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Home My WebLink AboutMO # 1916MUNICIPAL ORDER NO. 1916 A MUNICIPAL ORDER ADOPTING POST -ISSUANCE COMPLIANCE POLICIES AND PROCEDURES TO ENSURE COMPLIANCE WITH FEDERAL TAX LAW APPLICABLE TO OUTSTANDING TAX-EXEMPT DEBT OBLIGATIONS AND TO ENSURE THAT INTEREST PAID ON SUCH TAX-EXEMPT DEBT REMAINS EXEMPT FROM FEDERAL INCOME TAX AND DESIGNATING THE FINANCE DIRECTOR AS THE CITY'S COMPLIANCE OFFICER BE IT ORDERED BY THE CITY OF PADUCAH, KENTUCKY: SECTION 1. That the City of Paducah adopts post -issuance Compliance Policies and Procedures, as attached hereto, to ensure compliance with federal tax law applicable to outstanding tax- exempt debt obligations and to ensure that interest paid on such tax-exempt debt remains exempt from Federal Income Tax. SECTION 2. That the City of Paducah hereby designates the Finance Director as the Compliance Officer for the City of Paducah. SECTION 3. This order shall be in full force and effect from and after the date of its adoption. ATTEST: /J Tammara S. Sanderson, City Clerk Adopted by the Board of Commissioners, July 5, 2016 Recorded by Tammara S. Sanderson, City Clerk, July 5, 2016 \no\Post Issuance Bond Compliance Policies and Procedures 429 CITY OF PADUCAH, KENTUCKY POST -ISSUANCE COMPLIANCE POLICIES AND PROCEDURES ADOPTED AS OF JULY 5, 2016 430 TABLE OF CONTENTS Section1 - Purpose......................................................................................................................432 Section 2 — Compliance Officer Designation..............................................................................432 Section 3 — Closing of Tax -Exempt Debt Issues.........................................................................433 I. Tax Certificates..........................................................................................................433 11. Internal Revenue Service Forms 8038, 8038-G 8038 -GC — Tax -Exempt Deb t....... 433 III. Late Filing of Information Returns............................................................................433 IV. Volume Cap Limit.....................................................................................................433 V. Carryforward of Unused Volume Cap.......................................................................433 VI. Public Approval Requirement..................................................................................434 VII. Limitations Relating to Fees Charged by the Issuer when serving as a Conduit Issuer434 VIII. Certification Regarding Expectations for Use and Investment of Proceeds .............434 IX. Reimbursement Declarations of Official Intent .........................................................434 X. Qualified Hedge.........................................................................................................434 Section 4 — Use of Debt Proceeds — Tax -Exempt Bonds............................................................434 I. Private Business Use.................................................................................................434 II. Private Loans.............................................................................................................436 II1. Sale of Tax -Exempt Debt -Financed Property ...........................................................436 IV. Remedial Actions......................................................................................................436 Section 5 — Arbitrage Limitations Imposed on Debt Issuances ...................................................436 I. Hiring an Arbitrage Calculating Agent.....................................................................436 II. Payment of Arbitrage Rebate and Yield Reduction Liability....................................436 III. Yield Restriction Limitations....................................................................................436 IV. Timely Expenditure of Proceeds of the Issuer's Tax -Exempt Debt ..........................437 V. Advance Refunding Policies.....................................................................................437 Section 6 — Accounting; for Debt Proceeds.................................................................................437 I. General.......................................................................................................................437 II. Investment of Proceeds..............................................................................................437 III. Expenditure of Debt Proceeds on Capital Projects ....................................................437 Section7 — Recordkeeping..........................................................................................................438 I. Means of Maintaining Records..................................................................................438 II. Retention Period........................................................................................................438 III. Required Records......................................................................................................438 Section 8 — Voluntary Closing Agreement Pro ram...................................................................439 Section 9 — Continuing Education...............................................................................................439 Section10 —Miscellaneous .........................................................................................................439 Section 11 — Consultation with Counsel......................................................................................439 431 —,7 -.:-a, r] - 7 —. 