HomeMy Public PortalAbout9-Arbitrage Certificate.pdf ARBITRAGE CERTIFICATE
The undersigned is the Mayor of the Village of Key Biscayne, Florida (the “Village”), and
hereby certifies the following with respect to the Village’s $11,238,000 Capital Improvement
Revenue Refunding Bond, Series 2021 (the “Bond”). The undersigned is the official charged with
others with responsibility for issuing the Bond.
1. General.
(a) The Bond is being issued on the date hereof pursuant to Ordinance No. 2020-
05 adopted by the Village Council on November 17, 2020 and Resolution No. 2021-03 adopted by
the Village Council on January 12, 2021 (collectively, the “Bond Ordinance”) for the purpose of
refunding the following series of bonds issued by the Village:
(i) $1,865,000 Capital Improvement and Land Acquisition Revenue Refunding Bonds, Series
2011, issued on August 1, 2011 (the “2011 Bonds”), for the purpose of refunding the Village’s
$2,800,000 Capital Improvement and Land Acquisition Revenue Bonds, Series 2004 (the “2004
Bonds”), which 2004 Bonds were issued for the purpose of reimbursing the project fund for costs of
acquiring land located at 530 Crandon Boulevard for Village purposes and financing a portion of the
costs of site improvements for the Village’s community center (the “2004 Project”);
(ii) $7,130,000 Capital Improvement Revenue Refunding Bonds, Series 2011B, issued on August
1, 2011 (the “2011B Bonds”), for the purpose of refunding the Village’s $9,987,551 Capital
Improvement Revenue Bonds, Series 2002 (the “2002 Bonds”), which 2002 Bonds were issued for
the purpose of financing a portion of the costs of construction and equipping of a community center,
including a parking garage and swimming pool (the “2002 Project”);
(iii) $5,575,000 School Improvement Revenue Bonds, Series 2012, issued on October 24, 2012
and reissued for tax purposes on May 15, 2017 (the “2012 Bonds”), for the purpose of providing a
portion of the financing of a permanent secondary educational facility and recreational fields for
Village residents located at the MAST Academy Campus as well as necessary renovations of the Key
Biscayne K-8 Center (the “2012 Project”), pursuant to an Interlocal Agreement entered into on July
23, 2012 with the School Board of Miami-Dade County, a public body corporate and politic existing
under the laws of the State of Florida (the “School Board”);
(iv) $4,575,000 School Improvement Revenue Bonds, Series 2014, issued on July 17, 2014 (the
“2014 Bonds”), for the purpose of providing an additional portion of the financing for the 2012
Project; and
(v) $3,490,000 Sewer Improvement Revenue Bonds, Series 2016, issued on June 29, 2016 (the
“2016 Bonds” and together with the 2011 Bonds, the 2011B Bonds, the 2012 Bonds and the 2014
Bonds, the “Prior Bonds”), for the purpose of prepaying and refinancing a loan from the Florida
Water Pollution Cont rol Financing Corporation made in 2009 to finance a sanitary sewer construction
project (the “2009 Project” and together with the 2002 Project, the 2004 Project and the 2012
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Project, the “Projects”).
(b) Capitalized terms used herein but not otherwise specifically defined have the
same meanings as when used in the Bond Ordinance.
(c) This certification is made under 26 CFR section 1.148-2(b)(2) relating to
“arbitrage bonds” as defined in Section 148 of the Internal Revenue Code of 1986, as amended (the
“Code”). Terms used herein which are not capitalized or specifically defined have the same meanings
as when used in 26 CFR sections 1.148-1 - 1.148-11. The undersigned has investigated the facts,
estimates, and circumstances in existence on the date hereof. Such facts, estimates, and
circumstances, together with the expectations of the Village as to future events, are set forth in
summary form in this certificate. On the basis of such facts, estimates, and circumstances, it is not
expected that the proceeds of the Bond will be used in any manner that would cause the Bond to be
“arbitrage bonds” within the meaning of the Code and regulations. To the best of my knowledge and
belief, such expectations are reasonable and there are no facts, estimates, or circumstances that would
materially change them.
