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12/03/2019 06H Yakima Convention Center Expansion; Reimbursement of Expenses from Bond Proceeds a\'4\lyy bxk ik 1 • 1-,V, 9 PPPPPP+Pd ' lii it tYlltYlA.\ta. BUSINESS OF THE CITY COUNCIL YAKIMA, WASHINGTON AGENDA STATEMENT Item No. 6.H. For Meeting of: December 3, 2019 ITEM TITLE: Resolution for reimbursement of expenses from bond proceeds for Yakima Convention Center Expansion SUBMITTED BY: Steve Groom, Director of Finance and Budget SUMMARY EXPLANATION: This resolution enables the city to take necessary steps to ensure that appropriate expenditures of the convention center expansion project could be reimbursed from debt, should any be expended prior to issuance of the debt. Rules and procedures exist to document reimbursable expenses since it is common for the timing of the debt issuance to not coincide exactly with some of the preliminary expenditures. This authorizes the City Manager or Director of Finance and Budget to execute a certificate of intent when costs of the convention center expansion project are made that should be reimbursed from debt issuance. ITEM BUDGETED: NA STRATEGIC PRIORITY: Public Trust and Accountability APPROVED FOR SUBMITTAL BY THE CITY MANAGER RECOMMENDATION: Adopt Resolution ATTACHMENTS: Description Upload Date Type L r Maras 1 12912019 r Memo D esolution 10/31/2019 resolution D eimbur ement Mules summary-Pacifica I rout) 10/2 /201 r Me o 2 FINANCE MEMORANDUM TO: The Honorable Mayor and Members of City Council FROM: Steve Groom, Finance Director DATE: October 29, 2019 RE: Financing Capital Cost Reimbursement This is to request approval of the attached resolution which enables the city to take a step to ensure that appropriate expenditures of the convention center expansion project can be reimbursed from debt, should any be expended prior to issuance of the debt. Rules and procedures exist to document reimbursable expenses since it is common for the timing of the debt issuance to not coincide exactly with some of the preliminary expenditures. This is to authorize designated city officials to execute a certificate of intent when costs of convention center expansion project are made that should be reimbursed from debt issuance. Back ground information is attached. The informational summary from Pacifica Law Group, also attached, provides legal guidance for following the reimbursement process. 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'��.�► n. .y .x.. Oa bt 2004 Cori ve a ti as Ca ater ex pare si as debt, paid From Lai cJg irig Tax, kiNka a paid oFF -a 20-1 0_ 200,- Cori ve at i as Ca ater xpa as iori debt, paid From PFI=> Fu a a irig, exte a cJs to 2025 so will be e Fi a a cad a a pal-t of,0a c a, project_ T0a 2020 budget -a al ucJ as debt -a a split betwe as Loag irig Tax aril PFI=> ra vaa a a a_ debt i a u a as is a t i a pa tad For early 2020_ 2 OF 2 MEMO-Ra s Ol uii O r, COav a s ii O r, Caa-rar ra i m a u rs a m a i Fi a a a ai ag -1 O-2a-2a-I a 4 RESOLUTION NO. r 1 A RESOLUTION OF THE CITY OF YAKIMA, WASHINGTON, APPOINTING CERTAIN OFFICIALS FOR THE PURPOSE OF DESIGNATING CERTAIN EXPENDITURES FOR REIMBURSEMENT FROM THE PROCEEDS OF BONDS OR OTHER OBLIGATIONS THAT MAY BE AUTHORIZED AND APPROVED BY THE CITY COUNCIL FOR ISSUANCE IN THE FUTURE. WHEREAS, the City of Yakima, Washington (the "City") issues tax-exempt obligations, including bonds, notes and leases, from time to time for the purpose of financing its governmental activities; and WHEREAS, the United States Department of the Treasury has published regulations (the "Regulations") governing the ability of the City to use the proceeds of tax-exempt obligations for reimbursement of prior expenditures; and WHEREAS, the Regulations permit the City to appoint one or more officials for the purpose of identifying and qualifying capital projects for reimbursement purposes; and WHEREAS, any such declaration of official intent to reimburse must not be made as a matter of course or in an amount substantially in excess of the amount expected to be necessary for the proposed project; BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF YAKIMA: Section 1. The City Council hereby appoints and designates the City Manager and the City Director of Finance and Budget, including anyone acting in such positions on an interim basis, as the "Designated Officials" responsible for issuing declarations of official intent in compliance with U.S. Treasury Regulation Section 1.150-2. Section 2. Upon a determination by a Designated Official that the costs of a particular capital project may be reimbursed from the proceeds of tax-exempt obligations to be issued by the City, each Designated Official is authorized and directed to execute a certificate of official intent, substantially in the form attached hereto as Exhibit A. Each certificate so executed shall become a part of the official records of the City available for public inspection and review. Section 3. This resolution NMII take effect from and after its adoption as provided by law. 5 ADOPTED BY THE CITY COUNCIL this day of , 2019. Kathy Coffey, Mayor ATTEST: Sonya Claar Tee, City Clerk 2 6 EXHIBIT A FORM OF CERTIFICATE OF OFFICIAL INTENT Pursuant to Resolution No. f ] of the City Council of the City of Yakima, Washington (the "City"), the undersigned f ] of the City hereby certifies as follows: Section 1. The undersigned is a "Designated Official" of the City as defined in Resolution No. f ]for the purposes of this Certificate of Official Intent. Section 2. The City reasonably expects to reimburse the expenditures described herein with the proceeds of debt to be incurred by the City (the "Reimbursement Bonds"). Section 3. The maximum principal amount of the Reimbursement Bonds expected to be issued is $f ]. Section 4. The expenditures with respect to which the City reasonably expects to be reimbursed from