06TAX EXEMPTIONANDNONARBITRAGE CERTIFICATE
CONCERNING KODIAKISLAND BOROUGH ALASKA
$6210000 GENERAL OBLIGATION SCHOOL BOND 2015A
AND
$1780000 GENERAL OBLIGATION SCHOOL BOND 2015B
Karleton Short on behalf of Kodiak Island Borough Alaska the Borough
certify as follows
General
1.1 Responsible Officer am the Finance Directorofthe Borough and as
such am an officerof the Borough responsible for issuing the Boroughs $6210000 par
valueGeneral Obligation School Bond 2015A the 2015A Bond and $1780000 par
valueGeneral Obligation School Bond 2015B the 2015B Bond and together withthe
2015A Bond the 2015 Bonds dated delivered and paid for on the same date as the
date of this certificate the issue date Pursuant tothe provisions of Treasury
Regulations Section 1.150-1c4iii the Borough elects to treatthe 2015A Bond and
the 201 5B Bond as part of the same issue because all of the 2015Bonds aresecured
by pledge of the full faith and creditofthe Borough and all ofthe 2015Bondswere
sold and are being issued on the same date and pursuant to single offering document
namely the Preliminary Official Statement for the BondBank Bonds definedherein
dated August 182015 and the Official Statement for the Bond Bank Bonds dated
August 26 2015
1.2 Purpose of Certificate This certificate is executed toestablish the facts
estimates and circumstances in existence on the issue date and the bona fide
reasonable expectations ofthe Borough on the issue date as to future events in
connection with the 2015Bonds for the purposes of the applicable provisions of the
Internal RevenueCode of 1986 as amended the Code and applicable Treasury
Regulations underSections 103 141 and 148-150 of the Code
1.3 Reasonable Basis for Expectations To the best of my knowledge
information and belief thiscertificate accurately summarizes the facts estimates and
circumstances in existence on the issue date and the expectations ofthe Borough on
the issue dateabout future events in connection with the 2015Bonds are reasonable
1.4 Defined Terms Capitalized words used butnot otherwise defined in this
certificate have the meaning setforth in Resolution No FY2016-05 ofthe Borough
authorizing the 2015A Bond and Resolution No FY2016-06 authorizing the 2015B Bond
together the Bond Resolutions
51466369.2
Purpose of Issuing the 2015 Bonds
2.1 Governmental Purpose The Borough is local government unit of the
Stateof Alaska The2015Bonds are being issued by the Borough tothe Alaska
Municipal BondBank the Bond Bank to evidence the obligation ofthe Borough to
repay twoloans made by the BondBank tothe Borough from the portion of the
proceeds ofthe Bond Banks General Obligation Bonds 2015 Series Three allocable to
the Borough the Bond Bank Bonds TheBondBank is loaning the proceeds of the
BondBank Bonds tothe Borough pursuant to loan agreement the Loan
Agreement Pursuant to TreasuryRegulations Section 1.150-1d2iiB the
Borough is treated as the obligor on the Bond Bank Bonds
2015A Bond The 2015A Bond is being issued for the purpose of
providing the funds necessary to finance part ofthe costs of planningdesigning and
constructing school and related capital improvements in the Borough including without
limitation the reconstruction and renovation of Kodiak High School referred tothe
regular Borough election held on October 2009 as Proposition No the 2015A
Improvements and to pay costs of issuance as provided by the Bond Resolutions
2015B Bond The 2015B Bond is being issued for the purpose of
providing the funds necessary to finance the renewal and replacement schedule related
to Borough-owned school facilities including without limitation those projects listed in
Resolution No FY2016-06 referred to the regular Borough election held on October
2014 as Proposition the 2015B Improvements and together with the 2015A
Improvements the Improvements
2.2 No lmpermissible Private Business Use No more than 10%$906282 of
the proceeds of the 2015Bonds or of corresponding portion ofthe Improvements will
be used for any private business use No more than 5%$453141 of the proceeds of
the 2015Bonds or of corresponding portion of the Improvements will beused either
for any private businessuse that is unrelated to the governmentalpurpose of the 2015
Bonds or for any private businessuse that is related to governmentalpurpose of the
2015Bonds but exceeds the amount of proceeds ofthe 2015Bonds that are expected
to beused for that governmental purpose No more than 5%of the proceeds of the
2015Bonds will be used directly orindirectly to make or financeloans to anyperson
