The Internal Revenue Service is auditing $117.45 million of variable-rate demand utilities system subordinate-lien refunding revenue bonds that were issued in 2004 by Colorado Springs, Colo., for Colorado Springs Utilities to refund some 1994 bonds.
The city disclosed the audit in an event notice filed last week with the Municipal Securities Rulemaking Board’s EMMA system, saying it has “no reason to believe that the examination is other than random and routine.”
Meanwhile, Murray City, Utah, disclosed earlier in the week that the IRS had closed an audit without any change to the tax-exempt status of $262 million of variable-rate demand hospital revenue bonds it issued in 2005. The transaction was a conduit deal for the nonprofit IHC Health Services Inc., which planned to use the proceeds to pay for the purchase or construction of health care facilities, according to the official statement.
Colorado Springs’ notice included a copy of the Nov. 30 letter the IRS sent the city notifying it of the audit plus a six-page attachment with 18 requests for information. “At this time, we have no reason to believe that your debt issuance fails to comply with any of the applicable federal tax requirements,” the IRS said. “This correspondence examination is intended to assess the overall compliance risk of the bond issue. At this time, we are only requesting general informational responses and are not requesting any supporting documentation. However, we reserve the right to expand this examination.”
City officials said in their notice that they would fully cooperate with the audit.
JPMorgan was underwriter and JP Morgan Securities Inc. is remarketing agent. Bond counsel was Sherman & Howard LLC. George K. Baum & Co. was financial consultant to Colorado Springs.
JPMorgan Chase Bank NA and Citibank NA provided standby bond purchase agreements for the Murray City bonds. JPMorgan and Citi were remarketing agents. Chapman and Cutler LLP was bond counsel. Orrick, Herrington & Sutcliffe was underwriters’ counsel. Peck, Shaffer & Williams LLP represented IHC Health Services. George K. Baum provided financial consulting services to the nonprofit. Sidley Austin Brown & Wood LLP was counsel for the banks.