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HomeMy WebLinkAboutRES2025-025 Reimbursement ResolutionSponsored by: Sorensen CITY OF SEWARD, ALASKA RESOLUTION 2025-025 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SEWARD, ALASKA, DECLARING ITS OFFICIAL INTENT TO REIMBURSE CITY FUNDS USED FOR THE ACQUISITION, CONSTRUCTION AND EQUIPPING OF CERTAIN ELECTRIC TRANSMISSION SYSTEM CAPITAL IMPROVEMENTS FROM PROCEEDS OF ONE OR MORE TAX-EXEMPT BORROWINGS WHEREAS, the City of Seward, Alaska (the "Issuer") is a home rule city and under Section 11 of Article X of the Alaska Constitution may exercise all legislative power not prohibited by law or the Charter of the City, and it has been determined that the matters set forth in this resolution are not prohibited by law or the Charter; and WHEREAS, the Issuer owns, operates, and maintains an electric system ("System") which needs certain additions, improvements and extensions; and WHEREAS, Treasury Regulation, Section 1.150-2 (the "Reimbursement Regulations"), issued pursuant to Section 150 of the Internal Revenue Code of 1986, as amended (the "Code"), prescribes certain requirements by which proceeds of tax exempt bonds, notes or other obligations included in the meaning of "bonds" under Section 150 of the Code ("Obligations") may be used to reimburse advances made for capital expenditures which were paid before the issuance of such Obligations; and WHEREAS, such Reimbursement Regulations require that the Issuer make a Declaration of Official Intent (as hereinafter defined) to reimburse any capital expenditure prior to the issuance of the Obligations intended to fund such capital expenditures and require that such Declaration of Official Intent be made no later than sixty (60) days after payment of any such capital expenditure; and WHEREAS, the Issuer desires to ensure compliance with the Reimbursement Regulations. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF SEWARD, ALASKA that: Section 1. Definitions. The following definitions apply to the terms used herein and not otherwise defined: "Capital Expenditure" means an expense for an item that is properly depreciable or amortizable to or is otherwise treated as a capital expenditure for purposes of the Code. "Code" has the meaning set forth in the above Whereas Clause. CITY OF SEWARD, ALASKA RESOLUTION 2025-025 Page 2 of 3 "Declaration of Official Intent" means a written declaration that the Issuer intends to fund Capital Expenditures with an issue of Reimbursement Bonds and reasonably expects to be reimbursed from proceeds of such issue. "Issuer" has the meaning set forth in the above Whereas Clause. "Obligations" has the meaning set forth in the above Whereas Clause. "Reimbursement Bonds" means Obligations that are issued to reimburse the Issuer for Capital Expenditures, and for certain other expenditures permitted by the Reimbursement Regulations, previously paid for by the Issuer. "Reimbursement Regulations" has the meaning set forth in the above Whereas Clause. "System" has the meaning set forth in the above Whereas Clause. Section 2. Declaration of Official Intent. The Issuer hereby makes a declaration pursuant to the Reimbursement Regulations of intent to reimburse itself with the proceeds of Obligations, in an estimated principal amount not to exceed $9,500,000, for Capital Expenditures paid by the Issuer in connection with the acquisition, construction and equipping of electric transmission System upgrades. The electric transmission System is owned and operated by the Issuer. The Issuer reasonably expects on the date hereof that it will reimburse itself for Capital Expenditures with proceeds of Obligations. Section 3. This resolution shall take effect immediately upon adoption. PASSED AND APPROVED by the City Council of the City of Seward, Alaska, this 10th day of March 2025. THE CITY OF SEWARD, ALASKA t nga, Vice Mayor 1 1 1 CITY OF SEWARD, ALASKA RESOLUTION 2025-025 inn Page3of3 AYES: Warner, Barnwell, Crites, Wells, Osenga NOES: Finch ABSENT: McClure ABSTAIN: None ATTEST: Kris Peck City Clerk (City Seal) L City Council Agenda Statement Meeting Date: March 10, 2025 To: City Council Through: Kat Sorensen, City Manager From: Sully Jusino, Finance Director Subject: Resolution 2025-025: Declaring Its Official Intent to Reimburse City Funds Used for the Acquisition, Construction and Equipping of Certain Electric Transmission System Capital Improvements from Proceeds of One or More Tax -Exempt Borrowings Background and justification: On July 26, 2021, the Electric Department delivered a presentation to City Council which demonstrated the condition of the deteriorating electrical transmission system. In order to address the critical infrastructure needs, a major capital improvement project was being identified. All costs for the project, including labor and material, have been identified and evaluated by an engineer. The project's total cost was estimated to be $17.9 million, including labor. Finance researched funding sources and determined that a revenue bond was the best finance option for funding the large project due to its long-term debt structure. Now, we are in the middle of those infrastructure projects, with a final budgeted determined of $23 million, including the new Meter Reading (AMR) technology being replaced by Advanced Metering Infrastructure (AMI), which provides significantly lower operating costs and superior customer service performance. On the work session on February 24, 2025, the city council desired to proceed with the application of a new revenue bond through the Alaska Municipal Bond Bank Authority in the amount of $9,500,000 million to fund the remainder of the infrastructure projects. Prior to the approval of our application, the City's Bond Counsel has recommended the City pass a resolution declaring the intention of seeking reimbursement, for qualifying preliminary project costs, with bond proceeds for expenses incurred before the bond is issued. The Internal Revenue Code provides the ability for reimbursement of qualifying preliminary expenditures. However, any prolonged delay in issuing the bond could result in project costs being solely paid for by the City without reimbursement. This reimbursement resolution provides a mechanism to allow for reimbursement of certain costs to be paid with proceeds of the City's tax-exempt bond. Comprehensive and Strategic Plan Consistency Information This legislation is consistent with (citation listed): Comprehensive Plan: Strategic Plan: Other: Total amount of funds listed in this legislation: This legislation: Creates revenue in the amount of: Creates expenditure in amount of: Creates a savings in the amount of: Has no fiscal impact Funds are: Budgeted Line item(s): Not budgeted Not applicable $ 0 Affected Fund: General Boat Harbor Motor Pool Available Fund Balance X Yes SMIC Parking Other Electric Water Attorney Signature: Not applicable Comments: Wastewater Healthcare Note: amounts are unaudited Finance Director Signature: 3 Attorney Review Administration Recommendation X Adopt Resolution Other: