15 Resolution authorizing agreement with First Southwest Asset Management, Inc.

Home Browse Search

refunding issue are used to pay principal on a prior issue, a pro rata portion of the refunded bond proceeds are treated as "transferred" to the refunding issue. Althou-h no funds are physically transferred from one issue to another, it is often necessary to perform these calculations for rebate purposes. 4. Debt Service Fund Residual Calculations. Because tax rates are established using an estimated collection percentage, the balance in the debt service fund (often referred to as the Interest & Sinking Fund) may exceed the amount necessary to pay the current year's debt service requirements. Any such excess amounts in a debt service fund must be treated as a "reserve fund," thereby subjecting the excess balance to the rebate requirements. To the extent that any amounts deposited in the debt service fund remain for more than thirteen months on a first-in, first-out basis, that excess is classified as a"reserve fund portion" until used for payment of debt service. Special services are required to complete these debt service fund residual calculations. 5. $100,000 Test for Debt Service Funds. The Code requires that a bona fide debt service fund be included in the arbitrage rebate computation if it earns 00,000 or more in a given bond year and if the issue is not a private activity bond and a long-term fixed rate issue. 6. Variable/Floating Rate Bond Issues. Special services are also required to perform the arbitrage rebate calculations far variable rate bonds. A bond is a variable rate bond if the interest rate paid on the bond is dependent upon an index which is subject to changes subsequent to the issuance of the bonds. The computational requirements of a variable rate issue are more complex than those of a fixed rate issue and, accordin-gly, require significantly more time to calculate. For example, it is necessary to evaluate both a five-year yield as wel] as one-year yield increments to determine which yield is most beneficial to the issuer. Yield Restriction Analysis/Yield Reduction Computations. The Code provides that proceeds of a bond issue may not be invested above the yield on the bond unless an applicable exception applies which provides a temporary period during which proceeds are not yield restricted. First Southwest provides analysis to determine the amount of proceeds which must be yield restricted and provides computations to verify that the proceeds have been properly restricted. In addition, the 1993 Treasury Regulations provide that a yield reduction payment may be made in lieu of yield restricting proceeds. First Southwest will provide the necessary computations to determine the amount of yield reduction payment which must be made. _ Universal Cap. Current regulations provide an overall limitation on the amount of gross proceeds allocable to an issue. In certain circumstances, it is necessary to deallocate proceeds from an issue. First Southwest reviews the universal cap limitation for each bond issue at the appropriate time periods and, if necessary, performs the deallocation of proceeds. Calculation of Late Interest Amount. Additional calculations are required if an arbitrage rebate payment is not filed within the time pennitted by the regulations. A fee is charged to compute the ]ate interest amount from the time that the payment was originally due until the time the payment is made. The fee for any Bonds under this contract shall only be payable if a computation is required under Section 148( fl(2) of the Code. In the event that any of the Bonds, fall within an exclusion to the computation requirement as defined by Section 148 of the Code or related regulations and no calculations were required by First Southwest to make that determination, no fee will be charged for such issue. For example, certain bonds are excluded from the rebate computation requirement if the proceeds are spent within specific tune periods. In the event a particular issue of Bonds fulfills the exclusion requirements of the Code or related regulations, the specified fee will be waived by First Southwest ifno calculations were required to make the determination. Recognizing that computational complexities are reduced when all ar the majority of the b oss proceeds of an issue are expended, it is First Southwest's policy to reduce fees to the following levels, as appropriate: Per issue fees for each circumstance itemized below shall be: o Proceeds expended in prior year. Liability updated and report issued. $750 o Debt Service Residual Calculation only. $1,250 o Reserve Fund calculation only. $1,250 o Escrow Fund only. $1,250 o Rebate Fund only. $1,250 o Yield Restriction/Yield Reduction Computation only. $2,000 First Southwest's fees are payable upon delivery of the report prepared by First Southwest, the first report to be made following one year from the date of delivery of the Bonds and on each computation date thereafter durine, the term of the Ag-eement. The fees for computations of the Arbitrage Amount which encompass more, or less, than one Computation Year of investment data performed durina the same computation period shall be prorated to reflect the longer, ar shorter, period of work performed during that period. 34725 Page 5 W 000085