6. Update memo, Organized collection it i 6
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690 COULTER DRIVE • P.O. BOX 147 • CHANHASSEN, MINNESOTA 55317
1 (612) 937 -1900 • FAX (612) 937 -5739
. Atom By mg mamma
1 MEMORANDUM wow I,/ 1 ' A
Modifies
TO: Don Ashworth, City Manager Waled / / - 9 3
I Date Submitted to Commission FROM: Paul Krauss, AICP, Planning Director
Date Submitted to Council
1 DATE: November 3, 1993 1/.1 — 93
SUBJECT: Update Memorandum, Organized Collection
I At the previous Council meeting, the Phase I report of the Organized Collection Study was
presented. Most of the meeting focused on presentations by haulers who were opposed to the
1 idea. Several residents also raised concerns. Due to the lateness of the hour, it was not possible
to provide a response to these issues. The Council voted to continue the item.
I It is important to remember first why the Council initiated the study and secondly, to touch on
what the Recycling Committee actually recommended the Council do. The study was initiated
after the City Engineer raised concerns over the widespread breaking of the law that resulted
I from the haulers running significantly overweight trucks on City streets during weight limits.
Related to this is the concern that this situation is greatly accelerating the deterioration of City
streets which then need to be rebuilt prematurely at public expense. When the Recycling
I Committee looked into the situation they added the issues of noise and visual impacts stemming
from garbage being picked up over several days, air quality impacts, waste of energy caused by
I inefficient routing and the cost implications of the current "open" system. None of the haulers'
comments nor any of their mailings to their customers appear to have touched on these issues. -
Their primary focus seems to have been on customer choice and the impact of, organized
I collection on private enterprise. Both of these concerns are . valid and were discussed by the
Committee at length but they felt that there were options for addressing them.:;
I What exactly is the Council being asked to do? The Committee is asking that you accept their
Phase I study and enter into Phase II where an actual organized collection program will be
negotiated. If at the end of that period you feel that the program is unacceptable, you can modify
I or discard it. You can allow the present system to exist or develop some other alternative to
address the issues.
I As I indicated above, there was no opportunity to respond to the issues that were raised at the
last meeting. I have therefore asked our consultant, Dean Johnson of Resource Strategies
Corporation, to prepare a response. This is attached to this memo. Additionally, you will find
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1 Don Ashworth
November 3, 1993
Page 2
Dean's Phase II work outline and proposal. The scope of services is particularly important since
it outlines what will be occurring if you proceed with Phase II.
' STAFF RECOMMENDATION
1 Staff recommends that the City Council accept the Phase I Study and approve undertaking Phase
II of the program.
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R• ECEIVED
No v 0 1993
RESOURCE
L,n
STRATEGIES
CORPORATION November 1, 1993
6600 CITY WEST PARKWAY
SUITE 340 Mr. Paul Krauss, AICP
MINNEAPOLIS, MN Planning Director •
55344 City of Chanhassen
612/942-8010 P.O. Box 14 7
FAX 612/9427464 Chanhassen, Minnesota 55317
RE: 10/25/93 Public Hearing Comments - Organized
Collection
Dear Paul: 1
This memorandum is intended to serve as a summary and
response to comments registered at the October 25 public
hearing on organized collection. A total of nineteen
persons addressed the City Council, including seven
haulers, nine residents, one Carver County Commissioner,
one Carver County solid waste specialist and- one
Organized Collection Study Committee member.
The seven haulers that commented represented four of the
six licensed haulers in Chanhassen:
Waste Management (1) i
Woodlake /BFI (2)
Aagard (3)
Chaska (1) 1
Following are paraphrased comments /questions raised by
the haulers and subsequent responses.
1. We generated 350 customer responses to our survey
of resident attitudes; why wasn't this included in
the report?
The survey responses were presented at a committee
meeting in June. It was agreed that such information was
biased. The committee requested that a resident survey
be conducted -- this was not an original element in the
study. Committee members agreed to make random phone
calls, selecting every tenth residence in the phone book,
within various "letters" of the alphabet. RSC agreed to
generate the survey questionnaire and tabulate the
results. The questionnaire was presented to the 1
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Page 2
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t committee for review and revision prior to implementation. Six
participants generated 81 resident responses over a two -week
' period.
2. I disagree with the report's conclusion that most of the
collection vehicles exceed weight restrictions in the spring.
All information presented in the report, regarding the existing
collection system, was generated form the hauler survey. The
11 haulers identified all fleet vehicles, as well as vehicle
capacities and gross vehicle weights. Most of the garbage trucks
exceed weight restrictions in the spring -- some exceed weight
restrictions all year.
3. By signing a contract for collection, the City is one step
closer to Superfund cleanup liability. _
' This issue was raised by the committee and noted in the report.
Neither the Attorney General's office nor the City Attorney agree
with this position. There are no legal precedents to support this
conclusion. State Statutes specifically permit cities and counties
to organize collection. State Statutes also require cities to
ensure that all households have solid waste collection service,
which is most efficiently and cost - effectively accomplished by
organized collection.
' 4. I'm not supporting organized collection, but I'm not opposed
to it either -- I'm concerned about losing my existing base of
customers in Chanhassen.
Organized collection with existing haulers will °freeze" the base
level of customers each hauler currently has. Future account
growth will be tied to hauler performance and residential growth in
the City. A hauler cannot lose accounts unless there is a failure
in performance. A hauler may lose accounts in open collection
through competition with other haulers, which has occurred in
Chanhassen.
5. We made a major investment in the RVS recycling center and
' we're concerned about losing it due to organized collection.
See response #4. Organized collection will have no impact, unless
the City were to competitively bid for service and this particular
hauler lost all existing accounts.
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6. Heavy truck damage -- we always hear of it -- what about
school buses and other heavy trucks?
Garbage trucks and school buses are the only potentially overweight
vehicles which have "regularly scheduled service" in neighborhoods.
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Paul Krauss
• Page 3
The largest school buses will exceed 7 -ton weight restrictions when
g g
carrying more than 63 students. School buses do not travel on all
residential streets for service and there are not multiple carriers
providing duplicative service. State Statutes also exempt buses
from weight restrictions.
Nine residents raised issues with the City Council (one spoke
twice). Most of the comments addressed the preference to have
choice in hauler selection. Following are responses to questions
or other comments noted.
