Title
Recommendation to Approve a Professional Services Agreement, for an Amount not to Exceed $50,000, to BLX Group, LLC, for Arbitrage Rebate Compliance Services and Analysis for Various Bond Issues. (Finance 2410)
Body
To: Honorable Mayor and Members of the City Council
From: David L. Rudat, Interim City Manager
EXECUTIVE SUMMARY
Approve an agreement with BLX Group, LLC to perform arbitrage rebate compliance services in accordance with federal tax law regulations for tax exempt bond issues.
BACKGROUND
The City, the Alameda Public Financing Authority and the City of Alameda Public Financing Authority are required to compute arbitrage on its various tax exempt bond issues. The arbitrage calculation requires special expertise in understanding the complex federal tax laws and Internal Revenue Service regulations related to calculating arbitrage on tax exempt bonds. There are serious penalties for failing to comply with the IRS regulations.
The Alameda Municipal Code section 2-59.3 requires that contracts for a period longer than five years be approved by the City Council. Generally bonds issued by the City have a life span of 30 years. In addition, the arbitrage rebate calculation are performed every five years. As a result, staff is seeking Council approval for this specialized service contract.
DISCUSSION
The City, the Alameda Public Financing Authority and the City of Alameda Public Financing Authority have number of bond issues some of which are tax-exempt. Generally, bonds have various post-issuance compliance requirements. One of these requirements, specifically for the tax-exempt bonds, is tax compliance. Arbitrage rebate and yield restriction compliance is a significant part of tax compliance and is governed by the Federal tax law requirement, Section 148 of the Internal Revenue Code. The calculation must be performed every five years until the final maturity date of the bonds. If there is a positive arbitrage, the payment to the IRS is due no later than 60 days after the computation date.
Currently, there are five bond issues that require compliance services related to arbitrage for which the City has no agreement to perform such services. Staff solicited quotes from service providers and selected BLX Group, LLC to perform the service.
FINANCIAL IMPACT
The exact amount is dependent upon the number of bond issues and calculations needed as some bonds may be refinanced and repaid sooner or may not require rebate calculation if all bond proceeds have been spent. The fee schedule for various report types is listed in the Exhibit A of the Agreement. The overall amount is set not to exceed $50,000 for the duration of the agreement, unless amended in the future. All costs will be charged to the appropriate debt service fund.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
This action is in conformance with the Alameda Municipal Code and all policy documents.
ENVIRONMENTAL REVIEW
This activity is not a project and is exempt from the California Environmental Quality Act (CEQA) pursuant to Section 15378 (b) (4) of the CEQA Guidelines, because it involves governmental fiscal activities (acceptance of the third quarter financial report), which does not involve any commitment to any specific project which may result in a potentially significant physical impact on the environment.
RECOMMENDATION
Approve a professional services agreement, for an amount not to exceed $50,000, with BLX Group, LLC, for arbitrage rebate compliance services and analysis for various bond issues
Respectfully submitted,
Elena Adair, Finance Director
Financial Impact section reviewed,
Elena Adair, Finance Director
Exhibit:
1. Agreement