2. Source and Use of Proceeds.
(a) The proceeds received from the sale of the Bond will be $11,238,000 (the
“Sale Proceeds”), representing $11,238,000 principal amount plus accrued interest of $0.
(b) $39,965.40 of the Sale Proceeds will be used to pay costs of issuing the Bond.
(c) The balance of the Sale Proceeds will be used on the date hereof to refund and
retire the Prior Bonds.
(d) The Village reasonably expects that 2002 Project, the 2004 Project and the
2016 Project will continue t hroughout the term of the Bond to be owned and operated by the Village,
and that the 2012 Project will continue throughout the term of the Bond to be owned and operated by
the School Board.
3. Flow of Funds.
(a) The Village is required under the Bond Ordinance on each Interest Payment
Date to deposit Non-Ad Valorem Revenues into the Bond Fund, which, together with other moneys
therein, are sufficient to pay the principal of and interest on the Bond on such Interest Payment Date.
(b) The Bond Fund has been established to achieve a proper matching of revenues
and debt service within each bond year and will be depleted at least once each year (except for a
reasonable carryover amount that will not exceed the greater of one year’s earnings on the Bond Fund
and 1/12 of annual debt service on the Bond). All amounts in the Bond Fund will be expended to pay
debt service on the Bond within 13 months of the date of receipt thereof (12 months if the amounts
are interest or income from the investment of such amounts). Amounts in the Bond Fund will be
invested without yield restrictions. Interest earnings and gains resulting from investment of the Bond
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Fund will be retained therein and used to pay debt service on the Bond.
(c) The Rebate Fund is not pledged to pay debt service on the Bond and will not
be available if needed to pay such debt service.
4. Yield Restrictions
(a) The restrictions set forth in this Section 4 apply to taxable investments. For this
purpose, taxable investments include all investments other than obligations the interest on which is (i)
excluded from gross income for federal income tax purposes and (ii) not an item of tax preference for
federal alternative minimum tax purposes.
(b) All Sale Proceeds are being expended on the date hereof to retire the Prior
Bonds and pay costs of issuance of the Bond.
(c) Amounts in the Bond Fund that are not to be used within 13 months of the
date of receipt thereof (12 months if the amounts are interest or income from the investment of such
amounts) to pay debt service on the Bond will not be invested in taxable investments that produce a
yield over the term of the Bond that is materially higher than the yield on the Bond (within the
meaning of 26 CFR section 1.148-2(d)(2).
(d) There are no funds or accounts in existence or that are expected to be
established in addition to the funds referred to herein that are reasonably expected to be used (directly
or indirectly) or that will be pledged (directly or indirectly) to pay debt service on the Bond. There are
not any amounts that have been reserved or otherwise set aside such that there is a reasonable
assurance that such amounts will be available to pay principal or interest on the Bond. In addition,
the Village has not entered into, and does not reasonably expect to enter into within the next thirty
days, a hedge contract primarily for the purpose of reducing the Village’s risk of interest rate changes
with respect to the Bond. If any such fund or account is established after the date hereof, amounts in
the fund or account will not be invested at a yield higher than the yield on the Bond to the extent
necessary to preserve the federal income tax exemption of interest on the Bond.
(e) There are no amounts held under any agreement requiring the maintenance of
amounts at a particular level for the direct or indirect benefit of the owner of the Bond or any
guarantor of the Bond, excluding for this purpose amounts in which the Village may grant rights that
are superior to the rights of the owner of the Bond or any guarantor of the Bond and amount s that do
not exceed reasonable needs for which they are maintained and as to which the required level is tested
no more frequently than every six (6) months and that may be spent without any substantial restriction
other than a requirement to replenish the amount by the next testing date.
(f) There are no amounts that have a sufficiently direct nexus to the Bond to
conclude that the amounts would have been used for debt service on the Bond if the proceeds of the
Bond were not being used for those purposes.
(g) The yield on the Bond for purposes of this Section is 1.235102%, computed on
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the basis of a 360 day year consisting of twelve 30-day months and with interest compounded
quarterly. For purposes of computing the yield, the issue price of the Bond is $11,238,000 (the
principal amount plus $0 accrued interest). See Exhibits “A” and “B” attached hereto.
