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Ordinance No. 9,343ORDINANCE NO. 9343 ® AN ORDINANCE OF THE CITY. COUNCIL. OF THE CITY OF BAYTOWN, TEXAS, AUTHORIZING AND DIRECTING THE CITY MANAGER OF THE CITY OF BAYTOWN TO EXECUTE AN AGREEMENT WITH ARBITRAGE COMPLIANCE SPECIALISTS, INC., AND FIRST SOUTHWEST ASSET MANAGEMENT, INC., TO PERFORM. ARBITRAGE CALCULATION SERVICES FOR CURRENT BOND ISSUES; AUTHORIZING PAYMENT BY THE CITY OF BAYTOWN, THE SUM OF THIRTY - THREE THOUSAND FORTY -THREE AND 85/100 DOLLARS ($33,043.85); MAKING OTHER PROVISIONS RELATED THERETO; AND PROVIDING FOR THE EFFECTIVE DATE THEREOF. BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF BAYTOWN, TEXAS: Section 1: That the City Council of the City of Baytown, Texas, hereby authorizes and directs the City Manager of the City of Baytown to execute an agreement with Arbitrage Compliance Specialists, Inc., to perform arbitrage calculation services for current bond issues. A copy of said agreement is attached hereto, marked Exhibit "A," and made a part hereof for all intents and purposes. Section 2: That the City Council of the City of Baytown authorizes payment to Arbitrage Compliance Specialists, Inc., the sum of TWENTY -TWO THOUSAND FIVE HUNDRED AND NO /100 DOLLARS ($22,500.00), pursuant to the Agreement. Section 3: That the City Council of the City of Baytown, Texas, hereby authorizes and directs the City Manager of the City of Baytown to execute an agreement with First Southwest Asset Management, Inc., to perform arbitrage calculation services for current bond issues. A copy of said agreement is attached hereto, marked Exhibit `B," and made a part hereof for all intents and purposes. Section 4: That the City Council of the City of Baytown authorizes payment to First Southwest Asset Management, Inc., the sum of TEN THOUSAND FIVE HUNDRED FORTY - THREE AND 85/100 DOLLARS ($10,543.85), pursuant to the Agreement. Section 5: That the City Manager is hereby granted general authority to approve any change order involving a decrease or an increase in costs of TWENTY -FIVE THOUSAND AND NO /100 DOLLARS ($25,000.00) or less, subject to the provision that the original contract price may not be increased by more than twenty -five percent (25 %) or decreased by more than twenty -five percent (25 %) without the consent of the contractor to such decrease. Section 6: This ordinance shall take effect immediately from and after its passage by the • City Council of the City of Baytown. INTRODUCED, READ and PASSED by the affirniative vote of the City Council of the City of Baytown this the 11 `h day of April, 2002. ,,�x�. PETE C. ALFARO, Mayor ATTEST: a'i �' � .. I 7vl( GAR* W. S KITH, "City Clerk APPROVED AS TO FORM: 4yor�4Q get�� ACIO RAMIREZ, SR ty Attorney F:Veanene\My Documents\ Council\ 01- 02\ AprilWuthorizeContracts4ArbitrageCalculationServices4BondIssues .doc Ll un ua1,ClllMC nrruo- GUU61G'IUn) 10;1q 04/08/02 17:04 %T303 756 0901 Ms. Rhonda L. Young, CPA, Treasurer and Ms. Donna Sams, Director of Finance City of Baytown 2401 Market Street P.O. Box 424 Baytown, Texas 77522 -0424 Dear Ms. Young and Ms. Sams: ACS April 8, 2002 Via Fax: (281) 420 -6586 KM 1?1 002/003 A R B I T R A G E C 0 M P L I A K C E S P E C I A L I S T S I N C O R P O R A T E D 3800 South Albion Street, Suite 200 Englewood, Colorado 80110 -4239 303. 75& 5100 Fax: 303. 756. o9ol ArbCom *Earthlink.net www.RebalebyACS.com 800. 672. 9995 818n44 aftec tt r� 16no a TwWaaeo LA tar.. reucmo AWIjp� owfln too V#m Nov* W fats 00, umb ENGAGEMENT LET -CER FOR ARBITRAGE REBATE REPORT FOR THE FENAL IRS FILING FOR S2.65M SERIES 1991 The purpose of this letter is to propose our engagement to prepare arbitrage compliance computations as required by the Department of the U.S. Treasury, Internal Revenue Service ( "iRS ") for the following tax - exempt debt. Listed below is the tax- exempt debt requiring computations, our associated fees and information required to complete this engagement. S2.65M General Obligation Bonds, Series 1991 Issue Date: 10123191 Final iRS Filing Computation Period: 9/30/01 — 211102 added as part of 10/23/91 — 211102 Final Report Fee TOTAL $1.000 S Of Bill 4/02 Data Requirements: Uncommingled daily transactional investment data by fund for the computation period 9/30/01 — 211101 PLEASE NOTE THAT THI-i ISSUE HAS REACHED THE FINAL COMPUTATION DATE AS OF FEBRUARY 2, 2002. ACCORDINGLY, ANY REBATE LIABILITY iS DUE, TO THE IRS wiTHiN 60 DAYS OF THIS DATE, OR BY APRIL 2, 2002. Footnotes for pricing: OAn initial set -up is required for each bond issue. This fee covers our initial research on the bond issue and legal fees from our in-house for counsel who determines which funds are subject to arbirrage rebate. 9,40 s fee for completing Una filing Form $038 -T an S'* Year, W Yrur....Final Year if rebate is owed and applicable; on -time f ling 537:+, late filing 5 j110. Optional Charges for all issues, if applicable: WO per hour - Ujncommingling of any ff<ndr, accounts or investments, as required (g9proximaiely S230 • $1,000 per year): transferred proceeds allocations (approximately 5230 • 5500 pzr year), if required due to certain types of refunding$: if a Spending Esceptinn is a viable option for this issue, the fee per b -month report is 51,150, which is generally in lieu (runless there is a Reserve Fund) of rebate reports, 4CS's fees include one hour of data coll¢ction per debt issue. additional hours will be billed at 5150 per hour. MRWI W Rx Date /Time APR1$-HWMH) 16,54 M 956 HE P. W 04/08/02 17:04 $303 756 0901 ACS Q003/003 NOTES TO THE ENGAGEMENT LETTER: • Asa reminder, we will need to know if this debt has been or will be refunded, cash defeased or retired. This usually accelerates the deadline for the Final IRS riling on the debt. We should be notified as soon as possible. Also, we will assume the debt service fund for this issue was used for paying debt service payments and is bona fide and not overfunded, unless we are notified by you in writing. Please review the definition below