Arbitrage Consulting Services

SCOPE OF WORK:

For purposes of this document, the following terms will be defined as follows:

"Arbitrage" Arbitrage occurs when Okaloosa County, FL invests its bond proceeds at a yield higher than the overall borrowing yield on its bond issue. As it relates to tax-exempt bonds, Arbitrage is the ability to invest proceeds received from the sale of tax-exempt debt in higher-yielding taxable securities.

"Arbitrageur" The entity providing the arbitrage rebate services described in this ITQ.

"Arbitrage Rebate" Arbitrage Rebate is the payment of Arbitrage earned on the investment bond proceeds to the Internal Revenue Service in accordance with the requirements of Section 148 of the Internal Revenue Code and as defined by U.S. Treasury Department regulations.

"Trust Indenture" The document by the terms of which an entity issues or guarantees or provides for the issue or guarantee of debt obligations secured by a security interest and in which an entity is appointed as trustee for the holders of the debt obligation issued, guaranteed or provided for under it.

"Non-arbitrage Certificate" The key tax document for a bond issue which describes the rebate requirements associated with the debt service fund. The Non-arbitrage Certificate is part of the bond transcript.

Okaloosa County, Florida issues certain bonds, notes, certificates, or other tax-exempt obligations (the "Obligations") to finance the acquisition and construction of projects in the County. To ensure the compliancy and tax-exempt status of the bonds, it is necessary that Arbitrage Rebate calculations be performed in accordance with the Internal Revenue Code of 1986, as amended, and as defined by U.S. Treasury Department regulations.

The Arbitrageur shall perform and render services as an independent contractor and not as an agent, representative, or employee of Okaloosa County. These services shall be known as "consultant and professional services" and shall include the provision of advice and assistance on all obligations.

The consultant and professional scope of services include but are not limited to:

1. On an annual basis, but no later than 60 days after the end of the computation period, provide to Staff in writing a calculation of Arbitrage earnings and a determination of the amount of the rebate requirement in accordance with Section 148(f) of the Internal Revenue Code of 1986, as amended, for each series of bonds requiring such calculations.

1. On an annual basis, but no later than 60 days after the end of the computation period, provide an opinion in writing to Staff that such calculations have been performed in accordance with Section 148(f) of the Internal Revenue Code of 1986, as amended, and the regulations promulgated there under. Information needed for such calculations shall be supplied by the Trustee. The Arbitrageur shall compare the calculations supplied by the Trustee with the investment statement authorized by the Trust Indenture.

1. Apprise Staff in writing of any changes in Arbitrage compliance regulations that may occur during the term of the Contract.

1. Perform all duties required of the Arbitrageur as specified by the Trust Indenture, the Non-arbitrage Certificate, and any other documents governing the applicable bond series (Bond Documents).

1. Prepare the appropriate tax form, currently 8038-T (or equivalent) for the designated Okaloosa County signatory, in event that a rebate payment to the Internal Revenue Service is required. The completed tax form along with the rebate analysis report must be received by Florida Housing's Senior Financial Administrator no later than 45 days after the end of the five-year computation period.

1. Consult with Staff to address post-issuance tax compliance concerns.

1. Verify to Staff that the bond issue is subject to the rebate regulations and determine what general and/or elective exceptions are available.

1. Perform the following on the debt yields and excess earnings as defined by U.S. Treasury Department regulations including, but not limited to:

1. Data review and analysis;
2. Compute/verify the allowable yield limit for the issues;
3. Compute/verify the amount of excess earnings, if any, rebatable to the U.S. Treasury;
4. Compute/verify the amount of spend-down penalties payable to the U.S. Treasury under issues applying such provisions;
5. Prepare all necessary Internal Revenue Service forms relating to services provided;
6. Submit final reports to Staff showing the calculation method used, assumptions, conclusions, and any recommendations for changes in record keeping for the services provided; and
7. Provide a legal opinion of the liability due to the U.S. Treasury under any of the Arbitrage regulations. The opinion shall include a statement that the calculation methodology used is consistent with current tax laws and regulations and may be relied upon by Okaloosa County, Florida in determining liability payments to the U.S. Treasury.

1. Assist Staff, as necessary, in the event of an Internal Revenue Service inquiry and/or audit, both during and subsequent to the contract period.

1. Identify and separate accounts for all gross proceeds including those requiring allocation analyses due to circumstances involving transferred proceeds and/or commingled funds.

1. Retain all support documentation for the rebate calculations (hard copy records and computer database) for six years after the retirement or final maturity of the bonds or until any on-going litigation, audit, etc., is resolved, if longer.

1. Perform such other arbitrage rebate services and provide advice as requested by Staff.

TECHNICAL APPROACH:

1. Provide a brief description of the Respondent's approach in providing the services in this ITQ.

1. Describe the format that the Respondent will require for data submission from Okaloosa County to perform calculations. Describe in detail the information and assistance you will require from Okaloosa County, Florida in completing the Arbitrage calculations. Indicate whether additional information or reports will be required.

1. Provide an actual report or sample of calculations that the Respondent has performed for services similar to those requested in the ITQ.

FEES:

Provide the proposed fee to be charged in connection with the services described in this ITQ as outlined in Cost of Service below. Fees proposed must include all charges relating to the services required under the contract and all out-of-pocket expenses, such as telephone, postage and shipping, printing and/or copy costs, and travel, if any. No costs will be reimbursed under the contract.

TERM:

The agreement will begin when all parties have been assigned and run for one (1) year. The agreement may be renewed for up to four (4) one (1) year periods with written agreement from all parties.

COST OF SERVICE / FEE SCHEDULE:

• Provide projected total cost to perform the services described
• Describe the fee schedule, per issue, and provide estimates of additional expenses exclusive to the fee schedule (for example, fees associated with assisting in SLGs setups and assistance with tax strategies and IRS audits or inquiries as may occur). Identify follow-up consultation services available after completion of the arbitrage calculation and the costs thereof.
• Provide estimated costs for both annual calculations and five (5) year reporting, on a per issue, per service and/or all-inclusive basis.
• Describe the firm's fee schedule on a per-issue basis, including future bond issues, and provide the length of time the firm would honor such schedule.
• Describe how the firm would propose to handle and invoice for amending the firm's calculations if new regulations require amending previous calculations

FINAL FEE SCHEDULE WILL BE SUBJECT TO NEGOTIATION.