(h) If any taxable investments are subject to yield restriction under this Section 4,
the yield produced by the taxable investments shall be computed over the term of the Bond on the
basis of a 30-day month and 360 day year and with interest compounded quarterly. For purposes of
computing yield, the purchase price shall be determined as provided in 26 CFR section 1.148-5, and
yield reduction payments to the Internal Revenue Service and brokerage and selling commissions may
be taken into account to extent permitted thereunder.
5. Arbitrage Rebate. The Village has covenanted to comply with the arbitrage rebate
requirements under section 148(f) of the Code to the extent they apply to the Bond . See Section 12 of
the Resolution and Exhibit “C” attached hereto.
6. Miscellaneous
(a) No more than 50 percent of the proceeds of the Bond will be invested in
nonpurpose investments having a substantially guaranteed yield for four years or more (within the
meaning of section 149(g)(3)(A)(ii) of the Code). More than 85 percent of the spendable proceeds of
the Bond (within the meaning of section 149(g)(3)(A)(ii) of the Code) will be reasonably expended
for the governmental purposes within three years of the date of hereof.
(b) Amounts that are subject to yield restriction under Section 4 hereof will not be
invested (directly or indirectly) in federally insured deposits or accounts (within the meaning of
section 149(b)(4)(B) of the Code) if such investment would exceed the limit of 5 percent of the
proceeds of the Bond contained in section 149(b)(2)(B) of the Code.
(c) No portion of the proceeds of the Bond will be used as a substitute for other
funds that were otherwise to be used as a source of financing for any portion of the Project.
(d) There are no other obligations of the Village (i) that are or will be sold within
15 days of the date hereof; and (ii) that are to be paid out of substantially the same source of funds (or
that will have substant ially the same claim to be paid out of substantially the same source of funds) as
will be used to pay the Bond.
(e) The Village has covenanted that neither the Village nor any person under the
control or direction of the Village will make any investment or use of the proceeds of the Bond that
would cause the Bond to be “arbitrage bonds” within the meaning of section 148 of the Code. No
portion of the proceeds of the Bond will be intentionally used in the manner described in section
148(a)(1) or (a)(2) of the Code.
(f) The Village has covenanted that neither the Village nor any person under the
control or direction of the Village will make any use of the Project that would cause the Bond to be
“private activity bonds” within the meaning of section 141 of the Code. The Projects will be owned
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and operated by the Village or the School Board, and no portion of the Projects will be used in the
trade or business of any person other than a governmental unit (within the meaning of section 141 of
the Code).
(g) All investment s of amounts deposited in any fund or account created by or
pursuant to the Bond Ordinance, or otherwise containing gross proceeds of the Bond, within the
meaning of section 148 of the Code shall be acquired, disposed of, and valued (as of the date that
valuation is required by the Bond Ordinance or the Code) at Fair Market Value. For this purpose, Fair
Market Value means the price at which a willing buyer would purchase the investment from a willing
seller in a bona fide arm’s length transaction (determined as of the date the contract to purchase or
sell the investment becomes binding) if the investment is traded on an established securities market
(within the meaning of section 1273 of the Code) and, otherwise the term Fair Market Value means
the acquisition price in a bona fide arm’s length transaction (as referenced above) if (i) the investment
is a certificate of deposit that is acquired in accordance with applicable regulations under the Code,
(ii) the investment is an agreement with specifically negotiated withdrawal or reinvestment provisions
and a specifically negotiated interest rate (for example, a guaranteed investment contract, a forward
supply contract or other investment agreement) that is acquired in accordance with applicable
regulations under the Code, (iii) the investment is a United States Treasury Security-State and Local
Government Series that is acquired in accordance with applicable regulations of the United States
Bureau of Public Debt, or (iv) any commingled investment fund in which the Village and related
parties do not own more than a ten percent (10%) beneficial interest therein the return paid by the
fund is without regard to the source of investment.