of a bona fide debt service fund and phone us to discuss the implications regarding arbitrage compliance for this issue. Definition of a bona fide debt service fund (1993 IRS Regulations): • Is used primarily to achieve a proper matching of revenues with principal and interest payments within each bond year; and • is depleted at least once each bond year, excep for a reasonable carryover amount not to exceed the greater of: the earnings on the find for the immediate preceding bond year; or one- twelfth of the principal and interest paymcns on the issue for the immediately preceding bond yea,. • £xampic: The bond y,:ar end is 8 /1. Issue pays interest on JI and 811 and principal on 811, Tax receipts are directly deposited in the Debt Service Fund from 311 through 6/30. Last bond year': principal and interest payments totaled S1.2M. Onc- twelfth of S1.2M = S100K. Eammgs on the fund last year totaled S70K. The balance in the Debt Service Fund on 8/2 of the new year is SISOK. The Debt Service Fund is overfunded since the balance on the day after the bond year end was in excess of one- Nvetfth of last bond year's total principal and interest payments ('greater of" of 2 options). • Yield RestrictionNield Reduction Payment Reports are required if there is a balance of issue proceeds remaining in excess of the minor portion (the lesser of 3100,000 or 5% of the sale proceeds of the issue) and the fee is $1,250 per year in such Reports along with 5500 set -up fee. as required. In conjunction with this engagement, we will provide the applicable report(s) opining to the arbitrage compliance liability for the tax - exempt debt and related services for the above- referenced computation period(s). We appreciate the opportunity to provide assistance to help you comply with your IRS arbitrage compliance requirements. As always, if we may be of further assistance or if you have any questions, please do not hesitate to call us at 1800) 672 -9993. Very truly yours, Arbitrage Compliance Specialists, Inc. _DC PJJe__0 Doug Pahnke, Financial Manager Please acknowledge acceptance of this engagement by signing and faxing this letter in its entirety to Arbitrage Compliance Specialists, Inc, Accepted by - Signature • Accepted by — Print Name Organization .2.. Date Title November 20, 2001 Ms. Rhonda L. Young, CPA, Treasurer and Ms. Donna Sams, Director of Finance City of Baytown ( "City") 2401 Market Street P.O. Box 424 Baytown, Texas 77522 -0424 Dear Ms. Young and Ms. Sams: Via Fax 281- 420 -6586 A R E I T R A G E C O M P L I A N CIE S P E C I A L I S T S I N C O a P 0 n A T E D 3800 South Albion Street, Suite 200 Englewood, Colorado 80110 -4239 303. 756. 5100 Fax: 303. 756. 0901 ArbCom@Eariblink.net www.RebatebyACS.com 800. 672. 9993 Branch Offices: Hwsian, Texas Mw#zs, Tennessee La Jok, cabknva Pomaw,, Oregon Las Vegas, Nevada SO Lake City, Utah ENGAGEMENT LETTER FOR 2 YIELD REDUCTION REPORTS FOR $2.65M GENERAL OBLIGATION BONDS, SERIES 1991 ISSUED 10/23/91 In addition to the Arbitrage Rebate Requirements, there is another set of separate and distinct rules known as the Arbitrage Yield Restriction Requirements, which require that certain bond proceeds be invested at or below the bond yield during certain time periods. A Yield Reduction Payment Report is required, if there are any remaining construction or acquisition proceeds of the Bonds after the end of the "Temporary Period" (generally, the three -year period after the delivery date of the Bonds). Any yield reduction payment under the Yield Restriction Requirements must be paid as per the same deadlines for the Arbitrage Rebate Requirements. Therefore, 2 Yield Reduction Payment Reports are required to be completed for Series 1991, since there are Construction Fund proceeds remaining after the temporary period ending 10/23/94 and after the 5`h -Year ending 9/30/96 and through 9/30/01. In order that we may prepare 2 Yield Reduction Payment Reports for Series 1991, please sign and return to us the attached engagement letter. We appreciate the opportunity to provide assistance to the City. If we may be of further assistance or if you have any questions, please do not hesitate to call me at 1- 800 -672 -9993. �1,11� Very truly yours, Arbitrage Compliance Specialists, Inc. e—pi j A anet P. Sacks, Director . a Doug Pahnke, Financial Manger November 20, 2001 Ms. Rhonda L. Young, CPA, Treasurer and Ms. Donna Sams, Director of Finance City of Baytown ( "City ") 2401 Market Street P.O. Box 424 Baytown, Texas 77522 -0424 Dear Ms. Young and Ms. Sams: A R B I 'K I3 A G R C O M P L I A N C E S P E C I A L I S T S I N C on Flo RAT no 3800 South Albion Street, Suite 200 Englewood, Colorado 80110 -4239 303. 756. 5100 Fax: 303. 756. 0901 ArbCom@Earthlink.net www.RebatebyACS.com 800. 672. 9993 Branch Offices: Houston, Teams M&Wtr, Tervressee La Jolla, cakfanua Palba ,, Oregm Las Vegas, Nevada Salt Lake (pry. Utah ENGAGEMENT LETTER FOR 2 YIELD REDUCTION REPORTS The purpose of this letter is to propose our engagement to prepare 2 Yield Reduction Payment Reports pertaining to the yield restriction requirements of the Department of the U.S. Treasury, Internal Revenue Service ( "IRS ") for the following bond issue (the 'Bonds ") on behalf of the City. Listed below is the issue requiring computations, the Arbitrage Compliance Specialists, Inc. fees and information required to complete these calculations. $2.65M General Obligation Bonds, Series 1991 issued 10/23/91 Yield Reduction Payment Reports IRS 5th -Year Yield Reduction Payment Report 10/23/94 — 9/30/96 $1,000.00 IRS 10th -Year Yield Reduction Payment Report 9/30/96 - 9/30/01 2,500.00 TOTAL In conjunction with this engagement, we will provide 2 special reports opining to the Yield Reduction Payment Amount related to Yield Restriction Requirements of the City for the above - referenced Computation Periods_ :7 We appreciate the opportunity to provide assistance to the City. If we may be of further assistance or if you have any questions, please do not hesitate to call me at 1- 800 -672 -9993. Very truly yours, Arbitrage Compliance Specialists, Inc. !