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HomeMy Public PortalAbout10-ARBITRAGE CERTIFICATE.pdfARBITRAGE 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 $1,200,000 Water and Sewer Revenue Bonds, Series 2009 (the "Bonds"). The undersigned is the official charged with others with responsibility for issuing the Bonds. i. General. (a) The Bonds are being issued on the date hereof pursuant to Ordinance No. 2009-10 adopted by the Village Council on September 8, 2009 and Resolution No. 2009-25 adopted by the Village Council on October 27, 2009 (collectively, the "Bond Ordinance") to provide funds to pay a portion of the costs of water and sewer system improvements within the Village, finance architectural, engineering, environmental, legal and other planning costs related thereto, and pay costs of issuance of the Bonds (the "Project"). Capitalized terms used herein but not otherwise specifically defined have the same meanings as when used in the Bond Ordinance. (b) This certification is made under 26 CFR ~ 1.148-2@)(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 ~~ 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 Bonds will be used in any manner that would cause the Bonds 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 ofProceeds. (a) 'I'he proceeds received iiom the sale of the Bonds will be $1,200,000 (the "Sale Proceeds"), representing $1,200,000 principal amount plus accrued interest of $O. (b) $26,000 of the Sale Proceeds will first be used to pay costs of issuing the Bonds. (c) The remainder of the Sale Proceeds will be deposited in the Proj ect Fund on tile date hereof and used, together widl all arnounlt; derived fiom the investment thereof to pay for costs of the Proj ect. Arhitra9e CerCifiCBte (M18~0685_1) (d) The Sale Proceeds, together with all amounts derived from the investment thereof, will not exceed by any amount the amount necessary for the governmental purposes of the Bonds. (e) The Village reasonably expects to incur within six months of the date hereof substantial binding obligations to third parties in an aggregate amount in excess of 5% of the Sale Proceeds to acquire and construct the Project. Work on the Project and the expenditure of the Sale Proceeds will proceed with due diligence to the completion thereof. The Village reasonably expects that at least 85 percent of the Sale Proceeds deposited in the Project Fund will be applied to pay costs of the Project within three years of the date hereof. (f) No portion of the Sale Proceeds or amounts derived from the investment thereof will be used to pay debt service on any other debt obligation of the Village. (g) The Village will not treat any amount in excess of$100,000 as being used to reimburse an expenditure paid before the date hereof unless the requirements of26 CFR ~ 1.1 50- 2(d) relating to reimbursement allocations are met with respect to such expenditure. The preceding sentence shall not apply to preliminary expenditures with respect to a project to the extent that the amount of such expenditures does not exceed 20% of the aggregate issue price of the portion of an issue or issues that finance or are reasonably expected to finance the project for which the preliminary expenditures were incurred. Preliminary expenditures with respect to a project means architectural, engineering, surveying, soil testing, costs ofissuance, and similar costs incurred prior to commencement of acquisition, construction, or rehabilitation of the project, other than land acquisition, site preparation, and similar costs incident to commencement of construction. (h) The Village reasonably expects that the Project will continue throughout the term of the Bonds to be owned and operated by the Village. 3. FlowofFunds. (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 Bonds 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 Bonds). All amounts in the Bond Fund will be expended to pay debt service on the Bonds within 13 months of the date of receipt thereof(l2 months if the amounts are interest or income from the investment of such amounts). (c) The Rebate Fund is not pledged to pay debt service on the Bonds and will not be available if needed to pay such debt service. Arbitrage Certificate (M18606851) 2 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) Sale Proceeds and interest or income derived ~om the investment thereof will not be invested in taxable investments that produce a yield over the term of the Bonds that is materially higher than the yield on the Bonds (within the meamng of26 CFR ~ 1.1482(d)(2)) except as follows: (i) Such amounts may be invested without regard to yield until the date that is 3 years after the date hereof; (ii) Such amounts that represent investment earnings may be invested without regard to yield for a 1 -year period beginning on the date of receipt thereof; and (iii) An additional amount not in excess of $60,000 may be invested without regard to yield. (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 sewice on the Bonds will not be invested in taxable investments that produce a yield over the term of the Bonds that is materially higher than the yield on the Bonds (within the meaning of26 CFR ~ 1.148-2(d)(2)) except to the extent that the aggregate amount so invested does not exceed the difference between $100,000 and any amount invested pursuant to the $60,000 exception under Section 4(b)(iii) hereof. (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 Bonds. There are not any amounts that have been resen~ed or otherwise set aside such that there is a reasonable assurance that such amounts will be available to pay principal or interest on the Bonds. Tn 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 nsk of interest rate changes with respect to the Bonds. 