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H3. Reso 5865 - Westside Int ReimbursementCity of Kalispell Charles A. xarball Office of City Attorney City Attorney 201 First Avenue East P.O. Box 1997 Kalispell, MT 59903-1997 TO: FROM: MEMORANDUM Doug Russell, City Manager � ` Charles Harball, City Attorney Tel 406.758.7709 Fax 406.758.7771 charball@kalispell.com SUBJECT: Resolution No. 5865 — Declaring the Intent of the City to Reimburse Certain Original Expenditures Related to the Construction and Equipping of Westside Interceptor from Proceeds of Tax -Exempt Bonds to be Issued by City MEETING DATE: April 16, 2018 — Regular Council Meeting BACKGROUND: The City has determined to construct what is known as the Westside Interceptor, a necessary substructure of the sanitary sewer conveyance system to augment its existing sanitary sewer utility. The acquisition of the needed property rights is nearing completion and the preliminary engineering of the project is complete. The financing of the project through the issuance of bonds through the State Revolving Fund is contingent upon the completion of these tasks. The City is in the process of arranging with the State Revolving Loan Fund to finance the project. It is customary and prudent in such financed projects as this for the City Council to pass a resolution stating its intent to use proceeds from the bonds issued by the City for the project to reimburse the City for the preliminary funds it has expended on the project prior to securing the financing. RECOMMENDATION: It is recommended that the Council consider and pass Resolution No. 5865. ALTERNATIVES: Council may seek to amend the Resolution, reject the Resolution or continue the matter for further consideration. CERTIFICATE AS TO RESOLUTION AND ADOPTING VOTE I, the undersigned, being the duly qualified and acting City Clerk of the City of Kalispell, Montana (the "City"), hereby certify that the attached resolution is a true copy of a Resolution entitled: "RESOLUTION DECLARING THE OFFICIAL INTENT OF THE CITY OF KALISPELL, MONTANA TO REIMBURSE CERTAIN ORIGINAL EXPENDITURES RELATED TO THE CONSTRUCTION AND EQUIPPING OF THE WESTSIDE INTERCEPTOR AND SEWER LINE A REPLACEMENT PROJECT FROM THE PROCEEDS OF TAX-EXEMPT BONDS TO BE ISSUED BY THE CITY AFTER THE PAYMENT OF SUCH ORIGINAL EXPENDITURES" (the "Resolution"), on file in the original records of the City in my legal custody; that the Resolution was duly adopted by the City Council of the City at a regular meeting on April 16, 2018 and that the meeting was duly held by the City Council and was attended throughout by a quorum, pursuant to call and notice of such meeting given as required by law; and that the Resolution has not as of the date hereof been amended or repealed. I further certify that, upon vote being taken on the Resolution at said meeting, the following members of the City Council voted in favor thereof: voted against the same: abstained from voting thereon: or were absent: WITNESS my hand officially this _ day of April, 2018. City Clerk 1. 111111111V A RESOLUTION DECLARING THE OFFICIAL INTENT OF THE CITY OF KALISPELL, MONTANA TO REIMBURSE CERTAIN ORIGINAL EXPENDITURES RELATED TO THE CONSTRUCTION AND EQUIPPING OF THE WESTSIDE INTERCEPTOR AND SEWER LINE A REPLACEMENT PROJECT FROM THE PROCEEDS OF TAX-EXEMPT BONDS TO BE ISSUED BY THE CITY AFTER THE PAYMENT OF SUCH ORIGINAL EXPENDITURES. WHEREAS, U.S. Treasury Regulations, Section 1.150-2 (the "Reimbursement Regulations"), promulgated pursuant to Section 150 of the Internal Revenue Code of 1986, as amended (the "Code"), provides that the allocation of the proceeds of tax-exempt bonds to expenditures for governmental purposes originally paid from a source other than such tax-exempt bonds will be treated as expenditures of such tax-exempt bonds only if certain requirements of the Reimbursement Regulations are satisfied by the issuer of such tax-exempt bonds; and WHEREAS, the City of Kalispell, Montana (the "City"), expects to pay certain original expenditures for the acquisition, construction, and equipping of a the Westside Interceptor sewer line project in the City (the "Project"), which original expenditures are expected to be financed temporarily from the City's Sanitary Sewer Fund and which original expenditures are expected to be reimbursed from the proceeds of one or more series of tax-exempt bonds. