WASHINGTON — The Internal Revenue Service is auditing bonds issued by the East Bay Municipal Utility District in 2003 and 2005.
The district, which is located in the San Francisco-Oakland metropolitan region, disclosed the audits in event notices posted on the Municipal Securities Rulemaking Board's EMMA system on Nov. 19.
The district received letters from the IRS in early September. One letter informed the district of an audit of $41.73 million of bonds it issued in 2003. Another letter informed the district that the IRS is auditing two series from 2005: $300 million of series 2005A water system subordinated revenue bonds and $325 million of series 2005B water system subordinated revenue refunding bonds.
In the letters, the IRS said it routinely audits municipal debt issuances and that it has no reason at this time to believe that there are any tax problems with the district's bond issues. The district also has no reason to believe that there are any tax problems with the bonds, according to the event notices.
The bonds issued in 2003 that are under audit are wastewater system general obligation refunding bonds that are part of an issue that was authorized in 1970. . The bonds, which were retired in full in April, were issued to refund bonds that were issued in 1993. A syndicate led by Salomon Smith Barney underwrote the bonds. Sidley Austin Brown & Wood LLP, now known as Sidley Austin LLP, and Webster & Anderson were co-bond counsel, according to bond documents.
The series 2005A bonds were issued to finance improvements to the water system. A syndicate led by Citigroup was underwriter, and Sidley Austin and Lofton & Jennings were co-bond counsel, according to the official statement for the bonds.
The series 2005B bonds were variable rate demand bonds and were issued to refund bonds issued in 1996 and 1998. A group led by Citigroup served as underwriter, and Sidley Austin and Lofton & Jennings were bond counsel, according to the official statement for the bonds.
The series 2005B were retired in full in 2008. In a move that is independent of and unrelated to the audit, the district has adopted resolutions authorizing the district to issue refunding bonds. "The district is currently considering potential refunding opportunities, including, among other series of bonds, the possible refunding of all or a portion of the outstanding series 2005A bonds (for debt service savings)," the district said in the event notice for the 2005 bonds. "No assurance can be given that any such refunding will be undertaken."
