Loading...
HomeMy WebLinkAboutA028 - Declaration of Intent to Reimburse Expenses Associated with the Construction of the Resource Recovery and Recycling Campus ProjectITEM #:33 DATE:04-08-25 DEPT:FIN SUBJECT: DECLARATION OF INTENT TO REIMBURSE EXPENSES RELATED TO RESOURCE RECOVERY AND RECYCLING CAMPUS PROJECT COUNCIL ACTION FORM BACKGROUND: A reimbursement resolution is a formal declaration by a municipality stating its intent to use future bond proceeds to reimburse itself for project-related expenditures incurred before the bonds are issued. This approach ensures compliance with IRS regulations while providing financial flexibility for large-scale capital projects. As directed by the Council, the City plans to finance the construction of the Resource Recovery and Recycling Campus (RRRC) through a combination of bond proceeds and available cash reserves. To maximize financial flexibility as the project progresses, staff recommends that the Council approve the attached reimbursement resolution, authorizing a maximum principal amount of $10,000,000. THE REIMBURSEMENT RESOLUTION PROCESS: If approved, the following process would be utilized to fund the RRRC: Declaration of Intent: Before issuing bonds, the municipality adopts a resolution affirming its intent to reimburse itself for eligible project expenditures (this action). Project Expenditures: The City begins covering costs such as design, engineering, and early construction using available cash or short-term financing. Bond Issuance: Once key approvals are secured and the project is ready for bidding, the City issues bonds to finance construction. Reimbursement Allocation: After the bonds are issued, proceeds are used to reimburse the City for initial expenditures, ensuring accurate accounting and IRS compliance. Documentation & Compliance: The reimbursement process must be formally documented in the City's records. Bond proceeds can only be used for eligible expenses, and reimbursement must occur within 18 months of the expenditure or project completion, as per IRS rules. By approving this reimbursement resolution, the City ensures maximum financial flexibility to advance this critical project without delay, allowing the City to secure cost-effective financing while maintaining compliance with federal tax regulations. 1 ALTERNATIVES: 1. Approve the resolution, allowing the City to incur expenses with the potential for future reimbursement through a bond issuance. 2. Do not approve the resolution and direct staff to proceed with a bond issuance to support the development of the Resource Recovery and Recycling Campus. CITY MANAGER'S RECOMMENDED ACTION: The proposed resolution enables the City to cover expenses for the Resource Recovery and Recycling Campus while maintaining compliance with federal reimbursement regulations. Additionally, it provides the greatest amount of financial flexibility, which is important given the project's preliminary/developmental stage. Therefore, it is the recommendation of the City Manager that the City Council approve Alternative No. 1, as described above. It should be noted that these bonds will be considered Essential Corporate Purpose and, therefore, will not need a referendum in order to issue. ATTACHMENT(S): RRRC Reimbursement Resolution 2 Ames/419370/ RRR -1- DORSEY & WHITNEY LLP, ATTORNEYS, DES MOINES, IOWA 4900-6316-8300\1 ADOPT FEDERAL REIMBURSEMENT RESOLUTION 419370 Ames, Iowa April ___, 2025 The City Council of the City of Ames, Iowa, met on April ___, 2025, at ______ o’clock p.m., at the City Hall Council Chambers, Ames, Iowa. The meeting was called to order by the Mayor, and the roll was called showing the following Council Members present and absent: Present: Absent: . It was reported that, in order to preserve the City’s potential eligibility to issue tax exempt bonds in order to finance proposed solid waste management transfer station facilities, it would be necessary for the Council to adopt a resolution declaring the Council’s intent to spend cash and later reimburse those expenses from the proceeds of a bond issue. Council Member _____________________ introduced the resolution next hereinafter set out, related to financing a project, and moved its adoption, seconded by Council Member _______________. After due consideration and discussion, the Mayor put the question upon the adoption of said resolution, and the roll being called, the