7F -M- 7- U'lT. IT arr•i_n "T.n-+r City of Paducah Kentucky - Purpose It is the policy of the City of Paducah, Kentucky (the "Issuer") to comply with federal tax law applicable to its outstanding tax-exempt debt obligations (the "Tax -Exempt Debt") to ensure that interest paid on such Tax -Exempt Debt remains exempt from federal income tax. Federal tax law requires compliance with numerous rules and regulations, including but not limited to filing requirements, yield restriction limitations, arbitrage rebate requirements, use of proceeds and financed project limitations, remedial action requirements and recordkeeping requirements. Given the increasing complexity of the federal tax law, the Issuer hereby formally adopts the following policies and procedures concerning its Tax -Exempt Debt (the "TE Policies and Procedures"). These TE Policies and Procedures are intended to serve as a guide for the Issuer to facilitate compliance with federal tax law applicable to its Tax -Exempt Debt. In the event these TE Policies and Procedures conflict, in whole or in part, with the federal tax agreement or federal tax certificate executed by the Issuer in connection with the issuance of its Tax -Exempt Debt (the "Tax Certificate"), the terms of the applicable Tax Certificate will control. — Compliance Officer Designation The Issuer hereby designates the Finance Director as the Issuer's compliance officer (the "Compliance Officer"). Except as otherwise described herein, the Issuer's Compliance Officer will have primary responsibility for the Issuer's compliance with federal tax law in order that the interest on the Issuer's Tax -Exempt Debt is, and remains, exempt from federal income tax. The Issuer may appoint a new Compliance Officer from time to time as needed. Also, the Compliance Officer may delegate duties herein as deemed necessary. For conduit issues, the Compliance Officer may delegate a portion of its duties herein to the conduit borrower, as reasonably deemed prudent. The Compliance Officer will at all times be aware of the Issuer's obligations set forth in these TE Policies and Procedures, including the Issuer's ongoing recordkeeping and compliance responsibilities associated with its Tax -Exempt Debt. The Compliance Officer will at all times be familiar with these TE Policies and Procedures and will be authorized to consult with third - party professionals (e.g., legal counsel, bond counsel and arbitrage calculating agents), as necessary, to ensure compliance with these TE Policies and Procedures. In addition, the Compliance Officer will be familiar with the following publications of the Internal Revenue Service ("IRS"): IRS Publication 4079 "Tax -Exempt Governmental Bonds Compliance Guide," IRS Publication 5005 "Your Responsibilities as a Conduit Issuer of Tax -Exempt Bonds" and IRS Publication 4078 "Tax -Exempt Private Activity Bonds Compliance Guide." The Compliance Officer will also be familiar with the IRS's website at www.irs.gov/Tax-Exempt-Bonds and aware that such website contains information, forms and publications pertaining to tax-exempt bonds. 432 City of Paducah. Kentucky — Closing of Tax -Exempt Debt Issues Tax Certificates The Tax Certificate (which is generally prepared by bond counsel and signed by the Issuer and conduit borrower, as applicable) will serve as the operative document for purposes of establishing reasonable expectations of the Issuer as of the date of the issuance of the Issuer's Tax -Exempt Debt. Each Tax Certificate will provide a summary of the federal tax rules applicable to each Tax -Exempt Debt issuance. Prior to each issuance, the Compliance Officer will review each Tax Certificate to confirm that the expectations set forth in the Tax Certificate are reasonable and accurate and to become familiar with the requirements set forth therein. For conduit issues, the Compliance Officer may rely upon the representations of the conduit borrower set forth in the Tax Certificate. Internal Revenue Service Forms 8038, 8038-G, 8038 -GC — Tax -Exempt Debt Bond counsel, with assistance from the Issuer and other professionals associated with the financing, will prepare an IRS Form 8038, Information Return for Tax -Exempt Private Activity Bond Issues, Form 8038-G, Information Return for Tax -Exempt Governmental Obligations, or Form 8038 -GC, Information Return for Small Tax -Exempt Governmental Bond Issues, Leases, and Installment