BRADENTON, Fla. — Bankrupt Jefferson County, Ala., issued a notice to the bond market Monday saying that the Internal Revenue Service completed an examination of the county's 2006 lease revenue warrants with no change in tax exempt status.
The county issued $86.74 million of the warrants through the Jefferson County Public Building Authority. Warrants are similar to bonds.
Though there was no change in the status of the warrants, the IRS said its examination found that there were unspent warrant proceeds at the end of the initial three-years after issuance and at the first rebate computation date on Aug. 17, 2011.
"The unspent proceeds resulted from cancellation of one of the bond financed projects," the IRS said in a July 23 letter to County Attorney Carol Sue Nelson. "The rebate computation indicated there was no rebate liability and the project fund was properly yield restricted."
The letter did not state what project was cancelled, or how much in warrant proceeds were unspent.
The 20-year warrants were originally issued to build a courthouse and jail in Bessemer, a city within the county.
County commissioners were to make annual appropriations to pay the debt service.
After Jefferson County filed for bankruptcy in November 2011, the commission filed a motion to reject the lease. That led to negotiations with Ambac Assurance Corp., which insured the lease warrants.
In December, an agreement was reached with Ambac that would not reduce any principal or interest payments to investors.
Under a new, restructured lease, annual debt payments by the county will be reduced, and the final maturity extended to 2037 from 2026.
With Ambac contributing to future debt payments "there should be no effect on holders of the lease warrants," the county said in a court filing.
All scheduled payments will be made through a combination of sources, including the county, Ambac, reserves, and other funds.
According to the IRS, the undisclosed amount of unspent lease warrant proceeds also have been committed to pay debt service as result of the lease restructuring.