ADMIN 030 - Post-Issuance Tax Exempt Bond Compliance Policy

Policy

CWI will comply with all applicable federal laws and regulations which apply to tax‐exempt and certain taxable bonds issued to finance facilities and equipment owned or used by CWI. The Office of Vice President for Finance and Administration (VPFA) will create and maintain written guidelines and procedures to document the processes to be used to ensure compliance with applicable federal laws and regulations, and will designate the positions and individuals responsible for these processes.

Guidelines

Roles And Responsibilities 

The Vice President for Finance and Administration (VPFA) has primary responsibility for ensuring that processes are in place for maintaining post‐issuance compliance with tax‐exempt bond regulations, delegating and providing oversight of these processes.

A compliance coordinator (the “Compliance Coordinator”)will be designated to coordinate and document post‐issuance compliance monitoring activities and deadlines, and to ensure that compliance tasks are tracked and performed in an appropriate and timely manner, in accordance with the Appendix E - Post-Issuance Procedures and Appendix F – Post-Issuance Compliance Checklist, and any additional covenants required by specific bond agreements.  These responsibilities are currently delegated to the Senior Treasury Analyst.

The VPFA, the designated Compliance Coordinator, and other appropriate CWI personnel shall consult with bond counsel and other legal counsel and advisors, as needed, following issuance of Bonds to ensure that all applicable post issuance requirements are met.

For additional information on roles, responsibilities, and compliance monitoring tasks, reference Appendix A: Role and Responsibility Matrix and Appendix F. Post-Issuance Compliance Procedures and Checklist.

Use And Expenditure Of Bond Proceeds 

Bond proceeds are disbursed to pay project costs, capitalized interest, if applicable, and costs of issuing the bonds, in accordance with the tax rules and the restrictions of the bond documents. The expenditure of bond proceeds and related investment earnings will be tracked to ensure they are used only for qualified purposes.

As more fully set out in the Compliance Procedures (Appendix E – Post-Issuance Compliance Procedures), for each tax‐exempt bond financed project, accounting records detailing the receipt and expenditure of bond proceeds must be maintained. Such accounting records must reflect the date, the purpose, and the recipient of the expenditure. At the conclusion of a project when all bond proceeds have been exhausted, a final allocation will be compiled, documenting the use of all bond proceeds and related investment earnings. The data will detail all of the expenditures posted to the specific fund/project. This documentation will be part of the permanent records for the particular bond transaction.

When appropriate, records showing an allocation of bond proceeds and equity or taxable debt to certain project expenditures must be maintained. If CWI is reimbursed for project expenditures made prior to the bond closing, the reimbursement resolution or official statement of intent and the records showing such expenditures and the reimbursement to CWI must be maintained.

The Business Office must keep copies of all charges posted to the fund/project established for the bond proceeds. The bank statements detailing the bond proceeds’ bank account are reconciled by the Business Office monthly.

The statements are stored to meet record retention requirements.  

Arbitrage Yield Restriction And Rebate 

Arbitrage arises when proceeds from a bond issue are invested and the yield on the investments is greater than the yield on the bonds. The Internal Revenue Code contains two separate sets of requirements relating to arbitrage (yield restriction and rebate), which must be satisfied to ensure that the bonds do not lose tax‐exempt status.

Arbitrage rebate calculations must be made as required by applicable federal law and, if necessary, the appropriate federal arbitrage tax returns will be prepared and filed with the IRS together with any rebate amount owed. Accounting records tracking the investment of bond proceeds and the investment earnings must be maintained as required by this policy.

Yield Restriction: the arbitrage rules generally prohibit proceeds of a bond issue from being invested in a yield in excess of the bond yield.

Rebate: even if an exception to yield restriction applies, if arbitrage is earned on an issue, the excess earnings must be remitted to the U.S. Treasury Department unless an exception to rebate applies. CWI will engage the services of an outside vendor to perform arbitrage and rebate (and, as applicable, yield reduction) functions. The vendor performs rebate calculations annually based on the bond issue date, and again at the time all bond proceeds have been spent (or at the time that the bond issue is retired, if earlier). The vendor also measures CWI’s bond proceeds spending rate to determine whether an applicable “spending exception” to rebate is satisfied. The designated Compliance Coordinator is responsible for a) obtaining and supplying relevant investment and spending data to the vendor to allow it to perform these calculations, and b) coordinating with the vendor and the bond issuer to ensure that any rebate owed is paid to the U.S. Treasury Department (and Form 8038‐T filed) by the deadline applicable to the computation period in question.

The College is responsible for the timely payment to the U.S. Treasury of all arbitrage rebate installments and payments (including yield reduction payments if applicable) when due (generally (i) every fifth year and (ii) within 60 days of the final payment of all principal and interest on the bonds, as further described in the tax agreements relating to the bonds).

The VPFA is responsible for contracting with a third party to perform the required arbitrage and rebate calculations. The reports and schedule for the calculation will be maintained by the designated Compliance Coordinator, as well as documentation verifying compliance.