-C. 9&L— net P. Sacks, Director Doug Pahnke, Financial Manger Please acknowledge acceptance of this engagement by signing and faxing one copy of this letter to Arbitrage Compliance Specialists, Inc. Accepted • -2- Title I• November 20, 2001 Ms. Rhonda L. Young, CPA, Treasurer and Ms. Donna Sams, Director of Finance City of Baytown ( "City") 2401 Market Street P.O. Box 424 Baytown, Texas 77522 -0424 Dear Ms. Young and Ms. Sams: Via Fax 281-420-6586 .Ann I T R A G E C O lv1 Is I. I A N C E S]p E C I A I. I S T S I N C 0 n P Q R A T E D 3800 South Albion Street, Suite 200 Englewood, Colorado 80110 -4239 303. 756. 5100 Fax: 303. 756, 0901 ArbCom@Earthlink.net www.RebatebyACS.com 800. 672. 9993 Branch Offices: Narston, Tares Memphis, Temessee La rod'a, cabkm Aads+d, Oregon Las Vegas, Nevada SO Lake G'ry, Utah ENGAGEMENT LETTER FOR 2 YIELD REDUCTION REPORTS FOR S7.205M WATERWORKS AND SEWER SYSTEM REVENUE BONDS, SERIES 1991 ISSUED 10/23/91 In addition to the Arbitrage Rebate Requirements, there is another set of separate and distinct rules known as the Arbitrage Yield Restriction Requirements, which require that certain bond proceeds be invested at or below the bond yield during certain time periods. A Yield Reduction Payment Report is required, if there are any remaining construction or acquisition proceeds of the Bonds after the end of the "Temporary Period" (generally, the three -year period after the delivery date of the Bonds). Any yield reduction payment under the Yield Restriction Requirements must be paid as per the same deadlines for the Arbitrage Rebate Requirements. Therefore, 2 Yield Reduction Payment Reports are required to be completed for Series 1991, since there are Construction Fund proceeds remaining after the temporary period ending 10/23/94 and after the 51h -Year ending 9/30/96 and through 9/30/01. In order that we may prepare 2 Yield Reduction Payment Reports for Series 1991, please sign and return to us the attached engagement letter. We appreciate the opportunity to provide assistance to the City. If we may be of further assistance or if you have any questions, please do not hesitate to call me at 1- 800 - 672 -9993. Very truly yours, Arbitrage Compliance Specialists, Inc. Cps 11=.d7 anet P. Sacks, Director and • Doug Pahnke, Financial Manger AN111N TWA • November 20, 2001 Ms. Rhonda L. Young, CPA, Treasurer and Ms. Donna Sams, Director of Finance City of Baytown ( "City") 2401 Market Street P.O. Box 424 Baytown, Texas 77522 -0424 Dear Ms. Young and Ms. Sams: A R B I T R A G E C O M P L I A N C E S P E C I A L I S T S I N C o n p o R A T E D 3800 South Albion Street, Suite 200 Englewood, Colorado 80 110-4239 303. 756, 5100 Fax: 303. 756. 0901 ArbCom@Earthlink.net www.RebatebyACS.com 800. 672. 9993 Branch Offices: Hovsbl Taxes Mwpws, ranr ome to Job, Wknw ra w. Orw Las Vaps, Nevada Sall Lake Oty Ulan ENGAGEMENT LETTER FOR 2 YIELD REDUCTION REPORTS The purpose of this letter is to propose our engagement to prepare 2 Yield Reduction Payment Reports pertaining to the yield restriction requirements of the Department of the U.S. Treasury, Internal Revenue Service ( "IRS ") for the following bond issue (the "Bonds ") on behalf of the City. Listed below is the issue requiring computations, the Arbitrage Compliance Specialists, Inc. fees and information required to complete these calculations. $7.205M Waterworks and Sewer System Revenue Bonds, Series 1991 issued 10/23/91 Yield Reduction Payment Reports IRS 5th -Year Yield Reduction Payment Report 10/23/94 — 9/30/96 $1,000.00 IRS 10th -Year Yield Reduction Payment Report 9/30/96 - 9/30/01 2,500.00 TOTAL 334044 In conjunction with this engagement, we will provide 2 special reports opining to the Yield Reduction Payment Amount related to Yield Restriction Requirements of the City for the above - referenced Computation Periods. • We appreciate the opportunity to provide assistance to the City. If we may be of further assistance or if you have any questions, please do not hesitate to call me at 1 -$00- 672 -9993. Very truly yours, Arbitrage Compliance Specialists, Inc. net P. Sacks, Director Doug Pahnke, Financial Manger Please acknowledge acceptance of this engagement by signing and faxing one copy of this letter to Arbitrage Compliance Specialists, Inc. Accepted • Title -2- 1% a • • January 16, 2002 Ms. Rhonda L. Young, CPA, Treasurer and Ms. Donna Sams, Director of Finance City of Baytown ( "City ") 2401 Market Street P.O. Box 424 Baytown, Texas 77522 -0424 Dear Ms. Young and Ms. Sams: A R B I T R A G E C OMF'I.IANCE SIR E C IALIS'TS I N C On P O R A T E D 3800 South Albion Street, Suite 200 Englewood, Colorado 80110 -4239 303. 756. 5100 Fax: 303. 756. 0901 ArbCom ®Earthlink.net www.RebatebyACS.com 800. 572, 9993 Branch Offices: HOUSW, rem Mwp'&, remessee La doaa, caararoa Pwftnd Los Vegas, Nevada SaN take Cory, UMh ENGAGEMENT LETTER FOR ARBITRAGE REBATE SERVICES FOR FINAL IRS FILING The purpose of this letter is to propose our fees to prepare rebate reports pertaining to the required rebate to the Department of the U.S. Treasury, Internal Revenue Service (the "IRS ") for the following debt issues (the Bonds ") on behalf of the City. Listed below are the issues requiring computations with Arbitrage Compliance Specialists, Inc. ( "ACS ") fees. $24.73M General Obligation and Refunding Bonds, Series 1992 Final Computation Period: 9130197 — 211102 added as part of ACS'S prior rebate report 11/19192 — 9/30/97 Discounted Report fee for 5 year period $2,500.00 © © - Data Requirements: Uncommingled daily transactional investment data by fund for the computation period 9/30/97 to 2/1/02. $4.19M Marina Improvement Bonds, Series 1992 Final Computation Period: 9130197 — 211102 added as part ofACS's prior rebate report 11119192 — 9130197 Discounted Report fee for 5 year period $2,500.00©©• Data Requirements: Uncommingled daily transactional investment data by fund for the computation period 9/30/97 to 2 /l /02. 