Sales, (collectively "8038 Form") as applicable, in connection with each issuance of Tax -Exempt Debt by the Issuer, which the Compliance Officer or its designee will review prior to closing. An 8038 Form will be filed with the Internal Revenue Service no later than the 15th day after the second calendar month after the close of the calendar quarter in which the particular Tax—Exempt Debt is issued. All 8038 Forms will be filed by bond counsel, on behalf of the Issuer, with the IRS. Late Filing of Information Returns If the Compliance Officer determines an 8038 Form was not timely filed, the Compliance Officer will coordinate with bond counsel to file the relevant 8038 Form. The Compliance Officer will be familiar with the late filing procedures applicable to 8038 Forms as currently outlined in Revenue Procedure 2002-48, 2002-37 I.R.B. 531. These procedures generally require that the Issuer: (a) attach a letter to the 8038 Form briefly explaining when the return was required to be filed, why the return was not timely filed, and whether or not the bond issue is under examination; (b) enter on top of the return "Request for Relief under section 3 of Revenue Procedure 2002-48;" and (c) file the letter and the return with the IRS at the applicable IRS address. Volume Can Limit The volume cap limit for certain qualified private activity bonds, as set forth in section 146 of the Internal Revenue Code of 1986, as amended (the "Code"), limits the amount of Tax -Exempt Debt that can be issued to finance a particular qualified purpose during a calendar year. If, during a given year, the Issuer issues qualified private activity bonds in excess of its applicable volume cap limit, the tax-exempt status of those bonds is jeopardized. To the extent the Issuer issues Tax -Exempt Debt requiring a volume cap allocation, the Compliance Officer will monitor the Issuer's volume cap allocations in order to properly file information returns and make carryforward elections. Most qualified private activity bonds require volume cap allocations. Some refundings of private activity bonds will require volume cap allocations. Governmental bonds and qualified 501(c)(3) bonds generally do not require a volume cap allocation, however, certain governmental bonds and qualified 501(c)(3) bonds may require volume cap in limited circumstances. The Compliance Officer will require that bond counsel determine whether volume cap is needed in connection with the issuance of its Tax -Exempt Debt. Carryforward of Unused Volume Can The Issuer may elect to carry any unused volume cap of a calendar year forward for three years. This election can be made for each of the carryforward purposes described in section 146 of the Code. This election is made by filing IRS Form 8328, Carryforward Election of Unused Private Activity Bond Volume Cap ("Form 8328") by the earlier of February 15th following the year in which the unused amount arises or the date of issue of any bonds pursuant to the carryforward election. If the Issuer determines that volume cap needs to be carried forward into the next year, the Compliance Officer will ensure that the appropriate Form 8328 is timely filed with the IRS. Once Form 8328 is filed, the Issuer may not revoke the carryforward election or amend the carryforward amounts shown on the form. The Compliance Officer will be familiar with Revenue Procedure 2005-30, 2005-22 I.R.B. 1148, in the event the Issuer fails to timely file its Form 8328. 433 City of Paducah. Kentucky Public Approval Requirement Generally, prior to issuance, qualified private activity bonds (including qualified 501(c)(3) bonds) must be approved by an applicable elected representative for the governmental entity issuing the qualified private activity bonds and, in some cases, for each governmental entity having jurisdiction over the area in which a financed facility is to be located, after a public hearing with 14 days published notice. Governmental bonds are not subject to this public approval requirement. The Issuer will ensure that the public approval requirements applicable to its Tax -Exempt Debt are satisfied. The Compliance Officer will cause bond counsel to comply with the public approval requirements applicable to its Tax - Exempt Debt issues. Limitations Relating to Fees Charged by the Issuer when serving as a Conduit Issuer For conduit bond issues (to the extent applicable), the Issuer may charge fees payable either out of the bond proceeds or directly by the conduit borrower with its own funds. Such fees may be used by the Issuer to offset all or a portion of the costs payable by the Issuer related to its role as a conduit Issuer and may also be used to raise funds for governmental purposes of the Issuer. Such fees may increase the effective yield of the conduit loan when viewed by the Issuer as a purpose investment. Section 148 of the Code generally limits the yield on purpose investments to the yield on the bonds plus a spread. This limitation effectively limits the size of the fees that may be charged by the Issuer