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF KALISPELL, MONTANA AS FOLLOWS: 1. The City has a reasonable expectation (within the meaning of U.S. Treasury Regulations, Section 1.148-1 (b)) that it will make expenditures for the Project in 2018 out of the City's Sanitary Sewer Fund. The City has a reasonable expectation that it will issue one or more series of tax-exempt bonds (the "Bonds") in the estimated maximum principal amount not to exceed $12,300,000 to finance the Project and that the City will make reimbursement allocations with respect to such original expenditures for the Project from the proceeds of such Bonds. 2. This Resolution shall be maintained as part of the books and records of the City at the main administrative office of the City, and shall be continuously available during normal business hours of the City on every business day of the period beginning not more than thirty (30) days after adoption of this Resolution and ending on the last date of issue of any Bonds. 3. This Resolution has been adopted not later than sixty (60) days after payment of any original expenditure for a Project to be subject to a reimbursement allocation with respect to the proceeds of the Bonds. 4. All reimbursement allocations with respect to the Bonds will be made not later than eighteen (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 three (3) years after the original expenditure for a specific Project. If the Bonds are eligible for the small issuer exception from arbitrage rebate, the "18-month" limitation above is extended to "three years" and the "three-year" maximum reimbursement period is disregarded. 5. All original expenditures to which reimbursement allocations are to be made constitute: (i) capital expenditures; (ii) costs of issuance of the Bonds; (iii) expenditures for extraordinary, nonrecurring items that are not customarily payable from current revenues, such as casualty losses or extraordinary legal judgments in amounts in excess of reasonable insurance coverage, and for which no reserve is maintained; or (iv) a grant (as defined in U.S. Treasury Regulations, Section 1.148-6(d)(4), as a transfer for a governmental purpose of money or property to a transferee that is not a related parry to or an agent of the transferor with respect to which no obligation or condition is imposed to directly or indirectly repay any amount to the transferor). 6. Limitations set forth in paragraphs 3 and 4 of this resolution do not apply to: (i) the costs of issuance of the Bonds; (ii) an amount not in excess of the lesser of $100,000 or five percent (5%) of the proceeds of the Bonds; or (iii) preliminary expenditures up to an amount not in excess of twenty percent (20%) of the aggregate issue price of the Bonds that finance or are reasonably expected by the City to finance the Project for which the preliminary expenditures were incurred. The term "preliminary expenditures" includes architectural, engineering, surveying, soil testing, reimbursement bond issuance, and similar costs that are incurred prior to commencement of acquisition, construction, or rehabilitation of a Project, other than land acquisition, site preparation, and similar costs incident to commencement of construction. 7. This Resolution is an expression of the reasonable expectations of the City based on the facts and circumstances known to the City as of the date hereof. The anticipated original expenditures for the Project are consistent with the City's budgetary and financial circumstances. No sources other than proceeds of Bonds to be issued by the City are, or are reasonably expected to be, reserved, allocated on a long-term basis, or otherwise set aside pursuant to the City's budget or financial policies to pay such Project expenditures. 8. This Resolution is intended to constitute a declaration of official intent for purposes of the Reimbursement Regulations. 9. No reimbursement allocation of the proceeds of the Bonds to Project expenditures will employ an abusive arbitrage device (within the meaning of Treasury Regulations, Section 1.148-10) to avoid the arbitrage restrictions or to avoid the restrictions of Sections 141 through 150 of the Code. PASSED AND APPROVED BY THE CITY COUNCIL AND SIGNED BY THE MAYOR OF THE CITY OF KALISPELL, THIS 16TH DAY OF APRIL, 2018. ATTEST: Aimee Brunckhorst, CMC City Clerk Mark Johnson Mayor 2