other than governmental unit except loan if any whichenables the borrower to
finance governmental taxor assessment of general application for specific essential
governmental function orthatconstitutes nonpurpose investment withinthe meaning
of Section 148 ofthe Code
Source and Disbursement of Proceeds
3.1 Purchaser and Purchase Priceof the 2015 Bonds The Borough has
entered into the Loan Agreement withthe BondBank to secure payment of the sum of
$9037609.41 the Loan Amount Pursuant to the Loan Agreement the BondBank
will issue the BondBank Bonds at price equal to the Loan Amount plus an original
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51466369.2
issue premium on the Bond Bank Bonds of $1072818.00 less an underwriters
discount on the Bond Bank Bonds of $25208.59
3.2 Funds Into Which Proceeds From the Issuance and Sale of the 2015
Bonds and the BondBank Bonds Will Be Deposited The proceeds received by the
Borough from theissuance and sale ofthe 2015Bonds will be used and applied as
follows $36000.00 will beused to pay costs of issuance of the 2015 Bonds
$1609.41 representing the contingency account an amount less than 1%of the
sale proceeds ofthe 2015 Bonds will be deposited in an amount used primarily to
achieve propermatching of revenues of the Borough with principal and interest
payments on the 2015Bonds the Bond Fund andused to pay interest on the 2015
Bonds on April 2016 and $9000000 will be deposited in fund established by
the Borough to pay costs ofthe Improvements the Project Fund and used to carry
out the Improvements
3.3 Cost ofthe 201 5A Improvements The costof the 201 5A Improvements is
estimated to be $76310000 which cost will be paid from the proceeds ofthe issuance
and saleof the 201 5A Bond reasonablyexpected investment earnings therefrom in the
amount of $7763 proceeds of the Boroughs General Obligation School Bond 2011
Series in the principal amount of $8000000 General Obligation School Bond Series
2013 in the principal amount of 21595000 General Obligation School Bond 2014 in
the principal amount of $22660000 grant funding in the amount of $7000000 and
other money ofthe Borough legally availableto beused therefor The net amount
received by the Borough as resultofthe saleof the 2015A Bond after payment of all
expenses of issuing selling and delivering the 2015A Bondand the Bond Bank Bonds
is not expected to exceed the amount necessary to pay thecosts of the 2015A
Improvements
3.4 Cost ofthe 201 5B Improvements The costof the 201 5B Improvements is
estimated to be $1 0230000 whichcost will be paid fromthe proceeds ofthe issuance
and sale of the 201 5B Bond reasonably expected investment earnings therefrom in the
amount of $4450 and other money ofthe Borough legally available to beused therefor
The net amount received by the Borough as resultofthesaleofthe 2015B Bond
after payment of all expenses of issuing selling and delivering the 2015B Bond and the
BondBank Bonds is not expected to exceed the amount necessary to pay the costs of
the 2015B Improvements
ConstructionSchedule for the Improvements
4.1 Commencement and Prosecution of Construction ofthe Improvements
Construction ofthe Improvements has already commenced and the Borough has
entered into contractor otherwise incurredsubstantial bindingobligation toward
commencement of the Improvements involving an amount equal toat least 5%of the
sale proceeds ofthe 2015 Bonds or will have entered into such contractor other
substantial bindingobligation within six months aftertheissue date ofthe 2015Bonds
Work on the Improvements and expenditure of the sale proceeds ofthe 2015Bonds are
expected to proceed with due diligence to completion
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514663692
4.2 Completion of the Improvements It is expected that at least 85%of the
sale proceeds ofthe 2015Bonds will be spent for the Improvements by September 16
2018 the date that is three years after the issue date of the 2015 Bonds The expected
schedule for expenditure of 2015Bonds proceeds is attached as Exhibit
4.3 No Sale of ImprovementsExpected The Improvements are not expected
to be soldor otherwise disposed of in whole or in part prior to maturity of the 2015
Bonds otherthan to dispose of any portion ofthe Improvements that becomes
inadequate obsolete worn out unfit or no longernecessary or useful to the operation
of the Improvements
Payment of 2015 Bonds
5.1 Debt Service Structure 2015A Bond The 2015A Bond is general
