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City Council Resolution 2012-06CITY OF MONTICELLO WRIGHT COUNTY, MINNESOTA RESOLUTION NO. 2012-006 ADOPTING POST - ISSUANCE COMPLIANCE PROCEDURE AND POLICY FOR TAX - EXEMPT GOVERNMENTAL BONDS WHEREAS, the City from time to time issues tax - exempt governmental bonds to finance various public capital improvements; and WHEREAS, Under Sections 103 and 140 to 150 of the Internal Revenue Code of 1986, as amended (the "Code ") and related regulations, the City is required to take certain actions after the issuance of such bonds to ensure that interest on those bonds remains tax- exempt; and WHEREAS, the City has determined to adopt written procedures regarding how the City will carry out its bond compliance responsibilities, and to that end has caused to be prepared a document titled Post - Issuance Compliance Procedure and Policy for Tax - Exempt Governmental Bonds (the "Policy "); and WHEREAS, the Council has reviewed the Policy has determined that it is in the best interest of the City to adopt the Policy. NOW THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE CITY OF MONTICELLO: The Council approves the Policy, as shown in Attachment "A" (on file in the City Clerk's records); and BEIT FURTHER RESOLVED: that City staff is authorized to take all actions necessary to carry out the Policy. ADOPTED BYthe Monticello City Council this 9`1' day of January, 2012. CITY OF MONTICELLO C& Zia Clint Herbst, Mayor ATTEST: Jeff,& VI, City Administrator ATTACHMENT "A" (POST- ISSUANCE COMPLIANCE PROCEDURE AND POLICY FOR TAX - EXEMPT GOVERNMENTAL BONDS) City of Monticello, MN POST - ISSUANCE COMPLIANCE PROCEDURE AND POLICY FOR TAX - EXEMPT GOVERNMENTAL BONDS 1. Purpose The City of Monticello, Minnesota (the "Issuer ") issues tax - exempt governmental bonds (TEBs ") to finance capital improvements. As an issuer of TEBs, the Issuer is required by the terms of Sections 103 and 141 -150 of the Internal Revenue Code of 1986, as amended (the "Code "), and the Treasury Regulations promulgated thereunder (the "Treasury Regulations "), to take certain actions after the issuance of TEBs to ensure the continuing tax - exempt status of such bonds. In addition, Section 6001 of the Code and Section 1.6001 -1(a) of the Treasury Regulations impose record retention requirements on the Issuer with respect to its TEBs. 2. Goals The goal of the post- issuance compliance policy is to ensure that the City complies with its post- issuance compliance obligations under applicable provisions of the Code and Treasury Regulations 3. Policy A. Responsible Parties. The Finance Director of the Issuer (the "Compliance Officer ") shall be the party primarily responsible for ensuring that the Issuer successfully carries out its post- issuance compliance requirements under applicable provisions of the Code and Treasury Regulations. The Compliance Officer will be assisted by the staff of the Finance Department of the Issuer and by other Issuer staff and officials when appropriate. The Compliance Officer of the Issuer will also be assisted in carrying out post- issuance compliance requirements by the following organizations: (a) Bond Counsel (as of the date of approval of this Policy, bond counsel for the Issuer is Kennedy & Graven, Chartered); (b) Financial Advisor (as of the date of approval of this Policy, the financial advisor of the Issuer is Ehlers and Associates); (c) Paying Agent (the person, organization, or officer of the Issuer primarily responsible for providing paying agent services for the Issuer); and (d) Rebate Analyst (the organization primarily responsible for providing rebate analyst services for the Issuer). The Compliance Officer shall be responsible for assigning post- issuance compliance responsibilities to members of the Finance Department, other staff of the Issuer, Bond Counsel, Paying Agent, and Rebate Analyst. The Compliance Officer shall utilize such other professional service organizations as are necessary to ensure compliance with the post- issuance compliance requirements of the Issuer. The Compliance Officer shall provide training and educational resources to Issuer staff responsible for ensuring compliance with any portion of the post - issuance compliance requirements of this Policy. B. Post - Issuance Compliance Actions. The Compliance Officer shall take the following post- issuance compliance actions or shall verify that the following post - issuance compliance actions have been taken on behalf of the Issuer with respect to each issue of TEBs: (a) The Compliance Officer shall prepare a transcript of principal documents (this action will be the primary responsibility of Bond Counsel). (b) The Compliance Officer shall file with the Internal Revenue Service (the "IRS "), within the time limit imposed by Section 149(e) of the Code and applicable Treasury Regulations, an Information Return for Tax - Exempt Governmental Obligations, Form 8038 -G (this action will be the primary responsibility of Bond Counsel). (c) The Compliance Officer shall prepare an "allocation memorandum" for each issue of TEBs in accordance with the provisions of Treasury Regulations, Section 1.148- 6(d)(1), that accounts for the allocation of the proceeds of the tax - exempt bonds to expenditures not later than the earlier of: (i) eighteen (18) months after the later of (A) the date the expenditure is paid, or (B) the date the project, if any, that is financed by the tax - exempt bond issue is placed in service; or (ii) the date sixty (60) days after the earlier of (A) the fifth anniversary of the issue date of the tax - exempt bond issue, or (B) the date sixty (60) days after the retirement of the tax - exempt bond issue. Preparation of the allocation memorandum will be the primary responsibility of the Compliance Officer (in consultation with the Financial Advisor and Bond Counsel). (d) The Compliance Officer, in consultation with Bond Counsel, shall identify proceeds of TEBs that must be yield - restricted and shall monitor the investments of any yield - restricted funds to ensure that the yield on such investments does not exceed the yield to which such investments are restricted. (e) In consultation with Bond Counsel, the Compliance Officer shall determine whether the Issuer is subject to the rebate requirements of Section 148(f) of the Code with respect to each issue of TEBs. In consultation with Bond Counsel, the Compliance Officer shall determine, with respect to each issue of TEBs of the Issuer, whether the Issuer is eligible for any of the temporary periods for unrestricted investments and is eligible for any of the spending exceptions to the rebate requirements. The Compliance Officer shall contact the Rebate Analyst (and, if appropriate, Bond Counsel) prior to the fifth anniversary of the date of issuance of each issue of TEBs of the Issuer and each fifth anniversary thereafter to arrange for calculations of the rebate requirements with respect to such TEBs. If a rebate payment is required to be paid by the Issuer, the Compliance Officer shall prepare or cause to be prepared the Arbitrage Rebate, Yield Reduction and Penalty in Lieu of Arbitrage Rebate, Form 8038 -T, and submit such Form 8038 -T to the IRS with the required rebate payment. If the Issuer is authorized to recover a rebate payment previously paid, the Compliance Officer shall prepare or cause to be prepared the Request for Recovery of Overpayments Under Arbitrage Rebate Provisions, Form 8038 -R, with respect to such rebate recovery, and submit such Form 8038 -R to the IRS. C. Procedures for Monitoring, Verification, and Inspections. The Compliance Officer shall institute such procedures as the Compliance Officer shall deem necessary and appropriate to monitor the use of the proceeds of TEBs issued by the Issuer, to verify that certain post - issuance compliance actions have been taken by the Issuer, and to provide for the inspection of the facilities financed with the proceeds of such bonds. At a minimum, the Compliance Officer shall establish the following procedures: (a) The Compliance Officer shall monitor the use of the proceeds of TEBs to: (i) ensure compliance with the expenditure and investment requirements under the temporary period provisions set forth in Treasury Regulations, Section 1.148 -2(e); (ii) ensure compliance with the safe harbor restrictions on the acquisition of investments set forth in Treasury Regulations, Section 1.148 -5(d); (iii) ensure that the investments of any yield - restricted funds do not exceed the yield to which such investments are restricted; and (iv) determine whether there has been compliance with the spend - down requirements under the spending exceptions to the rebate requirements set forth in Treasury Regulations, Section 1.148 -7. (b) The Compliance Officer shall monitor the use of all bond - financed facilities in order to: (i) determine whether private business uses of bond - financed facilities have exceeded the de minimis limits set forth in Section 141(b) of the Code as a result of leases and subleases, licenses, management contracts, research contracts, naming rights agreements, or other arrangements that provide special legal entitlements to nongovernmental persons; and (ii) determine whether private security or payments that exceed the de minimis limits set forth in Section 141(b) of the Code have been provided by nongovernmental persons with respect to such bond - financed facilities. The Compliance Officer shall provide training and educational resources to any Issuer staff who have the primary responsibility for the operation, maintenance, or inspection of bond - financed facilities with regard to the limitations on the private business use of bond - financed facilities and as to the limitations on the private security or payments with respect to bond - financed facilities. (c) The Compliance Officer shall undertake the following with respect to each outstanding issue of TEBs of the Issuer: (i) an annual review of the books and records maintained by the Issuer with respect to such bonds; and (ii) an annual physical inspection of the facilities financed with the proceeds of such bonds, conducted by the Compliance Officer with the assistance with any Issuer staff who have the primary responsibility for the operation, maintenance, or inspection of such bond - financed facilities. D. Record Retention Requirements. The Compliance Officer shall collect and retain the following records with respect to each issue of TEBs of the Issuer and with respect to the facilities financed with the proceeds of such bonds: (i) audited financial statements of the Issuer; (ii) appraisals, demand surveys, or feasibility studies with respect to the facilities to be financed with the proceeds of such bonds; (iii) publications, brochures, and newspaper articles related to the bond financing; (iv) trustee or paying agent statements; (v) records of all investments and the gains (or losses) from such investments; (vi) paying agent or trustee statements regarding investments and investment earnings; (vii) reimbursement resolutions and expenditures reimbursed with the proceeds of such bonds; (viii) allocations of proceeds to expenditures (including costs of issuance) and the dates and amounts of such expenditures (including requisitions, draw schedules, draw requests, invoices, bills, and cancelled checks with respect to such expenditures); (ix) contracts entered into for the construction, renovation, or purchase of bond - financed facilities; (x) an