HomeMy WebLinkAboutA001 - Council Action Form dated February 24, 2026ITEM #:11
DATE:02-24-26
DEPT:FIN
SUBJECT:DECLARATION OF INTENT TO REIMBURSE EXPENSES RELATED TO
IMPROVEMENTS TO THE PRAIRIE VIEW 161 KV SUBSTATION AND
PRAIRIE VIEW 161 KV LINE EXPANSION
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 improvements to the Prairie View 161
kV Substation and Prairie View 161 kV Line Expansion. To maximize financial flexibility as
the project progresses, staff recommends that the Council approve the attached
reimbursement resolution, authorizing a maximum principal amount of $4,000,000 for
the Prairie View 161 kV Substation and $4,150,000 for the Prairie View 161 kV Line
Expansion.
THE REIMBURSEMENT RESOLUTION PROCESS:
If approved, the following process would be utilized to fund the project:
Declaration of Intent: Before issuing revenue 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 revenue 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.
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ALTERNATIVES:
1. Approve the resolution allowing the City to incur expenses with the potential for future
reimbursement through a revenue bond issuance.
2. Do not approve the resolution and direct staff to proceed with a bond issuance to support
the funding necessary to make construct the improvements.
CITY MANAGER'S RECOMMENDED ACTION:
The proposed resolution enables the City to cover expenses for the Prairie View 161 kV
Substation and Prairie View 161 kV Line Expansion for the City's Electric Utility 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.
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