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Council Communication

Title:	Resolution Declaring Intent to Reimburse Expenditures
Dept:	Finance
Date:	April 16, 2002
Submitted By:	Lee Tuneberg
Reviewed By:	Greg Scoles, City Administrator

Synopsis:	This resolution permits the City to reimburse itself for capital project costs with monies obtained through tax exempt public financing be it issuing bonds or bank placement. Additionally, it allows the Finance Director to make further declarations necessary for tax exempt financing for council approved projects during their construction without returning for added approval.
Recommendation:	Staff recommends approval of the attached resolution.
Background:	Federal law requires an issuer of tax-exempt obligations to declare its intention if the issuer expects to spend its funds on a project and later reimburse itself for those expenditures from the proceeds. Such an intention is done by resolution with a conservative estimate on project costs to allow flexibility in the total financing. Tax-exempt financing is preferred when possible since a 1 - 1 ½% overall savings is estimated for it versus other financing. City documentation from February 2000 on the Hillah remodel reflects an intent to finance the project through bank placement. The projected project costs at that time were $2.2 million with a loan of at least $1.3 million. Current estimates for the loan are in the $1.5 million range. Staff is reviewing alternatives and opportunities in today's market to develop the best plan for the city. In August 1999 the city approved a $6.0 million reimbursement resolution for AFN based upon the proposed $5.8 million financing plan. Since that time there has been considerable discussion regarding the change in projected and actual capital costs for build-out and the potential for refinancing and/or borrowing additional money for construction. The revised business plan shows accumulated capital costs to June 2002 at $7.4 million and AFN staff estimates another $1.3 million needed for total build out. The plan projects a peak total debt of $13 million in FY 2004-05 and peak internal borrowing of $8.9 million in FY 2006-07. Financing externally as much of the construction costs as possible will reduce AFN's reliance on other funds to be "operational expense" focused and this change will have a deflating impact on the city's overall budget. The intent is to either borrow the additional amount of approximately $2.5 million or refinance the original amount in conjunction with obtaining the additionally needed amount for a total of $8.5 million based upon actual or anticipated construction costs.

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RESOLUTION NO. 2002-

A RESOLUTION OF THE CITY OF ASHLAND, OREGON, DECLARING OFFICIAL INTENT TO REIMBURSE EXPENDITURES

Recitals:

A. The City of Ashland, Oregon (the "City"), intends to finance the costs of improvements to the Hillah Temple property (the "Hillah Project") and the costs of improvements for a fiber-optic network, cable television and telecommunications system (the "AFN Project") with tax-exempt obligation; and

B. Federal tax law requires an issuer of tax-exempt obligations to declare its intention if the issuer expects to spend its funds on a project and later reimburse itself for those expenditures from the proceeds of tax-exempt obligations; and

C. The City reasonably expects to reimburse the expenditures it incurs for the Projects by issuing tax-exempt obligations; and

D. The maximum principal amount of bonds which the City will issue and use to reimburse itself for the Hillah Project is $1.9 million and for the AFN Project is $9 million, of which $6 million has been previously designated by council for reimbursement through tax-exempt obligations.

THE CITY COUNCIL OF THE CITY OF ASHLAND, OREGON, RESOLVES:

SECTION 1. The City of Ashland, Oregon, declares its official intent to reimburse its expenditures on the Hillah Project and the AFN project with the proceeds of the tax-exempt obligations; and

SECTION 2. The Finance Director is authorized to make future declarations of intent to reimburse, without additional action by the City.

SECTION 3. This resolution takes effect upon signing by the Mayor.

This resolution was read by title only in accordance with Ashland Municipal Code §2.04.090 duly PASSED and ADOPTED this _____ day of ________________, 2002.
Barbara Christensen, City Recorder

SIGNED and APPROVED this __________day of ______________, 2002.
Alan W. DeBoer, Mayor

Reviewed as to form:
Paul Nolte, City Attorney

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