1m. Approval of Certificate of Mayor and City Manager Regarding Treasury Regs Sec 1.150-2 470 200 South Pillsb Center �'►►r/+..
Kennedy `�Sixth Street _ -
Minneapolis MN 55402
(612)337-9300 telephone • .-.. ..-.•_. _- -t. .
Graven (612)337-9310 fax
CHAR TER E D e-mail:artys@kennedy-graven.com ,
- • DAVID J. KENNEDY
Attorney at Law
Direct Dial(612)337-9232
e-mail:dkennedy@kennedy-graven.com
May 28, 1998 Manager's comments: Hopefully Mr. Kennedy's cover
letter is self-explanatory. Approval is recommended.
Donald Ashworth DWA (6-15-98)
City Manager
- City of Chanhassen =
P.O. Box 147
Chanhassen, MN 55317
RE Bond Issues - Reimbursement Regulations _ ,
- Dear Don: r t
We've run into a little snag on the bond issues sold on Tuesday evening.
Treasury regulations require that an issuer that expends funds for capital costs that are ultimately -
reimbursed from bond proceeds make an official declaration of intent to do so within 60 days
after the first expenditure. (There are a good many other aspects to this that I won't go into
now.) Back on 1993 when the regulation was finalized, we sent a form resolution to you to
comply with the rule which was adopted, Resolution 93-1 16. The resolution provided that you
or your designee would make the necessary declaration and enter the required data on an
appendix to the resolution. For some reason, this has not been done or in any event the appendix
cannot be found (Karen sent me the resolution, but she could not find the appendix). I recall
talking to Dan Chafee about this subject several times and it was my understanding that he was
a_
making the required entries. In any event, we don't have the appendix. •
I think this problem can be addressed by a certificate showing intent to comply and setting forth - _ .
facts that show substantial compliance. I've enclosed a draft of that certificate for your review.
I think it is factually accurate, but you should review it to be sure that you and the mayor are
comfortable with it. If it is satisfactory, let me know and I'll include it in the closing documents
for the bond issues for signature.
The regulation in question is most troublesome since it requires city officials to make the
declaration at a time when they are not complete certain of the maximum amount of bonds to
be issued or if in fact bonds will be issued. But nonetheless, we must attempt to comply.
RECEIVED '-
. #'t
MAY 2 9 1998 E
WK 44123 ,. :
Cri135 29 k CITY Y Ui-�.NA�IHASSEN ,
,i - - ,`„,-- -c"+. 1. i l_•, rr l' ` Y a:k. :Sx,,J y .: c ;s ,":.� ., i.-tec. a -- a..-',... 4e -.
Donald Ashworth
May 28, 1998
Page 2
May I make a suggestion to aid in complying with this rule? If the following statement were
added to (i) resolutions ordering public improvements, (ii) resolutions authorizing capital
expenditures, and (iii) TIF plans:
. The city declares its intent to reimburse itself for costs of the (project)
(item) (redevelopment costs) from the proceeds of tax exempt bonds in an amount
not to exceed $ "
I think we could always show compliance. I would still make the declaration on the appendix,
however.
You'll note that the certificate states that certain procedures will be put in place to make sure we
follow the rule. I don't think that these are onerous, and setting forth an intent to adopt them
would be of great help in the remote event that the IRS were to audit the bond issues.
Let me know what you think.
Your uly,
D . nnedy
DJK:jes
Enclosure
cc: Ron Batty (w/o enclosure)
P.S. You sure know when to go to the bond market. The rates you got are astonishing!
JK144123
CH135-29
STATE OF MINNESOTA ) CERTIFICATE OF
MAYOR AND CITY MANAGER
COUNTIES OF HENNEPIN AND CARVER ) ss. REGARDING TREAS. REG.
SECTION 1.150-2
CITY OF CHANHASSEN )
The undersigned are the Mayor and City Manager, respectively, of the City of
Chanhassen, Minnesota. The City Manager is the custodian of the books and records of the city.
This certificate is executed and delivered for the purpose of showing compliance with Treasury
Regulation 1.150-2 (Regulations) relating to the reimbursement of capital expenditures from the
proceeds of tax-exempt bonds issued or to be issued by the city.
1. On November 22, 1993, the city adopted Resolution No. 93-116 (copy attached)
evidencing its intent to comply with the Regulations. The resolution designated the city manager
or the manager's designee to record in an appendix to the resolution the council's intent to
finance projects with bond proceeds.
2. For whatever reasons, (i) the ministerial duty of entering the council's declarations
of intent have not been entered in the appendix as required by the resolution or (ii) the appendix
has been misplaced or lost.
