REPORT TO THE CITY COUNCIL
FROM: SANTINO DANISI, MBA, Controller/Finance Director
Finance Department
SCOTT L. MOZIER, PE, Director
Public Works Department
SUBJECT
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RESOLUTION - Declaring the official intent to use proceeds of future indebtedness to reimburse the City for certain expenditures related to capital costs of Pave More Now, Pay Later Program (Requires 5 Affirmative Votes).
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RECOMMENDATION
Staff recommends that City Council adopt a Resolution declaring the City’s official intent to use the proceeds of indebtedness to reimburse certain expenditures related to the capital costs of Pave More Now, Pay Later Program (Project).
EXECUTIVE SUMMARY
The City of Fresno will undertake plans to address broader road infrastructure challenges by addressing needs through immediate paving and repairs. This work will be financed through bonding anticipated to occur in FY 2026 with projects to be constructed over a multi-year period. Staff expects the majority, if not all of the work to be expended and performed in the first two years.
The paving season has already begun for 2025. It is imperative to authorize this Resolution to take advantage of the current paving season, which usually ends in the fall, depending on weather. If this Resolution is not approved, paving and work will not be able the start until the 2026 paving season.
Authorizing this Resolution allows staff to take advantage of the 2025 paving season and al lows the much needed paving projects to be addressed.
To enable immediate and preliminary work and in accordance with federal regulations the City is required to declare its official intent to reimburse prior expenditures for the Project with proceeds of a bond issuance. The proposed resolution meets that requirement and allows staff to begin design with the potential and option for physical construction by the end of 2025.
BACKGROUND
In FY 2022, the City completed a pavement management program update and provided a workshop to the Council, with the assistance of NCE, an engineering consulting firm specializing in asset management, pavement condition assessments and treatments. The pavement condition assessment for the Public Works Department evaluated our 1,767 centerline miles of arterials, collectors and residential streets, which had an asset value of $4.5 billion. As of the time of the assessment, the average pavement condition inde x (PCI) for the City of Fresno was 60, which falls within the “fair” or “at-risk” condition category. The average PCI was also evaluated by the consultant for all roadways north of Shaw Avenue (59) and all roadways south of Shaw Avenue (60).
This nationwide standard rating system utilizes a scale of 0 to 100, with 70 -100 being good to very good, 50-70 being fair or at-risk, 25 to 50 being poor, and 0 to 25 being very poor or failed conditions.
In terms of the Citywide network, 34.1 percent of the network was found to be in good condition, 29.8 percent was in fair condition and 33.8 percent in poor condition. The existing network PCI of 60 means that the average street in the City of Fresno is needing a mill and repave of the top lift of the asp halt concrete pavement.
The presentation to Council also provided information on the costs to maintain roadways. Good roads cost less to maintain on an annual basis. The cost of full reconstruction for failed roadways ranges from 15 to 30 times the cost of preventive maintenance such as slurry seal for good roadways. Full reconstruction is typically triple the cost of a simple mill and repave. With this in mind, time is of the essence to address roadways in fair, at-risk and poor conditions before these roadways completely fail and become much more expensive.
The assessment from FY 2022 also found that the City had $505 million in deferred maintenance.
Based upon the City’s annual paving budget as compared to the pavement degradation that naturally occurs from environmental factors, winter storms and heavy vehi cle loading, the network PCI was projected to deteriorate to 55 by the year 2025 and for the deferred maintenance to increase to $677 million. However due to construction cost increases in the post -pandemic environment utilizing recent bid results, that deferred maintenance figure has increased to an estimated $1.2 billion Citywide for our 1,800 centerline-miles.
These Citywide road infrastructure challenges require immediate attention to mitigate and prevent further degradation. To enable immediate action and avoid escalating cost pressures due to inflation and further road degradation, the City will pursue bond financing for these needs. The City is therefore pursuing a bond ranging from $75 million to $150 million under the “Pave More Now, Pay Later” initiative.
This bond will enable immediate design, paving, and repairs; mitigating inflation-related cost increases and preventing further road degradation. This type of maintenance not only reduces long -term repair expenses but also enhances road safety. Therefore Council approving the resolution will allows staff to initiate the project with the knowledge it will be reimbursed.
The attached resolution is necessary for the City to establish compliance with federal regulations (26 CFR § 1.150-2) by officially declaring its intent to use proceeds of indebtedness to reimburse itself for prior expenditures. This declaration does not b ind the City to make any expenditure, incur any indebtedness or proceed with the Project.
ENVIRONMENTAL FINDINGS
As projects are identified and finalized, the City will address the requisite environmental assessments and needs through design and prior to work commencing.
LOCAL PREFERENCE
Local preference was not implemented because this is a reimbursement resolution. As the projects move forward local preference and Project Labor Agreements (PLA) will be implemented.
FISCAL IMPACT
The City of Fresno will pursue bond financing ranging from $75 million to $150 million to support these costs. The funding will be expended over a multi-year period.
Attachment: Resolution
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Date Adopted:
Date Approved:
Effective Date:
City Attorney Approval: ______
515843v1 Resolution No.
RESOLUTION NO. ____________
A RESOLUTION OF THE COUNCIL OF THE CITY OF
FRESNO, CALIFORNIA, DECLARING ITS OFFICIAL
INTENT TO REIMBURSE CERTAIN EXPENDITURES
FROM PROCEEDS OF INDEBTEDNESS
WHEREAS, the City of Fresno intends to finance the capital costs of the Pave More Now, Pay Later Program (Project); and
WHEREAS, the City has paid or expects to pay certain expenditures (Reimbursement Expenditures) in connection with the Project prior to the issuance of indebtedness for the purpose of financing costs associated with the Project on a long- term basis; and
WHEREAS, the City reasonabl y expects that debt obligations in an aggregate principal amount ranging from $75 million to $150 million, not to exceed $150 million, will be issued, subject to the amount to be authorized pursuant to a resolution to be adopted by the City Council of the City of Fresno authorizing the issuance of such debt obligations; and
WHEREAS, the City further expects the final principal amount shall be conclusively determined upon sale and issuance of such debt obligations, and that certain of the proceeds of such debt obligations will be used to reimburse the Reimbursement Expenditures; and
WHEREAS, Section 1.150 -2 of the Treasury Regulations requires the City to declare its reasonable official intent to reimburse prior expenditures for the Project with proceeds of a subsequent borrowing.
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NOW, THEREFORE, BE IT RESOLVED by the Council of the City of Fresno as follows:
Section 1. The City hereby specifically finds and declares that the actions authorized hereby constitute and are with respect to municipal affairs of the City, and the statements, findings, and determinations of the City set forth in the recitals above are true and correct.
Section 2. This declaration is made solely for purposes of establishing compliance with the requirements of Section 1.150- 2 of the Treasury Regulations. This declaration does not bind the City to make any expenditure, incur any indebtedness, or proceed with the Project.
Section 3. The City hereby declares its official intent to use proceeds of indebtedness to reimburse itself for Reimbursement Expenditures.
Section 4. This resolution shall be effective upon final approval.
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STATE OF CALIFORNIA )
COUNTY OF FRESNO ) ss
CITY OF FRESNO )
I, TODD STERMER, City Clerk of the City of Fresno, certify that the foregoing resolution was adopted by the Council of the City of Fresno, at a regular meeting held on the day of , 2025.
AYES :
NOES :
ABSENT :
ABSTAIN :
TODD STERMER, MMC
City Clerk
By:
Deputy Date
APPROVED AS TO FORM:
ANDREW JANZ
City Attorney
By:
Sukhman S. Sekhon Date
Deputy City Attorney