8.3. SR 01-03-1994
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fl~ River
ITEM 8.3.
FROM:
MAYOR & CITY COUNCIL ~
FINANCE DIRECTOR, LORI JOHNSON ~~
TO:
DATE: DECEMBER 27, 1993
SUBJECT: REVISED REIMBURSEMENT BOND
REGULATION
In 1992, the City Council approved a resolution in order to
bring the City into compliance with the Internal Revenue
Service's proposed new rules and regulations for reimbursement
bonds. At that time the rules were rather lengthy and
unclear. The IRS has recently relaxed the rules, making them
easier for cities to comply.
The new rules still require that the City complete a
Declaration of Official Intent at the beginning of each project
for which the City may expect to reimburse itself for the cost
of the project out of the proceeds of a bond issue. The
resolution attached would replace the resolution adopted in
1992. The Declaration of Official Intent would change from a
three page document to a one page document.
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Staff recommends approval of the resolution as attached. This
will help to decrease the amount of time needed to comply with
the reimbursement bond regulation. If a Declaration of
Official Intent is not on file for a given project, the City
will not be allowed to issue bonds for that project.
Therefore, it is very important that the IRS reimbursement bond
regulation rules be followed carefully.
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P.O. Box 490 · 13065 Orono Parkway · Elk River, MN 55330 · (612) 441-7420 · Fax: (612) 441-7425
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RESOLUTION NO.
RESOLUTION ESTABLISHING PROCEDURES
RELATING TO COMPLIANCE WITH REIMBURSEMENT BOND
REGULATIONS UNDER THE INTERNAL REVENUE CODE
BE IT RESOLVED by the City Council (the "Council") of the City
of Elk River, Minnesota (the "City"), as follows:
1. Recitals.
(a) The Internal Revenue Service has issued Treasury
Regulations, Section 1.150-2 (as the same may be amended or
supplemented, the "RegUlations"), dealing with "reimbursement
bond" proceeds, being proceeds of the City' s bonds used to
reimburse the City for any project expenditure paid by the
City prior to the time of the issuance of those bonds.
(b) The Regulations generally require that the City make
a declaration of intent to reimburse itself for such prior
expendi tures out of the proceeds of subsequently issued bonds,
that such declaration be made not later than 60 days after the
expenditure is actually paid, and that the bonding occur and
the written reimbursement allocation be made from the proceeds
of such bonds within 18 months after the later of (1) the date
of paYment of the expenditure or (2) the date the project is
placed in service (but in no event more than 3 years after
actual paYment).
(c) The City heretofore implemented procedures for
compliance with the predecessor versions of the Regulations
and desires to amend and supplement those procedures to ensure
compliance with the Regulations.
(d) The city's bond counsel has advised the City that
the Regulations do not apply, and hence the provisions of this
Resolution are intended to have no application, to paYments of
City project costs first made by the City out of the proceeds
of bonds issued prior to the date of such paYments.
2. Official Intent Declaration. The Regulations, in the
situations in which they apply, require the city to have declared
an official intent (the "Declaration") to reimburse itself for
previously paid project expenditures out of the proceeds of
subsequently issued bonds. The Council hereby authorizes the City
Finance Directorto make the city's Declarations or to delegate from
time to time that responsibility to other appropriate City
employees. Each Declaration shall comply with the requirements of
the Regulations, including without limitation the following:
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(a) Each Declaration shall be made not later than 60
days after paYment of the applicable project cost and shall
state that the City reasonably expects to reimburse itself for
the expenditure out of the proceeds of a bond issue or similar
borrowing. Each Declaration may be made sUbstantially in the
form of the Exhibit A which is attached to and made a part of
this Resolution, or in any other format which may at the time
comply with the Regulations.
(b) Each Declaration shall (1) contain a reasonably
accurate description of the "project," as defined in the
Regulations (which may include the property or prog~am to be
financed, as applicable), to which the expenditure relates and
(2) state the maximum principal amount of bonding expected to
be issued for that project.
(c) Care shall be taken so that the City, or its
authorized representatives under this Resolution, not make
Declarations in cases where the City doesn't reasonably expect
to issue reimbursement bonds to finance the subject project
costs, and the City officials are hereby authorized to consult
with bond counsel to the City concerning the requirements of
the Regulations and their application in particular
circumstances.
(d) The Council shall be advised from time to time on
the desirability and timing of the issuance of reimbursement
bonds relating to project expenditures for which the City has
made Declarations.
3. Reimbursement Allocations. The designated City officials
shall also be responsible for making the "reimbursement alloca-
tions" described in the Regulations, being generally written
allocations that evidence the City's use of the applicable bond
proceeds to reimburse the original expenditures.
4. Effect. This Resolution shall amend and supplement all
prior resolutions and/or procedures adopted by the City for
compliance with the Regulations (or their predecessor versions),
and, henceforth, in the event of any inconsistency, the provisions
of this Resolution shall apply and govern.
Adopted this
River City Council.
day of
199
, by the Elk
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EXHIBIT A
Declaration of Official Intent
The undersigned, being the duly appointed and acting City
of the city of Elk River, Minnesota (the "city"),
pursuant to and for purposes of compliance with Treasury
Regulations, section 1.150-2 (the "Regulations"), under the
Internal Revenue Code of 1986, as amended, hereby states and
certifies on behalf of the City as follows:
1. The undersigned has been and is on the date hereof duly
authorized by the Elk River City Council to make and execute this
Declaration of Official Intent (the "Declaration") for and on
behalf of the city.
2. This Declaration relates to the following project,
property or program (the "Project") and the costs thereof to be
financed:
3. The City reasonably expects to reimburse itself for the
payment of certain costs of the Project out of the proceeds of a
bond issue or similar borrowing (the "Bonds") to be issued by the
City after the date of payment of such costs. As of the date
hereof, the Ci ty reasonably expects that $ is the
maximum principal amount of the Bonds which will be issued to
finance the Project.
4. Each expenditure to be reimbursed from the Bonds is or
will be a capital expenditure or a cost of issuance, or any of the
other types of expenditures described in section 1.150-2(d) (3) of
the Regulations.
5. As of the date hereof, the statements and expectations
contained in this Declaration are believed to be reasonable and
accurate.
Date:
City
City of Elk River, Minnesota
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CERTIFICATION
The undersigned, being the duly qualified and acting City
Clerk of the City of Elk River, Minnesota, hereby certifies the
following:
The foregoing is true and correct copy of a Resolution on file
and of official, publicly available record in the offices of the
City, which Resolution relates to procedures of the City for
compliance with certain IRS Regulations on reimbursement bonds.
Said Resolution was duly adopted by the governing body of the City
(the "Council") at a regular or special meeting of the Council held
on , 199. . Said meeting was duly called,
regularly held, open to the public, and held at the place at which
meetings of the Council are regularly held. Councilmember
moved the adoption of the Resolution, which
motion was seconded by Councilmember A vote
being taken on the motion, the following members of the Council
voted in favor of the motion to adopt the Resolution:
and the following voted against the same:
Whereupon said Resolution was declared duly passed and adopted.
The Resolution is in full force and effect and no action has been
taken by the Council which would in any way alter or amend the
Resolution.
WITNESS MY HAND officially as the city Clerk of the City of
Elk River, Minnesota, this ____ day of , 199
city Clerk
City of Elk River, Minnesota