1l. Approve Bonding Reimbursement Resolution
CITY OF
CHANHASSEN
7700 Market Boulevard
PO Box 147
Chanhassen, MN 55317
Administration
Phone: 952.227.1100
Fax: 952,227,1110
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Phone: 952,227.1180
Fax: 952.227,1190 .
Engineering
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. Senior Center
Phone: 952.227.1125
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Web Site
www.ci.chanhassen.mn.us
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MEMORANDUM
TO:
Mayor & City Council Members
Greg Sticha, Finance Director ~h.
&.
FROM:
DA TE:
December 14,2009
SuBJ:
Bonding Reimbursement Resolution
PROPOSED MOTION:
The City Council approves the Resolution Establishing Procedures
Relating to Compliance with Reimbursement Bond Regulations under
the Internal Revenue Code.
Approval requires a simple majority vote of the City Council.
BACKGROUND
In 2010, staff plans to issue debt for the reconstruction of Audubon Road.
Typically staff tracks project-related expenses prior to bonding and then the city
is reimbursed from the bond proceeds. The IRS requires that the finance
director put a note of declaration into each bonding file, authorizing the city to
reimburse itself for expenses incurred prior to receiving bond proceeds.
Attached is a resolution prepared by Ehlers & Associates that ensures we are
compliant with IRS regulations. The proposed resolution is essentially for
administrative purposes and will apply to all future bond sales.
RECOMMENDA TION
Staff recommends that the City Council adopt the attached resolution regarding
reimbursement bond regulations. Approval requires a simple majority vote of
those City Council members present.
ATTACHMENT
1. Resolution
F:\GregS\Bonding\2009 Bonding\Reimbursementmemo 12-14-09 karen.docx
Chanhassen is a Community for Life - Providing for Today and Planning for Tomorrow
RESOLUTION NO.
RESOLUTION ESTABLISHING PROCEDURES
RELATING TO COMPLIANCE WITH REIMBURSEMENT BOND
REGULATIONS UNDER THE INTERNAL REVENUE CODE
;
BE IT RESOLVED by the City Council (the "Council") of the City of Chanhassen,
Minnesota (the "City"), as follows:
)
1. Recitals.
(a) The Internal Revenue Service has issued Treasury Regulations, Section
1.150-2 (as the same may be amended or supplemented, the "Regulations"), dealing with
"reimbursement bond" proceeds, being proceeds of bonds used to reimburse the City for
any project expenditure paid by the City prior to the time of the issuance of those bonds.
(b) The Regulations generally require that the City (as the issuer of or the
primary obligor under the bonds) make a declaration of intent to reimburse itself for such
prior expenditures out of the proceeds of subsequently issued bonds, that such declaration
be made not later than 60 days after the expenditure is actually paid, and that the bonding
occur and the written reimbursement allocation be made from the proceeds of such bonds
within 18 months after the later of (1) the date of payment of the expenditure or (2) the
date the project is placed in service (but in no event more than 3 years after actual
payment).
(c) The City heretofore implemented procedures for compliance with the
predecessor versions ofthe Regulations and desires to amend and supplement those
procedures to ensure compliance with the Regulations.
(d) The City's bond counsel has advised the City that the Regulations do not
apply, and hence the provisions ofthis Resolution are intended to have no application, to
payments of City project costs first made by the City out of the proceeds of bonds issued
prior to the date of such payments.
2. Official Intent Declaration. The Regulations, in the situations in which they
apply, require the City to have declared an official intent (the "Declaration") to reimburse itself
for previously paid project expenditures out of the proceeds of subsequently issued bonds. The
Council hereby authorizes the Finance Director to make the City's Declarations or to delegate
from time to time that responsibility to other appropriate City employees. Each Declaration shall
comply with the requirements ofthe Regulations, including without limitation the following:
(a) Each Declaration shall be made not later than 60 days after payment ofthe
applicable project cost and shall state that the City reasonably expects to reimburse itself
for the expenditure out of the proceeds of a bond issue or similar borrowing. Each
Declaration may be made substantially in the form ofthe Exhibit A which is attached to
and made a part of this Resolution, or in any other format which may at the time comply
with the Regulations.
