PISMO BEACH CITY COUNCIL STAFF REPORT
Agenda Item #12.C
Meeting Date: March 19, 2024
TITLE:
Authorization to Proceed with Financing for the Public Safety Facility Project; Declaration of Intention to Reimburse Certain Expenditures from the Proceeds of Tax-exempt Obligations
RECOMMENDATION:
Adopt a Resolution authorizing commencement of proceedings in connection with the financing of design and construction of a new Public Safety Facility; and declaring its intention to reimburse certain expenditures from the proceeds of tax-exempt obligations and directing certain actions with respect thereto as required by United States Department of Treasury regulations section 1.150-2.
DISCUSSION:
The City of Pismo Beach intends to design and construct a new Public Safety Facility to replace and modernize the existing Police Station and Fire Station 64 (Project). It is contemplated that a portion of the cost to complete this Project will come from the issuance of lease revenue bonds or some other form of long-term tax-exempt indebtedness (Debt Obligations). The City is already incurring costs for the design of the Public Safety Facility and plans to begin demolition of the existing structures in May 2024 with construction immediately following. These design and demolition costs are incurred prior to the issuance of the Debt Obligations, which is expected in June 2024. By adoption of the attached Resolution (Attachment 1), and upon issuance of the Debt Obligations, the City will be legally allowed to reimburse itself for all expenses advanced for the Project as set forth in the Resolution (Reimbursable Expenditures).
The attached Resolution satisfies certain IRS tax code requirements by stating the following:
The City Council’s intention to finance a portion of the expenditures related to the Project
A statement that any such expenditures would be financed through the issuance of tax-exempt Debt Obligations
A qualitative description of the proposed Project whose expenditures would be reimbursed from the proceeds of Debt Obligations; and
Passage of the attached Resolution does not irrevocably bind the City to issue Debt Obligations, but rather merely spells out the City’s intent to do so at some future date and preserves the City’s right to reimburse itself for Reimbursable Expenditures.
Conclusion and Recommendation
Staff recommends that the City Council adopt a Resolution (Attachment 1) authorizing commencement of proceedings in connection with the financing of design and construction of a new Public Safety Facility; and declaring the City Council's intention to
12.C-1Council Agenda 3-19-2024
reimburse certain expenditures from the proceeds of tax-exempt obligations and directing certain actions with respect thereto as required by United States Department of Treasury regulations section 1.150-2.
FISCAL IMPACT:
The Fiscal Year (FY) 2024 Budget includes funding for the Public Safety Facility Project in the amount of $52,372,567. This amount includes both resource migration costs (temporary movement of staff, equipment, and facilities during construction) and pre- construction costs totaling $11,265,835 and design-build construction costs of $41,106,732. This amount is supported by a proposed $41,117,775 in bond proceeds, $6,591,393 in General Fund support, $2,000,000 from the General Fund Reserve, $2,658,399 from the Parking Enterprise Fund for a total of $52,367,567. (There is currently a $5,000 sources and uses shortfall, but staff will work to close the gap in the future, likely reducing the contingency expenditures by $5,000.) Table 1 details out the various funding sources and uses for the pre-construction costs and design-build costs.
Table 1: Public Safety Facility Project FY 2024 Remaining Budget The bond sale is expected to occur in June 2024. Until then, the City can use funds from the various other sources including the General Fund or the Parking Enterprise Fund until the bond proceeds can reimburse the General Fund and Parking Enterprise Fund. The maximum principal amount of the Debt Obligations from which Reimbursable Expenditures are to be made is reasonably expected to be $10,000,000.
ATTACHMENTS:
1. Resolution
Submitted by: Nadia Feeser, Administrative Services Director City Manager Approval:
Funding Sources Remaining Budget
Pay-As-You-Go (PAYG) cash
Set-Aside TOT 1% in FY 2023 to FY 2025 6,591,392.72$
General Fund Reserve 2,000,000.00
Parking Enterprise Fund 2,658,398.91
Subtotal Pay-As-You-Go (PAYG) cash 11,249,791.63$
Remaining financing 41,117,775.37
Total Funding Sources 52,367,567.00$
Funding Uses
Total Pre-Construction (Migration and Soft) Costs 11,265,835.15$ Design-Build Cost 41,106,731.85
Total Estimated Project cost 52,372,567.00$
12.C-2Council Agenda 3-19-2024
RESOLUTION NO. R-2024-XXX
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PISMO BEACH,
CALIFORNIA AUTHORIZING COMMENCEMENT OF PROCEEDINGS IN
CONNECTION WITH THE FINANCING OF THE DESIGN AND CONSTRUCTION OF A NEW PUBLIC SAFETY FACILITY; AND DECLARING ITS INTENTION TO
REIMBURSE CERTAIN EXPENDITURES FROM THE PROCEEDS OF TAX-EXEMPT
OBLIGATIONS AND DIRECTING CERTAIN ACTIONS WITH RESPECT THERETO
AS REQUIRED BY UNITED STATES DEPARTMENT OF TREASURY
REGULATIONS SECTION 1.150-2
WHEREAS, the City Council of the City of Pismo Beach (the “City”), after due investigation and deliberation, desires to undertake proceedings for the financing (the “Financing”) certain costs of designing, constructing a new Public Safety Facility located in the City known as Public Safety Facility (the “Facility Project”) and WHEREAS, the City intends to finance the design and construction of the Facility Project or portions of the Facility Project with the proceeds of tax-exempt bonds, notes, certificates of participation, revenue bonds or other forms of tax-exempt debt (the “Debt Obligations”); and
WHEREAS, prior to the issuance of any Debt Obligations the City desires to incur certain capital expenditures (the “Reimbursable Expenditures”) with respect to the Facility Project from available moneys of the City; and
WHEREAS, the City Council has determined that those moneys which will be advanced on and after the date hereof to pay Reimbursable Expenditures are available only for a temporary period, and it is necessary to reimburse the City for such Reimbursable Expenditures from the proceeds of the Debt Obligations, all as set forth pursuant to Section 1.150-2 of the regulations (the “Treasury Regulations”) promulgated under the Internal Revenue Code of 1986, as amended (the “Tax Code”); and WHEREAS, this Resolution will be reasonably available for public inspection within a reasonable period of time after its date of adoption and in the same manner governing the public availability of records of other official acts of the City Council; and WHEREAS, this Resolution is intended to be a “declaration of official intent” in accordance with Section 1.150-2 of the Treasury Regulations.
NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Pismo Beach as follows:
Section 1. The foregoing recitals are adopted as findings of the City Council as though set forth fully herein.
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Attachment 1
Section 2. The City reasonably expects to reimburse itself for the Reimbursable Expenditures made by the City in anticipation of the issuance of the Debt Obligations with proceeds of Debt Obligations. The reimbursement of Reimbursable Expenditures is consistent with the City’s budgetary and financial circumstances.
Section 3. The City Council hereby determines that it is necessary and desirable to proceed with the Financing and procurement of the Debt Obligations, subject to final authorization thereof by resolution of the City Council at a subsequent meeting held for such purpose. This Resolution does not bind the City to make any expenditure, incur any indebtedness or ultimately provide for the Financing and procurement of the Debt Obligations.
Section 4. The maximum principal amount of the Debt Obligations from which Reimbursable Expenditures are to be made is reasonably expected to be $10,000,000.
The obligation to be represented by the Debt Obligations may be incurred by the City by means of the execution and delivery of lease agreement, certificates of participation and/or revenue bonds.
Section 5. The proceeds from the Debt Obligations are to be used for the financing, acquisition, design and/or construction of the Facility Project, funding a reserve fund, a capitalized interest fund, and for paying certain costs of issuance related thereto.
Section 6. Except as described in Section 10 below, this Resolution is being adopted no later than 60 days after the payment of the Reimbursable Expenditures (the “Expenditure Date or Dates”).
Section 7. Except as described in Section 10 below, the expected date of issue of the Debt Obligations will be within 18 months of the later of: (a) the Expenditure Date or Dates; or (b) the date that the Facility Project is placed in service; provided that the reimbursement may not be made more than three years after the Expenditure Date or Dates.
Section 8. Proceeds of the Debt Obligations to be used to reimburse the City for costs of the Facilities are not expected to be used, within one year of reimbursement, directly or indirectly to pay debt service with respect to any obligation (other than to pay current debt service coming due within the next succeeding one year period on any tax-exempt obligation of the City (other than the Debt Obligations)) or to be held as a reasonably required reserve or replacement fund with respect to an obligation of the City or any entity related in any manner to the City, or to reimburse any expenditure that was originally paid with the proceeds of any obligation, or to replace funds that are or will be used in such manner.
Section 9. No moneys from sources other than the Debt Obligations are, or are reasonably expected to be, reserved, allocated on a long-term basis or otherwise set aside by the Pismo Beach Public Financing Agency (or any related party) pursuant to their budget or financial policies with respect to the costs of the Facility Project. To the
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Attachment 1
best of the Council’s knowledge, this City Council is not aware of the previous adoption of official intents by the City that have been made as a matter of course for the purpose of reimbursing expenditures and for which tax-exempt obligations have not been issued.
Section 10. The limitations that are described in Sections 6 and 7 above do not apply to:
(a) costs of issuance of the Debt Obligations; (b) an amount not in excess of the lesser of $100,000 or five percent (5%) of the proceeds of the Debt Obligations; or (c) any preliminary expenditures, such as architectural, engineering, surveying, soil testing, and similar costs other than land acquisition, site preparation, and similar costs incident to commencement of construction, not in excess of twenty percent (20%) of the aggregate issue price of the Debt Obligations that finance the Facility Project for which the preliminary expenditures were incurred.
Section 11. This Resolution is adopted for purposes of establishing compliance with the requirements of section 1.150-2 of the Treasury Regulations. This Resolution does not bind the City to make any expenditure, incur any indebtedness or proceed with the Financing of the Facility Project.
Section 12. The City Manager, the Administrative Services Director, the City Clerk and any and all other officers of the City are hereby authorized and directed, for and in the name and on behalf of the City, to do any and all things and take any and all actions, including execution and delivery of any and all assignments, certificates, requisitions, agreements, notices, consents, instruments of conveyance, warrants and other documents, which they, or any of them, may deem necessary or advisable in order to consummate any of the transactions contemplated by the documents approved pursuant to this Resolution.
Section 13. Effective Date. This Resolution shall take effect from and after the date of its passage and adoption.
UPON MOTION OF Council Member , seconded by Council Member , the foregoing resolution was adopted by the City Council of the City of Pismo Beach this 19th day of March 2024, by the following vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
RECUSED:
Approved: Attest:
________________________ ________________________
Ed Waage, Mayor Erica Inderlied, City Clerk
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IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of the City of Pismo Beach, California, on _______________________. ________________________
Erica Inderlied, City Clerk
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Attachment 1