obligation bond ofthe Borough The 2015A Bond matures on October 2036
Principal of the 2015A Bond is payableannually in installments on October of each
year from 2016 to 2036 inclusiveInterest on the 2015A Bond is payable semiannually
on each April and October commencing on April 2016 The principal installments
on the 2015Bondsdue on or beforeOctober 2024 are not subject to prepayment
The principal installments on the 2015A Bond due on orafter October 2025 are
subject to prepayment in whole or in part at the option ofthe Borough on any date on or
after April 2025 at price of 100%ofthe amount thereof to be prepaid plus accrued
interest to thedate of prepayment
5.2 DebtService Structure 2015B Bond The 2015B Bond is general
obligation bond ofthe Borough The 2015B Bond matures on October 2025
Principal ofthe 2015B Bond is payableannually in installments on October of each
year from 2016 to 2025 inclusiveInterest on the 2015B Bond is payablesemiannually
on each April and October commencing on April 2016 The principal installments
on the 2015Bondsdue on or beforeOctober 2024 are not subject to prepayment
The principal installment on the 2015B Bond due on October 2025 is subject to
prepayment in whole or in part at the option ofthe Borough on any date on or after
April 2025 at price of 100%of the amount thereof to be prepaid plus accrued
interest to thedate of prepayment
5.3 Source of Payment The2015Bonds are payable from the proceeds of
taxes levied against all of the taxable property locatedwithin the Borough and other
funds available therefor Those funds that are expected to be used to pay principal of or
interest on the 2015Bonds will be deposited in the Bond Fund and used within 13
months of their deposit in that fund for payment of principal of or interest on the 2015
Bonds The Bond Fund will be used primarily to achieve proper matching oftax
revenues of the Borough and debt service on the 2015Bonds within eachbond year It
is expected thatthe Bond Fund will be depleted at least once year on each
October except for reasonable carryover amount not expected to exceed the
greater of one years earnings on that fund or 1/12 of the annualdebt service on the
2015 Bonds
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466369.2
5.4 Absence of Other Sinking Funds Except for the Bond Fund the Borough
has not created or established and does not expect to create or establish any reserve
fund sinking fund or other similar fund that is reasonably expected to be used directly or
indirectly to pay debt service on the 2015Bonds or any pledged fund with respect to
which there is reasonable assurance that money will be available in that fund to pay
debt service on the 2015Bonds even if the Borough were to encounter financial
difficulties
Restrictions on Investing Proceeds of the 2015Bonds in Higher Yielding
Investments
6.1 Calculationof Yield on 2015 Bonds For purposes of this certificate the
yield on the 2015Bonds is deemed to be equal to the yield on the BondBank Bonds
The yield on the BondBank Bonds has been calculated as the yield that when used in
computing the present worth of all payments of principal of and interest on the Bond
Bank Bonds produces an amount equal to the issue price ofthe BondBank Bonds
The issue price ofthe BondBank Bonds is the initial offeringprice ofthe BondBank
Bonds including original issue discount or premium if any at which substantial
amount at least 10%of each maturity ofthe BondBank Bonds has been sold tothe
public not including bond houses brokers or other intermediaries The yield on the
BondBank Bonds has been calculated to be 3.698396%Such determination as to
yield has been made by Western Financial Group LLC attachedhereto as Exhibit
based on representations made by RBC Capital Markets LLC underwriter of the Bond
Bank Bonds attachedhereto as Exhibit In determining this yield no adjustments
were made for underwriters discount orother costs of issuance ofthe 2015Bonds
However pursuant to the specialyield calculationrule provided by Treasury
Regulations Section 1.148-4b3iiB for the purposes of determining the yield on the
BondBank Bonds the Bond Bank Bondsdue in 2025 through 2036 inclusive were
treated as redeemed on April 2025 because such redemptions would produce the
lowest yield on the BondBank Bonds
6.2 Restrictions on Investment of Proceeds in Higher Yielding Investments
Construction Fund The proceeds ofthe BondBank Bonds loaned
to the Borough pursuant to the Loan Agreement and the 2015Bonds and used to carry
