WASHINGTON – The Internal Revenue Service is auditing $12.77 million of Series 2009A general obligation corporate purpose bonds issued by Calumet City in Cook County, Ill.
The city disclosed the audit in an event notice posted on the Municipal Securities Rulemaking Board's EMMA system.
IRS officials selected the debt issuance as part of a "project/initiative involving safety bond issuances," according to an April 26 letter the agency sent Calumet City.
"The primary purpose of this examination will be to ascertain the compliance of your debt issuances with the federal tax requirements applicable to tax-exempt private-activity bond issues," IRS officials wrote in the letter.
"At this time, we have no reason to believe that your debt issuance fails to comply with any of the applicable tax requirements," they wrote. "As always, we reserve the right to expand this examination to any aspect of your debt issuance."
The document request issued by an IRS agent in Durham, North Carolina contains 46 requests for information from Calumet City, including regarding the use of proceeds, the status of the bonds, project agreements or contracts, the security for the bonds, minutes of meetings of the issuer related to the bonds, the accounting method used to account for gross proceeds, investments and expenditures of the bond issue, a spreadsheet showing investment earnings by date and amount, as well as compliance with arbitrage rebate or yield restriction requirements.
The IRS asked the city to provide the information by May 26.
In the event notice, Calumet City finance director John Kasperek, Jr. said, "The city intends to cooperate with the IRS in this examination."
Proceeds of the Series 2009A bonds, issued in May 6 of that year, were used to advance refund $3.64 million of outstanding Series 1999B GO Corporate Purpose Bonds; $2.62 million of outstanding Series 2002A GO Corporate Bonds; and $3.27 million of outstanding Series 2007 GO Corporate Purpose Bonds, according to the official statement. The bonds were also issued to provide funds for unspecified capital projects and to pay for certain costs of issuance associated with the bonds, according to the official statement.
The net proceeds of the refunding issue were placed in an irrevocable escrow account and invested in U.S. Government Securities.
Louis F. Cainkar, Ltd. was bond counsel and Mesirow Financial, Inc. served as underwriter.