4 1' y Footnotes for pricing: OAn initial set -up is required for each bond issue. This fee covers our initial research on the bond issue and legal fees from our in -house tax counsel who determines which funds are subject to arbitrage rebate. ©RCS's fee for completing and f ling Form 8038 -T if rebate is owed and applicable; on -time filing $375, late fling $500. ©RCS's fees include one hour of data collection per debt issue, additional hours will be billed at $150 per hour. - `Optional Charges for all issues, if applicable: S150 per hour - Uncommingling of any funds, accounts or investments, as required (approximately $250 - S1,000 per year); transferred proceeds allocations (approximately $250 - S500 per year), as required. If the 2 -Year Spending Exception is a viable option for this issue, the fee per 6 -month report is S1,250, which is generally in lieu of rebate reports. If Yield Restriction Reports are required the fee is $1.250 per year in such Reports along with 5450 set -up fee. In conjunction with this engagement, we will provide the applicable report(s) opining to the arbitrage compliance of City for the aforementioned debt issue(s). We appreciate the opportunity to provide assistance to the City. If we may be of further assistance or if you have any questions, please do not hesitate to call me at (800) 672 -9993. Sincerely, Arbitrage Compliance Specialists, Inc. Doug Pahnke, Financial Analyst Please acknowledge acceptance of this engagement by signing and returning one copy of this letter to Arbitrage Compliance Specialists, Inc. Accepted • -2- Title 0 n Ms. Rhonda L. Young, CPA, Treasurer and Ms. Donna Sams, Director of Finance City of Baytown ( "City ") 2401 Market Street P.O. Box 424 Baytown, Texas 77522 -0424 Dear Ms. Young and Ms. Sams: A R B I T R A G E C O M P L I A N C E January 22, 2002 S P E C I A L I S z S I114 C0AP0Ii.ATEri 3800 South Albion Street, Suite 200 Englewood, Colorado 80110 -4239 303. 756. 5100 Fax: 303. 756. 0901 ArbCom@Earthlink.net www.RebatebyACS.com 800. 672. 9993 Branch Offices: Hasten, Tags Memphis, Tmnessee La Jaws, Cad'=0 PWand Oregon Us Vagas, Nevada Sa8 fake Otf Utah ENGAGEMENT LETTER FOR 2 YIELD REDUCTION REPORTS FOR S4.19M MARINA IMPROVEMENT BONDS, SERIES 1992 ISSUED 11/19/92 In. addition to the Arbitrage Rebate Requirements, there is another set of separate and distinct rules known as the Arbitrage Yield Restriction Requirements, which require that certain- bond proceeds be invested at or below the bond yield during certain time periods. A Yield Reduction Payment Report is required, if there are any remaining construction or acquisition proceeds of the Bonds after the end of the "Temporary Period" (generally, the three -year period after the delivery date of the Bonds). Any yield reduction payment under the Yield Restriction Requirements must be paid as per the same deadlines for the Arbitrage Rebate Requirements. Therefore, 2 Yield Reduction Payment Reports are required to be completed for Series 1992, since there are Construction Fund proceeds remaining after the temporary period ending 11/19/95 and after the 5`h -Year ending 9/30/97 and through 2 /l /02. In order that we may prepare 2 Yield Reduction Payment Reports for Series 1992, please sign and return to us the attached engagement letter. We appreciate the opportunity to provide assistance to the City. If we may be of further assistance or if you have any questions, please do not hesitate to call me at 1 -800- 672 -9993. Very truly yours, Arbitrage Compliance pecialists, Inc. Janet P. Sacks, Director and Q�v �V41 Doug Pahnke, Financial Manager EXHIBIT A January 22, 2002 Ms. Rhonda L. Young, CPA, Treasurer and Ms. Donna Sams, Director of Finance City of Baytown ( "City") 2401 Market Street P.O. Box 424 Baytown, Texas 77522 -0424 Dear Ms. Young and Ms. Sams: A R B I T R A G E C O M P L I A N C E S P E C I A L I S T S I N C O R P O R A T E D 3800 South Albion Street, Suite 200 Englewood, Colorado 80110 -4239 303. 756. 5100 Fax: 303. 756. 0901 ArbCom@Earthlink.net www.RobalebyACS.com 600. 672. 9993 Branch Offices: Houston, Texas Memphis, Tennessee La Job, CaGrM= Portland, Dragon Las Vegas, Nevada Sall Lake Gty, Utah ENGAGEMENT LETTER FOR 2 YIELD REDUCTION REPORTS The purpose of this Ietter is to propose our engagement to prepare 2 Yield Reduction Payment Reports pertaining to the yield restriction requirements of the Department of the U.S. Treasury, Internal Revenue Service ( "IRS ") for the following bond issue (the 'Bonds ") on behalf of the City. Listed below is the issue requiring computations, the Arbitrage Compliance Specialists, Inc. fees and information required to complete these calculations. $4.19M Marina Improvement Bonds, Series 1992 issued 11/19/92 Yield Reduction Payment Reports IRS 5th -Year Yield Reduction Payment Report 11/19/95 — 9/30/97 $11000.00 IRS Final Yield Reduction Payment Report 9/30/97 — 2/1/02 2,5W00 TOTAL In conjunction with this engagement, we will provide 2 special reports opining to the Yield Reduction Payment Amount related to Yield Restriction Requirements of the City for the above - referenced Computation Periods. • ® We appreciate the opportunity to provide assistance to the City. If we may be of further assistance or if you have any questions, please do not hesitate to call me at 1- 800 -672 -9993. Very truly yours, Arbitrage Compliance Specialists, Inc. Janet P. Sacks, Director and Doug Pahnke, Financial Manager Please acknowledge acceptance of this engagement by signing and faxing one copy of this letter to Arbitrage Compliance Specialists, Inc. Accepted -2- Title n January 22, 2002 Ms. Rhonda L. Young, CPA, Treasurer and Ms. Donna Sams, Director of Finance City of Baytown ( "City") 2401 Market Street P.O. Box 424 Baytown, Texas 77522 -0424 Dear Ms. Young and Ms. Sams: A n B I T R A G E C A M P L I A N C E S P E C I A L I SF S I1v con P OnATE D 3800 South Albion Street, Suite 200 Englewood, Colorado 80110 -4239 303. 756. 5100 Fax: 303. 756. 