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Home My WebLink AboutPR 21530: YIELD REDUCITON PAYMENT DUE TO THE IRS ON 2015A AND 2015B CERTIFICATES OF OBLIGATION City of ; 4. ur4j7I€.kUS www.PortArthurTx.gov INTEROFFICE MEMORANDUM Date: August 11, 2020 To: The Honorable Mayor and City Council Through: Ron Burton, City Manager From: Kandy Daniel, Interim Finance Director RE: P.R. No. 21530 Yield Reduction Payment due to the IRS on 2015A and 2015B Certificates of Obligation Introduction: The intent of this agenda item is to seek the City Council's approval to make a yield reduction payment of$100,877.79 to the Internal Revenue Service on August 24, 2020. The required payment due is related to the City of Port Arthur Certificates of Obligation listed below. $6,995,000 Comb. Tax& Revenue Certificates of Obligation, Series 2015A $ 79,826.91 $2,080,000 Comb. Tax & Revenue Certificates of Obligation, Series 2015B 21,050.88 Total Due $100,877.79 The computation reports for the installment period June 24, 2015 to June 24, 2020 were prepared by Hilltop Securities Asset Management, LLC and are attached as Exhibit A. The yield reduction amount was determined using the provisions of the 1993 Treasury Regulations Section 1.148-5(c). Through the computation date, the cumulative yield of all restricted investments has exceeded the yield on the Obligations. As a result, the restricted investments allocable to gross proceeds of the Obligations are generating a yield restriction liability. This yield restriction liability exceeds the rebate liability. Therefore, the higher yield restriction payment is due. There are no further yield restriction calculations required. "Remember,we are here to serve the Citizens of Port Arthur" P.O.Box 1089 X Port Arthur.Texas 77641-1089 X 409.983.8101 X FAX 409.982.6743 City rl .�y X11 iik ort rtlrrr�— l ems www.PortArthurTx.gov Background: The 2015A and 2015B Obligations were purchased by the Texas Water Development Board and proceeds were placed in escrow at the Bank of New York Mellon and invested in accordance with the Public Funds Investment Act until drawn down by the City for approved expenditures. Budget Impact: There is no budgetary impact. Funds will be reimbursed from interest earnings held in escrow at Bank of New York Mellon. Recommendation: It is recommended that the City Council approve PR No.21530 it as presented. "Remember,we are here to serve the Citizens of Port Arthur" P.O.Box 1089 X Port Arthur,Texas 77641-1089 X 409.983.8101 X FAX 409.982.6743 P.R. No. 21530 08/11/2020 kd RESOLUTION NO. A RESOLUTION AUTHORIZING THE YIELD REDUCTION PAYMENT TO THE INTERNAL REVENUE SERVICE ON 2015A AND 2015B CERTIFICATES OF OBLIGATION IN THE TOTAL AMOUNT OF $100 , 877 . 79 . FUNDS TO BE REIMBURSED FROM INTEREST EARNINGS HELD IN ESCROW AT BANK OF NEW YORK MELLON. WHEREAS , the computation reports for the installment period of June 24, 2015 to June 24 , 2020 were prepared by Hilltop Securities Asset Management, LLC and are attached hereto as Exhibit "A"; and WHEREAS , the yield reduction amount was determined using the provisions of the 1993 Treasury Regulations Section 1 . 148-5 (c) ; and WHEREAS, the yield reduction payment due the Internal Revenue Service (IRS) on 2015A and 2015B Certificates of Obligation is $100, 877 . 79; and WHEREAS, there is no budgetary impact, with the funds being reimbursed from interest earnings held in escrow at Bank of New York Mellon. NOW THEREFORE , BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF PORT ARTHUR: Section 1 . That the facts and opinions in the preamble are true and correct . Section 2 . That the City Council directs the City Manager to pay the Internal Revenue Service $100, 877 . 79 for the yield reduction payment due on 2015A and 2015B Certificates of Obligation. Section 3 . That a copy of the caption of this resolution shall be spread upon the Minutes of the City Council . READ, ADOPTED AND APPROVED on this day of August, A. D. , 2020, at a Regular Meeting of the City Council of the City of Port Arthur, Texas, by the following vote : AYES : Mayor: P.R. No. 21530 08/11/2020 kd Councilmembers : , NOES: . Thurman Bill Bartie Mayor ATTEST: Sherri Bellard City Secretary APPROVED AS TO FORM: ( L2U he Val Tize o City Attorney APPROVED FOR ADMINISTRATION: Ronald Burton City Manager P.R. No. 21530 08/11/2020 kd EXHIBIT A HilltopSecurities iial? Asset Management Bill Johnson,CPA Managing Director July 13,2020 Ms. Kandy Daniel Director of Finance City of Port Arthur. Texas P.O. Box 1089 Port Arthur.Texas 7764 1-1089 56,995,000 City of Port Arthur,Texas Combination Tax and Revenue Certificates of Obligation, Series 2015A In accordance with the terms of our agreement. we have completed the determination of the yield reduction payment pursuant to Section 1.148-5(c)of the 1993 Treasury Regulations. The computation of the yield reduction amount. included in this report, covers the period from June 24. 