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HomeMy WebLinkAbout04 - Bond Reimbursement for Civic Center ProjectCITY OF NEWPORT BEACH CITY COUNCIL STAFF REPORT Agenda Item No. 4 June 22, 2010 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: Administrative Services Department Tracy McCraner, Administrative Services Director (949) 644 -3123 or tmccraner(&newportbeachca.gov Dan Matusiewicz, Acting Deputy Administrative Services Director (949) 644 -3126 or dmatusiewicza- newportbeachca.gov SUBJECT: RESOLUTION 2010 - Bond Reimbursement Authorization for Civic Center Expenditures ISSUE: Should the City Council adopt an updated reimbursement resolution that reaffirms the City's intent to reimburse itself for project costs incurred prior to the proposed future debt issuance for the Civic Center project? A similar reimbursement resolution was previously adopted by City Council but Tax Counsel has recommended that City Council approve the attached resolution simply out of an abundance of caution. RECOMMENDATION: Adopt Resolution No. 2010 - that reaffirms the City's intent to reimburse itself for project costs incurred prior to possible future debt issuance for the Civic Center project. DISCUSSION: The City Council has directed staff to take certain steps toward the preparation and construction of the Civic Center project site. Initial planning expenditures for this project have been recorded in a Civic Center capital improvement fund. Funding is expected from future debt issuance consistent with the Facilities Financing Plan; however, if authorization to issue bonds is ultimately not approved by the City Council for any reason, expenditures incurred for the project must be reimbursed from General Fund reserves. If the City desires the option to repay itself for site preparation and construction expenditures incurred prior to a debt issue, a "Reimbursement Resolution" for this project must be passed ahead of these expenditures. On February 23, 2010, City Council adopted Resolution No. 2010 -18 authorizing the City the option to reimburse itself for Civic Center project site preparation and construction expenditures incurred prior to a proposed future bond issue. Since the resolution adoption date, the project definition was further refined to include specific site addresses of the Interim Funding Reimbursement Resolution June 22, 2010 Page 2 Civic Center, Library and park; include the possibility of the Library expansion; and, include a conservatively high estimate of the expected maximum principal amount of the debt issuance of $150 Million. In an abundance of caution to ensure the City can fully reimburse itself for Civic Center project costs incurred prior to issuing debt, Straddling Yocca Carlson and Rauth, bond and tax counsel for the potential financing, has recommended the City revise adopted Resolution No. 2010 -18 to reflect the proposed changes to the resolution. Therefore, the attached resolution establishes the authority for the City to reimburse itself for the Civic Center project costs incurred prior to a debt issue. If the project does not go forward nothing needs to be done and the resolutions will have no effect. Environmental Review: This action is not subject to the California Environmental Quality Act ( "CEQA ") pursuant to Sections 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no potential for resulting in physical change to the environment, directly or indirectly. Public Notice: This agenda item has been noticed according to the Brown Act (72 hours in advance of the meeting at which the City Council considers the item). Funding Availability: No funding is necessary to approve the reimbursement resolution. Alternatives: The City Council could choose not to adopt this reimbursement resolution. Site preparation and construction costs incurred prior to any debt issuance would not be reimbursable from debt proceeds. Prepared by: Acting Deputy Administrative Attachments: Proposed Resolution Submitted by: Tracy Mc r ner AdministrcWve Services Director Resolution No. 2010 - A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF NEWPORT BEACH REGARDING ITS INTENTION TO ENABLE REIMBURSEMENT OF INTERIM EXPENDITURES FROM PROCEEDS OF A POSSIBLE FUTURE DEBT ISSUANCE FOR CIVIC CENTER PROJECT WHEREAS, the City of Newport Beach ( "City") intends to finance the costs of site preparation and construction of a new City Hall, Park, and Parking Structure, all positioned in relationship with the existing Newport Beach Central Library located on approximately 19 acres of land located at 1100 Avocado Avenue, 1300 Avocado Avenue and 1450 Avocado Avenue, and the expansion and improvement of the Newport Beach Central Library at 1000 Avocado Avenue, in connection with the foregoing improvements (the "Project "); WHEREAS, the City intends to finance the Project or portions of the Project with the proceeds of obligations, the interest upon which is excluded from gross income for federal income tax purposes, (the "Obligations "); and WHEREAS, prior to incurring Obligations the City desires to incur certain expenditures with respect to the Project from available monies of the City, which expenditures are desired to be reimbursed by the City from a portion of the proceeds of the Obligations; NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Newport Beach hereby resolve, order and determine as follows: The City hereby states its intention and reasonably expects to reimburse Project costs incurred prior to the incurrence of the Obligations with proceeds of the Obligations. 2. The reasonably expected maximum principal amount of the Obligations is $150,000,000.00. This resolution is being adopted on or prior to the date (the "Expenditures Date or Dates ") that the City will expend monies for the portion of the Project costs to be reimbursed from proceeds of the Obligations. 4. The expected date of incurrence of the Obligations will be within eighteen months of the later of the Expenditures Date or Dates or the date the Project is placed in service; provided the reimbursement may not be made more than three years after the original expenditure is paid. 5. Proceeds of the Obligations to be used to reimburse Project costs are not expected to be used directly or indirectly to pay debt service with respect to any obligation (other than to pay current debt service coming due within the next succeeding one year period on any tax- exempt obligation of the City (other than the Obligation)) or to be held as a reasonably required reserve or replacement fund with respect to a obligation of the City or any entity related in any manner to the City, or to reimburse any expenditure that was originally paid with the proceeds of any obligation, or to replace funds that are or will be used in such manner. DOC SOC/ 141353Ov2/022459 -0014 6. The resolution is consistent with the budgetary and financial circumstances of the City, as of the date hereof. No monies from sources other than the Obligation are, or are reasonably expected to be reserved, allocated on a long -term basis, or otherwise set aside by the City (or any related party) pursuant to its budget or financial statement. To the best of our knowledge, this City Council is not aware of the previous adoption of official intents by the City that have been made as a matter of course for the purpose of reimbursing expenditures and for which tax exempt obligations have not been issued. 7. The limitations described in Section 2 and Section 3 do not apply to (a) costs of issuance of the Obligations, (b) an amount not in excess of the lesser of $100,000 or five percent (5 %) of the proceeds of the Obligations, or (c) any preliminary expenditures, such as architectural, engineering, surveying, soil testing, and similar costs other than land acquisition, site preparation, and similar costs incident to commencement of construction, not in excess of twenty percent (20 %) of the aggregate issue price of the Obligations that finances the Project for which the preliminary expenditures were incurred. 8. This resolution is adopted as official action of the City in order to comply with Treasury Regulation 1.150 -2 and any other regulations of the Internal Revenue Service relating to the qualification for reimbursement of City expenditures incurred prior to the date of incurrence of the Obligations, is part of the City's official proceedings, and will be available for inspection by the general public at the main administrative office of the City. All the recitals in this Resolution are true and correct and the City Council of the City of Newport Beach so finds, determines and represents. ADOPTED, this 22nd day of June, 2010 MAYOR ATTEST: CITY CLERK 2 DOCSOC/ 1413530v2/022459 -0014