Private Business Use 

The private business use of facilities or equipment financed with bond proceeds must be monitored for the life of the bond issue and for the life of any bonds issued to refund the original issue. Private business use of bond proceeds and facilities and equipment financed with bond proceeds is limited by applicable federal law. Tax exempt status of a bond issuance is in jeopardy if more than 10 percent of the proceeds are used for private business use. Applicable federal law sets forth some categories of private business use including the following:

1.  Actual and beneficial use by a non-governmental user;
2. Ownership by non-governmental users;
3. Lease to non-governmental users;
4. Management contracts; 
5. Research agreements; and
6. Other actual or beneficial use.

An annual survey of the use of bond financed facilities and equipment must be conducted by the Compliance Coordinator to determine if there is any private business use of such property. Copies of any leases, management contracts, research agreements and any other documents involving private business use of such property must be attached to the survey and reviewed by the Compliance Coordinator.

If the potential for private business use exists, any lease, management contract, or other arrangement must be reviewed in advance by the Compliance Coordinator. Research agreements must be reviewed by Grants and Contracts.

An annual survey will be distributed by the Business Office to each department responsible for facility or equipment financed by tax exempt bonds.

See Appendix B - Private Use Questionnaire

Change Of Use

The VPFA must be notified before there is a change in use or a sale or disposition of any facility financed with tax‐exempt debt to ensure compliance with applicable federal law.  Documentation of such change in use must be maintained by the designated Compliance Coordinator.

Record Retention

As more fully set out in the Compliance Procedures, records relating to tax‐exempt bonds must be maintained for the term of the bond issue plus at least an additional five years, or, in the case of an issue refunded by one or more subsequent bond issues, for the combined term of the issues plus at least an additional five years. Records to be retained include, but are not limited to the following:

1. Bond transcript;
2. Expenditure records;
3. Investment Records;
4. Arbitrage rebate calculations and records;
5. Records of use of bond financed property;
6. Annual private business use survey and materials;
7. A copy of each IRS filing in regard to the bond issue; and
8. Any other records relating to the bond issue or bond financed property

See Appendix C - Records Retention

Disclosures And Filings 

CWI will remain in compliance with Security and Exchange Commission Rule 15c2‐12 by filing its annual financial statements and other financial and operating data for the benefit of its bondholders within 180 days of the close of the fiscal year.

CWI will provide financial statements, official statements, and periodic financial information under the Electronic Municipal Market Access System (“EMMA”) created by the Municipal Securities Rulemaking Board. Any notice of material events will also be filed under EMMA.

CWI will comply with continuing disclosure requirements as stated in the bond documents. Each bond issuance will have its own Information Reporting Agreement, Continuing Disclosure Agreement or similar document that sets forth CWI’s continuing disclosure requirements with respect to that issuance. Information regarding CWI’s financial condition must be provided annually to nationally‐recognized securities information repositories. Other required filings include:

1. Tax Forms. Tax‐exempt debt obligation issuers are required by the IRS to file the appropriate 8038 series of forms (8038, 8038‐G, 8038‐B, 8038‐T, and 8038‐R).
2. Continuing Disclosure Requirements. Certain material events must be reported on a case‐by‐case basis or annually as outlined in each bond document appendix.
3. See Appendix D. Material Events Checklist for a list of condition events that trigger additional reporting requirements.
4. Arbitrage Certificates. Within five years of the anniversary of the debt issue (to close out the issue) and within 60 days of retirement or refunding of the bonds, CWI must calculate any arbitrage on the debt in a final accounting, and make any required rebate payment to the Internal Revenue Service (IRS).

Responsibility For Maintaining Compliance

The Office of Vice President for Finance and Administration is responsible for implementing this policy and monitoring compliance with its requirements.  A Post‐Issuance Compliance Checklist will be completed for each facility financed with tax‐exempt bonds upon completion of the project and must be updated annually thereafter so long as the bonds are outstanding. The Post‐Issuance Compliance Checklist is maintained in the Business Office, and completed by the designated Compliance Coordinator.

See Appendix E - Post-Issuance Compliance Checklist

Remedial Action

CWI will seek the advice of bond counsel in the event that remedial action may be required. To the extent a potential violation arises that cannot be corrected through remedial action, or in the event of a potential arbitrage violation, CWI will seek the advice of bond counsel concerning its alternatives, which may include contacting the IRS under the Voluntary Closing Agreement Program (VCAP).

Continuity And Training

In furtherance of the policies set forth above, the VPFA will maintain a Tax‐Exempt Bond Compliance Handbook and will take such steps as necessary to ensure that the CWI staff responsible for complying with requirements applicable to tax‐exempt bonds are trained to complete their responsibilities relating to the procedures set forth above. Such training will cover the purposes and importance of these procedures, as well as the details of the particular staff member’s responsibilities.

Procedures

The Business Office is authorized to adopt procedures consistent with this Policy to further implement the goals and purposes of this Policy.

Reference

26 U.S. Code § 141

https://www.irs.gov/tax-exempt-bonds

IRS Publication 4079 Tax-Exempt Governmental Bonds