regardless of whether paid periodically or up front. For each conduit loan made by the Issuer to a conduit borrower with proceeds of the Issuer's Tax -Exempt Debt, the Compliance Officer will coordinate with bond counsel to ensure that the yield on the conduit loan does not exceed the yield on the Tax -Exempt Debt by more than the permitted spread. Certification Re arding Expectations for Use and Investment of Proceeds The Treasury Regulations generally require the Issuer to make a certification regarding its expectations for each issue of its Tax -Exempt Debt. Section 1.148-2(b)(2)(i) of the Treasury Regulations requires an officer of the Issuer to certify that the Issuer's expectations are reasonable as of the issue date of its Tax -Exempt Debt. For each issue of Tax -Exempt Debt, the Compliance Officer will review the Tax Certificate to make sure that the certification requirements described herein are satisfied. Reimbursement Declarations of Official Intent Under section 1.150-2 of the Treasury Regulations, the Issuer (or the conduit borrower for conduit issues) is permitted to use proceeds of Tax -Exempt Debt to reimburse certain expenditures paid before the date of issuance of the Tax -Exempt Debt (subject to certain requirements). One requirement is that the Issuer (or conduit borrower) must adopt a declaration of official intent to reimburse expenditures not later than 60 days after the reimbursed expenditure is paid. If proceeds of the Tax -Exempt Debt will be used for reimbursement purposes, the Compliance Officer will coordinate with the Issuer and Issuer's counsel in order that such declaration of official intent is adopted on a timely basis. Qualified Hedge If the Issuer enters into a qualified hedge (i.e. swap transaction) pursuant to Section 1.148-4(h) of the Treasury Regulations in connection with its Tax -Exempt Debt, the Compliance Officer will immediately inform Issuer's counsel to ensure compliance with the Treasury Regulations required for integration of the qualified hedge (to the extent integration is desired by the Issuer). — Use of Debt Proceeds — Tax -Exempt Bonds Private Business Use The Issuer will not knowingly take or permit to be taken any action that would cause any of its outstanding Tax -Exempt Debt to become taxable "private activity bonds," as described below. Generally, an issue of Tax -Exempt Debt will be considered a taxable "private activity bond" if more than a certain amount (5% for qualified private activity bonds, including qualified 501(c)(3) bonds, or 10% for governmental bonds) of the proceeds are used directly or indirectly in any trade or business carried on by a private business user and more than a certain amount (5% for qualified private activity bonds, including qualified 501(c)(3) bonds, or 10% for governmental bonds) of the debt service is directly or indirectly (a) secured by any interest in property used or to be used in any trade or business carried on by a private business user, or (b) derived from payments made in respect of property used or to be used in any trade or business carried on by a private business user. The Compliance Officer will annually review the "use" of its facilities financed with its outstanding Tax -Exempt Debt for compliance with the applicable use restrictions imposed on 434 City of Paducah. Kentucky tax-exempt financed facilities, as set forth in the Tax Certificate. Prior to entering into certain arrangements that could give rise to an impermissible amount of private business use, the Compliance Officer will consult with counsel to the Issuer before entering into such arrangements that include, but are not limited to, management contracts, operating agreements, licenses, leases, subleases, naming rights agreements, research agreements, cellular tower or solar panel placement agreements, clinical trial agreements and joint venture or partnership arrangements. In the event the Compliance Officer determines the Issuer has entered into an arrangement involving any of its facilities financed with Tax -Exempt Debt that may give rise to an impermissible amount of private business use, the Compliance Officer will consult with counsel to the Issuer to determine whether such arrangement impacts the tax-exempt status of the Tax -Exempt Debt. 435 —� --t— — —i City of Paducah. Kentucky Private Loans The Issuer's Tax -Exempt Debt will be considered taxable "private loan bonds" if more than the lesser of $5 million or 5% of the proceeds of the Tax -Exempt Debt is used, directly or indirectly, to make or finance loans to private persons. The Issuer will not take or permit to be taken any action that would cause any of its Tax -Exempt Debt to be considered taxable "private loan bonds." The Issuer will not loan the proceeds of its Tax -Exempt Debt to any third party without first consulting with Issuer's counsel. The Compliance Officer will consult with counsel to the Issuer prior to any such loans being made by the Issuer. Sale of Tax -Exempt Debt -Financed Property Prior to selling or otherwise