outthe Improvements will be deposited in the account ofthe Borough allocated to
paying costs of the Improvements the Construction Fund and may be invested in
higher yielding investments for temporary period not exceeding three years from the
issue date ofthe 2015 Bonds
Proceeds Used for Costs of Issuance Proceeds ofthe 2015Bonds
to beused to pay costs of issuance ofthe BondBank Bonds are expected to be spent
for that purpose on the issue date and not invested
Bond Fund Proceeds ofthe 2015Bonds representing the
contingency amounts deposited in the Bond Fund and other amounts treated as
replacement proceeds of the 2015Bondsbecause they are held in the Bond Fund may
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54663692
be invested in higher yielding investments for temporary period not exceeding 13
months from the date of their deposit in the Bond Fund
Investment Earnings Investment proceeds ofthe 2015Bonds for
which no other temporary period is available may be invested in higher yielding
investments for temporary period of one year from thedate of receipt of those
investment earnings
RestrictedYield Investments Proceeds and amounts treated as
replacement proceeds ofthe 2015Bonds that may not be invested in higher yielding
investments will be invested only in obligations purchased at fair marketvalue in
bona fide arms-length transactions in an established market for those obligations and
having yields not materially higher than the yield on the 2015Bonds when calculated
using the same frequency intervalof compounding interest as used for the 2015 Bonds
ii obligations theinterest on which is excluded from gross income underSection 103 of
the Code that are not private activity bonds underSection 141 of the Code or
obligations treated as tax-exempt obligations under Section 103 of the Code e.g
obligations issued by certain qualified regulated investment companies that invest to
theextent practicable all of their assets in tax-exempt governmental bonds and meet
certainother conditions and Demand Deposit Securities issued by theUnited States
Treasurypursuant to the State and Local Government Series program or iii other
UnitedStates Treasury ObligationsState and Local Government Series having yields
not materially higher than the yield on the 2015 Bonds
Compliance With Arbitrage Rebate Requirement
TheBondBank Bonds are subject to the rebate requirement imposed by Section
148f of the Code Because proceeds of the BondBank Bonds used pursuant tothe
Loan Agreement to acquire the 2015Bonds from the Borough are not treated as spent
until those proceeds are used to carry out the Improvements those proceeds continue
to be treated as proceeds ofthe Bond Bank Bonds until spent for that purpose and the
Borough on behalf of the Bond Bank in the manner and to theextent required by that
Section will calculate and rebate to the United States any investment earnings on gross
proceeds ofthe BondBank Bonds and the 2015 Bonds plus any income attributable to
such excess earnings Investment earnings on amounts held in the Bond Fund will not
betaken into account for this purpose at any time even if the amount earned is
$100000 or more in 2015Bonds year because the 2015Bonds bear interest at fixed
rates i.e ratesthat do not vary during the term ofthe 2015 Bonds and have an
average maturity of at least years If the Borough for any reason fails to comply with
therebate requirement totheextent applicable to the Bond Bank Bonds and the 2015
Bonds the Borough to the extent permitted and required by Section 148f7 of the
Code will pay any penalty that may be necessary to preserve the tax exemption for
interest on the 2015 Bonds
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51466369.2
2015BondsMeets Other Arbitrage Requirements
8.1 No Other Governmental Obligations Partof This Issue There are no
other obligations ofthe Borough that are being sold at substantially the same time less
than 15 days apart as the 2015Bonds pursuant to the same plan of financing and that
are reasonablyexpected to be paid from substantially the same source of funds
8.2 No Replacement of Funds Invested in Higher Yielding Investments No
portion ofthe proceeds ofthe 2015Bonds will beused directly or indirectly to replace
funds ofthe Borough invested in higher yielding investments
8.3 No Abusive Arbitrage Device The primary bona fide governmental
purposes of issuing the 2015Bonds are to finance the costs of the Improvements No
action is being taken or will be taken in connection with theissuance of the 2015Bonds
