IRS Closes Audit of Houston-Area Utility’s Bonds With No Change

WASHINGTON — The Cinco Municipal Utility District No. 1 near Houston announced that the Internal Revenue Service has closed an audit of $5.2 million of revenue bonds it issued with no change to their tax-exempt status.

The bonds were issued in 2002 to finance water and sewer infrastructure improvements. The district announced the closure of the audit in a material event notice filed with the Municipal Securities Rulemaking Board’s EMMA system.

The district had disclosed that it was under audit in a notice it filed with EMMA in July, but did not detail whether the audit was random or what areas the IRS was examining.

The MUD is one of 16 such districts, authorized as a political subdivision by Texas and created in 1985 by the Legislature.

The district oversees water, wastewater, and storm drainage facilities in 246 acres of land near Houston, according to bond documents.

It also is a regional provider of waste collection and treatment facilities, as well as water supply and delivery facilities, and was contracted to provide water and wastewater treatment to other districts in the area, covering about 5,345 acres.

The 2002 bonds were issued to reimburse the construction costs for several water supply projects, including water wells and water collection lines, the bond documents said.

The area serviced includes over 8,000 residential lots, three elementary schools, two junior high schools, and a high school. It also is home to several commercial and recreational properties, including the Willow Fork Country Club and Golf Course and the Golf Club at Cinco Ranch, according to documents.

Allen Boon Humphries Robinson LLP in Houston represented all the districts, including MUD No. 1. Vinson & Elkins LLP was bond counsel on the deal when the bonds were issued, but no longer represents the district.

First Southwest Co. was the district’s financial adviser. Financial Guaranty Insurance Co. insured the bonds.

The bonds were offered competitively, with William R. Hough & Co., now part of RBC Capital Markets, serving as underwriter.

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