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Auditor warns of IRS arbitrage liability; court authorizes payment once Hilltop calculation is complete
Summary
An auditor update showed a FY2024 arbitrage/yield-restriction exposure on the county's 2020 bond series (related to 2016 transportation bonds) with a September 30 liability of $559,668.90 and a Hilltop Securities estimate near $650,000; commissioners authorized prompt payment processing when the updated calculation is returned to meet IRS deadlines.
The county auditor briefed commissioners on post-issuance compliance for bond arbitrage and yield-restriction rules, presenting a FY2024 summary and a liability tied to the 2020 unlimited tax road bond series. The auditor said Hilltop Securities performs an annual calculation and provided a September 30, 2024 liability figure of $559,668.90 and an expected updated calculation that could be in the vicinity of $650,000.
"This is related to interest earnings on bond proceeds and the calculation that must be rebated to the IRS," the auditor explained, and recommended county staff process the payment once Hilltop finalizes the updated calculation to avoid penalties. Commissioners discussed a ceiling and accepted a motion authorizing payment as calculated by Hilltop, with the auditor committing to return the updated figure to the court or process payment so the county remains timely with IRS deadlines.
The court approved the approach to ensure timely payment and avoid penalties; staff said they will return with the exact calculated liability when Hilltop completes its March 12 update.
