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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...
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