WASHINGTON -The Internal Revenue Service has preliminarily determined that $19.89 million of 1997 Series A general obligation refunding bonds that California's Oxnard School District issued are arbitrage bonds and therefore taxable.
The district disclosed the IRS' Jan. 22 determination in a material event notice released yesterday by nationally recognized repositories.
"The IRS asserts that certain investment and reinvestment securities purchased with proceeds of the bonds and deposited in an escrow fund to refund certain prior bonds were not purchased at fair market value, and that the actual yield of the securities is in excess of the yield of the bonds," the notice said. "The determination also asserts that the yield of the bonds was computed on an incorrect issue price and that the correct yield of the bonds is less than the yield of the escrow securities, thereby causing the bonds to be arbitrage bonds."
The school district deal is the 13th of 26 transactions totaling about $800 million that has received an IRS determination of taxability. All of the deals were sold from 1993 to 2003, with Solana Beach, Calif.-based Kinsell, Newcomb & De Dios Inc., or a predecessor firm, as underwriter, and Best, Best & Krieger Inc. as bond counsel.
In this transaction, the now-defunct Miller & Schroeder Financial Inc. was also an underwriter on the deal, and Best Best was underwriter's and disclosure counsel.
District officials could not be reached for comment. q
