Loading...
HomeMy WebLinkAboutTrans 2011-04-18 Item 2A - Resolutions - Interfund Loans and Reimbursement Declaration Relating to Tukwila Urban Center Access (Klickitat) rt City of Tukwila Jim Haggerton, Mayor INFORMATIONAL MEMORANDUM TO: Mayor Haggerton Transportation Committee FROM: Shawn Hunstock, Finance Director DATE: April 14, 2011 SUBJECT: Tukwila Urban Center Access (Klickitat) Proiect Project 98410419 Resolutions for Interfund Loan(s) and Reimbursement Declaration ISSUE City Council approval is necessary for an interfund loan(s) to provide construction period financing for the Tukwila Urban Center Access (Klickitat) project. A declaration of intent is also necessary in order to reimburse the City for the interim financing from proceeds of the sale of long -term Local Improvement District (LID) bonds. BACKGROUND The Klickitat project combines federal, state, local and LID financing for total project costs of approximately $18.3 million. Total LID funding will depend upon how much of the 20% construction contingency will ultimately be used. LID funding will be approximately $8.9 million to $11.7 million. The draft resolutions include a not to exceed amount of $12 million to account for possible construction contingency usage and funding of an LID guarantee fund. Issuance of long -term LID bonds will not occur until after the final assessment roll is determined, all appeals are heard, a prepayment period expires and bonds are marketed to the public. This could take anywhere from six to twelve months after completion of construction, depending on the number and nature of assessment appeals. DISCUSSION An interfund loan, or loans from multiple funds, is preferable to seeking outside funding due to the cost savings available and the potential for interest income to the City. Current estimates for interim financing during the construction and appeal periods are approximately $88,000 for debt issuance and approximately 1.75% for interest. By utilizing internal financing through interfund loans, the City can pay itself the interest rather than an outside company, and we will save the $88,000 cost of debt issuance that would otherwise have to be built into the costs that will be paid for by property owners through the long -term LID bonds. 1 INFORMATIONAL MEMO Page 2 During the construction and appeal periods interest will be paid at the current market interest rate. Assuming an interest rate of 1.75 the General Fund or other funds will earn approximately $100,000 to $200,000 depending on the timing of the use of the funds, the total amount needed based on usage of construction contingency, and the length of time needed during the construction and appeal periods. A reimbursement declaration is needed because the City will fund a portion of construction costs internally, to be reimbursed eventually by the sale of long -term LID bonds. The declaration allows the City to include in the LID bond sale expenses that were previously incurred during construction, and financed internally through interfund loans. Prior expenses are typically not allowed for a bond sale, but the reimbursement declaration gives the City the ability to include those construction costs and reimburse ourselves from the bond sale proceeds. The City typically maintains approximately $30 -35 million in cash and investments on a regular basis. The balance fluctuates during the year, but the combined balances typically do not fall below $30 million in all the City's funds. These include the General Fund, capital project funds, internal service funds, enterprise funds and other miscellaneous funds. The interfund loan(s) are treated as an investment in the fund loaning the money to the arterial street (104) fund. As such, interest will be paid to those funds making the loan. Interest will be paid on at least a quarterly basis and again upon final project closeout and prior to issuance of long -term debt. It is the professional opinion of Finance staff that the use of $8.9 to $11.7 million in cash to internally finance a portion of the Klickitat project for up to twelve to eighteen months will not negatively impact cash flow in the other funds, and the use of cash in this manner represents a safe and prudent short-term investment of those resources at a rate more than likely higher than what is available in the investment market. RECOMMENDATION Staff is recommending adoption of the resolutions authorizing interfund loans and declaration of reimbursement. This item is scheduled for the April 18 Transportation Committee meeting, the April 25 Committee of the Whole meeting, and the May 2nd Regular Council meeting. attachments: Draft Resolution Authorizing Interfund Loan(s) Draft Resolution Reimbursement Declaration W: \PW Eng \PROJECTSW RW RS Project08410419 TUC Access (Klickitat)\ LID\ InfoMemo _LIDlnterfundLoanAndDeclaration gl.docx 2 LAAFT A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF TUKWILA, WASHINGTON, AUTHORIZING THE TRANSFER OF FUNDS FOR THE PURPOSE OF MAKING A LOAN OR LOANS FROM THE GENERAL FUND AND /OR OTHER FUNDS TO THE ARTERIAL STREET FUND FOR UP TO A 15 -MONTH PERIOD OF TIME. WHEREAS, there may be insufficient funds available from time to time during the period April 2011 to June 2092 in the Arterial Street Fund to cover authorized expenditures while the City waits for reimbursement of federal, state and local grant monies that have been approved for allocation to the City for which contracts have been executed; and WHEREAS, the General Fund and /or other funds have sufficient funds from which to transfer funds in an amount not to exceed twelve million dollars ($12,000,000) for the purpose of making loans to cover authorized expenditures from the Arterial Street Fund; and WHEREAS, in the event a loan is made from the General Fund and /or other funds to the Arterial Street Fund as provided above, the loans shall be at the current market rate of interest for comparable