3. The city has issued and sold on this date the following issues of tax exempt bonds.
a) $4,970,000 General Obligation Park Bonds, Series 1988A (Park Bonds);
b) $1,325,000 General Obligation Improvement Bonds, Series 1988B (Improvement
Bonds); and
c) $820,000 General Obligation Water Revenue Bonds, Series 1988C (Water
Revenue Bonds).
4. Park Bonds. The Park Bonds were authorized to be issued by a majority vote of
the voters of the city at a special election on September 16, 1997. No expenditures for the
projects to be financed by the Park Bonds (other than costs of professional services) have been
DJK143975
CH135-29 1
made by the city. The city intends to pay or reimburse itself for all costs of the projects from
the proceeds of the Park Bonds within three years from this date.
5. Water Revenue Bonds. No expenditures for costs of the projects to be financed
by the Water Revenue Bonds (other than the costs of professional services) have been made by
the city. The city intends to pay or reimburse itself for all costs of the project from the proceeds
of the Water Revenue Bonds within three years from this date.
6. Improvement Bonds. The proceeds of the Improvement Bonds will be used to
reimburse the city for costs of the Gateway Project, a multiphase improvement project begun in
1997. The proceeds will be used for Phase I costs, all of which have been paid for work
completed in 1997 and 1998. With regard to the Improvement Bonds, the following statements
are made:
a) The description of the project in the preliminary engineering report of Bonestroo,
Rosene, Anderlik & Associates, dated May, 1997, referred to planned financing
by bonds payable from special assessments against benefitted property.
b) At the public hearing conducted in connection with the project on June 23, 1997,
statements by the city staff, and the undersigned, publicly indicated the city's
intention to finance the costs of the project from the proceeds of tax exempt bonds
in the maximum amount of approximately $1,325,000.
c) The historical practice of the city in financing local improvements such as Phase
I, has been to finance those projects with the proceeds of tax exempt bonds
payable primarily from special assessments against benefitted properties, with the
proceeds of the bonds being expended for project costs within no more than two
years following the initiation of the projects.
7. Procedures for Future Compliance. The city has put in place procedures to insure
compliance with the Regulations. These include:
a) inclusion of standard language in all council resolutions dealing with capital
expenditures showing an intent, where appropriate, to reimburse from bond
proceeds;
b) conferences with bond approving counsel about the scope and application of the
Regulations;
D.7K143975 2
CH135-29
c) a "tickler" system for pre-checking council agenda items involving capital
expenditures to insure compliance and a quarterly "post audit" of council minutes
to insure that appropriate declarations of intent have been timely made; and
d) an annual review procedure in cooperation with the annual audit to insure that
reimbursed expenditures have been within the appropriate time limitations of the
Regulations.
Mayor
City Manager
Dated: , 1998
DJK143975 3
CH135-29
FROM CITY OF CHANHASSEN 05.26. 1998 11 :08 P. 2
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CITY OF CHANHASSEN
(*RVE t AND HENNEPIN COUNTIES, INNESOTA
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DATE a NOgmbyr 22 , 1993 RESOL ON NO: 93-116
MQTIdN IBY: ,j asor; _ SECONDS BY: Wing
A RB OLUTION DECLARING THE OFFICIAL NT OF THE CITY
OF CHA iHA SEN 'I'O REIMBURSE CERTAIN EXPENDITURES FROM THE
PR EDS OF BONDS TO BE ISSUED BY THE CITY
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WHEREAS, a Internal Revenue Service has issued Tr4. Reg. § 1.103-18 providing that
pro eels df tax-axe pt bonds used to reimburse prior expenditures will not be deemed spent
un1 ss Derain requi ments are met; and
WHEREAS, theCity expects to incur certain expenditures which may be financed
tempoirily frog► sources o er than bonds, and reimbursed from the proceeds of a bond; and
WHEREAS, ,the re mbursement rules apply to bonds i sued after March 2, 1992;
f
N W, '1 HEREFO , BE IT RESOLVED by the City Council of the City of Chanhassen
(Th1 " :.it ") aS follows:
1. The Cpty rea onably intends to make expenditu'ms for the projects described in
$xhib t A ( e "Project"), and reasonably inter ds to reimburse itself for such
expen itures from the proceeds of debt to be issued by the City in the maximum
princi al am unt described in Exhibit A.