asset list or schedule of all bond - financed depreciable property and any depreciation schedules with respect to such assets or property; (xi) records of the purchases and sales of bond - financed assets; (xii) private business uses of bond - financed facilities that arise subsequent to the date of issue through leases and subleases, licenses, management contracts, research contracts, naming rights agreements, or other arrangements that provide special legal entitlements to nongovernmental persons and copies of any such agreements or instruments; (xiii) arbitrage rebate reports and records of rebate and yield reduction payments; (xiv) resolutions or other actions taken by the governing body subsequent to the date of issue with respect to such bonds; (xv) formal elections authorized by the Code or Treasury Regulations that are taken with respect to such bonds; (xvi) relevant correspondence relating to such bonds; (xvii) documents related to guaranteed investment contracts or certificates of deposit, credit enhancement transactions, and financial derivatives entered into subsequent to the date of issue; (xviii) copies of all Form 8038Ts and Form 8038 -Rs filed with the IRS; and (xix) the transcript prepared with respect to such TEBs. The records collected by the issuer shall be stored in any format deemed appropriate by the Compliance Officer and shall be retained for a period equal to the life of the TEBs with respect to which the records are collected (which shall include the life of any bonds issued to refund any portion of such TEBs or to refund any refunding bonds) plus three (3) years. E. Remedies. In consultation with Bond Counsel, the Compliance Officer shall become acquainted with the remedial actions under Treasury Regulations, Section 1.141 -12, to be utilized in the event that private business use of bond - financed facilities exceeds the de minimis limits under Section 141(b)(1) of the Code. In consultation with Bond Counsel, the Compliance Officer shall become acquainted with the Tax Exempt Bonds Voluntary Closing Agreement Program described in Notice 2008 -31, 2008 -11 I.R.B. 592, to be utilized as a means for an issuer to correct any post- issuance infractions of the Code and Treasury Regulations with respect to outstanding tax - exempt bonds. F. Continuing Disclosure Obligations. In addition to its post- issuance compliance requirements under applicable provisions of the Code and Treasury Regulations, the Issuer has agreed to provide continuing disclosure, such as annual financial information and material event notices, pursuant to a continuing disclosure certificate or similar document (the "Continuing Disclosure Document ") prepared by Bond Counsel and made a part of the transcript with respect to each issue of bonds of the Issuer that is subject to such continuing disclosure requirements. The Continuing Disclosure Documents are executed by the Issuer to assist the underwriters of the Issuer's bonds in meeting their obligations under Securities and Exchange Commission Regulation, 17 C.F.R. Section 240.15c2 -12, as in effect and interpreted from time to time ( "Rule 15c2 -12 "). The continuing disclosure obligations of the Issuer are governed by the Continuing Disclosure Documents and by the terms of Rule 15c2 -12. The Compliance Officer is primarily responsible for undertaking such continuing disclosure obligations and to monitor compliance with such obligations. G. Other Post - Issuance Actions. If, in consultation with Bond Counsel, Financial Advisor, Paying Agent, Rebate Analyst, or the City Council, the Compliance Officer determines that any additional action not identified in this Policy must be taken by the Compliance Officer to ensure the continuing tax - exempt status of any issue of governmental bonds of the Issuer, the Compliance Officer shall take such action if the Compliance Officer has the authority to do so. If, after consultation with Bond Counsel, Financial Advisor, Paying Agent, Rebate Analyst, or the City Council, the Compliance Officer and the Administrator determine that this Policy must be amended or supplemented to ensure the continuing tax- exempt status of any issue of governmental bonds of the Issuer, the Administrator shall recommend to the City Council that this Policy be so amended or supplemented. H. Taxable Governmental Bonds. Most of the provisions of this Policy, other than the provisions of Section 7, are not applicable to governmental bonds the interest on which is includable in gross income for federal income tax purposes. On the other hand, if an issue of taxable governmental bonds is later refunded with the proceeds of an issue of tax - exempt governmental refunding bonds, then the uses of the proceeds of the taxable governmental bonds and the uses of the facilities financed with the proceeds of the taxable governmental bonds will be relevant to the tax - exempt status of the governmental refunding bonds. Therefore, if there is any reasonable possibility that an issue of taxable governmental bonds may be refunded, in whole or in part, with the proceeds of an issue of TEBs, then for purposes of this Policy, the Compliance Officer shall treat the issue of taxable governmental bonds as if such issue were an issue of TEBs and shall carry out and comply with the requirements of this Policy with respect to such taxable governmental bonds. The Compliance Officer shall seek the advice of Bond Counsel as to whether there is any reasonable possibility of issuing TEBs to refund an issue of taxable governmental bonds. This Post - Issuance Compliance Policy is effective January 9, 2012. ADOPTED BY the City Council of Monticello this 9h day of January, 2012. CITY OF MONTICELLO Clint Herbst, Mayor ATTEST: Jef O'k& ' , City Administrator