         Rating changes on the bonds;

            l)          Bankruptcy, insolvency, receivership or similar event of the Issuer;

            m)        The consummation of a merger, consolidation, or acquisition involving the Issuer or the sale of all or substantially all of the assets of the Issuer, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and

            n)         Appointment of a successor or additional trustee or the change of name of a trustee, if material.


Date of Review:  April 9, 2018


Date of Revision:


April 9, 2018