TITLE
Recommendation to adopt resolution authorizing the establishment of a method for the City to declare the intent to receive reimbursement from proposed future bond proceeds. (Citywide)
DISCUSSION
The attached Resolution updates the City’s existing practice with respect to the use of proceeds of debt obligations for the purposes of reimbursing capital projects. The City frequently explores various financing alternatives for capital projects. Although many of these projects have been listed in the City’s Capital Improvement Program, some of them cannot be fully cash-financed, with the most likely alternative involving the proposed issuance of tax-exempt bonds. Under certain conditions, U.S. Treasury Regulation, Section 1.150-2, permits debt issuers (Issuers) to use bond proceeds to reimburse Issuers for project-related expenditures paid prior to the issuance of project bonds.
In order to maximize and expedite the City’s ability to reimburse itself for pre-financing costs, the City Council is requested to designate the City Manager to act on its behalf in declaring the City Council’s official intent, from time-to-time, to reimburse capital expenditures from proposed future bond financings. This designation is for administrative expediency only and does not authorize the City Manager to issue bonds, but simply allows for the City Manager to ensure that, once a financing is approved by the City Council, City costs can be properly reimbursed from the proceeds of the financing. If a bond financing is proposed, the City Council will be presented with a staff report detailing the specific project and the financing proposal, and will be requested to take action on the proposal.
No aspect of the attached Resolution, or associated designation of the City Manager, commits the City to issuing any type of bond financing.
This matter was reviewed by Deputy City Attorney Amy R. Webber and by Budget Manager Victoria Bell September 16, 2015.
TIMING CONSIDERATIONS
City Council action is requested on November 3, 2015, to allow the City’s pre-financing costs related to the Pacific Avenue Storm Drain Relocation project, Courthouse demolition, and other projects to be reimbursed from future bond issues. Without the Resolution, federal law will not permit the City to reimburse itself for costs incurred prior to the issuance of the bonds.
FISCAL IMPACT
This item does not authorize the issuance of any financing. The proposed financing for each future capital project will be presented to the City Council for review and approval when the financing plans have been finalized. There is no direct fiscal or local job impact associated with this recommendation.
SUGGESTED ACTION
Approve recommendation.
BODY
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LONG BEACH AUTHORIZING A METHOD FOR DECLARATIONS OF OFFICIAL INTENT IN ORDER TO PERMIT THE REIMBURSEMENT OF CAPITAL EXPENDITURES WITH PROCEEDS OF FUTURE DEBT OBLIGATIONS
Respectfully Submitted,
JOHN GROSS
DIRECTOR OF FINANCIAL MANAGEMENT
APPROVED:
PATRICK H. WEST
CITY MANAGER