following Council Members voted: Ayes: Nays: . Whereupon, the Mayor declared the resolution duly adopted as hereinafter set out. • • • • At the conclusion of the meeting, and upon motion and vote, the Council adjourned. Mayor Attest: City Clerk 3 Ames/419370/ RRR -2- DORSEY & WHITNEY LLP, ATTORNEYS, DES MOINES, IOWA 4900-6316-8300\1 RESOLUTION NO._______ Resolution relating to financing of a project to be undertaken by the City of Ames, Iowa; establishing compliance with reimbursement bond regulations under the Internal Revenue Code BE IT RESOLVED by the City Council (the “Council”) of the City of Ames, Iowa (the “City”), as follows: Section 1.Recitals. (a)The Internal Revenue Service has issued Section 1.150-2 of the Income Tax Regulations (the “Regulations”) dealing with the issuance of bonds, all or a portion of the proceeds of which are to be used to reimburse the City for project expenditures made by the City prior to the date of issuance. (b)The Regulations generally require that the City make a prior declaration of its official intent to reimburse itself for such prior expenditures out of the proceeds of a subsequently issued borrowing and that the borrowing occur and the reimbursement allocation be made from the proceeds of such borrowing within a certain period after the payment of the expenditure or the date the project is placed in service; and (c)The City desires to comply with requirements of the Regulations with respect to a certain project hereinafter identified. Section 2.Official Intent Declaration. (a)The City proposes to undertake the following project and to make original expenditures with respect thereto prior to the issuance of bonds, notes or other obligations (the “Bonds”) and reasonably expects to issue the Bonds for such project in the maximum principal amount shown below: Maximum Amount of Bonds Project Expected to be Issued for Project Resource Recovery and Recycling Campus $10,000,000 (b)Other than (i) expenditures to be paid or reimbursed from sources other than the Bonds or (ii) expenditures made not earlier than sixty days prior to the date of this Resolution or (iii) expenditures amounting to the lesser of $100,000 or 5% of the proceeds of the Bonds or (iv) expenditures constituting preliminary expenditures as defined in Section 1.150-2(f)(2) of the Regulations, no expenditures for the project have heretofore been made by the City for which the City will seek reimbursement from the proceeds of the Bonds. (c)This declaration is a declaration of official intent adopted pursuant to Section 1.150-2 of the Regulations. 4 Ames/419370/ RRR -3- DORSEY & WHITNEY LLP, ATTORNEYS, DES MOINES, IOWA 4900-6316-8300\1 Section 3.Budgetary Matters. As of the date hereof, there are no City funds reserved, allocated on a long term basis or otherwise set aside (or reasonably expected to be reserved, allocated on a long term basis or otherwise set aside) to provide permanent financing for the expenditures related to the project, other than pursuant to the issuance of the Bonds. This resolution, therefore, is determined to be consistent with the City’s budgetary and financial circumstances as they exist or are reasonably foreseeable on the date hereof, all within the meaning and content of the Regulations. Section 4.Reimbursement Allocations. The City’s financial officer shall be responsible for making the “reimbursement allocations” described in the Regulations, being generally the transfer of the appropriate amount of proceeds of the Bonds to reimburse the source of temporary financing used by the City to make payment of the prior costs of the project. Each allocation shall be evidenced by an entry on the official books and records of the City maintained for the Bonds, shall specifically identify the actual prior expenditure being reimbursed or, in the case of reimbursement of a fund or account, the fund or account from which the expenditure was paid, and shall be effective to relieve the proceeds of the Bonds from any restriction under the bond resolution or other relevant legal documents for the Bonds, and under any applicable state statute, which would apply to the unspent proceeds of the Bonds. Section 5.Repealer. All resolutions, parts of resolutions, or actions of the Council in conflict herewith are hereby repealed, to the extent of such conflict. Passed and approved April 8, 2025. Mayor Attest: City Clerk 5 4900-6316-8300\1 6