0901 ArbCom@Earthlink.net www.RebatebyACS.com 800. 672. 9993 Branch Offices: Heaton, Texas Ma r4m, T&Mswe La Jok cautmis Portland, 0-9an Las Vegas, Nevada Sae Lake 0% Utah ENGAGEMENT LETTER FOR 2 YIELD REDUCTION REPORTS FOR $24.73M GENERAL OBLIGATION AND REFUNDING BONDS, SERIES 1992 ISSUED 11/19/92 In addition to the Arbitrage Rebate Requirements, there is another set of separate and distinct rules known as the Arbitrage Yield Restriction Requirements, which require that certain bond proceeds be invested at or below the bond yield during certain time periods. A Yield Reduction Payment Report is required, if there are any remaining construction or acquisition proceeds of the Bonds after the end of the "Temporary Period" (generally, the three -year period after the delivery date of the Bonds). Any yield reduction payment under the Yield Restriction Requirements must be paid as per the same deadlines for the Arbitrage Rebate Requirements. Therefore, 2 Yield Reduction Payment Reports are required to be completed for Series 1992, since there are Construction Fund proceeds remaining after the temporary period ending 11/19/95 and after the 5`s -Year ending 9/30/97 and through 2 /l /02. In order that we may prepare 2 Yield Reduction Payment Reports for Series 1992, please sign and return to us the attached engagement letter. We appreciate the opportunity to provide assistance to the City. If we may be of further assistance or if you have any questions, please do not hesitate to call me at 1- 800 - 672 -9993. Very truly yours, Arbitrage Compliance Specialists, Inc. 0&..q E=�� Janet . Sacks, Director and UW Doug Pahnke, Financial Manager 0 January 22, 2002 Ms. Rhonda L. Young, CPA, Treasurer and Ms. Donna Sams, Director of Finance City of Baytown ( "City") 2401 Market Street P.O. Box 424 Baytown, Texas 77522 -0424 Dear Ms. Young and Ms. Sams: A R B I T R A G E C 0M1P I.IA1vC E S P E C I A L I S 7 S INC 0RV 0)RA I'EA 3800 South Albion Street, Suite 200 Englewood, Colorado 80110 -4239 303. 756. 5100 Fax. 303. 756. 0901 ArbCom ®Earthlink.nel www.RebatebyACS.com 800. 672. 9993 Branch Offices. rauum, Texas Memphis, re w.es " ceJOBS. Cdbrrda pa *ml amgm Les VOW, Nevada Salt Lake ckry Utah ENGAGEMENT LETTER FOR 2 YIELD REDUCTION REPORTS The purpose of this letter is to propose our engagement to prepare 2 Yield Reduction Payment Reports pertaining to the yield restriction requirements of the Department of the U.S. Treasury, Internal Revenue Service ( "IRS ") for the following bond. issue (the 'Bonds ") on behalf of the City. Listed below is the issue requiring computations, the Arbitrage Compliance Specialists, Inc. fees and information required to complete these calculations. $24.73M General Obligation and Refunding Bonds, Series 1992 issued 11/19/92 Yield Reduction Payment Reports IRS 5th-Year Yield Reduction Payment Report 11/19/95 — 9/30/97 $1,000.00 IRS Final Yield Reduction Payment Report 9/30/97 — 2/1/02 2,500.00 TOTAL In conjunction with this engagement, we will provide 2 special reports opining to the Yield Reduction Payment Amount related to Yield Restriction Requirements of the City for the above - referenced Computation Periods. • We appreciate the opportunity to provide assistance to the City. If we may be of further assistance ® or if you have any questions, please do not hesitate to call me at 1- 800 -672 -9993. Very truly yours, Arbitrage Compliance Specialists, Inc. 0411d Janet P. Sacks, Director and Doug Pahnke, Financial Manager Please acknowledge acceptance of this engagement by signing and faxing one copy of this letter to Arbitrage Compliance Specialists, Inc. Accepted • -2- Title El 1 , . 4. February 6, 2002 Ms. Rhonda L. Young, CPA, Treasurer and Ms. Donna Sams, Director of Finance City of Baytown ( "City") 2401 Market Street P.O. Box 424 Baytown, Texas 77522 -0424 Dear Ms. Young and Ms. Sams: _MA A R P I T R A G E C O M P L I A N C E S P E C I A L I S T S I N C O R F O R A T E D 3800 South Albion Street, Suite 200 Englewood, Colorado 80110 -4239 303. 756. 5100 Fax: 303. 756. 0901 ArbCom@Earthlink.net www.RebatebyACS.com 800. 672. 9993 Branch Offices: Houston, Texas Me OUS,, Terriassm La Job, cdbrua padaad, oragm Les Vegas, Nevada Sad take Oty. Utah ENGAGEMENT LETTER FOR ARBITRAGE REBATE SERVICES FOR FINAL -YEAR IRS FILING The purpose of this letter is to propose our fees to prepare rebate reports pertaining to the required rebate to the Department of the U.S. Treasury, Internal Revenue Service (the "IRS ") for the following debt issue (the Bonds ") on behalf of the City. Listed below are the issues requiring computations with Arbitrage Compliance Specialists, Inc. ( "ACS ") fees. $7.205M Waterworks and Sewer System Revenue Bonds, Series 1991 Final 9 130101- 211102 added as part ofACS's prior rebate report 10/23/91 — 211102 Final Report Fee $1,000.0000* 00.00©©+ TOTAL 51,000.0 Data Requirements: Uncommingled daily transactional investment data by fund for the computation period 9/30/01 — 2/1/02. PLEASE NOTE THAT THIS ISSUE HAS REACHED THE FINAL COMPUTATION DATE AS OF FEBRUARY 2, 2002. ACCORDINGLY, ANY REBATE LIABILITY IS DUE TO THE IRS WITHIN 60 DAYS OF THIS DATE, OR BY APRIL 2, 2002. Foomotes for pricing: OAn initial set -up is required for each bond issue. This fee covers our initial research on the bond issue and legal fees from our in -house tax counsel who determines which funds are subject to arbitrage rebate. ©ACS'S fee for completing and filing Form 8038 -T if rebate is owed and applicable,- on -time filing 5375, fate filing ,5500. ©RCS's fees include one hour of data collection per debt issue, additional hours will be billed at $150 per hour. • ' Optional Charges for all issues, if applicable: 5150 per hour - Uncommingling of any funds, accounts or investments, as required (approximately 5250 - $1,000 per year): transferred proceeds allocations (approximately $250 - $500 per year), as required. If the 2 -Year Spending Exception is a viable option for this issue, the fee per 6 -month report is $1,250, which is generally in lieu of rebate reports. If Yield Restriction Reports are required the fee is $1, 250 per year in such Reports along with $450 set -up fee. 5,14 F91 (i �� .- In conjunction with this engagement, we will provide an applicable report opining to the arbitrage compliance of City for the aforementioned debt issue. We appreciate the opportunity to provide assistance to the City. If we may be of further assistance or if you have any questions, please do not hesitate to call me at (800) 672 -9993. Sincerely, Arbitrage Compliance` lSpecialists, Inc. Doug Pahnke, Financial Analyst Please acknowledge acceptance of this engagement by signing and returning one copy of this letter to Arbitrage Compliance Specialists, Inc. Accepted • -2- Title • Form No. 148(f); Rev'd 9/15/99 t AGREEMENT FOR ARBITRAGE REBATE COMPLIANCE SERVICES BY AND BETWEEN CITY OF BAYTOWN, TEXAS (Hereinafter Referred to as the "Issuer") AND FIRST SOUTHWEST ASSET MANAGEMENT, INC. (Hereinafter Referred to as "First Southwest') It is understood and agreed that the Issuer, in connection with the sale and delivery of certain bonds, notes, certificates, or other tax- exempt obligations (the "Bonds "), will have the need to determine to what extent, if any, it will be required to rebate certain investment earnings (the amount of such rebate being referred to herein as the "Arbitrage Amount") from the proceeds of the Bonds to the United States of America pursuant to the provisions of Section 148(f)(2) of the Internal Revenue Code of 1986, as amended (the "Code "). For purposes of this Agreement, the term "Arbitrage Amount" includes payments made under the election to pay penalty in lieu of rebate for a qualified construction issue under Section 148(f)(4) of the Code. We are pleased to submit the following proposal for consideration; and if the proposal is accepted by the Issuer, it shall become the agreement (the "Agreement") between the Issuer and First Southwest effective at the date of its acceptance as provided for herein below. This Agreement shall apply to all issues of tax- exempt Bonds delivered subsequent to the effective date of the rebate requirements under the Code, except for (i) issues which qualify for exceptions to the rebate requirements in accordance with Section 148 of the Code and related Treasury regulations, or (ii) issues excluded by the Issuer in writing in accordance with the further provisions hereof. Covenants of First Southwest We agree to provide our professional services in determining the Arbitrage Amount with regard to the Bonds. The Issuer will assume and pay the fee of First Southwest as such fee is set out in Appendix A attached hereto. First Southwest shall not be responsible for any extraordinary expenses incurred on behalf of Issuer in connection with providing such professional services, including any costs incident to litigation, mandamus action, test case or other similar legal actions. We agree to perform the following duties in connection with providing arbitrage rebate compliance services: a. To cooperate fully with the Issuer in reviewing the schedule of investments made by the Issuer with (i) proceeds from the Bonds, and (ii) proceeds of other funds of the Issuer which, under Treasury Regulations Section 1.148, or any successor regulations thereto, are subject to the rebate requirements of the Code; b. To perform, or cause to be performed, consistent with the Code and the regulations promulgated thereunder, calculations to determine the Arbitrage Amount under Section 148(f)(2) of the Code; and C. To provide a report to the Issuer specifying the Arbitrage Amount based upon the investment schedule, the calculations of bond yield and investment yield, and other information deemed relevant by First Southwest. In undertaking to provide the services set forth in paragraph 2 and this paragraph 3, First Southwest does not assume any responsibility for any record retention requirements which the Issuer may have under the Code or other applicable laws, it being understood that the Issuer shall remain responsible for compliance with any such record retention requirements. 11ll • Covenants of the Issuer 4. In connection with the performance of the aforesaid duties, the Issuer agrees to the following: a. The fees due to First Southwest in providing arbitrage rebate compliance services shall be calculated in accordance with Appendix A attached hereto. The fees will be payable upon delivery of the report prepared by First Southwest for each issue of Bonds during the term of this Agreement. b. The Issuer will provide First Southwest all information regarding the issuance of the Bonds and the investment of the proceeds therefrom, and any other information necessary in connection with calculating the Arbitrage Amount. Firsi Southwest will rely on the information supplied by the Issuer without inquiry, it being understood that First Southwest will not conduct an audit or take any other steps to verify the accuracy or authenticity of the information provided by the Issuer. C. The Issuer will notify First Southwest in writing of the retirement, prior to the scheduled maturity, of any Bonds included under the scope of this Agreement within 30 days of such retirement. This notification is required to provide sufficient time to comply with Treasury Regulations Section 1.148 -3(g) which requires final payment of any Arbitrage Amount within 60 days of the final retirement of the Bonds. In the event the Issuer fails to notify First Southwest in a timely manner as provided hereinabove, First Southwest shall have no further obligation or responsibility to provide any services under this Agreement with respect to such retired Bonds. 5. In providing the services set forth in this Agreement, it is agreed that First Southwest shall not incur any liability for any error of judgment made in good faith by a responsible officer or officers thereof and, except to the limited extent set forth in this paragraph, shall not incur any liability for any other errors or omissions, unless it shall be proved that such error or omission was a result of the gross negligence or willful misconduct of said officer or officers. In the event a payment is assessed by the Internal Revenue Service due to an error by First Southwest, the Issuer will be responsible for paying the correct Arbitrage Amount and First Southwest's liability shall not exceed the amount of any penalty or interest imposed on the Arbitrage Amount as a result of such error. Bonds Issued Subsequent to Initial Contract The services contracted for under this Agreement will automatically extend to any additional Bonds (including financing lease obligations) issued during the term of this Agreement, if such Bonds are subject to the rebate requirements under Section 148(f)(2) of the Code. In connection with the issuance of additional Bonds, the Issuer agrees to the following: a. The Issuer will notify First Southwest of any tax- exempt financing (including financing lease obligations) issued by the Issuer during any calendar year of this Agreement, and will provide First Southwest with such information regarding such Bonds as First Southwest may request in connection with its performance of the arbitrage rebate services contracted for hereunder. If such notice is not provided to First Southwest with regard to a particular issue, First Southwest shall have no obligation to provide any services hereunder with respect to such issue. b. At the option of the Issuer, any additional Bonds to be issued subsequent to the execution of this Agreement may be excluded from the services provided for herein. In order to exclude an issue, the Issuer must notify First Southwest in writing of their intent to exclude any specific Bonds from the scope of this Agreement, which exclusion shall be permanent for the full life of the Bonds; and after receipt of such notice, First Southwest shall have no obligation to provide any services under this Agreement with respect to such excluded Bonds . 9 Effective Date of Agreement 7. This Agreement shall become effective at the date of acceptance by the Issuer as set out herein below and remain in effect thereafter for a period of five (5) years from the date of acceptance, provided, however, that this Agreement may be terminated with or without cause by the Issuer or First Southwest upon thirty (30) days' written notice to the other party. In the event of such termination, it is understood and agreed that only the amounts due to First Southwest for services provided and extraordinary expenses incurred to and including the date of termination will be due and payable. No penalty will be assessed for termination of this Agreement. In the event this Agreement is terminated prior to the completion of its stated term, all records provided to First Southwest with respect to the investment of monies by the Issuer shall be returned to the Issuer as soon as practicable following written request therefor by Issuer. In addition, the parties hereto agree that, upon termination of this Agreement, First Southwest shall have no continuing obligation to the Issuer regarding any services contemplated herein, regardless of whether such services have previously been undertaken, completed or performed. Acceptance of Agreement 8. This Agreement is submitted in duplicate originals. When accepted by the Issuer, it, together with Appendix A attached hereto, will constitute the entire Agreement between the Issuer and First Southwest for the purposes and the consideration herein specified. Governing Law This Agreement M11 be governed by and construed in accordance with the laws of the State of Texas, without regard to its principles of conflicts of laws. Acceptance will be indicated on both copies and the return of one executed cony to First Southwest. Respectfully submitted, OLM- WEST ASET MANAGEMENT, INC. IJ Ado "esentaStive Print ed Nam ISSUER'S ACCEPTANCE CLAUSE The above and foregoing is hereby in all things accepted and approved by L , M • 0 A this the day of /9L -a,--6 , ;;� "aO By / / trthorized Representative Title Printed Namely • on APPENDIX A - FEES The Bonds to be covered initially under this contract include all issues of tax -exempt bonds delivered subsequent to the effective ® dates of the rebate requirements, under the Code, except for issues which qualify for exceptions to the rebate requirements in accordance with Section 148 of the Code and related Treasury regulations. The fee for each of the Bonds included in this contract shall be: Description Annual Fees Per Issue Per Computation Year (1) Base Fee Per Computation Year. $1,800 Additional Char es for Special Services Related to: Debt Service Reserve Funds $500 Commingled Funds $500 Transferred Proceeds $500 Debt Service Fund Residual Calculations (Excess Tax Collections) $500 Variable/Floating Rate Bond Issue $1,000 Yield Restriction Analysis/Yield Reduction Computation $500 Commercial Paper. Per allocated issue to nerformgrbotrage rebate co $4,000 Penalty Calculations: Serninnnnal fee for each is-,we of Bonds- repardlerr, of issue gize- $1,000 First Southwest is offering a special fee structure for computation services for TezPool participants meeting specific provisions: ❑ Annual base fee when 100% of the proceeds are invested in a separate TexPool $750* account for that issue *To be eligible for this special fee structure, a participant must adhere with the following provisions: — The proceeds must be invested in a separate TexPool account, or accounts, and not commingled with any other funds or bond issues, — The proceeds must remain invested in TexPool until needed to meet the issuer's construction expenditures, — Participant must contract separately with First Southwest to perform the arbitrage rebate calculations for desired bond issues, and — Special fees apply only to computational periods beginning after May 12, 1997. (1) A "Computation Year" represents a one year period from the delivery date of the issue to the date that is one calendar year after