disposing of any facilities financed with outstanding Tax -Exempt Debt, the Compliance Officer will consult with Issuer's counsel to determine what impact, if any, such sale or other disposition would have on the tax-exempt status of the outstanding Tax -Exempt Debt. Remedial Actions The Compliance Officer will be aware of the remedial action rules contained in Section 1.141-12 of the Treasury Regulations providing, in certain circumstances, a mechanism to voluntarily remediate violations of the private business tests or private loan financing test. Although the Issuer intends that none of its Tax -Exempt Debt will require the application of the remedial action rules, prior to taking any action that would cause its outstanding Tax -Exempt Debt to, absent a remedial action, violate the private business use tests or private loan financing test, the Compliance Officer will consult with counsel to the Issuer regarding the applicability of the remedial action rules to such action and the ability to remediate the impacted Tax -Exempt Debt. — Arbitrage Limitations Imposed on Debt Issuances Hiring an Arbitrage Calculating Agent With regard to each of the Issuer's outstanding Tax -Exempt Debt borrowings, the Compliance Officer, on behalf of the Issuer, will retain an arbitrage calculating agent to (a) determine whether the Tax -Exempt Debt in question qualifies for an exception to the arbitrage rebate rules and (b) perform calculations to ascertain whether an arbitrage rebate payment or yield reduction payment is owed to the IRS, unless, in the judgment of the Compliance Officer and in compliance with these TE Policies and Procedures and the Tax Certificate, there is no reasonable prospect of any arbitrage rebate or yield reduction payment liability. The Compliance Officer will coordinate the timely hiring of an arbitrage calculating agent as required by these TE Policies and Procedures. For conduit bond issues, the Issuer may require the conduit borrower to retain an arbitrage calculating agent to comply with the requirements described in this Section 5. However, the Compliance Officer will be aware that the IRS requires that the Issuer file the Form 8038-T (as defined below) if needed, not the conduit borrower. Payment of Arbitrage Rebate and Yield Reduction Liability The arbitrage calculating agent retained by the Issuer (or conduit borrower as the case may be) will determine whether an arbitrage rebate payment or yield reduction payment is owed to the IRS. If payment is owed to the IRS, the Issuer will instruct the arbitrage calculating agent to prepare IRS Form, 8038-T, Arbitrage Rebate, Yield Reduction and Penalty in Lieu of Arbitrage Rebate ("Form 8038-T"). The Compliance Officer or arbitrage calculating agent will obtain the Issuer's signature and remit the Form 8038-T, with the required payment, to the IRS on behalf of the Issuer. The Compliance Officer will consult with the Issuer's arbitrage calculating agent (or conduit's borrower's arbitrage calculating agent as the case may be) within 30 days of the issue date of its Tax -Exempt Debt as to the required "installment computation dates" for purposes of calculating arbitrage rebate and yield reduction liability. As background, for these purposes, within 60 days after each installment computation date, the Issuer must cause to be paid to the IRS at least 90% of the amount of arbitrage rebate and yield reduction payment liability owed. In addition, within 60 days after the final installment computation date, the Issuer must cause to be paid to the IRS 100% of the amount of arbitrage rebate and yield reduction payment liability owed. For conduit bond issues, the Tax Certificate will require the Borrower to remit these payments for filing with the Form 8038-T. Each completed Form 8038-T, together with full payment in the amount equal to the arbitrage rebate or yield reduction payment liability calculated by the arbitrage calculating agent, must be filed with the IRS at the applicable address which is currently, Internal Revenue Service Center, Ogden, UT 84201-0027. Yield Restriction Limitations For each Tax -Exempt Debt issue, the Issuer will comply with the applicable yield restriction investment limitations and temporary periods with regard to 436 City of Paducah. Kentucky its outstanding Tax -Exempt Debt, as described in the related Tax Certificate. The Compliance Officer will monitor the Issuer's compliance with these applicable yield restriction limitations. Timely Expenditure of Proceeds of the Issuer's Tax -Exempt Debt The IRS generally requires that issuers of Tax -Exempt Debt (or conduit borrowers for conduit bond issues) reasonably expect to spend 85% of the proceeds of such tax-exempt bonds within three years. Accordingly, it is the Issuer's policy to utilize (or require conduit borrowers for conduit bond issues to utilize) tax-exempt financing for projects that it reasonably expects will be substantially completed with three years, unless otherwise approved by its counsel. Upon receipt of proceeds from