7. I have garage -side pickup service and I'm willing to pay for
it. What evaluation of organized collection will be done to IF
ensure service, how often and how will you respond to
complaints?
Attached is the ro osed work program or scope of services for
P P P g P
Phase II. The answers to several questions posed by hearing
participants will not be determined until Phase II is completed;
however, the scope of services clearly outlines the issues that
will be discussed and included in service contracts.
II F & II G: Service levels ,
II J: Performance standards
II I: Complaints
8. What about other vehicle impacts; performance standards and
monitoring?
See response #6 and response #7.
9. There was no mention of the disadvantages to organized
collection.
This is a reasonable comment from anyone not having seen the
Organized Collection Study. The committee requested that a one -
page "findings and recommendations," highlighting the basis for
committee recommendations, be presented to the City Council. As a
result of the rather lengthy hearing preceding the organized
collection hearing, I did not supplement the one -page summary in my
presentation. It was my intention to respond to questions or
comments after the hearing was closed.
Section II of the report includes the description of the
alternative collection methods. Table 3 (attached) includes a
ranking of the alternative collection methods, highlighting the
most favored /least favored aspects of the alternatives.
The disadvantages of organized collection include loss of free
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11 Paul Krauss
Page 4
enterprise, loss of resident choice and an increase of city
administrative commitments.
10. Priorities for collection should be the environment, cost and
convenience.
I am not certain that this was a resident's endorsement of
organized collection; however, organized collection is the surest
way to meet these priorities.
1 11. The commercial hauler we used did not work out at the center -
fortunately, we had the choice to select another hauler.
I Organized collection will be limited to residential service and
will not affect commercial accounts. In general, if a residential
hauler does not meet minimum performance standards, the City will
have remedies, including license revocation.
12. If it ain't broke, don't fix it.
' The City Engineer has identified increasing costs of street
maintenance and repair. One of the unnecessary impacts to local
streets is the duplicative service inherent in open collection.
The City does not experience six independent contractors providing
duplicative school busing service; rather, the system operates as
efficiently as possible with one carrier, providing the least
impact to local streets. The existing open collection system may
be "broke."
13. I am not aware of any groundswell to organize collection.
Committee meetings were attended by several residents who indicated
their neighborhoods had implemented their own organized collection,
or were waiting to see what the City was going to do. The reasons
for organizing collection were reported to include reducing the
number of trucks on streets, reducing aesthetic impacts and
' reducing costs. There were no residents who attended the committee
meetings to express objections to the potential for organized
collection.
The survey of residents showed that nearly half of respondents
didn't have a preference for open or organized collection. Roughly
one - quarter of the residents opposed organized collection, while
one - quarter supported organized collection. There has neither been
a "groundswell" to organize collection nor a groundswell to oppose
organization.
' The remaining comments by Marcus Zbinden and John Siegfried, Carver
County, and Uli Sacchet, Study Committee favored the City's
examination of organized collection. The County presented its
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r rather h n landfilling waste through interest in processing t a g h hauler g
subsidies and city contracts. Mr. Sacchet provided a very good
summary of the committee's review process, survey credibility,
findings, recommendations and future work scope. -
Hopefully, I have identified all of the significant comments raised
at the public hearing. I will be prepared to address other
comments the City Council may have at the November 8th Regular
Meeting. The purpose of Phase II is to resolve the details on MI
issues regarding service levels, performance standards, complaint
response, City /hauler roles and responsibilities, account growth
distribution and cost. State Statutes require the 90 -day
"negotiating" period with interested licensed haulers.
There is no way to respond to the concerns expressed about hauler
choice and competition. These are personal opinions and must be
considered. As the report notes, there have been no known attitude
surveys completed in cities that have organized collection. There
is no way to document whether residents still have concerns about
choice and competition. It is hard to believe that residents would
favor a reversal to what Chanhassen is considering: switching from
service by one hauler on one day a week to six haulers randomly
providing service in the neighborhood on any given week day. We
have not learned of any cities with organized collection that have
reverted back to open collection.
Please do not hesitate to contact me if you have any questions
regarding this matter.
Sincerely, ,
Dean R. Johnson 1
Partner
DRJ /sh ,
Attachments
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ATTACHMENT A
CITY OF CHANHASSEN
PROPOSAL
PHASE 11 - ORGANIZED SOLID WASTE COLLECTION STUDY
SOLID WASTE COLLECTION ELEMENTS,
HAULER NEGOTIATIONS AND SERVICE IMPLEMENTATION
I. BACKGROUND
The City of Chanhassen approved a proposal by Resource Strategies Corporation (RSC) on May
10, 1993 to assist the City in evaluating the potential for organized collection of mixed municipal
1 solid waste (MSW) and recyclables. The Organized Collection Study Committee has completed
the 90 -day planning period, prepared the "City of Chanhassen Organized Collection Study" with
' assistance from RSC and submitted recommendations to the City Council to organize collection in
the City.
Minnesota Statutes, Section 115A.94, identify a 90 -day negotiating period to "... discuss possible
organized collection arrangements with all licensed collectors operating in the city or town who
have expressed interest. If the city or town is unable to agree on an organized collection
arrangement with a majority of the licensed collectors who expressed interest, or upon expiration
the 90 days, the city or town may propose implementation of an alternate method of organization
as authorized..."
RSC proposes to assist the Organized Collection Study Committee in establishing an organized
' collection system that reduces environmental impacts, reduces impacts on local streets, reduces
costs of collection to residents, improves overall efficiency of collection and allows the
' opportunity to existing licensed haulers to continue providing solid waste collection service in the
City of Chanhassen.
II. SCOPE OF SERVICES •
The following Scope Of Services is an breakdown of tasks required to complete Phase II of the
Organized Collection Study, which includes identification of uniform collection programs,
establishment of collection zones, negotiations with existing licensed haulers, amendments to
' ordinance /licensing provisions, public education and promotional information, implementation
strategies and service contracts.
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A. AMEND LICENSING PROVISIONS 1
RSC will prepare amendments to existing hauler licensing provisions to establish limits on the
number of licenses issued by the City. 1
B. HOUSING UNIT INVENTORY
The City will assist RSC in identifying the total number of single family detached and single
family attached housing units in the City (all households not utilizing centralized solid waste
collection service). The household inventory will be summarized by various zones or sectors 1
within the City.
