HomeMy WebLinkAbout12/03/2019 06H Yakima Convention Center Expansion; Reimbursement of Expenses from Bond Proceeds a\'4\lyy bxk ik 1
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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
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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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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.
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ADOPTED BY THE CITY COUNCIL this day of , 2019.
Kathy Coffey, Mayor
ATTEST:
Sonya Claar Tee, City Clerk
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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
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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
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