1 STAFF REPORT
DATE: November 15, 2022
TO: Justin Hess, City Manager
FROM: Dawn Roth Lindell, General Manager, Burbank Water and Power BY: Bob Liu, Chief Financial Officer, Burbank Water and Power SUBJECT: Adoption of a Resolution Approving the Reimbursement for Expenditures from Bond Issuance
RE
COMMENDATION
Adopt A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF BURBANK
DECLARING ITS INTENTION TO REIMBURSE CERTAIN EXPENDITURES FROM THE
PROCEEDS OF A PROPOSED TAX- EXEMPT BOND FINANCING, AS REQUIRED BY UNITED STATES DEPARTMENT OF TREASURY REGULATIONS SECTION 1.150 -2 (Attachment 1).
BACKGROUND
The last electric fund bond issuance was in 2010 and it was primarily used to finance the replacement and upgrade of the electric distribution system and some general plant items.
Since then, the electric fund has avoided debt issuance and has funded its capital projects through financial reserves developed through rates. However, over the next several years, Burbank Water and Power (BWP) anticipates the need for increased capital expenditures to maintain reliability, improve electric system efficiency , and meet new anticipated electric demand. These expenditures will include the replace ment of a substation, adding new substations, investment in renewable projects, and continuing its modernization and efficiency efforts, including the 4 kilovolts (kV) to 12kV distribution conversion program.
These projects provide long-term benefits to future ratepayers and it is prudent to finance these projects through a bond issuance rather than significantly raising rates in the short term to fund them. The bond issuance is also in compliance with the city’s debt management policy.
DI
SCUSSION
The electric fund intends to issue up to $120 million of tax-exempt revenue bonds to finance capital infrastructure over the next several years. It is anticipated that the City Council approval to issue the bonds will be requested by the end of January. Given the recent bond market conditions, the actual timing of the bond issuance is to be determined, but will likely occur in January or February 2023.
WATER AND
POWER
2 This reimbursement resolution will allow the electric fund to reimburse itself from future bond proceeds for capital expenditures paid from BWP’s cash reserves. The reimbursable expenditures are defined as capital expenditures paid no earlier than 60 days prior to the date of this resolution and up to 18 months after the date of payment of the reimbursable expenditures.
This resolution is not a commitment to issue bonds; however , it allows the City Council approved electric fund projects to be reimbursed from bond proceeds if and when the bonds are approved by the City Council.
FISCAL IMPACT
Adoption of this r esolution will allow the e lectric fund to reimburse itself from future bond proceeds for capital expenditures paid no earlier than 60 days prior to the date of this resolution and up to 18 months after the date of payment of the reimbursable expenditures.
There will be no impact on rates.
CONCLUSION
Staff requests that the Burbank City Council adopt the resoluti on approving the reimbursement for expenditures from a bond issuance, if and when that occurs.
Reimbursement for capital expenditures would include project costs paid on September 16, 2022 and thereafter. This will assist in maintaining BWP’s cash reserves.
ATTACHMENTS
Attachment 1 – Resolution