C. RESIDENTIAL GROWTH AREAS
The City will assist RSC in identifying planned residential growth areas in the City and in making
development assumptions and growth projections within the zones identified in paragraph IIA.
D. HAULER NOTICE, ACCOUNT VERIFICATION AND ACCOUNT DISTRIBUTION 1
RSC will provide notice to existing haulers of the Phase II process and request for participation. It
is presumed that uninterested or uncooperative parties will be excluded from contract discussions 1
and future contract participation. RSC will prepare maps and survey forms to solicit detailed
account distribution information from haulers. Data collected will be analyzed and organized 1
according to the zones identified in paragraph IIA.
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E. ESTABLISHMENT OF COLLECTION ZONES
Based upon data assembled and analyzed, RSC will establish potential hauler collection zones
within the City. The zones will be based upon total accounts of existing haulers and, to the extent 1
possible, hauler account distribution within the City and future growth assumptions.
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F. IDENTIFY UNIFORM COLLECTION PROGRAM BASE SERVICE LEVELS
RSC will develop base level curbside collection program criteria and standards. Service levels will
be volume based for recycling and reduction incentives and are anticipated to include:
• Same day recycling (expand existing service requirements)
• Senior /disabled services
• One can (32 gallon) biweekly service
• One can (32 gallon) weekly service
• Two can (64 gallon) weekly service
• Three can (96 gallon) weekly service
• Full service weekly
• Special collections (ie. Christmas trees, cleanup options)
The Committee will determine whether wheeled carts will be required as a base level service
or as an optional service level to residents.
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1 G. DEVELOP UNIFORM COLLECTION PROGRAM SERVICE OPTIONS
RSC will identify and summarize collection service options which may be made available to
1 residents for fees in addition to base base level service. Optional services may include but not be
limited to the following:
• Door step /garage -side pickup
• Service level overage fee
• Additional recycling collection/referral
• Bulky item collection
• Yardwaste collection
' H. DETERMINE PREFERRED ORGANIZED COLLECTION METHOD
RSC will present background information to the Committee from cities which utilized existing
haulers in establishing organized collection. The Committee will determine the preferred
' organized collection method for the City.
L DEFINE CITY AND HAULER ROLES AND RESPONSIBILITIES -
RSC will identify roles and responsibilities for the City and haulers within the proposed organized
1 collection structure. Roles and responsibilities may include but not be limited to the following:
• Responding to service inquiries
• Responding to complaints
• Complaint resolution procedures
• Billing process
• Reporting requirements
' • Monitoring requirements
• Public education and service promotion
' J. DEVELOP PERFORMANCE STANDARDS
RSC will develop performance standards which reflect City expectations for minimum levels for
' uniform collection service and the criteria for hauler performance evaluation. The standards will
include remedies for performance deficiencies and termination criteria. The standards may
include but not be limited to the following:
1 • Performance guarantee
• Personnel requirements
• Equipment requirements
1 • Insurance requirements
• Surety requirements
• Safety and supervision
1 • Monitoring and reporting
K. ESTABLISH CONTRACT REQUIREMENTS
RSC will prepare minimum service contract requirements for Committee, City Attorney and
hauler review. The contract(s) will be based upon and include but not be limited to the following:
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• Defuzitions 1
• General provisions
• Collection method
• Contract services
• Collection schedule
• Service zones and adjustments
• Roles and responsibilities
• Service fees and adjustments
• Service term, renewal and negotiating windows
• Performance standards
• Remedial actions and termination
• Monitoring and reporting
• Public education and service promotion
• Surety requirements
• Indemnification
• Assignment
L. NEGOTIATE CONTRACT TERMS AND RATES
RSC will establish base level and optional service fee structures and contract terms for Committee
review and evaluation. RSC and the Committee will review and negotiate contract terms and fees
with the haulers. The City will maintain the right to publicly bid or negotiate for collection service
with other haulers, if negotiations with existing haulers is unsatisfactory to the City. 1
M. AMEND ORDINANCE/LICENSING PROVISIONS
111
RSC will assist the City in preparing amendments to or establishing ordinance and licensing
provisions which will be necessary to implement organized collection in the City. The provisions
will include hauler licensing and contract references and mandatory collection requirements within
the City. The provisions will also include exemptions to mandatory collection, consistent with
State Statutes.
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N. PREPARE PUBLIC EDUCATION/ PROMOTIONAL INFORMATION
RSC will prepare press releases, public education and promotional information which identifies the
details of the pending changes in the solid waste collection system in Chanhassen. The City will
be responsible for printing and distribution of all information, which may include but not be
limited to the following:
• Purpose and objectives
• Organized Collection Study process and surnmary
• Collection program highlights
• Hauler identification
• Startup dates
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• Base and optional services
• Collection days and zones
• Transition issues and expectations
• Additional information sources and contacts
• Complaint process, contacts and remedies
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O. IMPLEMENT SERVICE CHANGES
RSC will present the contract recommendations, licensing/ordinance amendments and
implementation schedule to the City Council for review and consideration. RSC will provide
additional assistance to the City, as requested, in the implementation and transition to organized
collection.
P. STUDY COMMITTEE OVERSIGHT
RSC recommends that the Study Committee provide project oversight, comparable to the level of
participation in Phase I, to afford a balanced approach to service provisions, contract negotiations
and final contract recommendations. It is anticipated that the Committee will meet at four •
intervals in the process, as follows:
• Meeting #1 Establish collection zones, service levels and preferred collection method
1 • Meeting #2 Establish roles /responsibilities, performance standards, contract provisions
• Meeting #3 Negotiate contract terms and rates
1 • Meeting #4 Recommend final contract /implementation provisions
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ATTACHMENT B
TABLE 4
ALTERNATIVE METHODS COMPARATIVE MATRIX 1
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City of Chanhassen 38 Resource Strategies
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C ITY OF
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690 COULTER DRIVE • P.O. BOX 147 • CHANHASSEN, MINNESOTA 55317
I (612) 937 -1900 • FAX (612) 937 -5739
Action by NY Administrate
+� indorse ✓ W
MEMORANDUM Modrfied
NelectecL-- -
TO: Don Ashworth, City Manager _ /a 0') 3
Date Submitted to Commission
FROM: Paul Krauss, AICP, Planning Director ,
Charles Folch, City Engineer Ode Submitted to Council
/o 5
1 DATE: October 20, 1993
1 SUBJ: Findings and Recommendations of the Organized Collection Study Committee
e
Last winter the City Council directed staff to U ndertake a study of the benefits of organized
I collection of solid waste for the City. The impetus behind this request was largely to respond
to issues raised from the significant damage to City streets that results from their repeated use
I by overweight garbage trucks during load limit periods. It appeared that some sort of organized
collection program was the only means of effectively limiting this damage which has resulted in
the need to reconstruct streets at great cost. At the same time, there appeared to be other benefits
1 to organized collection including, reduced noise, lower costs, improved visual environment by
reducing the number of days trash is collected, better compliance with State law and improved
energy efficiency. The City retained the Resource Strategies Corporation to help undertake the
1 study which had to be conducted in accordance with established guidelines.