(h) The Village will use a consistently applied accounting method to account for
investments and expenditures of proceeds of the Bond. Allocations of Bond proceeds to expenditures
will be made only with respect to a current outlay of cash of the expenditures. The Village will not
invest proceeds of the Bond in a commingled fund in which the Village owns more than 10 percent of
the beneficial interest thereof. The Village will maintain books and records until six years after the
date of retirement or redemption of the Bond sufficient to (i) establish the accounting method used,
(ii) account for all investment of proceeds of the Bond, and (iii) substantiate the allocation of
proceeds of the Bond to expenditures. In the event such allocations of Bond proceeds to expenditures
are not made within 60 days after the date of five years after the date hereof, the Village will use a
specific tracing accounting method to account for investment and expenditures of proceeds of the
Bond.
(i) On June 29, 2016, the Village adopted the post-issuance compliance
procedures attached hereto as Exhibit “D”. The Village agrees to comply with and will take all
reasonable measures to effect the implementation of such post-issuance compliance procedures with
respect to the Bond.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 15th day of
January, 2021.
VILLAGE OF KEY BISCAYNE, FLORIDA
By:
Michael Davey, Mayor
Signature Page to
Arbitrage Certificate
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EXHIBIT "A"
ISSUE PRICE CERTIFICATE
This certificate is delivered in connection with the issuance of $11,238,000 Village of Key
Biscayne, Florida, Capital Improvement Revenue Refunding Bond, Series 2021 (the "Bond"), being
issued on the date hereof.
Key Government Finance, Inc. (the "Purchaser") does hereby certify as follows:
1. The Purchaser is purchasing the Bond for its own account and without any
present intent to reoffer the Bond to the public.
2. The total amount paid as the purchase price of the Bond is $11,238,000,
representing $11,238,000 principal amount and $0 accrued interest.
IN WITNESS WHEREOF, the Purchaser has caused this certificate to be executed in its
name on this 15th day of January, 2021 by one of its officers duly authorized as of such date.
KEY GOVERNMENT FINANCE, INC.
By: C)4,1(Yff\41, PwJ\1t4
Name: Thomas Parachini
Title: Senior Vice President
EXHIBIT “B”
FINAL NUMBERS
C-1
EXHIBIT “C”
ARBITRAGE COVENANTS
The Village of Key Biscayne, Florida (the “Village”) hereby covenants to comply with the
following provisions and procedures to insure that its $11,238,000 Capital Improvement Revenue
Refunding Bond, Series 2021 being issued on the date hereof (the “Bond”) comply with the arbitrage
requirements of Section 148 of the Code.
1. Definitions
(a) Capitalized terms used herein but not otherwise specifically defined have the
same meanings as when used in the Arbitrage Certificate to which this document is attached.
(b) Terms used herein and in 26 CFR sections 1.148-1 - 1.148-11 that are not
capitalized have the same meanings as when used in such regulations.
(c) The following definitions apply for purposes of this document:
“Calculation Date” means the same day in each calendar year selected by the
Village and the date the last Bond is discharged.
“Gross Proceeds” means: (i) all amounts actually or constructively received
fro m the sale of the Bond (exclusive of accrued interest) and all amounts derived from
the investment thereof; and (ii) all amounts that are part of a sinking fund or reserve
or replacement fund for the Bond . Such term shall not include amounts that are part
of a bona fide debt service fund for the Bond.
“Rebate Fund Requirement” as of any Calculation Date means the rebate
amount with respect to the Bond as of such date calculated in the manner provided in
26 CFR sections 1.148-1 -1.148-11. Investments need be taken into account in
calculating to rebate amount to the extent that such amounts are eligible for an
exemption from the requirements of Section 148 of the Code under Section 148(f) of
the Code.
“Rebate Payment Date” means sixty (60) days after each succeeding fifth
Calculation Date.
2. In General
In order for interest on the Bond to be excluded from gross income for federal income
tax purposes, arbitrage profits earned from investing all the Gross Proceeds must be paid to the
United States no later than each Rebate Payment Date.
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3. Rebate Fund and Payment
(a) The Village shall calculate the Rebate Fund Requirement as of each Calculation
Date no later than fifty (50) days after each Calculation Date.
(b) No later than fifty (50) days after each Calculation Date, the Village shall
deposit in the Rebate Fund the amount, if any, necessary to increase the amount in such Fund to the
Rebate Fund Requirement.
