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City staff report $600,650.93 arbitrage payment tied to 2021 utility bonds; new CFO introduced
Summary
City finance staff told the council a $600,650.93 yield-reduction (arbitrage) payment is required on prior tax-exempt water/wastewater bonds; the city said funds were accrued in FY2025 and introduced new CFO Mark Abernathy to the council.
City officials briefed the council on a required yield-reduction payment of $600,650.93 tied to tax-exempt utility bonds issued in 2021, and the council was introduced to the city’s new chief financial officer.
A city staff member explained that the 2021 tax-exempt bonds generated interest earnings that exceeded IRS limitations for tax-exempt proceeds, creating an arbitrage liability that must be refunded to bondholders via the U.S. Treasury. Staff described the payment as necessary to maintain the bonds’ nontaxable status and said an interim calculation in May 2025 produced an accrual fully reserved in the FY2025 budget; the actual payment due is about $40 lower than the accrual, staff said.
During the discussion staff introduced Mark Abernathy as the new CFO; Abernathy explained the purpose of the payment and said the city has set aside the funds. The council welcomed Abernathy and thanked staff for the explanation. No formal vote was recorded on the work-session record; staff said the item would be on a subsequent meeting agenda for formal action.
