To the extent that the issuer is issuing short term obligations to finance restricted working capital expenditures (meaning noncapital expenditures of the issuer for which no exception to Treasury Regulations section 1.148-6(d)(3)(i) applies) ("working capital financing"), the issuer will follow the following rules:
A. Proceeds Spent Last: The issuer will not allocate proceeds of its working capital financing to expenditures to the extent that it has other "available amounts" to pay such expenditures.
1. For this purpose, "available amounts", include any amounts that are available to the issuer for working capital expenditures of the type being financed; however, "available amounts" does not include amounts that may not be used by the issuer for working capital purposes without legislative or judicial action, or amounts that have a legislative, judicial or contractual requirement that those amounts be reimbursed (see Treasury Regulation section 1.148-6(d)(3)(iii)(A)).
2. For this purpose, reasonable working capital reserves are treated as unavailable. A working capital reserve is reasonable if it does not exceed five percent (5%) of the actual working capital expenditure of the issuer in the prior fiscal year (see Treasury Regulation section 1.148-6(d)(3)(iii)(B)).
3. If the issuer has not historically maintained a working capital reserve, then the issuer will consult with bond counsel regarding whether it can treat a reasonable working capital reserve as unavailable. An example of how to determine whether the issuer historically maintained a working capital reserve would be to average the beginning or ending monthly balances available for working capital expenditures (not including the proceeds of any bond issues) during the one year period preceding the working capital financing (see Treasury Regulation section 1.148-1(c)(4)(ii)).
B. Restricted Funds: To the extent that the issuer has funds which are available, but restricted (as discussed in subsection A2 of this section) the issuer will document why it treated such funds as unavailable by keeping a list of such funds and the restrictions that are applicable to them. The issuer will reevaluate such funds prior to the issuance of a working capital financing and prior to a final allocation of proceeds of a working capital financing to ensure that such funds should still be treated as unavailable.
C. Investment Of Proceeds: If any proceeds of a working capital financing remain unexpended thirteen (13) months after the issuance of the working capital financing, such proceeds will be invested at yield not exceeding the yield on the working capital financing; unless the Tax Certificate provides otherwise, or upon the advice of bond counsel.
D. Rebate: The issuer will calculate and pay any rebate owed (as provided in section 53-25-8 of this chapter) to the extent that the issuer has not spent one hundred percent (100%) of the proceeds of the working capital financing within six (6) months of the issuance of the working capital financing; provided, however, for this purpose, the proceeds of the working capital financing will be considered spent if the issuer achieves a cumulative cash flow deficit greater than ninety percent (90%) of the proceeds of the working capital financing within the period beginning on the issue date of the working capital financing and ending on the earlier of the date the deficit is achieved and six (6) months after the issue date of the working capital financing. "Cumulative cash flow deficit" means the excess of: 1) expenses paid during the period which would ordinarily be paid out of or financed by anticipated tax or other revenues; over 2) the aggregate amount available (other than from proceeds of the working capital financing) during such period for the payment of such expenses (see Treasury Regulation section 148(f)(4)(b)(iii)). For purposes of achieving the ninety percent (90%) cumulative cash flow deficit test, working capital reserves are treated as available.
E. Records: The issuer will maintain a final allocation of proceeds showing that it spent the proceeds of the working capital bonds using the proceeds spent last method (described in subsection A of this section). If the issuer did not spend one hundred percent (100%) of the proceeds of the working capital financing within six (6) months of issuance, the issuer should also maintain records showing either: 1) that it met the ninety percent (90%) cumulative cash flow deficit test within the applicable period; or 2) maintain records showing the calculation and payment (if any) of rebate. (2019 Compilation)