Tax -Exempt Debt borrowings, the Compliance Officer will monitor the expenditure of such proceeds on a regular basis to be determined by the Compliance Officer, but in no event less than each quarter of each calendar year. During its routine review, if the Compliance Officer determines that a portion of such proceeds will not be fully expended within three years of the issue date of the Tax -Exempt Debt, the Compliance Officer will determine how quickly such amounts can be spent, and if needed, contact counsel to the Issuer to determine whether remedial action as described above (or some other form of action) will be needed. Advance Refunding Policies It is the policy of the Issuer to retain a third -party verification agent for each of its advance refunding Tax -Exempt Debt issues. The verification agent will verify the arbitrage yield on the Tax -Exempt Debt, the arbitrage yield on the investments acquired as part of the refunding escrow established using gross proceeds of the tax- exempt debt issuance, and the sufficiency of the refunding escrow. The Issuer will deposit the Tax -Exempt Debt proceeds (and any other amounts) to be used to advance refund prior Issuer debt into one or more separate escrow trust accounts established with the trustee selected for the transaction. Working with the bond counsel, and in accordance with the documentation prepared for the refunding transaction, the primary responsibility for initiating actions required to be taken with respect to the refunding escrow (including the reinvestment of amounts within the escrow and disbursing funds from the escrow) will be imposed on the trustee. In the event of an omission on the part of the trustee, an error in the documentation or procedures establishing the refunding escrow, or an investment to be acquired as part of the refunding escrow is not available for purchase, the Compliance Officer will timely consult with bond counsel, as applicable, to determine the impact, if any, on the tax- exempt status of the Tax -Exempt Debt. When funding deposits to advance refunding escrows using proceeds of Tax -Exempt Debt, it is the Issuer's policy to acquire United States Treasury Securities — State and Local Government Series (SLGS) or securities purchased on the open market in accordance with the terms of the Issuer's bond documents. In the event the Issuer chooses to fund an advance refunding escrow using securities purchased on the open market, the Issuer will retain a third -party investment bidding agent to solicit bids from providers of qualifying securities in accordance with the limitations described in the "3 -bid" safe harbors set forth in Section 1.148-5(d)(6) of the Treasury Regulations. — Accounting for Debt Proceeds General Except as otherwise described below and in the Tax Certificate entered into by the Issuer in connection with its Tax -Exempt Debt, it is the policy of the Issuer to apply a direct tracing method of accounting for and allocating its tax-exempt debt proceeds. However, the Issuer reserves the right to utilize any other reasonable accounting and allocation method allowable under the law. Investment of Proceeds Proceeds of the Issuer's Tax -Exempt Debt shall be held in a separate funds or accounts, and will be invested in accordance with the permitted investments as determined by the relevant bond documents as authorized by the Tax -Certificate. The Compliance Officer has primary responsibility for ensuring that the proceeds of the Issuer's outstanding Tax -Exempt Debt are, and will remain, invested in accordance with the requirements set forth in the Tax Certificate. Expenditure of Debt Proceeds on Capital Projects The Issuer shall maintain an active ledger, updated with each payment of an expenditure from proceeds of its Tax -Exempt Debt that for each outstanding issuance shows: 437 City of Paducah. Kentucky relate; The name and date of issue of the Tax -Exempt Debt to which the proceeds The projects financed with the proceeds of the Tax -Exempt Debt; The authorized amount of proceeds to be used to finance each project; The amount of proceeds of the Tax -Exempt Debt used to date to finance each project; The amount of unspent proceeds of the Tax -Exempt Debt to be used to finance each project; and The date on which the proceeds of the Tax -Exempt Debt related to each project were fully expended. — Recordkeeping Means of Maintaining Records The Issuer may maintain all records required to be held as described in this Section 7 in paper or electronic (e.g., CD, disks, tapes) forms or both. It is the policy of the Issuer to maintain as much of its records electronically as feasible. The Compliance Officer will be responsible for verifying the Issuer's continued compliance with the recordkeeping requirements set forth in this Section 7 with regard to the Issuer's Tax -Exempt Debt. Retention Period. The Issuer will maintain, or cause to be maintained, all records relating to the tax-exempt status of its Tax -Exempt Debt and the representations, certifications and covenants set