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(b) Each Declaration shall (1) contain a reasonably accurate description of the
"project," as defined in the Regulations (which may include the property or program to be
financed, as applicable), to which the expenditure relates and (2) state the maximum
principal amount of bonding expected to be issued for that project.
(c) Care shall be taken so that the City, or its authorized representatives under
this Resolution, not make Declarations in cases where the City doesn't reasonably expect
that reimbursement bonds will be issued to finance the subject project costs, and the City
officials are hereby authorized to consult with bond counsel to the City concerning the
requirements of the Regulations and their application in particular circumstances.
(d) The Council shall be advised from time to time on the desirability and
timing of the issuance of reimbursement bonds relating to project expenditures for which
the City has made Declarations.
3. Reimbursement Allocations. If the City is acting as the issuer ofthe
reimbursement bonds, the designated City officials shall also be responsible for making the
"reimbursement allocations" described in the Regulations, being generally written allocations
that evidence the City's use of the applicable bond proceeds to reimburse the original
expenditures.
4. Effect. This Resolution shall amend and supplement all prior resolutions and/or
procedures adopted by the City for compliance with the Regulations (or their predecessor
versions), and, henceforth, in the event of any inconsistency, the provisions of this Resolution
shall apply and govern.
Adopted on
Minnesota.
, 2009, by the City Council of the City of Chanhassen,
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CERTIFICATION
The undersigned, being the duly qualified and acting Manager of the City ofChanhassen,
Minnesota, hereby certifies the following:
The foregoing is true and correct copy of a Resolution on file and of official, publicly
available record in the offices ofthe City, which Resolution relates to procedures of the City for
compliance with certain IRS Regulations on reimbursement bonds. Said Resolution was duly
adopted by the governing body of the City (the "Council") at a regular meeting of the Council
held on ,2009. The Council meeting was duly called, regularly held,
open to the public, and held at the place at which meetings of the Council are regularly held.
Councilrnember moved the adoption of the Resolution, which motion was
seconded by Councilmember . A vote being taken on the motion, the
following members ofthe Council voted in favor ofthe motion to adopt the Resolution:
and the following voted against the same:
Whereupon said Resolution was declared duly passed and adopted. The Resolution is in full
force and effect and no action has been taken by the Council which would in any way alter or
amend the Resolution.
WITNESS MY HAND officially as the Manager of the City ofChanhassen, Minnesota,
on ,2009.
Manager
City of Chanhassen, Minnesota
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EXHIBIT A
Declaration of Official Intent
The undersigned, being the duly appointed and acting Finance Director of the City of
Chanhassen, Minnesota (the "City"), pursuant to and for purposes of compliance with Treasury
Regulations, Section 1.150-2 (the "Regulations"), under the Internal Revenue Code of 1986, as
amended, hereby states and certifies on behalf of the City as follows:
1. The undersigned has been and is on the date hereof duly authorized by the City
Council of the City to make and execute this Declaration of Official Intent (the "Declaration")
for and on behalf ofthe City.
2. This Declaration relates to the following project, property or program (the
"Project") and the costs thereof to be financed:
3. The City reasonably expects to reimburse itself for the payment of certain costs of
the Project out ofthe proceeds of a bond issue or similar borrowing (the "Bonds") to be issued
after the date of payment of such costs. As of the date hereof, the City reasonably expects that
$ is the maximum principal amount ofthe Bonds which will be issued to finance
the Proj ect.
4. Each expenditure to be reimbursed from the Bonds is or will be a capital
expenditure or a cost of issuance, or any of the other types of expenditures described in Section
1.150-2(d)(3) of the Regulations.
5. As ofthe date hereof, the statements and expectations contained in this
Declaration are believed to be reasonable and accurate.
Date:
, 2009.
Finance Director
City of Chanhassen, Minnesota
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