2. The lty Manager is authorized to designate ap ropriate additions to Exhibit A
in clrc ms.ances where tim is of the essence, and any such de ignation shall be reported to the
Coupe at,the earlie t prat cable date and shall be filed with a official books and records of
the Ci a$ proi►ided Sec ion 3. i
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3. This soluti n shall be maintained as part of the books and records of the City
at a nail adr tints , tive ffice of the City, and shall be con4uously available during normal
bus ne s h urs Of the City on every business day of the period eginning not more than 30 days
aft aa! p on Of thi resole flan and ending on the last date f issue of any bonds issued to
rei bttde xpehaitu des ribed in Exhibit A.
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4. This r olutl n is an expression of the reasonably expectations of the City based
on the fats mid c ums nces known to the City as of the Date hereof. The anticipated
reimbiksenents set orth a Exhibit A are consistent with the City's budgetary and financial
care trottartces. No ources other than proceeds of bonds to be issued by the City are, or are
rea on bly, expected to be,j reserved, allocated on a long-tern basis, or otherwise set aside
pur ua,It to the City' budget of financial policies to pay such Project expenditures. The City
has!no adopted any allocation, budget, or restriction of money or adoption of a requirement or
FROM CITY OF CHANHASSEN 05.26. 1998 11:09 P. 3
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poll y feimt}urse fund the primary purpose of which is to prevent moneys from being
ava • e tb pa}i an a pendi ure the City intends to reimburse with proceeds of a borrowing.
This r oluti n is intended to constitute a declaraton of official intent for purposes
of 'PY•':. Reg ft 1.10 -18 a d any successor law, regulation, or ruling.
•. The al ocatio of proceeds of the bonds to be is ued to any Project expenditures
desdri••• i,n Exhibit . will made not later than one year after the expenditure was paid or one
yeas! a i the ptoper was laced in service.
The ject a penditures described in Exhibit A are capital expenditures as defined
in a Reg. 1.150- (h), i eluding costs of issuance of the bonds to be issued in order to
rei1.4.r
b . se the Pcojec I expe ditures.
Proc s of a bonds issued to reimburse the Project expenditures described in
Exh`bi A'will !be ddemed pent only when (1) an allocation entry is made on the books or
r
rec d..of the City with res ect to the bonds; (2) the entry iden ' es an actual expenditure to be
rei b Sc4, or lwhere the P oject is described as a fund or ac 'aunt, the fund or account from
whi h e xpetlditut was aid; and (3) the allocation is effec ve to relieve the bond proceeds
fro I .. tri`etionS on nspen proceeds under applicable docum is and state laws.
1 Ii
No en 'ty oil entities possess simultaneously WQ or more of the following
disc • •nary and non-minis rial powers with respect to the Cit': power to (1) remove without
cau co troling portion f the City Council; (2) select, appr ve, or disapprove a controlling
por o ,of he City Council; 3) determine the City's budget or r ulre the use of the City's funds .
or a . f r the oth entit 's purpose; or (4) approve, disapp ove, or prevent the issuance of
debt o' igition of th City
1 O. None of the roceeds of the bonds issued to rei burse the City for the Project
exp-n.' turOs de cri in E hibit A will be used within one y of the allocation (i) to refund
ano' -I go, ern enta oblig tion or (ii) to create or increase a balance in a sinking fund or
repl. - fu ds u$ed f r such purpose, or (iii) to create or inc se the balance in a reserve or
repl - -�t fu4d or replace funds used for such purposes; r will be used at any time to
rei b , 5e y petso or a 4ity (other than the City) for expe ditures originally paid with the
pro. -: s oa City o ligation (excluding a City Inter-fund borr wing); unless (i) such amounts
are . . .si in'a bo a fide ebt service fund or are used to pay ebt service in the next one-year
peri••• •n Any City o ligati n other than the reimbursement bo d, or (II) the original issue was
not : onably expec to used to finance the expenditure.
11. No ac on or naction by the City with respect to he allocation of bonds proceeds
to r1 •ur ement of ojec expenditures will be an artifice or device to avoid, in whole or in
part : ,•ltrige yield strictions or arbitrage rebate requirements,
12. a prodedur s des ibed in this resolution shall cease tq apply to the extent not required
by . Reg. § 1.10 -18 o any successor law, regulation, or riling.
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FROM CITY OF CHANHASSEN 05.26. 1998 11:09 P. 4
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Palmed tti nd atilopted by the Chanhassen City Council this 22nd day of November. 1993.
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Don • -: Worth; aly C1erkj1anager Donald J. * e ' ayor
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i SQ ABSENT
Chmil Senn None
Pock ndorf
Wing
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