that has theeffectof enabling the Borough to exploit thedifference between
tax-exempt and taxable interestrates to obtainmaterialfinancial advantage by
investing any portion ofthe gross proceeds ofthe 2015Bonds over any period of time
and ii overburdening the tax-exempt bond market as resultof issuing the 2015
Bonds in higher amount issuing the 2015Bonds earlier or allowing the 2015Bonds
to remain outstandinglonger than is otherwise reasonably necessary to finance the
Improvements
8.4 No Intent To Earn Impermissible Arbitrage Profit The Borough will not
take any intentionalaction to earn any impermissible arbitrage profit from the
investment of gross proceeds ofthe 2015 Bonds
2015BondsMeets Other Requirements for Tax Exemption
9.1 2015Bonds In Registered Form The2015Bonds areissued only in
registered form
9.2 No Federal Guaranty Except as otherwise permitted by the Code
payment of the principal of or interest on the 2015Bonds is not guaranteed in whole or
in part by the UnitedStates or anyagency or instrumentality thereof
9.3 Information Return ToBe Filed The Borough will cause Form8038-G
Information Return respecting the 2015Bonds to be timely filed withtheInternal
Revenue Service
9.4 2015Bonds Not Hedge Bonds The Borough reasonably expects that
atleast 85%ofthe spendableproceeds ofthe 2015Bonds will be used to carry out the
governmentalpurposes ofthe 2015Bonds withinthe three-year period beginning on the
issue date and ii not more than 50%ofthe proceeds ofthe 2015Bonds will be
invested in nonpurpose investments having substantially guaranteed yield for years
or more
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51466369.2
9.5 Post-Issuance Compliance Procedures The Borough has previously
established written procedures attached as Exhibit to ensure that any portion of
the 2015Bonds that becomes nonqualified is remediated in accordance withthe
requirements under TreasuryRegulations Section1.141-12 and ii monitor the
requirements of Sections 141 and 148 ofthe Code after the issue date
10 2015BondsTax Exempt and Not Arbitrage Bonds
The Borough expects that bond counsel to the Borough will rely upon the
foregoing facts estimates and circumstances in existence on theissue date and the
reasonable expectations of the Borough as to future events respecting the 2015 Bonds
to enable them to conclude that it is not expected that proceeds of the 2015 Bonds will
beused in any manner that would cause the 2015Bonds to be arbitrage bonds and to
provide their opinion that the 2015Bonds are governmental obligations theinterest on
which is excluded from gross income for federal income tax purposes underSection
103 of the Code
DATED September 16 2015
KODIAKISLAND BOROUGH ALASKA
By__________
Karleton Short Finance Director
Exhibit Draw Down Schedule
ExhibitCertificate of Western Financial Group LLC
Exhibit Certificateof RBC Capital Markets LLC
Exhibit Post-Issuance Compliance Procedures for Tax-Exempt Bonds
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1466369.2
KHS Monthly ConstructionCost
$6500000.00
$6000000.00
$5500000.00
$5000000.00
$4500000.00
$4000000.00
$3500000.00
$3000000.00
$2500000.00
$2000000.00
$1500000.00
$1000000.00
$500000.00
$-771/i
9/15/2015
$3500000
$3000000
$2500000
$2000000
$1500000
$1000000
$500000
$-
KIB Renewaland Replacement Projects
Antidpated CashFlow
$3150612
$1507792
$1695882
$1369401
$747874
$21024.00
9/15/2015
EXHIBIT
CERTIFICATE OF THE FINANCIAL ADVISOR
LAWRENCE PIERCE as financial advisor for the Alaska Municipal Bond
Bank the Bank hereby certify with respect to the Banks General Obligation Bonds
2015 SeriesThree the Bonds as follows
have no reason to believethat the financialinformation found in
Appendix ofthe Preliminary Official Statementdated August 192015 and the final
Official Statementdated August 26 2015 relating to the Bonds contains an untrue
statement ofmaterialfact or omits to statematerial fact necessary to make the
statements therein in light ofthe circumstanceunderwhich they were made not
misleading in any material respects
Payment of the Bonds is secured by reserve fund based on my
calculations and affirmed by the Trustee have determined the reservefund
requirement to be $58705591.41 as of the date hereof Theamount of the reserve
fund requirement is reasonable amount to facilitate marketing of the Bonds at the
most favorable interestrates available
have computed the yield on the Bonds to be not less than 3.6984%
based on the representations made tothe Bank by RBC Capital Markets LLC on
