2k Bond Regulations/IRS
CITY OF
CBMflIASSEN
6LJ<.,
-
Uli'MORANDllM
-.,
TO:
Mayor
City Council
BtuœM. Dc1ong,FinaDceDjmctO(!fjj)
January 5, 2000
o City CmttrDrilit, PO Box 147
~,Minntsot455317 !i'&ØM:
Plxmt612.937.1900
Gtnm1lFax612.937.5739 DATE:
;"ginttring Fax 612.937.9152
,ublic 54ftty FI/X 612.934.2524 SUBJECT:
Wíb www.ci.chanhllHtn.mn.us
Reimbursement Resolution
On the advice of our bond counsel, Mary Ippel of Briggs and Morgan, I am asking
1he<!ityCounciHo pass the 1Ittached resolution. It authorizes the City Manager
(orhis~ee)tomake declarations that signal the city's intent to reimburse
itself for capital expenditures made before bonds have been issued. There must
havecbeen.a procedure in place to.keep our process in accord with IRS regulations,
but it was not clearly defined. This resolution clarifies the responsiblity for
ensuring that proper procedures are followed to maintain the tax-free nature of
city bond issues.
TIDspl'ÓCessbecomes effective only when 1heeity makes the declaration within
'6thlaysufexpenåitwes for~tm whieh it intends to issue bonds. These
å:clarations:are.not'required'when bonds are issued fll'st,and the proceeds are used
to,-finance thecspecìfied capital expenditures.
attachment
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RESOLUTION NO.
'RESOLUTION ESTABLISHING PROCEDURES
Rß~G ~ COMPLIANCE WITH REIMBURSEMENT BOND
REGDLATIONS UNDER THE INTERNAL REVENUE CODE
BE IT RESOL'ÆØby the, City Council (the "Council") of the City of
Chanhassen, Mtnnesota (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 the City's
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
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 ~fterthe 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. . Tire City heretofore implemented procedures for
compliance with the predecessor versions of the Regulations
and desires to amend and supple~ent those PF9cedures 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 of
this 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
City Manager to make the City's Declarations or to
delegate from time to time that responsibility to other
1122404.1
appropriate City employees. Each Declaration shall comply with
the requirements of the Regulations, including without limitation
the following:
a. Each Declaration shall be made not later than 60
days after payment of the 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 of the 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.
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 does not reasonably
expect to issue reimbursement bonds 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. 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 this day of
Chanhassen City Council.
, 2000, by the
1122404.1
2
EXHIBIT A
Declaration of Official Intent
The undersigned, being the duly appointed and acting City
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 Chanhassen City Council to make and execute
this Declaration of Official Intent (the "Declaration") for and
on behalf of the 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 of the proceeds of a
bond issue or similar borrowing (the "Bonds") to be issued by the
City after the date of payment of such costs. As of the date
hereof, the City reasonably expects that $ is the
maximum principal amount of the Bonds which will be issued to
finance the Project.
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.
contained
accurate.
As of the date hereof, the statements and expectations
in this Declaration are believed to be reasonable and
Date:
City
City of Chanhassen, Minnesota
1122404.1
A-I
CERTIFICATION
The undersigned, being the duly qualified and acting City
Manager of the City of Chanhassen, Minnesota, hereby certifies
the following:
The foregoing is a true and correct copy of a Resolution on
file and of official, publicly available record in the offices of
the 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 or special meeting of the
Council held on , 2000. Said meeting was duly
called, regularly held, open to the public, and held at the place
at which meetings of the Council are regularly held.
Councilmember moved the adoption of the
Resolution, which motion was seconded by Councilmember
A vote being taken on the motion, the
following members of the Council voted in favor of the 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 City Manager of the City
of Chanhassen, Minnesota, this ____ day of . 2000.
City Manager
City of Chanhassen, Minnesota
1122404.1