DALLAS - Under pressure to resolve an arbitrage dispute with the Internal Revenue Service, the Oklahoma City school district board has rescheduled its $90 million bond sale for Jan. 10.
"It gives us more time to negotiate with the IRS," district spokesman L.D. Barney said.
Barney also said the district's financial adviser, Stifel, Nicolaus & Co., "told us that there would be more of a market for our bonds after the end of the year."
This is the second time in about a month that the district has rescheduled its general obligation bond sale to finance capital improvements and equipment.
The most recent delay occurred last week when investment banking firms failed to bid on the competitive issue because of the district's problems with the IRS, industry sources said.
The firms were concerned that the district's failure to pay arbitrage rebate to the IRS could jeopardize the tax-exempt status of future bond issues, sources said.
The district's troubles stem from the issuance of $30 million of tax-exempt tax and revenue anticipation notes in a controversial 1990-91 cash management program.
The notes were later determined to be arbitrage bonds by the IRS because the district appeared to have exaggerated its budget deficit. As a result, the IRS claimed the district owed more than $1 million in arbitrage profits, penalties, and interest on that program, as well as on $17 million in bonds issued during a similar cash management program in 1992-93.
The district refused to pay the IRS, casting a cloud over its $90 million bond issue approved by voters in mid-October. But officials now say they will settle with the federal agency following an opinion by the Oklahoma attorney general's office that the district can legally do so under state law.
Barney said the IRS has not approved a closing agreement submitted by the district to the federal agency to resolve the problem. "Nothing has been decided," he said.
Meantime, an agreement made between the IRS and the Tulsa school district over a similar demand for arbitrage rebate has been approved by the service's district office in Oklahoma, but has not received approval on the federal level.