The Internal Revenue Service has closed its audit ofthe Boise-Kuna Irrigation District's $55.98 million of Series 2002 revenue refunding bonds without taking any action.
In a material event notice filed to nationally recognized repositories yesterday, the Idaho district disclosed that the IRS had sent it a Nov. 19, 2007, letter stating it had decided to "close the examination with no change to the position that interest received by bondholders is excludable from gross income."
The bonds were sold in June 2002 to refund bonds that had been previously issued to finance the construction of the Lucky Peak Hydroelectric Project. The IRS had opened a random audit of the bonds last June.
"They gave us a no-action letter. They intend no further investigation," said Albert P. Barker of Barker, Rosholt & Simpson LLP in Boise, the district's counsel.
The Boise-Kuna, Nampa & Meridian, Wilder, and Big Bend irrigation districts hold a joint Federal Energy Regulatory Commission license to develop hydroelectric power at the Lucky Peak Dam on the Boise River, according to bond offering documents.
The districts in 1984 entered into a contract under which all the power produced at the dam is sold to Seattle. The city pays the project's ownership and operating costs, including debt service on all related bonds.
The district's $55.98 million of Series 2002 bonds refunded $66.1 million of outstanding debt previously issued to build the hydroelectric generating facility. Lehman Brothers, JPMorgan, Salomon Smith Barney, now Citi, and UBS PaineWebber Inc., now UBS Securities LLC, were co-managing underwriters for the transaction.
Hawley Troxell Ennis & Hawley LLP of Boise was bond counsel and Preston Gates & Ellis LLP, now Kirkpatrick & Lockhart Preston Gates Ellis LLP of Seattle, was underwriter's counsel. The bonds were insured by Ambac Assurance Corp.
"The redemption of the final batch of the bonds will be this summer, sometime in June or July," Barker said. "At that point, the debt will be paid in full."