The Recycling Committee was convened to undertake the organized collection study and work
I with Dean Johnson of Resource Strategies Corp. The group met frequently over a period of
months to define the issues, survey residents, develop and understand the options and prepare a
recommendation. The meetings were attended by representatives of many of the existing haulers.
I While it would not be accurate to state that the haulers are in agreement with the
recommendations, it is fair to state that they have had opportunity to review and comment.
' The Findings and Recommendations of the group are attached to this memo. Dean Johnson and
possibly some of the members of the Recycling Committee will be present at the meeting to
discuss the report. It is also likely that the haulers will be represented.
Since we were heavily committed over much of the summer neither the Planning Director or City
I Engineer were able to participate extensively in the committee's work until recently. However,
we have been brought up to speed on it and found it to be well prepared and am in agreement
with the recommendations. Please refer to the attached study and summary for details. We
1
Don Ashworth 1
October 20, 1993
Page 2
believe that the form of "managed competition" being proposed has the potential to address the I
many issues raised by open collection. At the same time, it has the potential to restrain or reduce
costs through improved efficiency while preserving the benefits of a "free market" approach in
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terms of customer satisfaction and existing business serving our community.
The Recycling Committee has recommended that the City Council, receive the report, initiate 1
licensing to limit the number of haulers to the present six that would decline over time when/if
a hauler drops out, adopt a resolution of intent to organize waste collections and proceed with
the Phase II program of the study where implementation would be developed. Dean Johnson was
asked to prepare a proposal to respond to Phase II assistance. The proposal is attached for your
review. ,
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CITY OF CHANHASSEN
r ORGANIZED COLLECTION STUDY COMMITTEE
FINDINGS AND RECOMMENDATIONS
' FINDINGS
• As many as six (6) solid waste collection vehicles and six (6) recycling vehicles currently serve the
' same residential neighborhoods in Chanhassen each week
• Garbage cans and recycling bins are visible throughout the community on each week day
' • The current open system of collection results in up to five or six times more mileage on residential
streets by heavy collection vehicles than required by organized collection
' • A typical solid waste collection vehicle and typical recycling vehicle, meeting weight restrictions,
have the combined cumulative effect on residential street pavement as 1650 automobiles
' • The current open system of collection may create the equivalent impact on residential streets as
nearly 10,000 automobiles each week - up to six times more than required by organized collection
' • Organized collection will reduce current collection vehicle air emissions, vehicle noise, vehicle
fuel consumption, vehicle trips, vehicle miles, residential street wear and aesthetic impacts .
• The costs of organized collection are lower than the costs of open collection in Carver County and
' within the Twin Cities Metropolitan Area
• Any change in the current system of open collection will result in varying impacts on existing
licensed haulers in the City
• The Committee favors an organized collection system which allows existing haulers to continue
' providing service in the City, while minimizing the negative impacts of open collection
• In a survey of Chanhassen residents, 27% of the respondents were not at all supportive of
organized collection, 48% were neutral and 25% were very supportive of organized collection
1 • Residential organized collection will allow the City to comply with and enforce provisions of
Minnesota Statutes, which require that cities with a population over 1000 ensure that every.
' household in the community has solid waste collection service
RECOMMENDATIONS
In view of the study objectives, review of existing conditions, evaluation of collection impacts,
service costs and resident opinions, the Chanhassen Organized Collection Study Committee
recommends that the City Council consider the following actions:
1. Accept the City of Chanhassen Organized Collection Study.
2. Initiate licensing and /or ordinance provisions to limit the number of solid waste collection
licenses to a maximum of six, with a declining limit based upon turnover.
3. Adopt a Resolution of Intent to organize solid waste collection.
4. Proceed with Phase II of the Organized Collection Study to discuss arrangements for organized
collection with existing licensed haulers in Chanhassen.
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CITY OF CHANHASSEN
CARVER AND HENNEPIN COUNTIES, MINNESOTA
DATE: RESOLUTION NO:
MOTION BY: SECONDED BY:
A RESOLUTION OF INTENT TO ORGANIZE RESIDENTIAL SOLID WASTE
COLLECTION IN THE CITY OF CHANHASSEN
WHEREAS, Minnesota Statutes Section 115A.94 allows cities to organize collection of
solid waste and identifies a process for organization; and
WHEREAS, the City Council of the city of Chanhassen provided mailed notice to
licensed solid waste haulers and published notice in the official newspaper of a public hearing on
May 24, 1993, to consider organizing solid waste collection; and
WHEREAS, the City Council adopted Resolution No. , A RESOLUTION OF
INTENT TO COMMENCE THE PROCESS OF EVALUATION AND PLANNING FOR A
POTENTIAL SYSTEM OF ORGANIZED SOLID WASTE COLLECTION IN THE CITY OF
CHANHASSEN; and
WHEREAS, The City of Chanhassen Organized Collection Study Committee has
completed a planning period and summarized its findings and recommendations in the "City Of
Chanhassen Organized Collection Study;" and 1
WHEREAS, the City of Chanhassen has mailed notice to licensed solid waste haulers,
published notice in the official newspaper and held the public hearing on its intent to consider
organized collection.
