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TO: Mayor John Laesch
FROM: Dan Ferguson, Accounting Manager
DATE: October 16, 2025
SUBJECT:
A resolution authorizing the execution of the 5-year agreement for arbitrage rebate compliance services with Hilltop Securities Asset Management, LLC.
PURPOSE:
To obtain the approval of the City Council of the attached, proposed resolution that would provide the City with arbitrage rebate compliance services. These services ensure that the City complies with Internal Revenue Service ("IRS") arbitrage requirements regarding the City's tax-exempt bond issuances.
BACKGROUND:
When a municipality issues tax-exempt bonds, the IRS imposes restrictions on how the proceeds can be invested. Specifically, the City is prohibited from earning a higher rate of return, known as arbitrage, on the invested bond proceeds than the interest rate it pays to bondholders. The IRS mandates that municipalities track, and when necessary, remit the excess earnings via an arbitrage rebate to the U.S. Treasury to maintain the tax-exempt status of the bonds.
DISCUSSION:
The City has used an outside firm to perform the required arbitrage rebate calculations since 2016. The current agreement with Hilltop Securities Asset Management ("HSAM") was executed back in August 2022 and will expire in August 2027. This agreement is being presented to the City Council at this point, since the cumulative cost of this contract will exceed $50,000.00, and therefore requires further approval. At the onset of this agreement, it was not known at the time that it would, therefore, this was not previously presented.
These calculations are highly technical and governed by complex IRS requirements. Approving this agreement with HSAM retains a specialized rebate consultant that will ensure full compliance with IRS regulations, accurate reporting and timely filings, avoidance of financial penalties, and further protection of the City's tax-exempt financing.
The City has paid $49,900.00 per the current agreement going back to 2022. As of right now, we anticipate an additional $13,000.00 will need to be paid to HSAM before the agreement expires in August 2027. That is a total agreement cost of $62,900.00 for the 5-year period. For reference, the cost is capped at $4,500.00 per calculation performed by HSAM.
Funding is available in account 101-2502-415.32-99.
IMPACT STATEMENT:
Arbitrage rebate compliance is not optional and is the responsibility of the City as an issuer of tax-exempt bonds. The proposed resolution retains HSAM's expert services to ensure that the City remains in full compliance with the IRS and avoids unnecessary financial risks and penalties.
RECOMMENDATIONS:
Staff requests the proposed resolution be adopted.
cc: Finance Committee
CITY OF AURORA, ILLINOIS
RESOLUTION NO. _________
DATE OF PASSAGE ________________
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A Resolution authorizing the execution of the 5-year agreement for arbitrage rebate compliance services with Hilltop Securities Asset Management, LLC.
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WHEREAS, the City of Aurora has a population of more than 25,000 persons and is, therefore, a home rule unit under subsection (a) of Section 6 of Article VII of the Illinois Constitution of 1970; and
WHEREAS, subject to said Section, a home rule unit may exercise any power and perform any function pertaining to its government and affairs for the protection of the public health, safety, morals, and welfare; and
WHEREAS, the current, executed agreement with Hilltop Securities Asset Management, LLC covers August 9, 2022 through expires August 8, 2027 and is subject to City Council approval based on the cumulative cost anticipated for the duration of this agreement; and
WHEREAS, arbitrage rebate calculations are highly technical and governed by complex Internal Revenue Service requirements, and the City is mandated to track and potentially remit excess arbitrage earnings to the U.S. Treasury to maintain the tax-exempt status of the bonds; and
WHEREAS, the proposed agreement retains the expert and specialized services of Hilltop Securities Asset Management, LLC to ensure that the City remains in full compliance with the IRS and avoids unnecessary financial risks and penalties; and
WHEREAS, funding is available in account 101-2502-415.32-99.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Aurora, Illinois, as follows: The Director of Purchasing is hereby authorized to execute the 5-year agreement for arbitrage rebate compliance services with Hilltop Securities Asset Management, LLC.