forth in its respective Tax Certificates until the date that is four years after the last outstanding obligation of the issue to which such records and Tax Certificate relate has been retired. The Issuer will maintain all of the records described in this Section 7 with respect to the refunded Tax -Exempt Debt as well (whether taxable or tax-exempt) until the date that is four years after the refunding Tax -Exempt Debt, the proceeds of which were used to refund the refunded the Tax -Exempt Debt, has been retired. For example, if the Issuer issued Tax -Exempt Debt in 2014 (2014 Bonds) to refund Tax -Exempt Debt issued in 2009 (2009 Bonds), the Issuer will maintain the records described herein with respect to the 2009 Bonds until the date that is four years after the date on which the last outstanding 2014 Bond was retired. If the 2009 Bonds refunded prior debt, the Issuer will also maintain records related to such prior debt for the same period of time. Required Records The Issuer will maintain detailed records with respect to the following: Transcript of Proceedings for the Issuer's Tax -Exempt Debt. Documentation evidencing the expenditure of proceeds of the Issuer's Tax -Exempt Debt. Documentation evidencing any private business use of facilities financed with proceeds of the Issuer's Tax -Exempt Debt. Documentation evidencing all sources of payment or security for the Issuer's Tax -Exempt Debt. Documentation pertaining to any investment of proceeds of the Issuer's Tax -Exempt Debt, including documentation pertaining to broker's fees paid (if at all) or other administrative costs with respect to such investments. Documentation pertaining to the public approval/TEFRA process. Records of arbitrage rebate payment and yield reduction payment calculations performed by the arbitrage calculating agent (irrespective of whether any amount was determined to be owed to the IRS), as well as records related to 438 City of Paducah, Kentucky any arbitrage rebate payments or yield reduction payments made to the IRS, including the calculations performed by the arbitrage calculating agent substantiating such payments, together with Form 8038-T, that accompanied all such payments. Documentation authorizing the reimbursement of expenditures using proceeds of the Issuer's Tax -Exempt Debt. Appraisals, demand surveys and feasibility studies related to projects financed or refinanced with the Issuer's Tax -Exempt Debt. Documentation relating to any third -party funding for projects to which proceeds of the Issuer's Tax -Exempt Debt will be applied (including government grants). Records of any IRS audits or compliance checks, or any other IRS inquiry related to the Issuer's Tax -Exempt Debt. — Voluntary Closing Agreement Program The Compliance Officer will be aware of the IRS's Tax -Exempt Bond Voluntary Closing Agreement Program ("VCAP") and its ability, pursuant to IRS Notice 2008-31, 2008-11 I.R.B. 592 (or a successor notice as the case may be), to request a voluntary closing agreement with the IRS to resolve compliance violations on the part of the Issuer with the federal tax rules applicable to its outstanding Tax -Exempt Debt. A copy of IRS Notice 2008-31 is available on the IRS's website at www.irs.gov. — Continuing Education The Compliance Officer will consult with counsel to the Issuer regarding the federal tax rules applicable to the Issuer's outstanding Tax -Exempt Debt and any changes to the federal tax law. The Issuer will update these policies and procedures as needed to reflect any such changes. The Issuer will encourage its Compliance Officer to attend continuing education events and conferences, as needed, pertaining to tax-exempt municipal bonds. — Miscellaneous The Issuer reserves the right to amend or withdraw these TE Policies and Procedures at any time and from time to time to reflect changes in federal tax laws or other applicable laws concerning its outstanding Tax -Exempt Debt. The Compliance Officer will consult with counsel to the Issuer as it deems necessary to ensure the applicable federal tax law requirements are satisfied. These TE Policies and Procedures do not, and are not intended to, limit the actions of the Issuer solely to those federal tax matters listed above, but are intended to provide the Issuer with broad discretion and general guidelines in addressing any and all federal tax matters that may affect its outstanding Tax -Exempt Debt. — Consultation with Counsel Should the Issuer, including the Compliance Officer, have further questions regarding these TE Policies and Procedures or any other questions concerning the Issuer's Tax -Exempt Debt, please contact Dirk Bedarff at 859-431-7000 or Lona Valentine at 513-639-9238. 