WASHINGTON - The Internal Revenue Service has begun auditing limited-tax general obligation, medium-term street bonds issued by Reno, Nev., in 2009.
The audit was disclosed on the Municipal Securities Rulemaking Board's EMMA system.
The IRS told Reno officials that the audit is part of an initiative to examine tax-exempt transportation bonds and their compliance with federal tax requirements.
"At this time, we have no reason to believe that your debt issuance fails to comply with any of the application tax requirements," the IRS said.
The IRS sent city officials an eight-page request for documents and information, as well as a two-page paper called Understanding the Tax-Exempt Bonds Examination Process.
The bonds are part of a $45 million issue the city competitively sold in mid-2009. Almost $15.96 million of the bonds have already matured as of March, according to the official statement.
The bond proceeds were to be used to acquire, construct, improve and equip street projects based on criteria set forth in the city's Accelerated Street Program, the OS said.
The bonds constitute general obligations of the city, which pledged its full faith and credit toward debt service payments, subject to state statutory and constitutional limits on the amount of ad valorum taxes it can levy, according to the OS.
The city panned to repay the bonds using proceeds from a street fund tax override, according to Moody's Investors Service, which assigned an Aa3 rating with a negative outlook to the bonds before they were issued.
"The Aa3 rating primarily reflects the city's favorable, although challenged long-term credit characteristics which include a sizable and somewhat diversified economic base, modest debt levels, pressured financial operations and narrowed general fund reserve levels," Moody's said at the time." The negative outlook on the city's long term ratings reflects weakening financial flexibility while at the same time the local and state economic outlook is also weakening and remains uncertain."
Morgan Stanley won the bid as underwriter. The financial advisor was NSB Public Finance, now Zions Public Finance. The bond and special counsel was Swendseid & Stern, a member in Sherman & Howard at the time.