HomeMy WebLinkAbout14 REASSESS DIST. 95-1 04-20-98DATE: April 15, 1998
NO. 14
4-20-98
In t e r- C o m
TO:
FROM:
SUBJECT:
William A. Huston, City Manager
Ronald A. Nault, Finance Director
REASSESSMENT DISTRICT 95-1 REBATES
SUMMARY: Outstanding Assessment District 85-1 and 86-2 Bonds were refinanced into new
Reassessment District 95-1 in February 1996. Subsequent to the refinancing, staff authorized our
Financing Consultants to apply to the Internal Revenue Service for a refund of arbitrage interest
paid in prior periods. After a lengthy review period the IRS has refunded all prior period payments.
We have been working with our Assessment District Administrators to prepare an allocation
schedule and database to allow us to prepare refund checks to Tustin Ranch residents.
RECOMMENDATION:
Receive and file.
DISCUSSION:
We completed the Assessment District refinancing in February of 1996. Following the
close we mailed approximately 3,800 checks to Tustin Ranch residents as a goodwill
gesture from the City Council because we could not complete the refinancing in time to
reduce the 95-96 property tax assessments. The checks were equivalent to ten percent of
their 1995-96 assessment.
Tax exempt bond issues are regulated by the Internal Revenue Service. In order to
maintain tax exempt status, issuers must prepare an arbitrage report to the IRS every five
years. An allowable yield on inactive funds is established and all earnings that exceed the
allowed yield are sent to the IRS as an arbitrage rebate. Earnings not subject to rebate
are required to be used to reduce the following year's assessments. Tustin's practice has
been to do an annual arbitrage calCulation to be aware of any potential liability due the
IRS, and t° take advantage of fluctuations in the market, i.e., offset any positive arbitrage
with negative arbitrage. At the conclusion of the refinancing, after all the bond accounts
had been reconciled, our Assessment District Administrators requested the City's
authorization to recompute all prior period IRS arbitrage reports and prepare a final report
as of the new closing date. The resulting report indicated the City .had overpaid in prior
years and, under existing IRS regulations, could request a refund.
We applied to the Internal Revenue Service for the refund and, after approximately one
year, received a refund check in excess of $800,000. This refund, together with current
bond fund surpluses, totals approximately $1.6 million that staff is preparing to return to
Tustin Ranch residents within the next thirty days.
The checks will be issued by State Street Bank in various amounts, but single family
residential unit refunds will range from $137.00 to $1,086.00 and attached unit refunds will
range from $88.00 to $290.00. A letter explaining the circumstances will accompany each
refund check.
Ronald A. Nault
Finance Director
RAN:ts
RAN7:AD Rebate 98.Agenda