NOW, THEREFORE, BE IT RESOLVED that the City Council accepts the "City of
Chanhassen Organized Collection Study," adopts The Findings and Recommendations of the
Organized Collection Study Committee and authorizes the Committee to begin a 90-day review
period to discuss possible organized collection arrangements with interested, existing licensed
haulers in the City of Chanhassen. 1
Passed and adopted by the Chanhassen City Council this 25th day of October, 1993.
A'1"1 "EST: 1
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Don Ashworth, City Clerk/Manager Donald J. Chmiel, Mayor
YES NO ABSENT
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PUBLIC HEARING NOTICE
' CITY OF CHANHASSEN
CARVER AND HENNEPIN COUNTIES, MINNESOTA
NOTICE IS HEREBY GIVEN, the City Council of the City of Chanhassen will hold a public
' hearing at 7:30 p.m., Monday, October 25, 1993 at the Chanhassen City Hall, 690 Coulter
Drive, Chanhassen, Minnesota. The purpose of the public hearing is to receive input on the
' recommendations of the City of Chanhassen Recycling Committee, regarding the establishment
of organized collection of solid waste in the City.
' The Recycling Committee completed a 90-day planning process, which included the review and
analysis of the existing open collection system and alternative methods of collection. The
' Committee held five public meetings with licensed haulers and residents to discuss organized
collection. A summary of the planning process and recommendations of the Recycling
' Committee are included in the "City of Chanhassen Organized Collection Study."
' Based upon recommendations of the Committee, The City Council will consider a resolution of
intent to organize residential solid waste collection. If the City Council decides to pursue
organized collection, the Recycling Committee will begin a 90-day process to discuss possible
arrangements for organized collection with interested, existing licensed haulers.
1 Copies of the Organized Collection Study are available for review and inspection at the
Chanhassen City Hall. All persons who desire to comment on this matter will be heard at the
' public hearing.
Dated this 8th day of October, 1993.
/s/
Don Ashworth
Don Ashworth, City Clerk/Manager
' City of Chanhassen
Carver and Hennepin Counties, Minnesota
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AGENDA
RECYCLING COMMITTEE MEETING 1
ORGANIZED COLLECTION STUDY
Tuesday, September 21, 1993, 5:30 P.M. 1
City Council Chambers
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1. Organized Collection Study - Final Report 1
2. Committee Recommendations 1
3. Adjournment 1
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I Recycling Committee Meeting
Organized Collection Study
August 31, 1993 -
I Attendance
1 NAME REPRESENTING PHONE
1 JoAnn Olsen City of Chanhassen 937 -1900
Paul Smith Metropolitan Council 291 -6408
I Don Chmiel City Council 937 -1900
Tom Moline Woodlake 941 -5174
1 Chris Boatwright Aagard West 332 -8412
I Marcus Zbinden Carver County 448 -1217
Gary Lano Chaska Sanitation 448 -2547 .
1 Colleen Dockendorf City Council 470 -4112
Cyrus Childs Committee member 934 -4907
1 Sharmin Al -Jaff City of Chanhassen 937 -1900
Jay Johnson Committee member 934 -5682
I Uli Sacchet - Committee member 937 -2371
1 Beth Wahlberg Resource Strategies 942 -8010
Dean Johnson Resource Strategies Corp. 942 -8010
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C ITYOF
CHANHASSEN
1 690 COULTER DRIVE • P.O. BOX 147 • CHANHASSEN, MINNESOTA 55317
(612) 937 -1900 • FAX (612) 937 -5739
' MEMORANDUM
TO: Mayor and City Council
FROM: Don Ashworth, City Manager .1 A
�A- /
1 DATE: October 25, 1993
SUBJ: Resolution Declaring the Official Intent of the City of Chanhassen to Reimburse
Certain Expenditures from the Proceeds of Bonds Issued by the City
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Included in this agenda is a resolution asking the state and federal governments to cease passing
unfunded mandates on cities. The attached resolution is but another example of unnecessary
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Background
1 For the past ten years, the federal government has been attempting to tighten the reins as to what
type of projects are permitted to be considered as tax exempt. I agree with many of the changes
' which basically stopped cities from selling tax exempt bonds to finance the construction of a K-
Mart, Hardees, etc. However, as with most federal laws, they went too far or established rules
which put cities into a Catch -22 position. For example, in the quest for insuring that cities were
' not bonding for expenses that truly were not tax exempt, a decision was made that the bond
proceeds could only be used for expenses occurring after the bonds were sold. The rationale was
one that since the bonds could only be sold after .being reviewed and approved by a Washington
' recognized bond attorney [only a handful of designations are typically made in any one state],
it was reasonable to assume then that the city would only be spending those proceeds on the
items that were approved by that bond attorney as a part of the sale itself. -- The problem with the
1 solution is that it didn't recognize another law which requires that a city carry out a feasibility
study and hold various hearings in advance of declaring the project as a public improvement
project. If those steps are not completed, you cannot legally bond for the costs associated with
1 that project even though it is recognized that the costs of feasibility studies and hearings are
typically expensive. To solve the problem, the feds should have returned to the previous method
wherein the approving attorney reviewed the pre - bonding expenses and made a decision as to
whether those were reasonable and therefore allowed as a part of the overall bond sale. That
solution was rejected and instead replaced with a requirement that a city pass a resolution which
states someone in the organization has maintained a list of all of the pre -bond sale expenses and
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1 Mayor and City Council
October 21, 1993
I Page 2
that prior to those expenses being paid that he or she had kept track of the amounts of money
I that would be later sought to be paid for from the bond proceeds once received. The attached
resolution meets the federal guidelines and insures that our city stays in conformance with federal
law even though it serves no useful purpose.
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Recommendation
I Passage of the attached resolution as recommended by the city's bond consultant, Holmes and
Graven, is recommended.
