In order to ensure that no money is owed to the United States Treasury, Winamac Town Council members agreed to allow Umbaugh and Associates to assess the status of their existing bonds when they met last Monday.
Winamac Town Attorney Justin Schramm explained that whenever the town bonds a project, the bonds are tax-exempt since they were governmental bonds issued for a utility project.
He added that typically, bonds are subject to arbitrage regulations and if any excess interest or income earned are invested into higher yielding bonds for additional proceeds. However, since the town’s bonds are tax-exempt, different rules apply.
Shramm explained, “If you are to make any yield, rate or interest on what the face value of those bonds are, the idea is that you are not going to be penalized for it by the federal government you just have to pay over any excess that you earn directly over to the Internal Revenue Service, so it would go to the United States Treasury.”
Schramm told members that every five years that the bonds are outstanding, until their maturity date, they must be analyzed to determine whether any money is owed. He added town currently has revenue bonds from 2010 and 2013 that have yet to be assessed.
Schramm said recently received a letter from Umbaugh representatives, offering to conduct the necessary calculations to determine if anything is payable to the U.S. Treasury Department for a preliminary cost of about $1,900.
After looking over the proposed contract, Schramm recommended that the town council members move forward with the agreement, especially since if anything is owed and goes unpaid, it could potentially jeopardize the town’s tax exempt status.
Members mentioned that even if they cost a little more, they’ve always had positive experiences with Umbaugh in the past. With Schramm’s suggestion noted, members cast a unanimous vote to allow Umbaugh access to the bonds, make the calculations and fill out the necessary paperwork.
Umbaugh representatives will report back to the council members if any money is owed, at which point further services may need to be rendered.