the proceeds of the Reimbursement Bonds will be made from the City's [name of fund]for project costs related to [identify the project]. Dated this day of , CITY OF YAKIMA, WASHINGTON [Title] PACIFICA LAW GROUP Municipal Bonds: Reimbursement Rules Issuers of governmental bonds, qualified 501(c)(3) bonds, and private activity bonds issued for the purpose of financing governmentally owned facilities, may allocate all or a portion of the proceeds of such bonds to the reimbursement of expenditures made prior to the date of issuance if certain rules are followed. These bonds are referred to as"reimbursement bonds." If the rules are followed, the portion of the proceeds allocated to the reimbursement will be considered "spent' when the allocation is made, and will not be subject to the general arbitrage and rebate rules imposed under the Internal Revenue Code of 1986,as amended (the "code")and the federal tax regulations(the "Regulations'). The following is a summary of the general requirements for qualifying reimbursements. Offtcbi Gntent Declaration Requirement The issuer, or in limited circumstances the ultimate borrower, must declare its"official intent' to reimburse itself not later than 60 days after payment of the original expenditure. The declaration of official intent may be made before any expenditures are made, and will essentially"start the clock' for purposes of reimbursement.The official intent declaration must include the following requirements: • The declaration may be made in any reasonable form, including a resolution or other legislative authorization.The legislative action may specifically declare the intent o reimburse or may delegate to an individual the authority to make the declaration. • The declaration of official intent must: o contain a general functional description of the project, property or program to be financed by the reimbursement bonds(for instance, highway capital improvement program or school building renovation).The project description is sufficient if it identifies, by name and functional purpose, the fund or account from which the original expenditure is paid (for instance, parks and recreation fund-recreational facility capital improvement program);and o state the maximum principal amount of the obligations expected to be issued for the project. The Regulations allow for reasonable deviations in the project description,so long as the actual project is reasonably related in function to the described project. • The declaration of intent must be"reasonable." A declaration of intent will be considered reasonable if, on the date of the declaration, the issuer or ultimate borrower had a reasonable expectation that it would reimburse the original expenditure with proceeds of reimbursement bonds. Reasonableness is based on the relevant facts and circumstances, including the issuers history of making declarations and actually reimbursing expenditures. For instance, declarations of intent made as a matter of course or in amounts substantially in excess of the amounts expected to be necessary for the project are not reasonable. Similarly,a pattern of failing to reimburse original 8 expenditures covered by declarations of official intent(other than due to extraordinary circumstances) is evidence of unreasonableness. Eligible Expenditures. Generally, the expenditures to be reimbursed must be "capital expenditures." A capital expenditure is any cost of a type that is properly chargeable to a capital account(or would be so chargeable with a proper election) under general federal income tax principles. The Regulations also include extraordinary working capital expenditures, bond costs of issuance, grants,qualified student loans, and qualified mortgage loans as expenditures eligible for reimbursement. Non-extraordinary working capital expenditures are typically not eligible. The determination of whether an expenditure is a capital expenditure is made at the time the expenditure is made, not at the time of issuance of the reimbursement bonds. Reimbursement Period.The reimbursement bonds must be issued and proceeds must be allocated to reimburse the issuer or conduit borrower not later than 18 months after the later of: • The date on which the original expenditure is paid,or • The date that the project to be financed was placed in service, but in no event more than three years after the original expenditure is paid. Special rules apply for governmental issuers that expect to issue no more than $5 million of governmental bonds in any calendar year,and for long term construction projects. Proceeds of reimbursement bonds will be "allocated"to reimbursement once there is written evidence of an issuer's (or conduit borrower's) use of the proceeds to reimburse a prior expenditure. An allocation made within 30 days of issuance of the reimbursement bonds may be treated as made on the date of issuance of the reimbursement bonds. Special Exceptions.The official intent declaration requirement and the timing of issuance of reimbursement bonds do not apply to: • costs of issuance for a bond issue; • an amount not in excess of the lesser of$100,000 or 5%of the bond proceeds; or • preliminary expenditures not in excess of 20%of the aggregate issue price of the related reimbursement bond issue. Preliminary expenditures include architectural,engineering, surveying, soil testing, reimbursement bond issuance,and similar costs that are incurred before commencement of acquisition,construction or rehabilitation of the financed property. Land acquisition, site preparation and other costs incident to commencement of construction do not constitute preliminary expenditures. Original expenditures in these categories may be reimbursed with bond proceeds without following the reimbursement bond rules. Paofica Law Group LLP tO11 na Avenue, t 00 Acaroc WA rs101 /Oo.2ra/.i7OO www paroPraru:gru p`c m