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City of Chanhassen 1
Carver and Hennepin Counties, Minnesota
DATE: RESOLUTION NO:
MOTION BY: SECONDED BY:
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A RESOLUTION DECLARING THE OFFICIAL INTENT OF THE CITY 1
OF CHANHASSEN TO REIMBURSE CERTAIN EXPENDITURES FROM THE
PROCEEDS OF BONDS TO BE ISSUED BY THE CITY
WHEREAS, the Internal Revenue Service has issued Tres Reg. § 1.103 -18 providing that
proceeds of tax- exempt bonds used to reimburse prior expenditures will not be deemed spent
unless certain requirements are met; and
WHEREAS, the City expects to incur certain expenditures which may be financed
temporarily from sources other than bonds, and reimbursed from the proceeds of a bond; and
WHEREAS, the reimbursement rules apply to bonds issued after March 2, 1992;
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NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of
Chanhassen (The "City ") as follows:
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1. The City reasonably intends to make expenditures for the
project described in Exhibit A (the "Project "), and reasonably intends to reimburse itself for such
expenditures from the proceeds of debt to be issued by the City in the maximum principal
amount described in Exhibit A.
2. The City Manager is authorized to designate appropriate additions to Exhibit A
in circumstances where time is of the essence, and any such designation shall be reported to the
Council at the earliest practicable date and shall be filed with the official books and records of
the City as provided in Section 3.
3. This resolution shall be maintained as part of the books and records of the City
at the main administrative office of the City, and shall be continuously available during normal
business hours of the City on every business day of the period beginning not more than 30 days
after adoption of this resolution and ending on the last date of issue of any bonds issued to
reimburse expenditures described in Exhibit A.
4. This resolution is an expression of the reasonable expectations of the City based 1
on the facts and circumstances known to the City as of the Date hereof. The anticipated
reimbursements set forth at Exhibit A are consistent with the City's budgetary and financial
circumstances. No sources other than proceeds of bonds to be issued by the City are, or are
reasonably expected to be, reserved, allocated on a long -term basis, or otherwise set aside
pursuant to the City's budget of financial policies to pay such Project expenditures. The City
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has not adopted any allocation, budget, or restriction of moneys or adoption of a requirement or
policy to reimburse a fund, the primary purpose of which is to prevent moneys from being
available to pay an expenditure the City intends to reimburse with proceeds of a borrowing.
5. This resolution is intended to constitute a declaration of official intent for purposes
' of Tes Reg § 1.103 -18 and any successor law, regulation, or ruling.
6. The allocation of proceeds of the bonds to be issued to any Project expenditures
' described in Exhibit A will be made not later than one year after the expenditure was paid or one
year after the property was placed in service.
' 7. The Project expenditures described in Exhibit A are capital expenditures as defined
in Tes. Reg. 1.150 -1(h), including costs of issuance of the bonds to be issued in order to
reimburse the Project expenditures.
8. Proceeds of the bonds issued to reimburse the Project expenditures described in
Exhibit A will be deemed spent only when (1) an allocation entry is made on the books or
records of the City with respect to the bonds; (2) the entry identifies an actual expenditure to be
reimbursed, or where the Project is described as a fund or account, the fund or account from
which the expenditure was paid; and (3) the allocation is effective to relieve the bond proceeds
1 from restrictions on unspent proceeds under applicable documents and state laws.
9. No entity or entities possess simultaneously two or more of the following
1 discretionary and non - ministerial powers with respect to the City: power to (1) remove without
cause a controlling portion of the City Council; (2) select, approve, or disapprove a controlling
portion of the City Council; (3) determine the City's budget or require the use of the City's funds
or assets for the other entity's purpose; or (4) approve, disapprove, or prevent the issuance of
debt obligations of the City.
1 10. None of the proceeds of the bonds issued to reimburse the City for the Project
expenditures described in Exhibit A will be used within one year of the allocation (i) to refund
' another governmental obligation or (ii) to create or increase the balance in a sinking fund or
replace funds used for such purpose, or (iii) to create or increase the balance in a reserve or
replacement fund or replace funds used for such purposes; or will be used at any time to
' reimburse any person or entity (other than the City) for expenditures originally paid with the
proceeds of a City obligation (excluding a City inter -fund borrowing); unless (i) such amounts
are deposited in a bona fide debt service fund or are used to pay debt service in the next one -year
period on any City obligation other than the reimbursement bond, or (ii) the original issue was
not reasonably expected to be used to finance the expenditure.
' 11. No action or inaction by the City with respect to the allocation of bond proceeds
to reimbursement of Project expenditures will be an artifice or device to avoid, in whole or in
part, arbitrage yield restrictions or arbitrage rebate requirements.
12. The procedures described in this resolution shall cease to apply to the extent not
required by Tres. Reg. § 1.103 -18 or any successor law, regulation, or ruling.
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Passed and adopted by the Chanhassen City Council this 13th day of April, 1992. I
ATTEST:
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Don Ashworth, City Clerk/Manager Donald J. Chmiel, Mayor
YES NO ABSENT 1
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HOLMES & GRAVEN
CHARTERED
471 Pill bury Center, Minneapolis, Minnesota 55402
. Telephone (02) 3374300
Facsimile (612) 3374310
RECE 92
February 19, 1992 FEB 2 0
9
CITY OF CkgtvH4SSEN
Jean Meuwissen
Treasurer
690 Coulter Drive
Chanhassen N 55317
Dear Ms. M
In Augus 991, I wrote to you describing the Treasury's proposed
regulations— referred to as the "reimbursement rules providing, in general terms,
that proceeds of tax - exempt governmental bonds used to reimburse the issuer for
prior expenditures will not be deemed to have been "spent" unless certain
requirements are met . After receiving many critical comments, the Internal Revenue
• Service revised the regulations and published them on January 30, 1992. A summary
of the final reimbursement rules is enclosed for your information.
J
The final rules are effective for bonds issued after March 2, 1992. Some of the
cumbersome features of the proposed regulations have been revised, but the overall
concept remains the same.
In most general terms the reimbursement rules provide that:
J (I) a declaration of "official intent" by the City must be made on or before
the date of an expenditure that the City expects to reimburse from bond
proceeds;
(ii) the reimbursement from bond proceeds must be made within a) one year
after the expenditure or b) one year after the project financed was
"placed in service," whichever date is later; and
(iii) the expenditures to be reimbursed must be "capital expenditures"
under general federal tax law (bond issuance costs are deemed "capital
expenditures ") .
There are two key exceptions to the "official intent" requirement: (1) the
declaration is not required for "preliminary expenditures" (such as engineering,
architectural work, and bond issuance costs) up to 20% of the bond amount; and (2)
"official intent" during the period from September 8, 1989 to March 1, 1992 can be
shown by "objective" evidence that the issuer intended at the time of the
expenditure to reimburse itself from bond proceeds.
