WASHINGTON — The Internal Revenue Service is auditing $98.5 million of general obligation water financial assistance and refunding bonds that the Texas Water Development Board issued in 2002.

The audit was disclosed Wednesday in a notice the board filed with the Municipal Securities Rulemaking Board's EMMA system.

The IRS has advised the board that it has "randomly selected" the Series 2002B bonds for an audit, according to the notice.

The board was created in 1957 and given authorization to issue $200 billion of Texas general obligation water development bonds for the construction of dams, reservoirs and other water storage projects, according to bond documents.

In 1987, the board received authorization to issue an unlimited amount of revenue bonds to fund certain eligible projects, such as the construction of water and wastewater projects of political subdivisions and nonprofit water supply corporations, the bond documents said.

The board can also issue revenue bonds to provide interim financing to political subdivisions which are also receiving long-term financing from the board.

In 1987, the Texas Legislature also created the Water Resources Finance Authority as a governmental entity governed by six board of directors from the Water Development board.

On Aug. 1 2012, the bonds maturing on or after Aug. 1 2013, could be redeemed before their scheduled securities at the option of the board, bond documents said.

Salomon Smith Barney was lead underwriter for the 2002 bonds.

McCall Parkhurst & Horton LLP and Delgado, Acosta, Braden & Jones PC. were co-bond counsel. The Texas attorney general also provided a legal opinion. Vinson & Elkins LLP was underwriter's counsel.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.