(c) The Village shall pay any amount required to be paid to the United States
under section 148(f) of the Code out of amounts in the Rebate Fund no later than each Rebate
Payment Date.
(d) The Village may withdraw from the Rebate Fund any excess of the amount on
deposit in the Rebate Fund over the Rebate Fund Requirement calculated as of a Calculation Date.
4. Rebate Calculations
(a) The rebate amount as of any Calculation Date is computed by future valuing
certain investment receipts and payments at an interest rate equal to the yield on the Bond computed
as of the Calculation Date.
(b) The yield on the Bond is 1.235102%, computed in accordance with 26 CFR
section 1.1484(c) on the basis of a 30 day month and 360 day year and with interest compounded
semiannually. For purposes of computing the yield, the issue price of the Bond is $11,238,000.
(c) The Village shall: (i) if necessary, retain an experienced professional to perform
calculations relating to the Rebate Amount; (ii) consult legal counsel experienced in matters relating
to calculations relating to the Rebate Fund Requirement to resolve issues that may arise and for which
it is necessary to consult legal counsel; and (iii) retain all records with respect to the calculations and
any payments to the United States for at least 6 years after the last Bond is discharged.
(d) Payments to the United States shall be filed with the Internal Revenue Service
Center, Ogden, Utah 84201 on or before the payment is required to be paid and shall be accompanied
by Form 8038-T or such other form as is prescribed for such purpose.
5. Investment Restrictions
(a) No investment of Gross Proceeds (other than a United States Treasury security
of the State and Local Government Series) will be acquired for an amount in excess of its fair market
value or sold or disposed of for an amount less than its fair market value.
(b) The Village shall not enter into any investment contract to invest Gross
Proceeds unless: (i) the Village makes a bona fide solicitation for an investment contract with
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specified material terms and receives at least 3 bona fide bids from different reasonably competitive
providers of investment contracts that have no material financial interest in the Bond; (ii) the Village
purchases the highest -yielding investment contract (net of broker fees) for which a qualifying bid is
made; (iii) the determination of the terms of the investment contract takes into account as a significant
factor the Village’s reasonably expected drawdown schedule for the funds to be invested, exclusive of
amounts deposited in debt service funds and reasonably required reserve or replacement funds;
(iv) t he terms of the investment contract are reasonable, including collateral security requirements;
(v) the obligor on the investment contract certifies the administrative costs (including any broker fees
or commissions) that it is paying (or expects to pay) t o third parties in connection with the investment
contract; and (vi) the yield on the investment contract is not less than the yield then available from the
obligor on reasonably comparable investment contracts offered to other persons, if any, from a source
of funds other than gross proceeds of tax-exempt bonds.
(c) The Village shall not use Gross Proceeds to purchase a certificate of deposit
that is not actively traded in an active secondary market if the certificate of deposit has a fixed interest
rate, a fixed principal payment schedule, a fixed maturity, and a substantial penalty for early
withdrawal (“CD”) unless the yield on the CD is not less than: (i) the yield on reasonably comparable
direct obligations of the United States; and (ii) the highest yield that is published or posted by the
provider to be currently available from the provider on comparable CDs offered to the public.
(d) The Village will first consult with Bond Counsel before entering into any Swap
Agreement with respect to the Bond.
[Signature Page Follows]
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 15th day of
January, 2021.
VILLAGE OF KEY BISCAYNE, FLORIDA
B
Michael Davey, Mayor
Signature Page to
Arbitrage Covenants
C-4
D-1
EXHIBIT “D”
VILLAGE OF KEY BISCAYNE, FLORIDA
TAX-EXEMPT BOND POLICIES AND PROCEDURES (Adopted June 29, 2016)
In connection with the issuance of tax-exempt obligations (including, without limitation,
bonds, notes, loans, leases and certificates) (together, “tax-exempt bonds”) that are subject to certain
requirements under the Internal Revenue Code of 1986, as amended (the “Code”), the Village of Key
Biscayne, Florida (the “Village”) hereby adopts the following policies and procedures which are
intended to constitute written procedures for ongoing compliance with the Federal tax requirements
applicable to the tax-exempt bonds and for the timely identification and remediation of violations of
such requirements.