Enclosed is a sample resolution that we think will put the City in compliance with the
' final rules if it is adopted prior to the expenditure p xpenditure to be reimbursed. The
JIM resolution:
(i) states a general intent to reimburse;
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February 19, 1992
Page 68
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(ii) designates a City official of your choice as the person to declare official
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intent with regard to the expenditures; and
(iii) includes an exhibit describing the expenditures to be reimbursed and
the maximum amount of debt to be issued for such reimbursement.
Please note that in completing Exhibit A, you will need to provide a "general
functional description" of the project to be reimbursed, or identify a fund or account
and its general functional purpose. For example, it will suffice to describe a project
as "streets and roads capital improvement program" or as "parks and recreation
fund — recreational facility capital improvement program."
One further requirement of the rules is that the issuer's declaration of intent may
be relied upon only if it is "reasonable." This means that the reimbursement must
be consistent with the City's budgetary and financial circumstances, i.e., no other
source of funds are allocated on a long -term basis to pay for the expenditures.
Another factor is whether the issuer has a history of failing to reimburse after
declaring an intent to do so. Therefore, it is not advisable to declare official intent
before making every expenditure; only do sTn cases where there is a realistic
. expectation (and budgetary need) to bond for the expenditure, and where the
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principal amount of bonds can be reasonably estimated.
We think that the resolution and forms are self - explanatory (to the degree that these
complex rules can be explained), but if you have any questions be sure to contact
me or any of the bond approving lawyers in our office.
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The resolution form sent to you last August (designed to comply with the proposed
regulations) , in most cases will comply with the final regulations, though it contains
certain restrictions that are now unnecessary. If your Council adopted the prior
resolution, it may wish to adopt the enclosed, revised resolution to avoid confusion
and undue limitations on your financing plans. If convenient, we would like to
receive a certified copy of the resolution after its adoption.
A final no of caution is in order. If the City made expenditures it expected to
reimburse from bond proceeds and those expenditures were made before
September 8, 1989, or the project financed was placed in service more than a year
ago, it is not possible to finance those expenditures tax- exempt. If you think this
is a problem for your City, please contact us to see what, if anything, can be done
to reimburse those expenditures.
Yours very truly,
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HOLMES & N, Chartered
By �i�•t ii
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Davi J . K nnedy
lk
• cc: Don Ashworth
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HOLMES & GRAVEN
2/18/92
SUMMARY OF
REIMBURSEMENT REGULATIONS
TRES. REG. 1 1.103 -
1.103-18
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1. The Reimbursement Rules.
S A. General. The reimbursement rules generally apply to
governmental bonds, 501(c) (3) bonds, and private activity bonds used to
finance a governmentally -owned facility. Beginning with such bonds issued
after March 2, 1992, if bond proceeds are used to reimburse an expenditure
made before the bonds were issued, the bond proceeds will not be considered
"spent" unless three basic requirements are met:
1. Declaration of Intent.
(a) General Rule. On or before the date an expenditure
is paid, the issuer or a person or entity authorized to act on its
behalf must declare a reasonable expectation to reimburse the
expenditure with proceeds of a borrowing.
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(b) Content of Declaration of Intent. The declaration of
official intent must:
11111 (1) state that the issuer reasonably expects to
r eimburse the expenditure with proceeds of debt to be
incurred by the issuer;
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(ii) specifically state that it is a declaration of
official intent under Tres. Reg. Section 1.103 -18;
(iii) contain a general functional description of' the
project for which the expenditure to be reimbursed is
made, and state the maximum principal amount of debt to
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be issued for such purposes. The term "project" means a
property, project or program. The description of the
project is sufficient if it identifies the fund or account
from which the expenditure is paid, and describes the
general functional purpose of the fund or account. Some
examples of sufficient project descriptions are: "Highway
capital improvement program;" "school building
renovation;" "parks and recreation fund -- recreational
facility capital improvement program."
_ * Reasonable deviations between the project as described and as
actually reimbursed are acceptable as long as the actual project
- is reasonably related in function to the declared project. For
example, an expenditure for hospital equipment is a reasonable
deviation from a project described as "hospital building
•. improvements." By contrast, an expenditure for rehabilitation
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of a city office building is not a reasonable deviation from a
project described as "highway improvements."
(c) Reasonableness of the declaration. The declaration
of intent to reimburse is reasonable if the following conditions are
met :
(i) Budgetary and Financial Circumstances. The
expectation to reimburse must be consistent with the
budgetary and financial circumstances of the issuer at the
time of the declaration. Such consistency is demonstrated
if no funds from sources other than the reimbursement
bonds are (or are reasonably expected to be) reserved or
allocated on a long -term basis for the expenditure.
Sources considered include the issuer and all members of
the same "controlled group" (generally, entities whose
powers are significantly controlled by another entity or
group of entities) .
(ii) Reasonable Expectation. The expectation to
reimburse must be reasonable based on all the relevant
facts and circumstances at the time of the declaration.
Factors include: the issuer's purposes for declaring
official intent, its history of actual reimbursement for
expenditures for which official intent was declared, and.
its actions taken toward reimbursement of the
expenditures . "Blanket" or excessive declarations will not
be reasonable. A pattern of failing to reimburse in the past
is one factor indicating that the intent is unreasonable,
though an exception is made for extraordinary
circumstances that were unforeseen and beyond the
issuer's control.
(d) Public Availability. The declaration of intent must
be reasonably available for public inspection within a reasonable
period of time after it is made. This requirement if met if the
declaration is available at the issuer's main administrative office
or customary location of records at least 30 days after the date
of the declaration and continuing until the date the bonds are
issued. The requirement will also be met simply by complying
with state or local law governing the public availability of records
of official acts.
(ej Exceptions.
(1) Emergency expenditures. If an expenditure
was not reasonably foreseeable at least 30 days before its
payment, the intent to reimburse may be declared up to 45
days after the date of the payment.
(ii) Prel;m;n►ry expenditures. No declaration of
official intent is required for preliminary expenditures in
an amount up to 20 percent of the issue price of the
relevant bonds. "Preliminary expenditures" include
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architectural, engineering, surveying, soil testing, bond •
issuance, and similar costs that are incurred before the
project commences . Land acquisition, site preparation and
similar costs incident to construction are not preliminary
expenditures.
