WASHINGTON — The Internal Revenue Service is auditing $43.26 million of subordinate revenue bonds that the Coral Springs, Fla., Improvement District sold in 2007 to finance water and sewer system improvements.
Prager & Co. LLC, formerly Prager, Sealy & Co. LLC and underwriter of the bonds, disclosed a copy of the Aug. 29 letter the IRS sent the district alerting it to the audit.
"Your debt issuance was selected for examination as part of a project/initiative involving financings of utility facilities," IRS revenue agent Robin M. Helton said in the letter. "The primary purpose of this examination will be to ascertain the compliance of your debt issuance with the federal tax requirements applicable to governmental bonds."
"At this time, we have no reasonable to believe that your debt issuances fails to comply with any of the applicable tax requirements," Helton added. "As always we reserve the right to expand this examination to any aspect of your debt issuance."
Accompanying the letter was a Form 4564 — an Information Document Request — seeking information and documents.
The letter is in line with what Allyson Belsome, the IRS' manager of tax-exempt bond field operations, told bond lawyers meeting in Chicago last month. She said the IRS conducts audits of bonds in certain sectors every three years, and that in 2013 those sectors would include airports, hotels and convention facilities, and utilities.
The district includes about 5,000 acres, or about 30% of the land area of Coral Springs, Fla., according to the official statement for the bonds. It operates a water and sewer system serving an area with a population of about 41,806, based on 2006 statistics. In 2007, the district planned to make roughly $54.3 million of improvements to its water and sewer system over the next five years, the OS stated.
Ruden, McClosky, Smith, Schuster & Russell PA, now GreenspoonMarder was bond counsel and disclosure counsel for the issuer. Billing, Cochran, Heath, Lyles, Mauro & Anderson, PA, now Billing, Cochran, Lyles, Mauro & Ramsey PA in Ft. Lauderdale, was counsel to the district.