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 Bonds to the extent necessary to preserve the federal income tax exemption of interest on the Bonds. (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 owners of the Bonds or any guarantor of the Bonds, excluding for this purpose amou~lts in which the Village may ~-ant nghts that are superior to the rights of the owners of the Bonds or any guarantor of the Bonds and amounts Arbierage Certificate ~M1860685_1) 3 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 Bonds to conclude that the amounts would have been used for debt service on the Bonds if the proceeds of the Bonds were not being used for those purposes. (g) The yield on the Bonds for purposes ofthjs Section is 4.80%, computed on the basis of a 360 day year for the actual number of days elapsed and with interest compounded quarterly. For purposes of computing the yield, the issue price of the Bonds is $1,200,000 (the principal amount plus accrued interest). See Exhibit "B" 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 Bonds on the basis of a 360 day year for the actual number of days elapsed and with interest compounded quarterly. For purposes of computing yield, the purchase price shall be determined as provided in 26 CFR ~ 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. Proiect Fund. Amounts on deposit in the Project Fund will be used for the payment of costs of acquisition and construction of the Project. No portion of the proceeds of the Bonds will be used for reimbursement of expenditures paid by the Village prior to the date of issuance of the Bonds except for (i) preliminary capital expenditures incurred before commencement of acquisition or construction of the Project that do not exceed twenty percent (20%) of the portion of the issue price of the Bonds, and (ii) capital expenditures that (A) were paid no earlier than sixty (60) days before the date of the adoption by the Village ofa declaration of intent to reimburse such expenditures ~-om the proceeds of obligations, and (B) are reimbursed no later than eighteen (1 8) months after the later of the date the expenditure was paid or the date the Proj ect is placed in service (but no later than three (3) years after the expenditure is paid). Proceeds (if any) used for reimbursement of expenditures will be deposited in the general fund of the Village and will not be used to replace funds of the Village to be used to refund debt of the Village to create a sinking or pledged fund for such debt or the Bonds or otherwise to create replacement proceeds for such debt or for the Bonds. 6. ~uali-tied Tax-Exempt Obli~ations (a) The Village reasonably expects that the aggregate face amount of all tax- exempt obligations issued by the Village during calendar year 2009 will not exceed $10 million. The Village represents that neither the Village nor any subordinate entities or entities issuing tax- exempt obligations on behalf of the Village within the meaning of Section 265(b)(3) of the Code have issued tax-exempt obligations during calendar year 2009 and neither the Village nor any such entities expect to issue tax-exempt obligations during calendar year 2009. Arbitrage Certificate (M1860685_1~ 4 For purposes of this paragraph (a): (i) The Village and all entities that issue obligations on behalf of the Village are treated as the Village, and all obligations issued by any entity subordinate to another entity are treated as issued by such other entity. (ii) The term "obligation" includes any bond or Bond (whether or not recourse), any warrant, any lease purchase agreement, and any other instrument that is treated as an obligation for purposes of section 103 of the Code, except that such term shall not include: any private activity bond las defined in section 141 of the Code) or any current refunding obligation; (iii) An obligation is "tax-exempt" if: (a) interest on the obligation is excluded from gross income for federal income tax purposes; (b) at the time of issuance of the obligation it was represented to the purchaser that interest on the obligation is or may be excluded from such gross income; or(c) the proceeds of the obligation were derived (directly or indirectly) from proceeds ofa tax-exempt obligation. ~iv) An obligation that is part of an issue is a refunding obligation to the extent that: (a) proceeds of the issue are used to pay principal or interest on an obligation that is part of another issue; and (b) the amount of the refUnding obligation does not exceed the amount of the refunded obligation (determined at the time of issuance of the refUnding obligation). For this purpose, the amount of an obligation is the stated principal amount plus accrued unpaid interest (or, if the original issue premium or discount exceeds 2 percent, the present value of the obligation). (v) A refUnding obligation is a current refunding obligation if no portion of the proceeds of the issue of which the refunding obligation is a part is used (directly or indirectly) to pay principal, interest, or call premium on any obligation that is part of another issue more than 90 days after the date of issue of the refunding obligation. (b) The Bonds have been designated by the Village as qualified tax-exempt obligations las defined in section 265(b)(3)(B) of the Code) in Section 13 of the Resolution. 7. Miscellaneous (a) No more than 50 percent of the proceeds of the Bonds 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 Bonds (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 (determined without regard to the $60,000 exception) 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 ~rbitrage CerLificaCe (M18606851) 5 such investment would exceed the limit of 5 percent of the proceeds of the Bonds contained in section 149(b)(2)(B) ofthe Code. (c) No portion of the proceeds of the Bonds 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 substantially the same claim to be paid out of substantially the same source of funds) as will be used to pay the Bonds. (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 Bonds that would cause the Bonds to be "arbitrage bonds" within the meaning of section 148 of the Code. No portion of the proceeds of the Bonds will be intentionally used in the manner described in section 148(a)(l) or (a)(2) of the Code. (f) 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 Bonds. See Section 14 