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TO: HONORABLE BOARD OF COUNTY COMMISSIONERS <br />DATE: OCTOBER 11, 2000 <br />SUBJECT: ARBITRAGE REBATE AND OPINION SERVICES CONTRACT <br />FROM: EDWIN M. FRY, JR, FINANCE DIRECTOR <br />United States Treasury regulations require the board of county commissioners to rebate all arbitrage <br />earnings from the investment of county bond proceeds to the Treasury every five years. By <br />definition, arbitrage is the purchase and sale of the same or a similar security in order to profit by <br />price discrepancies between markets. For tax-exempt bond purposes, arbitrage is the ability to obtain <br />tax-exempt proceeds and invest those fiords in higher yielding taxable securities, resulting in a profit <br />to the county. Arbitrage is the profit earned from investing low yielding tax-exempt bond proceeds <br />in higher yielding taxable securities. <br />As the auditor, recorder and custodian of all county funds, the Clerk of the Circuit Court's Finance <br />Department invests all bond proceeds and records the interest earnings. Annually, the Finance <br />Department calculates the arbitrage earnings on all county bond issues. To insure compliance with <br />all Treasury Arbitrage Restriction Regulations, the Clerk of the Circuit Court selects an independent <br />firm to verify the calculations and to insure that the Finance Department's calculations comply with <br />the Treasury regulations. <br />A Request For Proposals for arbitrage rebate and opinion services was mailed to sixteen firms that <br />the Finance Department identified as having expertise in the calculation of excess arbitrage earnings <br />and compliance with the applicable Treasury Regulations. Eight firms responded to the Request For <br />Proposals. After a through review of the proposals, taking into consideration each firm's <br />qualifications, experience and references, their fee, and their technical approach, a joint venture <br />proposal from Public Financial Management and Orrick, Herrington & Sutcliffe was determined to <br />best suit the requirements set forth in the Request For Proposals. A copy of their proposal is on file <br />in the Clerk to the Board office. <br />QUESTED ACTION <br />Request the Honorable Board of County Commissioners authorize the Chair to sign the two enclosed <br />Letters of Engagement with Public Financial Management and Orrick, Herrington & Sutcliffe. <br />October 17, 2000 <br />18 <br />I <br />