2.5 ERMUSR 01-12-2021UTILITIES COMMISSION MEETING
TO: FROM:
ERMU Commission Theresa Slominski –General Manager
MEETING DATE: AGENDA ITEM NUMBER:
January 12, 2021 2.5
SUBJECT:
Resolution for Reimbursement of Capital Expenditures
ACTION REQUESTED:
Adopt ResolutionNo. 21-1 Declaring the Official Intent to Reimburse Certain Capital
Expenditures from the Proceeds of Tax-Exempt Bonds and Establishing Compliance with
Reimbursement Bond Regulations Under the Internal Revenue Code.
BACKGROUND:
Elk River Municipal Utilitiesintends to expand its field services facility to have indoor parking
for all of its equipment and vehicles, holdinventory in one secured area, and expand its office
space. We will bebonding for this in 2021, and the funds will be received in thespring.As
certain expenditures will occur prior to the funding being received, ERMU intends to pay for
these expenditures and then reimburse the companywhen the bond funds are received.
DISCUSSION:
The IRS has guidelines for an entity toreimburse themselves out of bond funds for expenses
already incurred. As ERMU intends to be compliant with these requirements, bond counsel has
prepared a resolution for the commission to adopt stating this intent. The amount listed is
$14,000,000, which will cover our budgeted $12,500,000 amount for the building, plus bond
issuance costs.
ATTACHMENTS:
Resolution No. 21-1 – Declaring the Official Intent to Reimburse Capital Expenditures
from the Proceeds of Tax-Exempt Bonds and Establishing Compliance with
Reimbursement Bond Regulations Under the Internal Revenue Code
______________________________________________________________________________
Page 1 of 1
49
Member ______________introduced the following resolution and moved its adoption:
RESOLUTION NO. 21-1
RESOLUTION DECLARING THE OFFICIAL INTENT TO REIMBURSE
CERTAIN CAPITAL EXPENDITURES FROM THE PROCEEDS OF TAX-
EXEMPT BONDS AND ESTABLISHING COMPLIANCE WITH
REIMBURSEMENT BOND REGULATIONS UNDER THE INTERNAL
REVENUE CODE
WHEREAS, the Internal Revenue Service has issued Treasury Regulations, Section 1.150-2
(the “Reimbursement Regulations”) under the Internal Revenue Code of 1986, as amended (the
“Code”), providing that proceeds of tax-exempt bonds used to reimburse prior capital expenditures
will not be deemed spent unless certain requirements are met; and
WHEREAS, the Elk River Municipal Utilities Commission, public body corporate and politic
of the State of Minnesota (the “Commission”), expects to incur certain expenditures that may be
financed temporarily from sources other than tax-exempt bonds, and later reimbursed from the
proceeds of tax-exempt bonds; and
WHEREAS, the Commission has determined to make a declaration of its official intent (the
“Declaration”) to reimburse certain capital costs from the proceeds derived from the sale of tax-
exempt bonds issued by the Commissionor another political subdivision in accordance with the
Reimbursement Regulations.
NOW, THEREFORE, BE IT RESOLVED BY THE ELK RIVER MUNICIPAL UTILITIES
COMMISSION AS FOLLOWS:
1. The Commission may incur certain capital expenditures in connection with the
construction of a field house facility to house service trucks, inventory and offices (collectively, the
“Project”)
2. The Commission reasonably expects to reimburse the expenditures made for certain
costs of the Project from the proceeds of tax-exempt bonds in a principal amount currently estimated
not to exceed $14,000,000. All reimbursed expenditures related to the Project will be capital
expenditures, costs of issuance of the tax-exempt bonds or other expenditures eligible for
reimbursement under Section 1.150-2(d)(3) of the Reimbursement Regulations.
3. This Declaration has been made not later than 60 days after payment of any original
expenditure to be subject to a reimbursement allocation with respect to the proceeds of tax-exempt
bonds, except for the following expenditures: (a) costs of issuance of tax-exempt bonds; (b) costs in
an amount not in excess of the lesser of $100,000 or 5% of the proceeds of the tax-exempt bonds; or
(c) “preliminary expenditures” up to an amount not in excess of 20% of the aggregate issue price of
the tax-exempt bonds that are reasonably expected by the Commission to finance the Project. The
term “preliminary expenditures” includes architectural, engineering, surveying, soil testing, bond
EL185-13-697167.v1
50
issuance and similar costs that are incurred prior to commencement of acquisition, construction, or
rehabilitationof the Project, excluding land acquisition, site preparation, and similar costs incident to
commencement of construction.
4. A reimbursement allocation with respect to tax-exempt bonds will be made not later
than 18 months after the later of: (i) the date the original expenditure is paid; or (ii)the date the Project
is placed in service or abandoned, but in no event more than 3 years after the original expenditure.
5. This Declaration is an expression of the reasonable expectations of the Commission
based on the facts and circumstances known to the Commission as of the date hereof. The anticipated
original expenditures for the Project and the principal amount of the tax-exempt bonds described in
paragraph 2 are consistent with the Commission’s budgetary and financial circumstances. No sources
other than proceeds of tax-exempt bonds are reasonably expected to be reserved, allocated on a long-
term basis, or otherwise set aside pursuant to the Commission’s budget or financial policies to pay
such expenditures for which bonds are issued.
6. The action is intended to constitute a declaration of official intent for purposes of the
Reimbursement Regulations.
The motion for the adoption of the foregoing resolution was duly seconded by member
_______________ and, after a full discussion thereof and upon a vote being taken thereon, the
following voted in favor thereof:
and the following voted against the same:
Whereupon the resolution was declared duly passed and adopted.
EL185-13-697167.v1
51
STATE OF MINNESOTA )
COUNTY OF SHERBURNE )
ELK RIVER MUNICIPAL )
UTILTIES COMMISSION )
I, the undersigned, being the duly qualified and Secretary of the Elk River Municipal Utilities
Commission(the “Commission”), DO HEREBY CERTIFY that I have compared the attached and
foregoing extract of minutes with the original thereof on file in my office, and that the same is a full
and true and complete transcript of the minutes of a meeting of the Commission, duly called and held
on January 12, 2021, insofar as such minutes relate to a resolution declaring official intent.
WITNESS my hand on this _____ day of _____, 2021.
Secretary
EL185-13-697167.v1
52