The Internal Revenue Service has begun auditing $149.2 million of excise tax revenue refunding bonds that were issued by the city and county of Denver in 2005.
The city disclosed the IRS action in a notice filed last week with the nationally recognized municipal securities information repositories.
However, the IRS told the city in a Jan. 15 letter that it has no reason to believe the bonds are in violation of the tax law, and routinely examines various bond issues for compliance.
James P. Lane, a tax partner with Sherman & Howard LLC who is handling the audit for Denver, said yesterday that there is nothing to suggest the audit is anything beyond routine.
"We can only assume it's an absolutely random audit," he said. "It appears that this is not part of any specific initiative and .... It appears there are no issues."
The city said the agency sent it an information document request form, but did not disclose the form along with the IRS audit letter in its notice.
Denver said in the notice that it plans to cooperate with the IRS.
The bonds under audit were issued on Aug. 11, 2005, to refund a portion of a 2001 issue of $186.5 million of excise tax revenue bonds, according to bond documents. The 2001 bonds were originally issued to finance an expansion of the Colorado Convention Center in Denver.
Sherman & Howard and Trimble Tate Nulan & Evans PC, now Trimble Nulan & Evans PC, served as co-bond counsel on the deal. Stifel, Nicolaus & Co. underwrote the bonds and Kutak Rock LLP was underwriter's counsel.
The bonds were insured by Financial Security Assurance Inc. and Piper Jaffray & Co. was financial adviser.