The Norman Transcript

November 21, 2012

County jail trust releases 8-month-old IRS audit letter

By Andy Rieger and Mick Hinton
The Norman Transcript

NORMAN —  The Internal Revenue Service’s official audit notice for Cleveland County’s $52 million jail sales tax bonds came eight months before county officials publicly acknowledged the examination, records showed Tuesday.

County officials, in response to an open records request from The Transcript, on Tuesday released the original IRS notice dated Feb. 16, 2012.  It was mailed to District 3 County Commissioner Rusty Sullivan, chairman of the Cleveland County Justice Authority, and was signed by Kurt J. Ochsner, an IRS agent with the Tax Exempt and Government Entities Division in Bismark, N.D. 

“We have selected the debt issuance named above for examination,” Ochsner wrote. “The Internal Revenue Service routinely examines municipal debt issuances to determine compliance with federal tax requirements.”

Ochsner came to Norman in October to visit the jail, review documents and interview county officials.

The contract for construction of the jail that opened in January amounted to $24 million. The Justice Authority has hired Washington, D.C. attorney Brad Waterman to act on its behalf before the IRS. On Monday, the Justice Authority approved a $4,280 invoice for Waterman’s work from July 1 to Aug. 31.

  On Monday, Cleveland County Assistant District Attorney Jim Robertson denied a request by a reporter to obtain a copy of an audit of the Cleveland County Justice Authority which issued the bonds. Just minutes before, the audit had been approved by the commissioners in their weekly public meeting.

   However, Robertson insisted that an Open Records request would have to be filed before the audit would be released. Sullivan had asked for Robertson’s advice on releasing the document.  When asked why the release was being stalled, Robertson walked away from the reporter.

Sullivan relented after the meeting Monday and had assistants print a copy of the public document.

Earlier, the assistant district attorney advised Sullivan not to talk publicly about the jail contract because the IRS inquiry is still pending. County officials maintain the audit is routine and will show nothing unusual about the bond issue.

The Transcript has over the past few weeks requested details of jail trust expenditures. Assistant District Attorney Carol Price Dillingham, the chief of the DA’s civil division, said Tuesday she continues to prepare documents for release to The Transcript

In March 2009, county commissioners acting as members of the Jail Trust Authority, sold the $52 million worth of bonds. They were surprised when the winning contract to build the jail came in at only $24 million, due to a downturn in the economy prompting the low bid.

    Commissioners have said that the actual cost of the jail on U.S. 77 south of Franklin Road is expected to be about $42 million, considering other improvements needed in addition to the jail construction itself. This would include site preparation and street improvements in the area. 

A small fraction of the one-fourth cent sales tax can be spent on maintenance and operations. Keeping a 5 percent reserve required by the state, total cost would be about $46 million, leaving $5 million to $6 million that is not encumbered.  Other allowable costs include payment to Glenn Floyd, the bond advisor, Authority counsel Lindsay Bailey and the financial adviser Marshall Hawkins of Governmental Finance of Oklahoma, Inc. 

Floyd’s law firm received $1.046 million for work on behalf of the authority. The fee amounted to 2 percent of the bond issue. Hawkins and the Authority’s own counsel Bailey were each paid 1 percent or $520,000. 

Floyd said last month that he had not been contacted by the IRS on the matter.

Floyd had reported in March, 2009 to the State Bond Council that his fee was 1 percent of the bond issue. Floyd said the incorrect amount on a state bond form about his fee was a clerical error and that his firm attempted to later correct the percentage.


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