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Commissioner Hovis - Financial and Management Services - Finance - To Appropriate Debt Service Fund Balance for Internal Revenue Service Arbitrage Rebate Payment Related to the FY2023 Vehicle Financing ($98,267.37)
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STAFF CONTACT
Kyle Sutherland - Finance - 704-866-3130
BUDGET IMPACT
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Debt Service Fund: Increase fund balance appropriation by $98,267.37. Increase expense by $98,267.37.
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BACKGROUND
On June 21, 2023, Gaston County entered into an installment financing agreement with Bank of America for the purchase of county vehicles and equipment. The financing proceeds were deposited into an interest-bearing account with NC Capital Management Trust (NCCMT). As of January 2026, all purchases authorized under this financing had been completed. During the investment period of the financing, the interest earnings totaled $408,631.56. The interest earnings were appropriated in FY2026 to use towards debt payments.
Federal tax regulations limit the amount of investment earnings that may be retained on the proceeds of tax-advantaged financings before those proceeds are spent on their intended purpose. Because the financing proceeds earned investment income at a rate that exceeded the allowable federal arbitrage limits, Gaston County is required to rebate the excess earnings to the Internal Revenue Service. Based on the required arbitrage calculation for this financing, the rebate payment due to the Internal Revenue Service is $98,267.37.
POLICY IMPACT
N/A
ATTACHMENTS
Budget Change Request (BCR); Equip. Fin. Agmt. $8MM.report (Final Installment)