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.-. <br />Conditions Related To Tax-Exempt Status <br />� <br />18. the City's bond counsel must prepare a written opinion that states that the interest on the <br />Obligadons is excludable from gross income or is exempt from federal income taxation. <br />Bond counsel may rely on covenants and representations of the City when rendering this <br />opinion; <br />19. the City's bond counsel opinion must also state that the Obligations are not "private <br />activity bonds." Bond counsel may rely on covenants and representations of the City <br />when rendering this opinion; <br />20. the Obligations must include a provision prohibiting the City from using the proceeds of <br />this loan in a manner that would cause the Obligations to become "private activity <br />bonds"; <br />21. the Obligations must provide that no portion of the proceeds of the loan will be used, <br />direcdy or indirectly, to acquire or to replace funds which were used, directly or <br />indirectly, to acquire Nonpurpose Investments which produce a yield materially higher <br />than the yield on the TWDB's bonds that aze issued to provide financing for the loan <br />{"Source Series Bonds"}, other than Nonpurpose Investments acquired with: <br />a. proceeds of the TWDB's Source Series Bonds invested for a reasonable <br />temporary period of up to three (3) years (reduced by the period of investment by <br />the TWDB} until such proceeds are needed for the facilities to be financed; <br />b. amounts invested in a bona fide debt service fund, within the meaning of § 1.148- <br />1(b) of the IRS Regulations; and <br />c. amounts deposited in any reasonably required reserve or replacement fund to the <br />extent such amounts do not exceed the least of maximum annual debt service on <br />the Loan, 125% of average annual debt service on the Loan, or 10 percent of the <br />stated principal amount (or, in the case of a discount, the issue price) of the Loan; <br />22. the Obligations must include a provision requiring the City to restrict the use of the <br />proceeds of the Loan (or amounts within the control of the City that are treated as funds <br />from the Bonds) or to pay rebate to the United States in order to satisfy the requirements <br />of § 148 of the Internal Revenue Code of 1986 (relating to azbitrage). The Obligations <br />must provide that the City shall: <br />a. account for all Gross Proceeds (including all receipts, expenditures and <br />investments thereo� on its books of account separately and apart from all other <br />funds (and receipts, expenditures and investrnents thereo� and retain all records <br />of such accounting for at least six years after the final Computation Date. The <br />City may, however, to the extent permitted by law, commingle Gross Pmceeds of <br />its Loan with other money of the City, provided that the City separately accounts <br />Exhibit A, Page 6 of ] 0 <br />