Greetings, good folks, and I trust that you are well.
Let me be the first of many to welcome you to the Treasury Institute Bond Compliance (TIBC) blog. The purpose is to encourage the sharing and exchange of information with respect to tax-exempt bond compliance issues (rolls off the tongue). In other words, this blog serves as a forum for asking those questions that need more information or thought-provoking discussion.
Please feel free to join with any questions that you have and let the fun begin.
I have been asked to post a query from a relative small organization regarding DSRF holdings.
We were just visited by an outfit from Florida which was trying to get us to enlist their investment advice and trading desk to better manage our Debt Service Reserve Fund (DSRF) versus what the Bond Trustee has been investing in for us. The idea is that greater returns on our DSRF will help us recoup our cumulative negative arbitrage and stand a chance to provide allowable levels of arbitrage into the future to contribute toward our annual interest payments.
This firm offers a no-contract, “no-fee” service wherein they provide a staggered array of Qualified Investments (a mix of commercial paper and government securities with varying maturity dates) to our Bond Trustee in exchange for the current holdings. I didn’t feel I got a complete answer, but I was told they get paid by settling the trades (the spread between the par value and purchase prices of the new securities?).
Has anyone heard of or participated in this type of arrangement? Has anyone done a risk/benefit analysis on it that you are willing to share? Any information or comments that you may have to share is greatly appreciated.
I have not heard of this service (we do not maintain DSRFs), however, if it helps, as a thought (if you haven't done so already) you may want to ask for a list of schools that have used their service, including contact names. These contacts may be able to answer your practical questions better than the firm.
Greetings, good folks, and posted is a question raised by Ken Davis with the University of South Alabama.
Good morning all,
This is a first for us. We are a public university that last summer issued a Qualified 501(c)(3) bond. The proceeds of the bond will be used to build a physician's office building that will be owned by the university and leased to our separate 501(c)(3) physicians clinical practice organization. The 990 instructions say that bonds issued "for the benefit of the organization" are reported on Sch. K, and also on the balance sheet (Part X) if in addition "the organization has a direct or indirect liability" on the bonds.
Seems the bond should be reported on Sch. K of the 990 filed by the 501(c)(3) physicians clinical practice org. Correct?
What about the balance sheet? The lease is not a capital lease, so it would seem strange to report the POB asset and the bond liability on the balance sheet. But, does the 501(c)(3) org. have an "indirect liability" on the bonds because of the operating lease?
Thanks, Ken Davis University of South Alabama kdavis@usouthal.edu
Greetings, good folks, and I trust that you are well.
ReplyDeleteLet me be the first of many to welcome you to the Treasury Institute Bond Compliance (TIBC) blog. The purpose is to encourage the sharing and exchange of information with respect to tax-exempt bond compliance issues (rolls off the tongue). In other words, this blog serves as a forum for asking those questions that need more information or thought-provoking discussion.
Please feel free to join with any questions that you have and let the fun begin.
I have been asked to post a query from a relative small organization regarding DSRF holdings.
ReplyDeleteWe were just visited by an outfit from Florida which was trying to get us to enlist their investment advice and trading desk to better manage our Debt Service Reserve Fund (DSRF) versus what the Bond Trustee has been investing in for us. The idea is that greater returns on our DSRF will help us recoup our cumulative negative arbitrage and stand a chance to provide allowable levels of arbitrage into the future to contribute toward our annual interest payments.
This firm offers a no-contract, “no-fee” service wherein they provide a staggered array of Qualified Investments (a mix of commercial paper and government securities with varying maturity dates) to our Bond Trustee in exchange for the current holdings. I didn’t feel I got a complete answer, but I was told they get paid by settling the trades (the spread between the par value and purchase prices of the new securities?).
Has anyone heard of or participated in this type of arrangement?
Has anyone done a risk/benefit analysis on it that you are willing to share?
Any information or comments that you may have to share is greatly appreciated.
Thank you.
Greetings, fellow blogger.
DeleteI have not heard of this service (we do not maintain DSRFs), however, if it helps, as a thought (if you haven't done so already) you may want to ask for a list of schools that have used their service, including contact names. These contacts may be able to answer your practical questions better than the firm.
Greetings, good folks, and posted is a question raised by Ken Davis with the University of South Alabama.
ReplyDeleteGood morning all,
This is a first for us. We are a public university that last summer issued a Qualified 501(c)(3) bond. The proceeds of the bond will be used to build a physician's office building that will be owned by the university and leased to our separate 501(c)(3) physicians clinical practice organization. The 990 instructions say that bonds issued "for the benefit of the organization" are reported on Sch. K, and also on the balance sheet (Part X) if in addition "the organization has a direct or indirect liability" on the bonds.
Seems the bond should be reported on Sch. K of the 990 filed by the 501(c)(3) physicians clinical practice org. Correct?
What about the balance sheet? The lease is not a capital lease, so it would seem strange to report the POB asset and the bond liability on the balance sheet. But, does the 501(c)(3) org. have an "indirect liability" on the bonds because of the operating lease?
Thanks,
Ken Davis
University of South Alabama
kdavis@usouthal.edu