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Finance committee approves $592,811.31 IRS arbitrage rebate for 2020 GOs
Summary
Finance staff told the committee the city must remit $592,811.31 to the U.S. Treasury as an arbitrage rebate tied to the 2020 A general obligation bonds; a specialist firm produced the calculation and the committee approved the payment by voice vote.
The Tuscaloosa City Finance Committee on Dec. 16 voted to authorize payment of $592,811.31 to the U.S. Treasury as an arbitrage rebate tied to the city’s 2020 A general obligation bonds.
Finance staff member Susan Standridge explained that because the bonds were issued as tax-exempt debt, federal rules require the city to return any investment earnings that exceed the interest paid to bondholders. "We have calculated that we owe, exactly $592,811.31," Standridge said, noting the five-year IRS compliance window for the 2020 A issue and the use of a specialist arbitrage firm to perform the necessary calculations.
Standridge told the committee the city hires an outside arbitrage group annually to analyze bond issuances, project potential prepayment scenarios, and calculate amounts that must be remitted. A committee member noted the city typically pays that firm about $15,000–$20,000 a year to produce the analyses.
Following brief questions and a motion, the committee approved the payment by voice vote. No additional conditions or reporting requirements were listed at the meeting.
The item was procedural and limited to clearing the compliance item; the committee moved on to the next agenda item after the vote.
