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RESOLUTION R-1415-106: A RESOLUTION OF THE TRUSTEES OF THE NORMAN UTILITIES AUTHORITY AND THE COUNCIL OF THE CITY OF NORMAN, OKLAHOMA, TRANSFERRING $1,433,017 OF 2006 SERIES WATER BOND FUNDING TO THE BERRY ROAD WATER LINE REPLACEMENT PROJECT, REALLOCATING $500,000 TO THE RAW WATER LINE PROJECT, AND REDUCING WATER FUND APPROPRIATIONS BY $834,675.
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BACKGROUND: The Norman Utilities Authority (NUA) approved a $20.4 million ($20.4MM) revenue bond in 2006 to implement a series of water improvement projects including the first phase of a parallel raw water line from Lake Thunderbird to the Water Treatment Plant; construction of ten new water wells and associated water supply lines; and other improvements to the water distribution system. In the revenue bond process, proceeds from the entire debt issuance are placed on deposit with the trustee bank pending work on specified projects. As the projects progress, funds on deposit are drawn to make payment for the work performed. Funds on deposit are allowed to accumulate interest while those funds are waiting to be drawn. Under IRS rules, proceeds from revenue bonds are targeted to be spent within three years of their deposit.
This spending time frame specified by IRS rules is designed to protect against profiteering by using low interest financing options available to public entities leveraged against higher interest paying investment vehicles during the time the bond proceeds are waiting to be drawn to pay for public improvements. These provisions are commonly referred to as the anti-arbitrage provisions. To avoid arbitrage penalties, if bond proceeds not spent after five years from the date of the debt issuance then a public entity is require to explain why the proceeds have not been spent timely. The NUA has been providing valid explanations since 2011 regarding remaining proceed from the 2006 Bond issuance. Some of the reasons given have included pending litigation on projects funded with ...
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