the delivery date, and each subsequent one -year period thereafter. Therefore, if a calculation is required that covers more than one "computation year," the annual fee is multiplied by the number of computation years contained in the calculation being performed. For example, if the first calculation performed for an issue covers three computation years, the fee for that calculation would be three times the annual fees stated above. is IM EXPLANATION OF ADJUSTMENTS TO BASE FEE ® 1. Debt Service Reserve Funds. The authorizing documents for many revenue bond issues require that a separate fund be established (the "Reserve Fund ") into which either bond proceeds or revenues are deposited in an amount equal to some designated level, such as average annual debt service on all parity bonds. This Reserve Fund is established for the benefit of the bondholders as additional security for payment on the debt. In most instances, the balance in the Reserve Fund remains. stable throughout the life of the bond issue. Reserve Funds, whether funded with bond proceeds or revenues, must be included in any calculations of rebate. 2, Commingled Fund Allocations. By definition, a commingled fund means that the proceeds of any particular bond issue have been deposited in a fund that contains amounts that are not part of that bond issue. It is common for issuers to commingle bond proceeds with either operating revenues or other bond proceeds. The arbitrage regulations, while permitting the commingling of funds, require that bond proceeds be "carved -out" for purposes of calculating rebate. Interest must be allocated to the portion of the commingled fund that represents bond proceeds of the issue in question. 3. Transferred Proceeds Calculations. When a bond issue is refinanced (refunded) by another issue, special services relating to "transferred proceeds" calculations may have to be performed. Under the regulations, when proceeds of a refunding issue are used to pay principal on a prior issue, a pro rata portion of the refunded bond proceeds are treated as "transferred" to the refunding issue. Although no funds are physically transferred from one issue to another, it is often necessary to perform these calculations for rebate purposes. Debt Service Fund Residual Calculations. Because tax rates are established using an estimated collection percentage, the balance in the debt service fund (often referred to as the Interest & Sinking Fund) may exceed the amount necessary to pay the current year's debt service requirements. Any such excess amounts in a debt service fund must be treated as a "reserve fund," thereby subjecting the excess balance to the rebate requirements. To the extent that any amounts deposited in the debt service fund remain for more than thirteen months on a fast -in, first -out basis, that excess is classified as a "reserve fund portion" until used for payment of debt service. Special services are required to complete these debt service fund residual calculations. Variable/Floating Rate Bond Issues. Special services are also required to perform the arbitrage rebate calculations for variable rate bonds. A bond is a variable rate bond if the interest rate paid on the bond is dependent upon an index which is subject to changes subsequent to the issuance of the bonds. The computational requirements of a variable rate issue are more complex than those of a fixed rate issue and, accordingly, require significantly more time to calculate. For example, it is necessary to evaluate both a five -year yield as well as one -year yield increments to determine which yield is most beneficial to the issuer. 6. Yield Restriction Analysis/Yield Reduction Computations. The Code. provides that proceeds of a bond issue may not be invested above the yield on the bond unless an applicable exception applies which provides a temporary period during which proceeds are not yield restricted. First Southwest provides analysis to determine the amount of proceeds which must be yield restricted and provides computations to verify that the proceeds have been properly restricted. In addition, the 1993 Treasury Regulations provide that a yield reduction payment may be made in lieu of yield restricting proceeds. First Southwest will provide the necessary computations to determine the amount of yield reduction payment which must be made. The fee for any Bonds under this contract shall only be payable if a computation is required under Section 148(f)(2) of the Code. In the event that any of the Bonds, fall within an exclusion to the computation requirement as defined by Section 148 of the Code or related regulations and no calculations were required by First Southwest to make that determination, no fee will be charged for such issue. For example, certain bonds are excluded from the rebate computation requirement if the proceeds are spent within specific time periods. In the event a particular issue of Bonds fulfills the exclusion requirements of the Code or related regulations, the specified fee will be waived by First Southwest if no calculations were required to make the determination. Recognizing that computational complexities are reduced when all or the majority of the gross proceeds of an issue are • expended, it is First Southwest's policy to reduce fees to the following levels, as appropriate: Per issue fees for each circumstance itemized below shall be: • Proceeds expended in prior year. Liability undated and report issued. $500 • Debt Service Residual Calculation only. $1.250 • Reserve Fund calculation only. $1.000 • Escrow Fund only. $500 • Rebate Fund only. $500 • Preparation of IRS refund request. $750 • Yield Restriction/Yield Reduction Computation only. $1.800 First Southwest's fees are payable upon delivery of the report prepared by First Southwest, the first report to be made following one year from the date of delivery of the Bonds and on each computation date thereafter during the term of the Agreement. S :\ REBATE \SHARED\COMRACT%2000\bayt --d- 6