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HomeMy WebLinkAbout5L Reimbursement for 2018A Bonds Report Phone 952.447.9800 / Fax 952.447.4245 / www.cityofpriorlake.com 4646 Dakota Street SE Prior Lake, MN 55372 CITY COUNCIL AGENDA REPORT MEETING DATE: MAY 7, 2018 AGENDA #: 5L PREPARED BY: CATHY ERICKSON, FINANCE DIRECTOR PRESENTED BY: CATHY ERICKSON AGENDA ITEM: Consider Approval of a Resolution Establishing Procedures Relating to Compliance with reimbursement Bond Regulations under the Internal Revenue Code DISCUSSION: Introduction Cities will often pay capital costs out of available cash, in anticipation of long-term financing with tax-exempt bonds. Bond or other municipal obligations issued to finance prior expenditures in this way are commonly called “reimbursement bonds”. History In 1993, the IRS issued new regulations describing the permitted uses of reimbursement bonds and establishing a timeframe in which to incur the reimbursable expenditures. The regulations require municipalities that expect to issue reimbursement bonds, to take actions specified in the regulations within 60 days of incurring the reimbursable expenditure. The action necessary for the City is to issue a Declaration of Intent, describing the projects, and stating the maximum principal amount of bonds it expects to issue for the projects. The city has historically included the declaration of intent with each capital project resolution. Current Circumstances Since there are multiple purposes/projects in the 2018 bond issue, staff is recommending completion of one reimbursement resolution to cover all projects in the 2018 bond issue versus including the language in each individual capital project resolution. The declaration relates to the following projects: equipment acquisition (fire pumper), capital improvement plan projects (SCBA, compressor and fill stations, Fire Station #2 parking lot), improvement projects (Franklin area and Huron area streets), street reconstruction projects (County wide flashing yellow and Duluth/TH13 street), PIR projects (2018 street overlay project streets), water and sewer projects (Automated Meter Reading System and Huron area street improvement). ISSUES: Bond counsel suggest annual adoption of this resolution, and staff concurs. FINANCIAL IMPACT: By adopting the resolution, the city may reimburse itself for costs incurred on capital improvement projects, which will be bonded for in the 2018 bond issue. ALTERNATIVES: 1. Approve the resolution establishing procedures relating to compliance with reimbursement bond regulations under the Internal Revenue Code. 2. Remove this item from the Consent Agenda for additional discussion. RECOMMENDED MOTION: Motion and second for approval of alternative #1. 10709385v1 RESOLUTION NO. ________ RESOLUTION ESTABLISHING PROCEDURES RELATING TO COMPLIANCE WITH REIMBURSEMENT BOND REGULATIONS UNDER THE INTERNAL REVENUE CODE IN CONNECTION WITH THE GENERAL OBLIGATION BONDS, SERIES 2018A BE IT RESOLVED by the City Council (the "Council") of the City of Prior Lake, Minnesota (the "City"), as follows: 1. Recitals. (a) The Internal Revenue Service has issued Treasury Regulations, Section 1.150-2 (as the same may be amended or supplemented, the "Regulations"), dealing with "reimbursement bond" proceeds, being proceeds of bonds used to reimburse the City for any project expenditure paid by the City prior to the time of the issuance of those bonds, specifically in this ca se, the General Obligation Bonds, Series 2018A (the "Bonds"). (b) The Regulations generally require that the City (as the issuer of or the primary obligor under the Bonds) make a declaration of intent to reimburse itself for such prior expenditures out of the proceeds of the Bonds, that such declaration be made not later than 60 days after the expenditure is actually paid, and that the bonding occur and the written reimbursement allocation be made from the proceeds of the Bonds within 18 months after the later of (1) the date of payment of the expenditure or (2) the date the project is placed in service (but in no event more than 3 years after actual payment). (c) The provisions of this Resolution are intended to have no application, to payments of City project costs first made by the City out of the proceeds of bonds issued prior to the date of such payments. 2. Official Intent Declaration. The Regulations, in the situations in which they apply, require the City to have declared an official intent (the "Declaration") to reimburse itself for previously paid project expenditures out of the proceeds of the Bonds. This Declaration relates to the following projects (collectively, the "Project") and the costs thereof to be financed: Equipment Acquisition $ 680,000 Capital Improvement Plan projects 625,000 Improvements Projects 2,990,000 Street Reconstruction 1,195,000 Permanent Improvement Revolving projects 490,000 Water projects 1,400,000 Sewer projects 1,625,000 Project Total $ 9,005,000 3. The City reasonably expects to reimburse itself for the payment of certain costs of the Project out of the proceeds of the Bonds to be issued after the date of payment of such costs. As of the date hereof, the City reasonably expects that $9,050,000 is the maximum principal amount of the Bonds which will be issued to finance the Project. 2 4. Each expenditure to be reimbursed from the Bonds is or will be a capital expenditure or a cost of issuance, or any of the other types of expenditures described in Section 1.150-2(d)(3) of the Regulations. 5. As of the date hereof, the statements and expectations contained in this Declaration are believed to be reasonable and accurate. Adopted on _______________, 2018, by the City Council of the City of Prior Lake, Minnesota. 3 CERTIFICATION The undersigned, being the duly qualified and acting Clerk of the City of Prior Lake, Minnesota, hereby certifies the following: The foregoing is true and correct copy of a Resolution on file and of official, publicly available record in the offices of the City, which Resolution relates to procedures of the City for compliance with certain IRS Regulations on reimbursement bonds. Said Resolution was duly adopted by the governing body of the City (the "Council") at a regular meeting of the Council held on ___________________, 2018. The Council meeting was duly called, regularly held, open to the public, and held at the place at which meetings of the Council are regularly held. Councilmember _________________ moved the adoption of the Resolution, which motion was seconded by Councilmember ____________________. A vote being taken on the motion, the following members of the Council voted in favor of the motion to adopt the Resolution: and the following voted against the same: Whereupon said Resolution was declared duly passed and adopted. The Resolution is in full force and effect and no action has been taken by the Council which would in any way alter or amend the Resolution. WITNESS MY HAND officially as the Clerk of the City of Prior Lake, Minnesota, on _____________, 2018. ____________________________________ Clerk City of Prior Lake, Minnesota