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Home My WebLink About1988-09-20; City Council; 9643; Arbitrage Rebate Calculation Services Agreement. . z 0 f; cc .... 0 z :::, 0 (,) CIT.U,QF CARLSBAD -AGENl)A BILL r------~--,.-- AB# CJ w 'i 3 TITLE; MTG. 9J20 /88 DEPT. FIN RECOMMENDED ACTION: AGREEMENT FOR ARBITRAGE REBATE CALCU~ATION SERVICES Adopt Resolution No. \58~33q authorizing the City Manager to enter into an agreement for rebate calculation services tdth Jones Hall Hill and White. ITEM EXPLANATION: The 1986 Tax Reform Act established controls on local governments' ability to earn and retain arbitrage earnings related lo bond issues. Arbitrnge earnings are interest earnings from bond proceeds over and above the total yield of the bond issue. Under the Act, 100% of any arbitrage earnings must be repaid to the federal governm~nt once every five years. The law further requires that governments calculate annually the amount of arbitrage earnings and. identify oz- set aside these funds for futux·e refund to the government. The rules that apply to the calculation and refund of arbitrage earnings are both lengthy and complex. In addition, the IRS has not fully established the guidelines for arbitrage calculations and, therefore, much is still unc.lear about how to calculate the amount due. Due to the uncertainty surrounding the calculation and rebate of arbitrage earnings, many cities have turned to the services of specialists in this area. One such specialis L, Jones Hall Hill and White , acted as the Ci tr• s bond co,msP 1 for the Hosp Grove issues. Services offered by these specialists include performing rebate calculations; providing instructions to the City concerning compliance with r~bate requirements; consulting with the City, its trustees, and paying agents on any bond issues under contract; the issuing of a legal opinion stating that the City's bonds continue to be exempt from federal and state income taxes; and providing periodic updateb on rules and regulations related to arbitrage calculations. City staff recommends that the City ente1· into such an ag1·eement in order to avoid conflict with the arbitrage law as it currently exists and to guaraatee that the City's bonds will not be compromised in the years to come due to inadvertent conflict with IRS rules. l'he cost related to these services will be borne b)• each of the issues in the years to come. The cost for existing issues will be borne either by the issue itself, if funds currently exist 01· can be obtained, or by the City if no other funding source is available. Aftet reviewing services of feted by several companies, staff finds that those offered by Jones Hall Hill and White dre far supedor and p.dced within reason . FISCAL IMPACT: The cost for the arbitrage rebate calculation services as described under the Jones Hall Hill and White contract, ,~oul<l be $3,000 fo1· the first year for each bond issue under contract and $2,000 per year for each of the following years . The City of Carlsbad current!) has thrPe bond issues. which would require such services; the Hosp Grove issue, th!:' Redevelopment issue, ano the Palo1J1ar Airport Road Assessment District bond issue. The co::,L fat the Ho::;p Grove issue l\uuld require the City Council to appropnate $3,000 in the curtent yeat from the Page 2 of ABtt __9_h lf'3 Contingency Fund. The cost of the Redevelopment bond issue arbitrage se1:vices would require the City Council lo appropriate $3,000 from the Redevelopment fund balance, and the cost of the Paloma1: Airport Road Asse&sment District services will be b<. ·ne in the fit-st year from bond issue proceeds and in future years from a combination of bond issue proceeds and service fees lev,ied against each parc..:el. Any bond issues plannecl for the future kill indude an amonnl to c·over arbitrage rebate calculation services for the life of the bond tssue. EXHIBITS: Resolution No. 88'-33'7 authotiziug the City Manager to enter into au agreement for arbitrage rebate calculation services ~dth Jones Hall Hill and h'lnte. AFI'ER EXECUTION PLEASE RETURN TO: Jones Hall Hill & White, A Professional Law Corporation Four Embarcadero Center, Suii:e 1950 Snn Francisco, CA 94111 Attention: Ms. Janice S. Mazyck AGREEMENT FOR REBATE CALCULA1'ION SERVICES THIS AGREEMENT, is made and entered into this~ay of~198i\, by and between the CITY OF CARLSBAD (heroin called "City"), -the-014¥-0-F-GAfl-bSB:A:B- I-IGYS!NG---AND-Rm)EJ,Zg~MEm-A-GENG¥--01€F&in--oollG<l--'!Ag9R~y.'') and JONES HALL HILL & WHITE, A PROFESSIONAL LAW CORPORATION, San Francisco, California herein called "Attorneys"); WIT NE S S E TH: WHEREAS, the City-and--t-he-A-gef.te;' have issued and propose to issue obligations, the interest on which is excludable from gross income (the "Bonds"); WHEREAS, in order to assure that interest on the Bonds is excludable from gross income, it is necessary that the City -a.1ul-..;ho.