Arbitrage Yield Limit


Overview

Calculates the arbitrage yield limit for fixed and variable rate bond issues.   Performs future-value rebate calculations and alternative 18-month and 24-month spenddown penalty calculations.  Generates completed 8038  tax forms.

Features & Capabilities

Handles the special rules for calculating the arbitrage yield limit (AYL) when a bond issue contains yield-to-call bonds and there are multiple call scenarios or when a bond contains deep-discount term maturities. Provides two calculation options for variable rate bonds: 5-year calculation or a separate calculation for each bond year.

Includes complete text of arbitrage regulations in the online help (sections 103, 141-150).  Also includes court decisions, letter rulings, technical /field service advice memoranda, and revenue rulings/procedures.  The regulations are referenced and cross-referenced by topic to allow for quick and easy access.

Generates completed 8038, 8038B, 8038G, 8038GC, 8038R, and 8038T tax forms.  Results from your rebate calculations are automatically inserted into the forms.

Provides options to perform rebate calculations by (a) future-valuing purpose expenditures and unspent proceeds and netting them against original proceeds or (b) future-valuing individual investments.  Ability to perform rebate calculations for individual funds within a bond issue.

Ability to mark an investment to its market value.  Mun-Ease can automatically split the cash flows into two separate investments as of the market-value date (this feature is especially useful when bond proceeds have been commingled).

Provides a customizable spreadsheet-like mode of data entry.  Maintains a database table of nonpurpose investments and purpose expenditures.

Provides an option to discount investment receipts that fall beyond rebate calculation date by the Internal Rate of Return (IRR) for the investment portfolio or the IRR of the individual investment.

Provides features to compute rebate and the value of unspent proceeds when bond proceeds have been commingled with other issues.  Also provides numerous features to assist in data entry and the reconciliation process.

Rebate calculations can be performed on a 30/360, actual/360, or actual/actual basis with a 7-day, 14-day, 28-day, 35-day, monthly, quarterly, semiannual, or annual compounding.

Arbitrage what-if calculations – Allows the user to maintain a portfolio of investments.  Automatically downloads investment outlays and receipts of interest and principal to a rebate transaction file.  Uniquely identifies all rebate transactions by Group ID.  Mun-Ease can structure an optimal portfolio of securities to meet a user-defined draw schedule.

Applies de-minimus and reasonable retainage rules when computing spenddown penalties.

Provides features for the entry of computation credits and prior rebate payments.  Entry of these items will reduce the future-value rebate amount while not impacting the internal rate of return computed by Mun-Ease.

Calculates yield-reduction payments when the issuer is not compliant with temporary period yield restriction rules.

Provides a separate utilities menu for frequently needed computations.  Provides an interface to load data from an Excel spreadsheet.

Calculations

Future-value rebate amount, 18-month spenddown penalty, 24-month spenddown penalty, yield-reduction payments, IRR of investment portfolio, arbitrage yield limit, arbitrage NIC.

Reports

(1f) Arbitrage Yield Limit Verification Report for a Variable Rate Issue – Report #1f verifies the arbitrage yield limit calculation for a variable rate bond issue.

(1h) Arbitrage Yield Limit Verification Report for a Fixed Rate Issue – Report #1h verifies the arbitrage yield limit calculation for a fixed rate bond issue.

(70a) Pricing Summary Report – Displays reoffering prices and yields for each maturity in the bond issue. If the bond issue contains yield-to-call maturities, the report displays the price and call date from which the yield was calculated.

(75) Bond Production Report – Displays the original issue premium/discount for each series within the bond issue. Also provides the summary totals needed to verify the arbitrage NIC calculation.

(57a) Yield-to-Call Tests Report – Provides information to determine whether specific maturities in a bond issue are subject to the yield-to-call provisions of the Internal Revenue Code.

(57b) Sinking Fund Adjustments Report for Deep-Discount Term Bonds – Determines whether the term bonds in a bond issue will need to be valued at their “present-value” amount as determined by the IRS regulations. Calculates the sinking fund adjustments for the deep-discount term bonds.