2015 (the "Delivery Date") through June 24, 2020 (the "Installment Computation Date"). The period from the Delivery Date to the Installment Computation Date is hereinafter referred to as the "Yield Reduction Payment Period." All yield restricted proceeds have been spent as of the Installment Computation Date: consequently, there are no further yield restriction calculations required. In order to determine the yield reduction amount for the Yield Reduction Payment Period, we were provided with all information regarding the issuance of the Obligations and the investment of the gross proceeds, as well as other information as deemed necessary under the circumstances. We did not perform any procedures to test the accuracy of the information provided to us. Certain information and definitions used in preparing the attached schedules are described in the Summary of Computational Information. Based upon the computations included in this report, the yield reduction amount for the above- defined Yield Reduction Payment Period is summarized as follows: direct 214.953.8817 toll free 800.678.3792 11878.1 I fax 214.840.5040 bill.johnson t hilltopsecuritics.eom Hilltop Securities Asset Management,LLC 1201 Elm Street,Suite 3500,Dallas,Texas 75270 7 of 23 Summary of Yield Reduction Amount: Actual Interest Earnings S 162.815.37 Allowable Interest Earnings at Materially Higher Yield $ 82.988.46 Cumulative Yield Reduction Payment S 79,826.91 The yield reduction amount was determined using the provisions of the 1993 Treasury Regulations Section 1.148 [T.D. 8476]. These regulations may be revised or replaced and. accordingly. the computations contained in this report may, be subject to modification in order to comply with the revised regulations. if any. when issued. The terms of our engagement are such that we have no obligation to update the results of this report for events occurring or information coming to our attention subsequent to the date of this report. We appreciate this opportunity to serve you. If you have any questions regarding the computations contained in this report. please do not hesitate to contact us. Sincerely. HILLTOP SECURITIES ASSET MANAGEMENT. LLC by Bill Johnson.CPA direct 214.953.8817 toll free 800.678.3792 148784 1 fax 214.840.5040 bill johnson r?hilltopsecurities.cont Hilltop Securities Asset Management,LLC 1201 Elm Street.Suite 3500.Dallas. Texas 75270 8 of 23 HilltopSecurities 4411) Asset Management Bill Johnson,CPA Managing Director July 13,2020 Ms. Kandy Daniel Director of Finance City of Port Arthur. Texas P.O. Box 1089 Port Arthur.Texas 77641-1089 $2,080,000 City of Port Arthur,Texas Combination Tax and Revenue Certificates of Obligation, Series 2015B In accordance with the terms of our agreement. we have completed the determination of the yield reduction payment pursuant to Section 1.148-5(c)of the 1993 Treasury Regulations. The computation of the yield reduction amount, included in this report. covers the period from June 24, 2015 (the "Delivery Date") through June 24, 2020 (the "Installment Computation Date"). The period from the Delivery Date to the Installment Computation Date is hereinafter referred to as the "Yield Reduction Payment Period." All yield restricted proceeds have been spent as of the Installment Computation Date; consequently. there are no further yield restriction calculations required. In order to determine the yield reduction amount for the Yield Reduction Payment Period. we were provided with all information regarding the issuance of the Obligations and the investment of the gross proceeds, as well as other information as deemed necessary under the circumstances. We did not perform any procedures to test the accuracy of the information provided to us. Certain information and definitions used in preparing the attached schedules are described in the Summary of Computational Information. Based upon the computations included in this report. the yield reduction amount for the above- defined Yield Reduction Payment Period is summarized as follows: direct 214.953.8817 toll free 800.678.3792 148794_1 fax 214.840.5040 bill.johnson rt hilltopsecuritics.com Hilltop Securities Asset Management.LLC 1201 Elm Street.Suite 3500,Dallas,Texas 75270 7 of 25 Summary of Yield Reduction Amount: Actual Interest Earnings $ 37.310. 9 Allowable Interest Earnings at Materially Higher Yield $ 16.259.71 Cumulative Yield Reduction Payment $ 21,050.88 The yield reduction amount was determined using the provisions of the 1993 Treasury Regulations Section 1.148 [T.D. 8476]. These regulations may he revised or replaced and. accordingly. the computations contained in this report may be subject to modification in order to comply with the revised regulations. if any. when issued. The terms of our engagement are such that we have no obligation to update the results of this report for events occurring or information coming to our attention subsequent to the date of this report. We appreciate this opportunity to serve you. If you have any questions regarding the computations contained in this report. please do not hesitate to contact us. Sincerely. HILLTOP SECURITIES ASSET MANAGEMENT.LLC by Bill Johnson.CPA direct 214 953 8817 toll free 800.678.3792 148794 I lax 214.840.5040 bill.johnsoni hilltopsecuritics.com Hilltop Securities Asset Management.[lc c 1201 Elm Street.Suite 3500,Dallas,'J esus 75270 8 of 25