FILE:  D-2.1a

Cf:  D-2.1

 

POST-ISSUANCE TAX COMPLIANCE

 

 

In order to maximize the likelihood that the Central Community School Board satisfies all applicable post-issuance requirements of federal income tax law needed to preserve the tax-exempt status of its bonds, and to ensure that the School Board shall take any appropriate remedial action on a timely basis if a future event occurs that could affect the tax-exempt status of its bonds, the School Board has established the following provisions.  The School Board reserves the right to use its discretion as necessary and appropriate to make exceptions or request additional provisions as circumstances warrant.

 

For purposes of this policy, tax-exempt obligations (“bonds”) include (a) obligations the interest on which is excludable from gross income for federal income tax purposes pursuant to the Internal Revenue Code of 1986, as amended, and regulations thereunder, and (b) obligations the interest on which is not excludable from gross income for federal income tax purposes, but federal law otherwise requires such obligations to satisfy requirements of the Internal Revenue Code applicable to tax-exempt obligations, such as “Build America Bonds.”

 

The reasonable expectations of the Central Community School Board with respect to its bonds as of their date of issuance shall be set forth in each bond issue’s Tax Compliance Certificate executed by the undersigned officers on each bond issue date.

 

This policy documents existing practices and authorizes various procedures and systems designed to identify on a timely basis facts relevant to demonstrating compliance with the requirements that must be satisfied subsequent to the issuance of tax-exempt bonds in order that the interest on such bonds be, or continue to be, or would be but for certain provisions of the Internal Revenue Code, excludable from gross income for federal income tax purposes.  The School Board recognizes that compliance with certain provisions of the Internal Revenue Code and regulations is an ongoing process, necessary during the entire term of tax-exempt bonds, and is an integral component of the School Board’s debt management.  Accordingly, the analysis of facts and implementation of this policy shall require ongoing monitoring with respect to the issuance of any tax-exempt bonds.

 

Specific post-issuance compliance procedures addressed in this policy are not intended to be exhaustive, and further areas may be identified from time to time by the Central Community School Board in consultation with bond counsel and other appropriate personnel.

 

DESIGNATION OF THE POST-ISSUANCE COMPLIANCE OFFICER

 

The Chief Financial Officer of the Central Community School Board shall be designated as the Post-Issuance Compliance Officer for all tax-exempt bonds of the School Board.  The Compliance Officer may designate such other personnel as may be necessary to assist in determining continuing compliance with all relevant law and regulations applicable to the continued favorable tax treatment of such indebtedness, and to comply with the record-keeping responsibilities outlined in this policy.

 

At such time as the initial Compliance Officer is replaced or a new Compliance Officer is designated by the Central Community School Board, the School Board or departing Compliance Officer shall ensure that such successor is fully briefed as to the status of the School Board’s outstanding tax-exempt indebtedness and the location of records relating to such indebtedness, and that the successor receives training and consultation with bond counsel as to his or her duties as Compliance Officer under this policy.

 

Unless otherwise provided in any Continuing Disclosure Agreement pursuant to Securities and Exchange Commission Rule 15c2-12, the Compliance Officer shall also be the Dissemination Agent for the Central Community School Board under such Continuing Disclosure Agreement.

 

The Compliance Officer shall also calculate the annual debt service requirements of the bonds, as well as the anticipated investment earnings on bond-related funds, and shall include these in the School Board’s annual budget as necessary.

 

EXTERNAL ADVISORS;  ANNUAL REVIEW

 

The School Board shall consult with bond counsel and other legal counsel and advisors, as needed, so long as any of the bonds remain outstanding, to identify requirements and to establish procedures necessary or appropriate so that interest on all tax-exempt bonds shall continue to be excludable from gross income for federal income tax purposes.  These requirements and procedures shall include future compliance with applicable private activity bond tests, arbitrage rebate requirements, and all other applicable post-issuance requirements of federal tax law throughout (and in some cases beyond) the term of the tax-exempt bonds.

 

The Compliance Officer shall conduct periodic reviews, at least annually on or about March 1 of each year (which is the principal payment date of tax-exempt bonds), or more often as may be necessary, to determine that the Central Community School Board remains in compliance with all laws and regulations, including, without limitation, the matters set forth in this policy.  The Compliance Officer’s annual review shall include matters that relate to the tax-exempt status of the bonds, continuing compliance with covenants that relate to the tax-exempt status of the bonds, and any new matters or public finance developments that relate to the tax-exempt status of bonds or continuing compliance with such requirements.

 

The School Board may consult with bond counsel in conducting its review and may engage expert advisors to assist in the calculation of arbitrage rebate payable in respect of the investment of bond proceeds in the manner more fully set forth in the Tax Compliance Certificate.

 

RECORDS AND RETENTION

 

The Compliance Officer shall maintain written or electronic records relating to all tax-exempt obligations and shall retain such records until at least three (3) years after the final payment of the principal of the tax-exempt bonds.  Such records shall include

 

  1. A copy of the bond closing transcript and other relevant documentation delivered to the School Board at or in connection with the delivery of the bonds, including a computation of the yield of the bonds;

  2. A copy of Internal Revenue Service Form 8038-G, Information Return for Tax-Exempt Governmental Obligations, and any other reports with the Internal Revenue Service (or similar information returns) for the bonds, and Form CP152, Acknowledgment of Receipt, relating thereto;

  3. A copy of all material documents relating to expenditures financed or refinanced by bond proceeds, including (without limitation) construction contracts, purchase orders, invoices, requisitions and payment records, as well as documents relating to costs reimbursed with bond proceeds and records identifying the assets or portion of assets that are financed or refinanced with bond proceeds;

  4. A copy of all leases, subleases, management contracts, naming rights agreements or other agreements relating to the use of any bond-financed property and an accounting of all revenues received pursuant to any of the foregoing, if applicable;

  5. A copy of all material documents relating to the source of funds used to make debt service payments of the bonds; and

  6. A copy of all records of investments, investment agreements, arbitrage reports and underlying documents, including bank statements and bidding materials, if any, in connection with the bonds (including the debt service fund).

 

SOURCE OF REPAYMENT OF BONDS

 

The bonds shall be secured by a pledge of special tax to be imposed and collected annually in excess of all other taxes on all the property subject to taxation within the territorial limits of the School Board.  If the School Board proposes to pay debt service on the bonds with moneys other than such funds, then the Compliance Officer shall immediately contact bond counsel to determine that such use shall not cause the bonds to become Private Activity Bonds.

 

CHANGES IN USE

 

If, during the term of the bonds or during the term of any bonds issued to refinance the bonds, all or any portion of the bond-financed property is owned, used by, or transferred to, any nongovernmental person, or if the School Board plans to enter into any arrangement with respect to the bond-financed property that conveys special legal entitlements for beneficial use of the bond-financed property, priority rights or other preferential benefits, or any special economic benefit to any person other than the School Board, then the Compliance Officer shall contact bond counsel to determine that such use shall not cause the bonds to become Private Activity Bonds.

 

If the School Board plans to enter into a lease, management or incentive payment contract, or other arrangement such as a take or pay or other output-type contract, directly or indirectly granting an interest in the bond-financed property to a person other than the Central Community School Board, then the Compliance Officer shall contact bond counsel to review the terms of such agreement to determine that such use shall not cause the bonds to become Private Activity Bonds.

 

In the event that any other change in use of the bond-financed property takes place that could affect the tax-exempt status of the bonds, then the Compliance Officer shall contact bond counsel to ensure that such change shall not affect the tax-exempt status of the bonds, or to formulate a plan to remediate such actions, which could include the redemption or defeasance of bonds so as to preserve the tax-exempt status of the bonds.

 

The provisions of this section shall not apply to the sale or other dispositions of such minor parts or portions of the bond-financed property as may be disposed of due to normal wear and tear and obsolescence.

 

USES AND INVESTMENTS OF FUNDS AND ACCOUNTS

 

  1. Various funds and accounts are established pursuant to bond resolutions and in the Tax Compliance Certificate.  The Central Community School Board shall prepare regular, periodic statements regarding the investments and transactions involving bond proceeds, which shall compromise part of the records required to be kept as stipulated under Records and Retention, above; and

  2. If the debt service fund ever contains any balance after the March 1 principal payment of the bonds is made each year, except for a reasonable carryover amount which is less than the greater of the earnings on the debt service fund for the immediately preceding year on such principal payment date, or one-twelfth (1/12) of the principal and interest payments on the bonds for the immediately preceding bond year, then the Compliance Officer shall contact bond counsel to ensure that such facts shall not cause the bonds to become arbitrage bonds, to formulate a plan to remediate such condition, if necessary, and to determine an allowable use for such excess moneys or to determine if any yield restrictions apply.

 

ARBITRAGE REBATE

 

The Compliance Officer shall engage a rebate analyst to calculate any arbitrage rebate payable under Section 148(f) of the Internal Revenue Code.

 

POST-ISSUANCE EVENTS

 

In the event that after the issuance of the bonds the Central Community School Board

 

  1. prepays, redeems or defeases any bonds in advance of their scheduled maturity date or mandatory sinking fund redemption date,

  2. changes or amends any maturity date, interest rate, redemption provision, source of repayment, or security or collateral for the bonds,

  3. changes or amends any other material provision of a bond resolution that could be construed as a reissuance for federal income tax purposes, or

  4. refunds all or any part of the bonds through the issuance of taxable or tax-exempt refunding bonds,

 

then the Compliance Officer shall contact bond counsel to determine if the yield of the bonds should be recalculated, if there are any other tax-related consequences of such actions, or if there are any transferred proceeds consequences in the event of the issuance of refunding bonds, and shall formulate a plan to remediate such actions, which may include the redemption or defeasance of bonds so as to preserve the tax-exempt status of the bonds.

 

New Policy:   July 30, 2018

 

 

Ref:    Securities and Exchange Commission Rule 15c2-12

Board minutes, 7-30-18

 

Central Community School Board