Travis County Commissioners Court
March 6, 2007
Housing Finance Corporation
Now let's call to order the Travis County housing finance corporation, two items. Number one is to consider and take appropriate action on request to approve plan to provide arbitrage rebate calculation services for the 1997 single family mortgage revenue bonds.
>> I’m manager for the corporation of I was recent recently informed by our trustee, bank of new york, for the 1997 single family bond programs, that she didn't have any record of a an arbitrage calculation that was due after the first five years of the bonds, which would have been 2002. These bonds were issued in January of 1997. I looked in the transcript of, you know, who was to calculate the arbitrage, because normally the practice has been that we hire somebody to calculate that and provide for their being paid when the bond are issued, and they receive some bonds as part of the closing transaction but when e looked at the disbursements of funds when these bonds were closed, the arbitrage amount, $3,000, was paid to the Travis County housing finance corporation. So for some reason which I can't explain, it was paid to us instead of to a firm that calculates arbitrage. I think at that time there height have been some discussion of, well, maybe we could calculate arbitrage in house for the corporation corporations. In fact when the funds were depositived there were some photos saying why did we get this money, what is it for? We didn't really know why we were receiving a check for $ $3,000. Of course what happened, we put it in the corporation's bank account you know, and didn't think about arbitrage there after. So, I did what I have done since then, is to contact chat man and cutler, who calculated the arbitrage on our single family bond programs, to see what they would charge, and attached is an engagement fee that they would charge a fee of $ $5,000 to go back and calculate for this program. To complicate matters a little more, the original trustee was u.s. Trust company, who in 2002 sold the trust business to bank of new york. U.s. Trust never sent us a statement, so we don't have statements to provide chat chatman and cutler to to--to calculate the arbitrage, and to be able to go back and get the statements from u.s. Trust, they charge a fee of $300. So what I’m asking the board to do is to approve the e engagement letter and the payment of the $300. I did have a conversation with first southwest, who does the arbitrage calculation for the county. They told me that they don't do arbitrage calculations for single family bond programs because they are a little more complicated than with other types of municipal bonds , but that their fee would probably be in the range of $10,000 to do, to go back that far and do a calculation. So, due to that, I do feel like that chatman's fee is reasonable.
>> who are we going to be using on to do that ?
>> I’m suggesting chatman and cutler, who has done the arbitrage for all of our recent single family programs. When you set up these bonds, you normally set up, and these bonds did provide for an arbitrage account to accumulate the funds and be able to pay the arbitrage tax. I inquired on the trustee, how much was in our arbitrage account, because that would indicate whether you owe arbitrage or not. And there is not an arbitrage account. So at some point, that account was closed, which gives a strong indication that we probably don't owe arbitrage. And if you don't owe arbitrage, then you are not required to file a report with the internal revenue service, but you are obligated to do a calculation and be able to show irs, if they ask, that, you know, we don't owe it because here is our calculation. So, I don't think that we will owe arbitrage, but of course we do have to make the calculation.
>> we are certain of that.
>> yes.
>> we must makel calculation.
>> that is what I have, I am informed, yes.
>> now, the calculation is required.
>> yes.
>> we know that.
>> yes.
>> but we should have done it in 2002.
>> yes.
>> everybody at the irs seems to be doing fine without it.
>> right. But we didn't have to, we are not required to submit a report to them, like a zero, a no-tax due report, for example.
>> they have to get a hold of it.
>> right. But we do have to have that calculation done.
>> is there a way to do a preliminary calculation? That would put us, that would probably let us know preliminarily whether we probably should complete the calculation because we may owe some money? Or is there a preliminary analysis we can do to suggest one way or the other other?
>> yes, there is, but without the statements, it's a little hard to do that calculation.
>> we need to spend $300 to get the statement.
>> yes.
>> I suggest that we spend $ $300 to get the statement, hand those to somebody and say, make a preliminary review, we are trying to figure out if we owe something. If we don't, we would rather not spend the $5,000. We would rather spend a little bit. If the irs insists on getting them later on, we say here is our preliminary report. Had they say that won't do, we spend the rest of the five, I guess.
>> second.
>> that's my recommendation. We spend $300, we authorize spending enough to get a preliminary determination. If it looks like we need the whole deal, this motion is authorization to spend up to five. If we can fall short of five and get a reading, and the reading is zero, then I say let's be happy with that. That way we all feel that we have done our good government part to comply with the federal standard. Can you live with that ?
>> I sure can.
>> seconded by director dougherty, who is eager to vote.
>> and I will come back.
>> all in favor? That passes by unanimous vote with director eckhardt absent today.
>> and item number 2 is to consider and take prep action to approve changes to the program design for the american dream down payment initiative funded with a grant from the Texas department of housing and community affairs.
>> on this item we have two grants, two home buyer assistance grants going at this time. The old grant, which the origination period runs out next September, we have made 23 out of the 30 loans that are available in the program program. The original plan was that 12 of these would be made to home buyers below 60 percent of the Austin area median income. And we have so far done six of the 12, which means of the seven remaining, six of the seven would have to be to families below 60 percent percent. In our new grant we have to make 20 of the 25 to the families below 60 percent median income. So what I am recommending is that we, that the board approve the letter to the state, Texas department of housing and community affairs, requesting that on the old grant, that we can make all the remaining seven two families below 80 percent median family income income. The letter does explain that if we had submitted in our original grant application six at 60 instead of 12, we still would have scored enough to have been awarded the grant. So we're not cheating somebody else that would have been awarded the money, and we got it because we scored more points with more loans to the lower income families. So, it seems reasonable that this way we could easily finish off the old grant and then provide the money in the new grant to the the lower income families.
>> do we think the state is likely to think that we are trying to change the rules in the middle of the game? Or are requests like this to typical that--
>> I think they will approve the request and that it's a reasonable request. I don't think we're, I think they are interested in us spending all the grant funds funds. They want it spent just as much as we do. And as long as it doesn't unfairly make us get money that maybe we wouldn't have gotten if we hadn't have changed the rules, then that would have been a problem. But I think we are still being fair.
>> move approval of the recommendation.
>> second.
>> discussion? I guess if they don't like the idea, they just turn it down.
>> that's right.
>> all in favor? That passes by unanimous vote.
>> second.
>> all in favor? That passes than mostly too.
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Last Modified:
Wednesday, March 7, 2007 8:00 AM