of the Resolution and Exhibit "A" attached hereto. (g) The Village reasonably expects that at least 75 percent of the available construction proceeds (within the meaning of section 148(f)(4)(C)(vi) of the Code) of the Bonds will be used for construction expenditures with respect to property owned by the Village. (h) 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 Bonds to be 'Lprivate activity bonds" within the meaning of section 141 of the Code. The P~oject will be owned and operated by the Village, and no portion of the Proj ect 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). (i) All investments of amounts deposited in any fund or account created by or pursuant to the Resolution, or otherwise containing gross proceeds of the Bonds, within the meaning of section 148 of the Code shall be acquired, disposed of, and valued las of the date that valuation is required by the Resolutiori 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 ~om 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 las 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 Ftr~p:tarSaggeS gcger~jicate 6 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. O') The Village will use a consistently applied accounting method to account for investments and expenditures of proceeds of the Bonds. 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 Bonds 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 Bonds sufficient to (i) establish the accounting method used, (ii) account for all investment of proceeds of the Bonds, and (iii) substantiate the allocation of proceeds of the Bonds 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 Bonds. [Remaiizder of this page intentionally left blank] Arhielagp Certificace (M1860685_1) 7 IN WITNESS WHEREOF, the undersigned has hereunto set his hand this IOth day of November, 2009. VILLAGE OF KEY BISCAYNIE, FLORIDA By: Robert L. Vernon, Mayor iT~i ~TSa09eg gCgefli j icae e 8 EXHIBIT "A" ARBITRAGE COVENANTS Tile Village uTKey Biscayne, Florida (Lhe "Vill~e") hereby covenants to comply with the following provisions and procedures to insure that its $ 1 ,200,000 Water and Sewer Revenue Bonds, Series 2009, being issued on the date hereof(the "Bonds~ comply with the arbitrage requirements of Section 148 of the Code. 2. Definitions (a) Capitalized terms used herem but not otherwise specifically defined have the same meanings as when used in the Tax Certificate to which this document is attached. (b) Terms used herein and in 26 CFR ~~1.148-1-1.148-1 1 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 from the sale of the Bonds (exclusive of accrued interest) and all amounts derived from the investment thereof; and (ii) all amounts that are part of a sinkmg fund or reserve or replacement fund for the Bonds. Such term shall not include amounts that are part of a bona fide debt service fund for the Bonds. "Rebate Account Requirement" as of any Calculation Date means the rebate amount with respect to the Bonds as of such date calculated in the manner provided in 26 CFR ~~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. 3. In General In order for interest on the Bonds 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. (M1860655_1) Arbitrage Cenilicale A-i 4. Rebate Fund and Payment (a) The Village shall calculate the Rebate Account 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 Account Requirement. (c) The Village shall pay any amount requtred to be paid to the United States under section 148(f) of the Code out of amounts in the Rebate Fund no latex 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 Account Requirement calculated as of a Calculation Date. 5. 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 Bonds computed as ofthe Calculation Date. (b) The yield on the Bonds is 4.80%, computed in accordance with 26 CFR ~ 1.1484(c) on the basis of a 360 day year for the actual number of days elapsed and .with interest compounded quarterly. For purposes of computing the yield, the issue price of the Bonds is $1,200,000. (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 Account 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 Zntemal Revenue Service Center, Ogden, Utah 84201 on or before the payment is required to be paid and shall be accompanied by Form 803 8-T or such other form as is prescribed for such purpose. 6. 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 Arbi~rage Certificate (M1860685_1) A-2 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 specified matenal 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 Bonds; (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 requ~red reserve or replacement funds; (iv) the terms of the investment contract are reasonable, including collateral security requirements; (v) the obliger on the investment contract certifies the administrative costs (including any broker fees or commissions) that it is paying (or expects to pay) to 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 obliger 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 ~om 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 Bonds. IN WITNESS WHEREOF, the undersigned has hereunto set his hand this IOth day of November, 2009. VILLAGE OF KEY BISCAYNE, FLORIDA By: Robert L. Vernon, Mayor P~rbitrage Certificate (M18606s5_1) A-3 EXHIBIT "B" ISSUE PRICE CERTIFICATE This certificate is delivered in connection with the issuance of $1,200,000 Village of Key Biscayne, Florida, Water and Sewer Revenue Bonds, Series 2009, being issued on the date hereof (the "Bonds"). SunTrust Bank (the "Bank") does hereby certify as follows: I. The Bank is purchasing the Bonds for its own account and without any intent to reoffer the bonds to the public. 2. The total amount paid as the purchase price of the Bonds is $1,200,000, representing $1,200,000 principal amount and $0 accrued interest. IN WITNESS WHEREOF, the Bank has caused this certificate to be executed in its name on this 10th day of November, 2009 by one of its officers duly authorized as of such date. SUNTRU By: eJ Vice Pr$s~dent (M1850685_1) Arbihage Certificate B-l