DALLAS - The Internal Revenue Service is examining $178.4 million of North Texas Tollway Authority revenue bonds and commercial paper issued in 2009, according to a supplement to the NTTA's preliminary official statement filed April 2.
"The letters from the IRS stated that such debt issuances were selected for examination as part of a project/initiative involving transportation bonds and that the IRS has no reason to believe such debt issuances fail to comply with any applicable tax requirements," according to the notice. "NTTA intends to cooperate with the IRS with respect to the examinations."
NTTA learned of the examination on March 31, according to the notice.
Horatio Porter, chief financial officer for the NTTA, said the IRS examination was "not a big deal."
"We actually talked to the agents and were told this was part of a routine survey and that we were chosen at random," he said.
"In the spirit of full disclosure, we sent the notice out," Porter said.
In addition to toll road operators, the survey is expected to include airports, seaports and other forms of transportation, Porter said.
The 2009D bonds were first-tier variable rate revenue refunding bonds and commercial paper notes Series A, according to the notice.
The examination comes as NTTA prepares to issue $871 million of second-tier refunding bonds for interest rate savings. Those bonds are pricing April 8 through negotiation with book-runner JPMorgan.
There was no indication that the IRS audit is related to four-year FBI investigation of former NTTA board members. So far, that investigation has led to no indications of wrongdoing.
The FBI investigation began in October 2011 when agents interviewed several officials of the NTTA regarding any knowledge the officials may have concerning the conduct of certain current and former Board members, including possible conflicts of interests, according to the NTTA.
"The Authority has no reason to believe that it is the target of the investigation or that the investigation will materially adversely affect the operations or financial condition of the Authority," according to the NTTA's POS. "The investigation is ongoing and the Authority is cooperating fully with the FBI. There can be no assurance that the investigation will be limited to the matters described above or that the Authority will not become a target at a later date."
Moody's Investors Service on April 2 reinstated the Aa1/VMIG 1 letter of credit backed rating on the 2009 D bonds after a letter of credit from Royal Bank of Canada replaced the previous LOC from JPMorgan. The interest-rate mode on the bonds shifted from flexible to weekly.
"Moody's has determined that the joint probability of default between the Bank and the Issuer is low which results in long-term joint default analysis rating of Aa1," analysts said.