• In connection with the issuance of tax-exempt bonds, the Mayor or Village Manager will
sign a tax certificate prepared by Bond Counsel which sets forth (i) the Village’s reasonable
expectations as to the use of the proceeds of the tax-exempt bonds; and (ii) instructions for post -
issuance compliance with the federal tax laws relating to the tax- exempt bonds. The Village’s
Finance Director shall thereafter be responsible for monitoring compliance with the provisions of the
tax certificate.
• The Village’s Finance Director shall identify persons responsible for monitoring ongoing
compliance with the tax requirements and provide adequate training to such persons, including
training with respect to the requirements of the Code applicable to the expenditure of proceeds of the
tax-exempt bonds and the private use of bond-financed projects.
• The Village’s Finance Director or such other responsible persons, shall annually review
compliance with these procedures and the terms of the applicable tax compliance certificates in order
to determine whether any violations have occurred so that such violations can be timely remediated
through the “remedial action” provisions of the United States Treasury Regulations or through the
Voluntary Closing Agreement Program administered by the Internal Revenue Service (the “IRS”).
• The Village’s Finance Director will work with the Village’s Bond Counsel or the
Underwriter, if applicable, to obtain a written certification as to the offering price of bonds so as to
establish the issue price of bonds for arbitrage purposes.
• The Village’s Finance Director will work with Bond Counsel to ensure that the IRS Form
8038-G is filed in a timely manner in connection with the issuance of bonds.
• The Village’s Finance Director will periodically check the financial records and expenditures
of the Village to ensure that (i) clear and consistent accounting procedures are being used to track
the investment and expenditure of bond proceeds, (ii) bond proceeds are timely expended in
accordance with the applicable temporary period rules of the arbitrage regulations, and (iii) bond
proceeds are expended in accordance with the expectations contained in the tax certificate. The
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Village’s Finance Director will ensure that a final allocation of bond proceeds (including investment
earnings) to qualifying expenditures is made with respect to its tax-exempt bond proceeds.
• The Village’s Finance Director or other designated responsible persons will review
arrangements for the use of bond-financed facilities with non-governmental persons or organizations
or the federal government (collectively referred to as “private persons”) in order to ensure that
applicable private activity bond limitations are not exceeded. Such review shall include the review
of contracts or arrangements with private persons with respect to bond-financed facilities which
could result in private business use of the facilities, including the sale of facilities, leases,
management or service contracts, research contracts or other contracts involving “special legal
entitlements” to bond-financed facilities. If it appears that applicable private activity bond limitations
are exceeded, the Village shall immediately contact Bond Counsel.
• With respect to any financed facilities the control of which is being transferred to the county
or another municipal entity, the Village’s Finance Director will, at a minimum, notify in writing the
other governmental entity that the facilities are bond-financed and, as such, the use of the same is
restricted to general public use and use by governmental entities, that any management contract with
respect to the financed facilities must comply with Rev. Proc. 97-13, and that any proposed transfer
of any portion of such financed facilities to a nongovernmental entity is subject to an opinion of Bond
Counsel.
• The Village’s Finance Director shall comply with the arbitrage rebate covenants contained in
the tax certificate. The Village’s Finance Director shall hire a rebate analyst or otherwise ensure that
the rebate calculations are conducted in a timely manner in order to determine compliance with
arbitrage yield restrictions and rebate requirements with respect to its bonds.
• The Village shall ensure that for each issue of bonds, the transcript and all records and
documents described in these procedures will be maintained while any of the bonds are outstanding
and during the three-year period following the final maturity or redemption of that bond issue, or if
the bonds are refunded (or re-refunded), while any of the refunding bonds are outstanding and during
the three-year period following the final maturity or redemption of the refunding bonds.
• The Village will follow the above-described procedures to comply with all tax-exempt bond
requirements. If any violations of the above or other applicable provisions of the federal tax laws
relating to tax-exempt bonds are discovered, the Village shall immediately contact Bond Counsel to
determine the appropriate course of action to remedy such violation, including contacting the IRS, if
necessary.
Date: June 29, 2016