The URL can be used to link to this page

Home My WebLink About9.i. 1986 Bond Tax Designation Resolution � � � ,�; ` P.O: BOX Stp Z�� Q 2875-tASTM ST. W. OSe�!'�.�u/i�� ROSEMOUN7. MINNESOTA 55068 612-423-441 t T0: Mapor Iioke ITEM 9 i. Cauncilmembers: Napper Oxborough Walsh Wippermann FROM: Stephan Jzlk, Administrator/Clerk DATE: December 15, 1988 RE: Resolution - 1986 Bond Designation Attached please 'find a letter of explanation an�i resolution for cansiderat�.on regarding the 1986 Bvnds issued by the Citp of Rosemount, The letter fu17.p explains the purpose of the resalutic�n. At first hlush the request see�aed a bit of a nuieance and sn action showin$ on�.y a "favor" to be done. But on further investigation we find that if there is any question as to the status of the bonds, under the new tax 1aws, the city could possibly find itself liable to bond holders for the Ioss du� to papin$ of t�xes �, on the interest gained. The price to pay now adopting the resolution, is little compared to the potential liability. We recommend your �pproval and � adoption of the resolution. 1� L,&W OFFICES BI?IGGS AND MOIE?GAN PROFESSIONAL ASSOCIATION 2200 FIRST NATIONAL BANK 13UIIMING RECEIVED SAINT PAXTL, MINNESOTA 55101 DEC 100" 1988 TELEPHO14B (612) 201-1215 TELECOPIER (612) 222-4071 CLERKS OFFICE C17Y OF ROSEMOUNT INCLUDINO THE FORMER FIRM OF LEVITT, PALMER, BOWEN, ROTMAN & SHARE December 8, 1988 Mr. Stephan Jilk City AdministraLor-Clerk 2875 -145th Street West Rosemount, MN 55068 Re: $2,150,000 General obligation Temporary Improvement Bonds, Series 1986A Deat- Mr. Jilk: The above referenced bonds (the "Bonds,,) were issued in 1986 while the Tax Reform. Act of 1906 (the "Act"), was pending in the United States House (if Representatives and in the United States Senate. The Act contained several provisions which had a retroactive effective date prior to the date of issuance of the in Bonds. One of these provisions affected purchasers of the Bonds -)mpletely disallowed iany interest expense on money which that it c( was treated as borrowed to purchase the. Bonds. Howeverr the Act e bonds contained a provision which allowed the City to designate th as "qualified tax exempt obligations" (commonly referred to as use it "bank qualified bonds"). This designation is important beca allows bondholders to deduct 80% of their interest expense on any money treated as borrowed for the bonds. if the designation of the Bonds as "qualified tax exempt obligations" is not effectively made, then no part of that interest expense is deductible. In the resolution authorizing the issuance of the Bonds, the City designated the Sonds under the Tax Reform Act as "qualified tax exempt obligations,,. 2270 NN WORLD TRADE CENTER 2200 FIRSTNATIONAL BANE BUILDINO 2400 Ing CENTER SAM PAUL, MINNESOTA W101 SArNT PAUL, XrNNESOTK MOI XrNNZAPOLTS, M";NESOTA 55402 ft2i em - 1215 (612) 201 - IP -15 RM) 330 - Oem � � jc � � . r�. .� . . , .. � . . . . .. . � . . �. � . � � . �. . . .. � � . �. . . .. . �iRIGCsS �xr� MC?RGAN The Tecl�nical ana Miscell.aneous Revenue Act of 1988 ( "TAMRA" ) , whicti hecame law on November 14 , 1988, requires that the designation of the A�nds as "qur�tified tax exempt obligations" be mac�e under_ Section 265(b) ( 3) of. t.t�e COC�P_ c'�T1CI that i.i: be made this year. Although it is possible tliat the In�:ernal Reven��e Serv.ice will announce a�i exterision of tlie t.ime for the designatiori, l�ecause a r�esignation was made under tfie Tax Reform Act and the resol.ution cantained a covenant i:� take wliat�vPr �ction is necessary to eff?ctuaY.e this desi.gnation, it is im��rt:ant that the enclosed tesolu�ivn be adoptPd to_ designafi.e t}ie Bonds as "qualified tax exempt obligations " as required k�y TAMRA. If. any b�ndholder dPcides to sel.l the Bonds it owns at some f_nture time alid the City has not adopted this resolution, the mar_ket va.lue of the B�ncis may be less and th� b�ndholcier might attemE�t to bri.ng an acti�n agains,t the City because of the re�ucLion in value of its Bonds . Please see that the enclosec� resolution is ' adopted at the ea.r_liest �►ossi_ble date and, in any event if at all possible, no laLer than Deceml.ier 31, 1988 . We sugg�st that yo�x rstain a c�py �f this resolution in y�ur files 'in case an}� Bonciholder requesfs infor_mation regarding this matter. If you liave any quesi:ions, p.lease give me a cal1 . . F ery truly yours, ��° � r �� '�-------�'" � ,t ;�`tiA .�;, . :� M�r.y � Dyr_set� Enc . cc: Springsted Iiicorporateci �. � _ — CITY OF xOSEMOUNT RBso�uTrax lgss - RBSOLUTION DESIGNATING CBRTAIN BQHDS ISSUBD IN 1986 AS "QUAL�FIBD TAR-SXSMPT OBLIG�ITIOAiS" WHEREAS, the City of Rosemount, Minnesota (the "Issuer") , issued its $2, 150,Q00 General Obllgation Temporarp Improvement Bond�, Series 1986A {the "Bonds") after August 7, 198b, the effective date of the federal Tax Refctrm Act of 1986; and WHEREAS, when the Bonds were isaued, the Issuer mede a design�tion that it intended Co qusiify th� Bonds under Section 8Q2(e)(3) of H.R. 3838 of the 99th Gangreas �s passed bp the House of Representatives; and WHEREAS, the Issuer coven�nted to take such actions as are necessary to effectuate such attempted designation; and WHEREAS, for the Bonds to get the benefit o£ being designated �s "qualified tax-exempt obligationa" under Section 265(b)(3) o£ the federa�. Internal Revenue Code of 1986, as amended (the "Code"} , it is necessary that the Issuer designate the Bonda pursuant to subparagraph (B) of Section 10U9(b)(3) af the federal Teehnical and Miscellan�ous Revenue Act of 1g88 (TAMRA" ) and Section 265(b)(3) of the Code; and WHEREAS, the Bonds qualifp for 91tG�1 designation because they are not private activitp bonds (ox� if private activitq bonds, are qualified 501(c)(3) bonda, or refand bonds ahich were not industriaS development bonds vr private loan bonds} , the Issuer with respect to bonds iaaued in 1986, is a "qnalified small issuer" of �10,000�00f} or less of bonds, and not nore th�n $10,000,000 of bonds iasued in 1986 have been designated: NOW. THBRBFORE, BE, IT RBSQLVSD bp the City Council of the City of Rosemount, Minnesota, $s fallows: Desi$nation of Qualified Tax-Exemvt Oblif�atians. In order to qualify the Bond as '=q�allfied tax-exempt ohllgations" wi.thin the meaning of Section 265(b)(3) of the Code, the Tssuer t�ereby m�ke�4 the follawing factual statement� and representations: {A) the Bands were issued after August 7, 1986, (B) the Bonds are not "private activitp bonds" as defined in section 141 of the Code, or, if private activitp bonda, they are: