The adopted Capital Improvement Program for Fiscal Year 2018 includes projects that will be funded from the issuance of tax-exempt Certificates of Obligation and Revenue Bonds. Projects typically funded from debt issuance have a life span equal or greater to the expected repayment term of the debt to be issued.  This ensures generational equity and reduces financial impacts on today's residents, as residents in the future will also be beneficiaries of such improvements as streets, drainage and water/wastewater infrastructure. Debt issues are primarily timed to meet cash flow needs based on projected expenditures. Since the issuance and use of tax-exempt debt is monitored closely by the IRS, there are certain restrictions on how it can be used.

The IRS does allow projects to begin prior to the bonds being issued, as long as the City declares its intent to reimburse from the issuance of the bonds. This statement must be made within 60 days of the first expenditure of funds that will be reimbursed. A reimbursement resolution is not required for design and engineering work, only construction work. Bonds must be issued within 18 months in order to reimburse expenditures.  Once the City is ready to issue Certificates of Obligation, there is a separate process that includes an additional resolution stating the City's intent to issue the Certificates, and a public notice that must be published at least 30 days prior to the intended sale date.

Since some projects have already had contracts awarded for construction, a resolution stating the City's intent to finance these expenditures from the proceeds of the future bonds is necessary to be able to fund these projects from bond proceeds. The Resolution proactively includes all projects slated for funding from tax-exempt debt in fiscal year 2018, regardless of anticipated start date. Most of the projects in the CIP will be ready to go to construction in the spring or summer of 2018. The resolution is for a maximum amount to be reimbursed of $12 million, which includes $7.4 million in projects from tax-backed Certificates of Obligation and $4.5 million Water and Sewer Revenue Bonds. The issues are separate to ensure that the bonds are repaid from the appropriate funding sources (i.e. property taxes or utility revenues).

The amount included in this resolution is based on the amount budgeted from bond proceeds for each project. The actual bond issues will be adjusted based on contract awards, and the construction budgets will be amended to reflect the savings, if any. It’s important to note that the City does not issue more debt than necessary to fund the projects. Moving forward with this resolution simply allows us to begin construction of projects now and issue the bonds when the City is ready to do so.

FY18 Budgeted capital projects to be funded from tax-exempt bond proceeds are as follows:

Utility Revenue Bonds:

Certificates of Obligation:

Staff recommends approval of Resolution No. 18-03 stating the City's intent to finance certain expenditures from the proceeds of future bond issues, not to exceed $12 million. This resolution and the amount to be reimbursed is referenced in the IRS Form 8038-G (Information Return for Tax-Exempt Governmental Obligations) that is provided with each bond transcript.