behalf of itself and as representative of the underwriters named in the bond purchase
contract dated August 26 2015 as tothe offeringprices at which at least 10%of each
maturity ofthe Bondswere sold or reasonablyexpected to be sold For purposes of
this certificate the term yield means that yield which is computed as described in
Section1.148-4 ofthe Treasury Regulations
have computed the weighted average maturity of the Bonds to be
17.7084 years The weighted average maturity ofthe Bonds is the sum of the products
ofthe issue price and the par amount of each group ofidentical bonds and the number
of years to maturity determined separately for each group ofidentical bonds and taking
into account mandatory redemption if any divided by the aggregate sale proceeds of
the Bonds
DATED this 16th day of September 2015
WESTERN FINANCIAL GROUP LLC
cEW.IERCE
EXHIBIT
UNDERWRITERREPRESENTATIONS
Alaska Municipal BondBank
General Obligation Bonds 2015 SeriesThree
This certificate is being delivered by RBC Capital Markets LLC on behalfof itself
and as representative ofthe underwriters named in the bond purchase contract dated
August 26 2015 the Underwriter in connection with theissuance by theAlaska
Municipal BondBank the Bond Bank of the Bond Banks General Obligation Bonds
2015 Series Three the Bonds
Each capitalized term used herein but not defined herein shall have the
meaning specified for such term in the Federal Tax Certificate dated the date hereof
and relating to the Bonds
The undersigned is authorized to execute thiscertificate on behalfofthe
Underwriter which certifications are not necessarily based on personal knowledge but
may instead be based on either due inquiry deemed adequateby the undersigned or
institutional knowledge or both regarding the matters setforth herein
The Underwriter has made bona fide publicoffering of the Bonds at the
prices or the prices corresponding to the yields setforth on the inside cover of the
Official Statement On the sale date of the Bonds August 26 2015 at least 10%of
each maturity ofthe Bonds except as set forth in the following paragraph were sold to
the public at initial offeringprices not greater than the respectiveprices corresponding
to the yields shown on the inside cover ofthe Official Statement
In the case of the Bonds maturing on October in the years 201620192024
2025 and 2026 the Underwriter herebyrepresents that the actualsales price of such
Bonds is consistentwith the Underwriters reasonable expectations that at least 10%of
the Bonds ofthat maturity would be soldat the respective initial offeringprice as shown
on the inside cover ofthe Official Statement
The term public as used herein does not include bond houses brokers
dealers and similar persons or organizations acting in the capacity ofunderwritersor
wholesalers
Theamount of the ReserveFund Requirement as defined in the 2005
General Bond Resolution as amended is reasonable amount to facilitate marketing
of the Bonds at the most favorable interest rates available
The statementscontained in the Official Statement under the heading
Underwriting are true and correct in all material respects
These representations are provided to Wohlforth Brecht Cartledge
Wohlforth and the Alaska Municipal BondBank to provide them withinformation
concerning the Bonds ii Wohlforth to provide them withinformation concerning the
municipal bond ofthe University of Alaska iii KL Gates LLP to provide them with
information concerning the municipal bond of the Haines Borough and iv Foster
Pepper PLLC and Levesque Law Group LLC to provide them withinformation
concerning the municipal bonds of the City of King Cove and the Kodiak Island
Borough for purposes of formulating their opinions with respect to such municipal
bonds and are notto be used or relied upon by any other person The Underwriter
expresses no view regarding the legalsufficiency or the correctness of any legal
interpretation made by bond counsel nothing herein represents our interpretation of any
laws and in particular regulations under the Code and the Underwriter expresses no
view regarding the legalsufficiency of any representations made herein
DATED this 16th day of September 2015
RBC CAPITAL MARKETS LLC
By_________
Authorized Si tory
AMBB/General Obligation Bonds 2015 SeriesThree
Underwriter Representations Page
i\Docs\37421 742\Underwriter Representations.Docx
EXHIBIT
POST-ISSUANCE COMPLIANCE PROCEDURES
FOR TAX-EXEMPT BONDS
Kodiak Island Borough Alaska the Borough issues governmental tax-exempt bonds subject
to ongoingcompliance obligations that must be met to preserve the tax-exempt status of the
bonds Inaddition to loss of tax-exemption adverse consequences can result from failure to
comply with Internal Revenue Service IRS restrictions relating to arbitragetiming and use of
bond proceeds and other aspects of bond issue However issuers that discover noncompliance
as result of the adoption and adherence to written post-issuance compliance policy are
eligible for significantly more favorabletreatment when remediating the noncompliance through
the IRSs Voluntary Closing Agreement Program Accordingly the Borough has adopted these
procedures to assist in identifying and correcting noncompliance in timely manner
Responsibility for Maintaining Compliance
The Assembly of Borough hasthe overall final responsibility for monitoring whether the
Borough is in compliance with post-issuance federaltax requirements for its tax-exempt bonds
However the Assembly has delegated to the Finance Director the primary operating
responsibility for implementing and monitoring compliance with this policy document The
Finance Director shouldconsult with bond counsel when there are questions or concerns about
the application of applicable federal law to tax-exempt bond financing or post-issuance tax
compliance issue
Expenditures of Tax-Exempt Bond Proceeds
For each project financed in whole or part with tax-exempt bond proceeds the FinanceDirector
will monitor the expenditure of both tax-exempt bond proceeds and funds that are not proceeds
of tax-exempt bonds and will track allocations of tax-exempt bond proceeds and funds that are
not proceeds of tax-exempt bonds to projectexpenditures For expenditures of tax-exempt bond
proceeds the Finance Director will record the date purpose property financed and vendor
associated with each expenditure of bond proceeds and identify which expenditures are for the
purpose of reimbursing the Borough for prior expenditures
Use of Property Financed with Tax-Exempt Bond Proceeds
For each issue of tax-exempt bonds the Finance Director will monitor the use of property
financed with tax-exempt bond proceeds for the term of the bond issue and for the term of any
bonds issued to refund the original issue or issued to refund an issue that refunded the original
issue The Finance Director will monitor suchuse no less frequently than once year
Arbitrage Yield Restriction andRebate
For each issue of tax-exempt bonds the FinanceDirector will monitor the interest earned on
investment of tax-exempt bond proceeds on an annualbasis and will cause arbitrage rebate
calculations to be made as required by applicable federal law If necessary the FinanceDirector
also will cause the appropriate federal arbitrage taxreturns to be prepared and timely filed with
the IRS together with any rebate amount owed
51352843
IdentificationofPotentialViolations
If at any time during the term of an issue of tax-exempt bonds the Borough discovers that
violation of federaltax requirementsapplicable tothat issue may have occurred the Finance
Director will consult with bond counsel to determine whether any such violation actually has
occurred and if so take prompt action to accomplish an available remedial actionunder
applicable IRS regulations or enter into closing agreement with the IRSunder the Voluntary
Closing AgreementProgram describedunder Notice 2008-31 or otherfuture published guidance
Record Retention
Records relating to tax-exempt bonds must be maintained as required by the State Auditors
Office However notwithstanding the recordretention requirements set forth by the State
Auditors Office records relating to tax-exempt bondsmust be maintained for the term of the
bond issue plus three years or in the case of an issuerefunded by one or more subsequent bond
issues for the combined term of the issues plus three years
Training
It is the policy of Borough that the Finance Director and his or her staff as well as the principal
operating officials of those departments of the Borough for which property is financed with
tax-exempt bonds should be provided with education and training on federaltax requirements
applicable to tax-exempt bonds The Borough therefore will enable and encourage those
personnel to attend and participate in educational and training programs offered by among
others bond counsel the Washington Municipal Treasurers Association and the Washington
Finance Officers Association with regard to the federal tax requirements applicable to
tax-exempt bonds
51352843