(9c,d) Present Value Reports – Verifies the internal rate of return calculations used during the rebate calculations. Report #9d displays the present value for calculations done via nonpurpose investments. Report 9c displays the present value for calculations done via purpose expenditures. Reports 9c and d can also be generated through the arbitrage|rebate transactions|IRR calculations menu option.

(10a) Nonpurpose Investments Rebate Future Value Report – This report provides verification of the excess earnings calculation (the amount to be rebated to the federal government). Using the arbitrage yield limit, Mun-Ease calculates the future value of investments to the future value date.

(11,b) Rebate Unspent Proceeds Report – This report computes a running balance of unspent bond proceeds by displaying in chronological order, bond proceeds, purpose obligations, non-purpose obligations, interest earnings, and debt service payments. Report 11b is similar to 11 except that it displays totals by date.

(15a) Future-Value Purpose Expenditures Report – The report future-values your purpose expenditures and unspent proceeds and nets this total against the future-valued original gross proceeds. The future-value factor is the arbitrage yield limit.

(16a,b) Spenddown/Penalty Reports – Verifies the 18-month or 24-month spenddown penalty calculation. Report #16a calculates the rebate penalty based on the spenddown schedule of net proceeds. Report #16b displays a summary of the calculations and the reasonable retainage and de minimus rates calculations for the spenddown penalty if the calculations were performed on the last calculation period.

(22) Rebate Calculation Summary Report – Provides a summary of the rebate calculations.

(79) Arbitrage Yield Reduction Payment Report – This report calculates the yield reduction payment when the issuer is not compliant with the temporary period yield restriction rules.
79b Future Value & Yield Reduction Report – This report displays a side-by-side comparison of a bond issue’s future value rebate liability and the yield reduction payment calculation.

(27,b) Rebate Transaction Reports – The rebate transaction reports shows the total deposits, withdrawals, and interest earnings for nonpurpose investments and positive and negative transactions for purpose expenditures. Report 27 is sorted by group ID while Report 27b is sorted by fund and Group ID.

(27c) Rebate Transactions With Running Totals by Group ID – This report is similar to report #27 except that it includes an additional column that displays running amount totals by group ID.

(27d) Rebate Transactions With Running Totals by Rebate Type – This report is similar to report #27 except that it includes an additional column that displays running amount totals by rebate type (purpose or nonpurpose).

(29a) Investments Portfolio Report – This report lists the investments purchased for a bond issue.

(30b) Investments/Expenditures Verification Report – Report 30b verifies that the investment receipts adqueately cover planned expenditures.

(62) Commingled Bond Proceeds Calculation of Unspent Proceeds Report – Displays information with regard to the calculation of unspent proceeds when bond proceeds have been commingled with proceeds of other issues.

(63a) Arbitrage Utilities Future Value/Present Value Report – Displays the results of a future-value/present-value calculation that you performed from the arbitrage|utilities menu option.

(91) Allowable Debt Service Reserve Report – Provides the supporting information for the calculation of the allowable debt service reserve fund.

(105,b) 18-Month Spenddown Tests Report – This report performs calculations to determine whether a bond issue is in compliance with the 18-month spenddown exception. The report displays the calculations for each six-month period during the 18-month test. Report 105 is a detail report and report 105b is a summary report. (Note: This volume of documentation only provides a report sample of reports 106 and 106b. The format of report #105 is exactly the same as report #106).

(106,b) 24-Month Spenddown Tests Report – This report performs calculations to determine whether a bond issue is in compliance with the 24-month spenddown exception. The report displays the calculations for each six-month period during the 24-month test. Report 106 is a detail report and report 106b is a summary report.

Tax Forms (8038, 8038G, 8038T, 8038R, 8038GC) – Mun-Ease can optionally generate a completed 8038 tax form whenever it performs an arbitrage calculation.