investments of similar maturity; and WHEREAS, the City Council intends to replace any funds loaned to the Arterial Street Fund with long term .Local Improvement District bonds upon completion of the Tukwila Urban Center Access Project (Project No. 98410419), also known as the Klickitat project, upon completion of construction and completion of the final assessment roll; NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF TUKWILA, WASHINGTON, HEREBY RESOLVES AS FOLLOWS: Section 1. Purpose. Authorization is hereby given during the time period April 2011 to June 2012 for the transfer of funds to the Arterial Street Fund, when there are insufficient funds available therein to cover authorized expenditures for which contracts have been executed, in an amount not to exceed twelve million dollars ($12,000,000) from the General Fund and /or other funds for the purpose of making a loan at the current market rate of interest. W:\Word Processing \ResolutionsWickitat Interfund Loan Authorization SH:bjs 4112/11 Page 1 of 2 3 Section 2. Implementation. The Finance Director is hereby authorized to implement such administrative procedures as may be necessary to carry out the directions of this legislation. PASSED BY THE CITY COUNCIL OF THE CITY OF TUKWILA, WASHINGTON, at a Regular Meeting thereof this day of 2011. ATTEST /AUTHENTICATED: Christy O'Flaherty, CMC, City Clerk Allan Ekberg, Council President APPROVED AS TO FORM BY: Filed with the City Clerk: Passed by the City Council: Resolution Number: Shelley M. Kerslake, City Attorney W: \Word Processing \Resolutions \Klickitat Interfund Loan Authorization SH:bjs- 4/12/11 Page 2 of 2 4 DRAFT' A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF TUKWILA, WASHINGTON, EXPRESSING OFFICIAL INTENT, PURSUANT TO TREASURY REGULATION SECTION 1.150 -2, TO REIMBURSE THE CITY FROM THE PROCEEDS OF BONDS FOR CERTAIN ORIGINAL EXPENDITURES PAID IN CONNECTION WITH CERTAIN ARTERIAL STREET FUND PROJECTS; AND DESIGNATING AN AUTHORIZED REPRESENTATIVE TO MAKE DECLARATIONS OF OFFICIAL INTENT ON BEHALF OF THE CITY. WHEREAS, the City of Tukwila, Washington (the "City intends to make expenditures for the Project (identified below) from funds that are available but that are not, and are not reasonably expected to be, reserved, allocated on a long -term basis, or otherwise set aside for those expenditures, and reasonably expects to be reimbursed for those expenditures from proceeds of bonds or other obligations issued to finance those expenditures; and WHEREAS, it is the intent of the City to pay certain capital expenditures incident to the acquisition and construction of the Project to be financed by the proceeds of the bonds from other funds of the City pending the sale and delivery of the bonds and the receipt of the proceeds thereof, and the City reasonably expects to reimburse the funds of the City from the proceeds of such bonds; NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF TUKWILA, WASHINGTON, HEREBY RESOLVES AS FOLLOWS: Section 1. Description of Project for Which Expenditures are to be Made. The City intends to make, and/or not more than 60 days before the date of this declaration has made, expenditures and reasonably expects to reimburse itself for those expenditures from the proceeds of bonds for the Tukwila Urban Center Access Project, Project No. 98410419 (the "Project also known as the Klickitat project. Section 2. Maximum Principal Amount of Obligations Expected to be Issued for the Project. The City expects that the maximum principal amount of bonds that will be issued to finance the Project will be twelve million dollars ($12,000,000). WAWord Processing \Resolutions\Klickitat Interfund Loan Express Intent SH:bjs 4112/11 Page 1 of 2 5 Section 3. Declaration Reasonable. The City Council has reviewed its existing and reasonably foreseeable budgetary and financial circumstances and has determined the City reasonably expects to reimburse itself for expenditures for the Project from proceeds of bonds because the City has no funds available that already are, or are reasonably expected to be, reserved, allocated on a long -term basis, or otherwise set aside by the City for those expenditures on the Project. Section 4, Limitations on Uses of Reimbursement Amounts. For one year after the allocation of proceeds, the City will not use amounts corresponding to proceeds received from bonds issued in the future to reimburse the City for previously paid expenditures for the Project in any manner that results in those amounts being treated as replacement proceeds of any tax exempt bonds, i.e., as a result of being deposited in a reserve fund, pledged fund, sinking fund or similar fund other than a bona fide debt service fund that is expected to be used to pay principal of or interest on tax exempt bonds. The City will not use said amounts in any manner that employs an abusive arbitrage device to avoid arbitrage restrictions. Section 5. Designation of Authorized Representative. The Finance Director is hereby designated as the authorized representative of the City to declare in writing, in such form as may be approved by the City Council, the official intent of the City to reimburse original expenditures for the Project from proceeds of debt to be issued for purposes of and in accordance with Treasury Regulation Section 1.150 -2. Section 6. Implementation. The Finance Director is hereby authorized, to implement such administrative procedures as may be necessary to carry out the directions of this legislation. PASSED BY THE CITY COUNCIL OF THE CITY OF TUKWILA, WASHINGTON, at a Regular Meeting thereof this day of 2011. ATT ESTIAUTH ENTI CATE D: Christy O'Flaherty, CMC, City Clerk Allan Ekberg, Council President APPROVED AS TO FORM BY: Filed with the City Clerk: Passed by the City Council: Resolution Number: Shelley M. Kerslake, City Attorney WAWord ProcessinglResolutions \Klickitat Interfund Loan Express Intent SH :bjs 4/12/11 Page 2 of 2 6