2. Reimbursement Period.
(a) General Rule. The allocation of bond proceeds to
the reimbursement must occur on or after the date of the
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IIP expenditure and no later than 1 year after the expenditure was
paid or 1 year after the date the property is placed in service,
whichever is later.
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(b) Method of Allocation. An allocation of bond proceeds
to reimburse a prior expenditure:
(i) must be evidenced by an entry on the books
or records of the issuer maintained with respect to the
bonds;
(ii) must identify either an actual prior
expenditure to be reimbursed, or, in the case of a fund or
account, the fund or account from which the expenditure
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(iii) must be effective to relieve the allocated
proceeds from any restrictions under the relevant legal
documents and applicable state law that apply to unspent
bond proceeds.
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(c) Abandonment Exception. If a project is abandoned
before completion, the time limit for allocation of bond proceeds
to reimburse project expenditures is the later of:
(1) 1 year after the date the project is
abandoned; or
11 (ii) 2 years after the last payment of an
expenditure for the abandoned project that is at least
$25,000 or 5 percent of the project cost, whichever is less.
3. Capital expenditure requirement. The expenditure to be
reimbursed must be a capital expenditure, which means any cost of a
type that is properly chargeable to the capital account under general
federal income tax principles. For the purposes of this regulation,
costs of issuance of the reimbursement bond are treated as capital
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B . Anti -abuse Rules.
1 1. General Rule. A reimbursement allocation is not treated as
an expenditure of bond proceeds if any action or inaction of the issuer
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is an artifice or device to avoid arbitrage yield restrictions or arbitrage
rebate requirements.
2. Tax Exempt Refunding of Taxable Bonds. In a tax exempt
refunding of a taxable bond, if proceeds of the taxable bond were
allocated to reimburse a previously paid expenditure, such proceeds
are not deemed to have been spent unless the allocation complied with
federal tax laws and reimbursement allocations applicable to tax- exempt
bonds as of the date of the taxable issue. If the taxable bond proceeds
are deemed unspent, such proceeds are subject to "transfer" to the
tax- exempt refunding bond issue.
3. Other Reimbursement Limitations . An issuer cannot treat
proceeds as spent if the proceeds are used directly or indirectly (i)
within 1 year of the allocation to refund a governmental obligation; (ii)
within 1 year of the allocation to create or increase the balance in a
sinking fund or replace funds used for such purposes; (iii) within 1
year of the allocation to create or increase the balance in a reserve or
replacement fund or replace funds used for such purposes; or (iv) to
reimburse any person or entity other than the issuer for any
expenditure that was originally paid with proceeds of an obligation of
the issuer (excluding an inter -fund borrowing by the issuer) .
An exception is made where proceeds are placed in a bona fide debt
service fund or are used to pay debt service in the next one -year
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period on any obligation of the issuer other than the reimbursement
bonds, or where the proceeds of the original financing were not
reasonably expected to be used as of the date of the original financing
to finance the expenditure.
• C. Application to Private Activity Bonds . In addition to official
action requirements, all private activity bonds are subject to the anti -abuse
rules described above, except as follows: exempt facility bonds and qualified
small issue bonds are subject only to the general anti -abuse rule described in
B .1. above and the reimbursement limitations described in B .3. (i1) and (iii)
above. As noted in paragraph A., governmentally owned exempt facility
bonds and 501(c) (3) bonds are subject to all the reimbursement rules.
D. Effective Date and Transition Rule. •
1. Effective Date. The reimbursement and anti -abuse rules
apply to bonds issued after March 2, 1992.
2. Transition Rule. Bonds may be issued after March 2, 1992
to reimburse expenditures made after September 8, 1989 and before
March 2, 1992 without a prior declaration of official intent, if there is
objective evidence that at the time the expenditure was paid, the issuer
reasonably expected to reimburse the expenditure with proceeds of a
borrowing. The reasonableness of the expectation is determined as
described in A.l (c), above.
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II. Why Regulations Were Issued. The reimbursement regulations were
issued in response to a perceived abuse. The IRS was concerned that a city might
decide to issue bonds to reimburse itself for old expenditures, such as a two -year-
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. old library financed with general funds, and then invest bond proceeds without
regard to rebate or yield restriction requirements until spent on a new project.
These bonds began to be referred to as "pyramid bonds," on the theory that an
issuer could rely on this method to reimburse itself for expenditures as far back as
construction of the pyramids. The IRS has taken the position that under certain
circumstances, the reimbursement is not effective and the bond proceeds are in
reality being issued to finance the new expenditures and should be subject to
applicable yield restriction and rebate requirements. The new regulations are
intended to identify under what circumstances bond -• proceeds used for
reimbursement will be considered "spent" for yield restriction and rebate purposes.
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1111 III. The Consequences for Failure to Comply. If an issuer does not comply
with the reimbursement rules, the immediate result is that bond proceeds are not
considered "spent." The bond proceeds, wherever they are, will be deemed to be
subject to whatever yield restrictions and rebate requirements are applicable.
Assume, for example, that the issuer allocates $1,000,000 of bond proceeds to an
expenditure made the prior year and no declaration of official intent was made.
A. Rebate. If the issuer fell within the $5,000,000 small issuer
rebate exemption, rebate is not a problem. If the issuer was attempting to
meet the six -month or two -year spenddown test, however, the issuer will be
treated as if it hasn't spent the $1,000,000 of proceeds. This may cause it to
fail the spenddown requirement. If the issue is subject to rebate, it will owe
rebate on the investment of the $1,000,000 even if for its accounting purposes
the issuer cbnsiders the money spent. -
B . Yield Restriction. Assume the same $1,000,000 reimbursement
allocation made without a valid official intent. Normally, the issuer has a
three -year temporary period for the expenditure of proceeds to be used for
construction or acquisition of a project based on an expectation that all
amounts will be spent within that three -year period, and any amounts
remaining after three years may be subject to yield restriction. If amounts
subject to yield restriction are invested at a yield in excess of the yield on the
bonds, the bonds become "arbitrage bonds" and lose their tax- exempt status .
Further, if the reimbursement allocation is not spent when made, and in fact
is not spent within three years, the issuer may not be entitled to a temporary
period at all. •
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