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City staff weigh timing of bond issues to avoid federal arbitrage liabilities
Summary
Finance staff and council discussed whether to take debt up front based on CIP schedules or to reimburse costs after projects are complete to reduce federal arbitrage risk and potentially improve market timing.
City finance staff and council members discussed strategies for timing debt issuance to reduce federal arbitrage exposure and to take advantage of favorable market conditions.
Julie explained the federal arbitrage concern: when municipalities issue tax‑exempt debt and temporarily invest proceeds at yields higher than the bond interest, federal rules may require an arbitrage rebate to the government unless exceptions apply. She…
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