439 ATTACHMENT I —FORM OF ANNUAL COMPLIANCE CHECKLIST [Attached] FORM ANNUAL COMPLIANCE REPORT & CHECKLIST CITY OF PADUCAH, KENTUCKY The Compliance Officer shall complete this Form Annual Compliance Report and Checklist (the "Annual Checklist") for each of the Issuer's outstanding tax-exempt bonds on an annual basis, within 60 days of the close of the applicable bond year, which should be set forth in the Tax Certificate. The tax-exempt obligations identified below shall hereinafter be referred to as the "Obligations." The project(s) financed or refinanced with proceeds of the Obligations T shall hereinafter be referred to as the "Project." The Bond Year covered by this Annual Checklist shall hereinafter be referred to as the "Annual Period." If the Compliance Officer identifies any compliance deficiencies in this Annual Checklist, the Compliance Officer should immediately contact Bond Counsel, as identified in the Issuer's TE Policies and Procedures and take the actions required in the Tax Certificate or TE Policies and Procedures. If the Compliance Officer has any questions pertaining to completion of this Annual Checklist, please contact Dirk Bedarff at 859-431-7000 or Lona Valentine at 513-639-9238. GENERAL QUESTIONS Caption of the Obligations: Date of Issuance of the Obligations: Applicable Annual Period: Date of Annual Checklist: Name of Compliance Officer: Description of Project: PROJECT OWNERSHIP Has the Project been continuously owned by the Issuer during the Annual Period: If ownership of the Project has changed during the Annual Period, has the Issuer notified Bond Counsel: Lel i. rJJ�L'I A.r�.,-rl=.. 4•rvr. �r .... «...... _.... .�I_.. ... .Nr. Jn ,. �;�....,{. ,...-u ,.iii 1=LLQ— �Ll[ �._1 L L % i — �_, I r _ i1.� L1 PROJECT COMPLETION & EXPENDITURE OF PROCEEDS OF BONDS (FOR NEW MONEY PROJECTS) Amount of proceeds of the Obligations originally allocated to construct the Project: Have all such proceeds (including interest earned thereon) been spent: If not, does the Issuer expect such amounts will be expended in accordance with its expectations set forth in the Tax Certificate: If all such proceeds have not been spent, has more than three years elapsed since the Date of Issuance of the Obligations: Has the Project been completed and placed in service: If Project has been completed and placed in service, has the Issuer completed a "final Allocation" of the proceeds of the Obligations: If Project completed, do any proceeds of the Obligations allocated to construct the Project remain unspent: If Project has been completed during the Annual Period, has the Issuer notified Bond Counsel: USE OF PROJECT During the Annual Period, has any portion of the Project been managed by another entity: If so, has the arrangement been determined to be compliant with Revenue Procedure 97-13: During the Annual Period, has any portion of the Project been leased to another entity: If so, has the arrangement been determined to be compliant with Revenue Procedure 97-13: During the Annual Period, has any portion of the Project been used for research by another entity: If so, has the arrangement been determined to be compliant with Revenue Procedure 2007- 47: During the Annual Period, has the Issuer entered into any agreements with respect to the Project that could result in private business use (such as naming rights agreements, cell tower or wind generation agreements, or other types of arrangements): If the Issuer intends to use the Project in a manner that may jeopardize the tax-exempt status of the Obligations, has the Issuer notified Bond Counsel: ARBITRAGE AND REBATE Have all rebate and yield reduction calculations mandated in the Tax Certificate been prepared: If a rebate and yield calculation was prepared during the Annual Period, has the Issuer retained a copy: RECORD KEEPING Has the Issuer maintained all records as required by the Tax Certificate and the TE Policies and Procedures: CORRESPONDENCE WITH INTERNAL REVENUE SERVICE During the Annual Period, has the Issuer received any correspondence from the IRS pertaining to the Obligations: If yes, please describe: If yes, has the Issuer contacted Bond Counsel and the Issuer: QUALIFIED HEDGE CONTRACTS During the Annual Period, has the Issuer entered into a new hedge contract: If the Issuer previously integrated a hedge contract with the Obligations, has the Issuer taken action to terminate the hedge contract during the Annual Period: MODIFICATIONS TO BOND DOCUMENTS During the Annual Period, has the Issuer entered into an arrangement that modified the terms of the bond documents If yes, please describe: CONTINUING EDUCATION During the Annual Period, describe any continuing education events and/or conferences attended by the Compliance Officer: During the Annual Period, has the Compliance Officer consulted with counsel regarding federal tax rules pertaining to the Obligations as needed: REMEDIAL ACTION During the Annual Period, has the Compliance Officer identified a violation that may necessitate the need for the Issuer to take remedial action with regard to the Obligations: VCAP During the Annual Period, has the Compliance Officer identified a violation that may necessitate utilization of the IRS's Voluntary Closing Agreement Program: �1 A COPY OF THIS ANNUAL CHECKLIST SHOULD BE FILED WITH THE ISSUER'S RECORDS PERTAINING TO THE ISSUANCE OF THE BONDS.