-Agoncy.. assure compliance with requirements relating to rebate of certain investment earnings to the United States; and WHEREAS, the City end-Agency-have determined that Attorneys are qualified by training and experience to perform the services required to assist the City aR4--th.e A-geae:r in complying with such requirements; NOW, THEREFOR}!;, the City a-nd-the--:Agency employ Attorneys, and Attorneys accept such employment, upon the following terms and conditions: ARTICLE I DUTIES OF A'ITORNEYS Attorneys shall perform and render the following services to the extent necessary to provide for compliance with applicable provisions of the Internal Revenue Code of 1954 and the Internal Revenue Code of 1986 in connection with the Bonds: A. Perform rebate calculations required by applicable statutes and regulations. B. Provide instructions to tho City a-nd-ehe:-Agen-ey concerning compliance with rebate requirements of applicable statutes and regulations. C. Consult and cooperate with the City, -hlte--AgeRty, the trustees and paying agents for the Bonds and the consultants to, and employees of the City ttnd-the-Agenc.r as necessary to provide for compliance by the City -a-nd--tli<r-Ageney with tho rebate requirements for tho Bonds. D. Upon the request of the City antl-hlie--Age-Rey-following any rebate calculation, and assuming complinnce with rebate instmctions provided by Attorneys, provide n legal opinion stating that the exclusion from gross income of interest on the Bonds for federal income tax purposes has not been adversely affected by reason of failure to comply with 2pplicable ptovisions relating to the rebate requirement. E. Provide periodic memoranda summarizing newly issued regulations, rulings and court decisions regarding the rebate -~quircment and describing their application to the Bonds and suggest modifications (if any) of legal documents and procedures relating to tho Bonds as may be necessary to conform to such regulations, rulings and court decisions. AR'l'ICLE II COMPENSATION AND COSTS For the services of Attorn<:ys set forth in Article I, and following the notification by the City aa4-the-Agene:Y to Attorneys that the services set forth in this contract are to be performed with respect to an identified issue of Bonds, the City 8n:d-ttte-f¼eney shall pay Attorneys an initial acceptance fee of $1,000 payable upon delivery of such issue of Bonds or upon the date of such notification, if later, and an annual service fee of $2,000 per year payable at the end of each bond year following performance of duties required of Attorneys for such bond year. In addition to the compensation set forth in the preceding paro.grai::h, the City and the-:t-\g(.,-x1cy shall reimburse Attorneys for direct out-of-pocket expenses for Federal Express or other courier, messenger or delivery services, photocopying and (upon request by the City and the t_\gency for the same) expenses for travel outside of the State of California in connection with the services rendered by Attorneys hereunder. AR'l'ICLE III RESPONSIBILITIES OF CITY ANE>:AGENG¥ Tho City ttnd-~-Agen-cy shall cooperate with Attorneys in tho performance of their services under Article I, shall provide Attorneys with information requested by Attorneys regarding investments made by the City and-the-:Ageney with proceeds of the Bonds and amounts to he used for payment of the Bonds and shall assist Attorneys in obtaining information regarding investments made by the trustee for tho Bonds with proceeds of the Bonds and amounts to be used for payment of tho Bonds. IN WITNESS WHEREOF, the City, t.he-:Ageney and Attorneys have caused this Agreement to be executed, in duplicate, in their respective corporate names, by one of their respective duly authorized officers, all as of the day and year first above written. CITY OF CARLSBAD •. Ii l ·1./ ;: _, • B / ::,/Jz . : ft .. ' ' . Tit~., A: LE~~s: ~a._y_o_r ___ _ CITY ING AND GENCY JONES HALL HILL & WHITE, A Professional Law Corporation /Y~~ By ~~~~ ;; Sharon Stanton White • J. 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 RESOL[TION XO. 88-339 A RESOLUTION Of THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA, AUTHORIZING THE CITY ~IANAGER TO ENTER INTO AGREEMENT FOR ARBITRAGE REBATE CALCt;LATION SERVICES WITH JONES HALL HILL AND WHirE AND APPROPRIATING FUNDS WHEREAS, the Tax Reform Act of 1986 established cet:t.1111 cuntroh on the City's ability to earn and retain arbitrage ea1.nings: and WHEREAS, these rules e:.t..i.blished by the federal government .md i::.,•,,twl by the IRS are extremely complex and require the set vices uf an e~~perl ill Lhe field of arbitrag~ calculations to guatantee that the City fully complies 1,ith the IRS rules: and \v1IEREAS , the Cit> Council has de term in.ed that it is in the Ci tr' s best interest to obtain the services of an expert in the field of at·bitt·age calculations to help the City safeguard the Lax exempt status of existing bourl issues; and WHEREAS, the City staff has reviewed the ser·vices offered by !>eve ml agencies and finds those offered by Jones Hall Hill and White to be of superior quality; ~OW, THEREFORE, BE IT RESOLVED by the City Council of the City of Carlsbad, California, that the City Manager is hereby authorized to enter inlo the attached agreement (Exhibits A) for arbitrage rebate calculaLion services with the firm of Jones Hall Hill and White. BE IT FURTHER RESOLVED that: 1) the amount of $3,000 is heteby appi·opriated from the City Council's Contingency Fund, 2) the amount of S3, 000 is hereby appropdated ft·om the Redevelopment Fund balan.:-~ for these servit;es, and 3) City staff is hereby directed to inc,;lude the cost of the first yeai· o( II II l 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 arbitrage rebate calculation services in the issue costs for the P~1lo1111.u Airport Road Assessment District. PASSED, APPROVED, AND ADOPTED at a t·egular meeting of the Cndsbacl City Council held on the ~ day of Septembei; 1988, by the folloiving vote, to wit: ,\YES: Council Members Lewis• Kulchin, Pettine, Mamaux and Larson NOES: None ABSENT: None ATTEST: ~ L Reudr:J~ ALETHA L. RAUTENKRANZ, City Clerk\ (SEAL) •' .,