ATTACHMENT 1
AGENDA #4c
MEMORANDUM
TO: Mayor and Town Council
FROM: W. Calvin Horton, Town Manager
SUBJECT: Reimbursement Resolution for Town Operations Center Capital Project
DATE: November 10, 2003
The attached resolution would declare the Town’s intent to reimburse all expenses incurred in the design, engineering and construction of the planned Town Operations Center from Certificates of Participation proposed to finance this project. The proposed reimbursement amount would be based on the project budget for the Town Operations Center approved by the Council on October 27, 2003.
On October 27, 2003, the Council approved a project budget for the Town Operations Center totaling $42,622,822 which includes new facilities for Transit operations, Public Works operations and Public Housing maintenance. The addition of about $53,000 for a proposed right-of-way purchase would bring the total project budget to about $42.7 million. On June 23, 2003, the Council approved the use of Certificates of Participation to finance this project. This method of financing would require approval by the Local Government Commission in the same manner that is required for all capital improvements projects financed by a variation of installment contracts such as Certificates of Participation.
DISCUSSION
U. S. Treasury regulations and guidelines which involve debt financing transactions require that a governmental entity declare its intent to use debt financing for a given project before any expenses are incurred. In accord with this requirement, the Town must adopt a resolution of intent to use an installment contract (Certificates of Participation) for this project in order to be reimbursed from the proceeds of the financing for any costs incurred before the financing contract is finalized.
We expect that funding for the Public Housing portion of the project (about $1.12 million) would be provided from federal Housing Capital Grant funds and that up to 90% of funding for the Transit facility (about $18.3 million) would come primarily from federal and State grants and the Town’s Transportation Capital Reserve Fund, leaving a net balance of about $24.4 million to be financed by Certificates of Participation. However, because of considerable uncertainty in the timing of federal and State grants for the Public Housing and Transportation portions of the facility, we believe there is a potential need to issue Certificates initially for the full project costs and later be reimbursed by federal and State grants that would allow us to retire the appropriate portion of the Certificates issued.
Therefore, based on the uncertainty and timing of federal and State grants, we recommend adopting the attached reimbursement resolution in an amount that would include the full allowance of up to $42.7 million to be eligible for reimbursement from the debt financing. The resolution would not commit the Council in any way to issue the full amount specified in the resolution. It merely allows a maximum that may be issued for the project based on the final decisions of the Council. This resolution would satisfy the federal reimbursement requirements by declaring the Town’s intent to finance the project from Certificates of Participation in an amount not to exceed $42.7 million for the total project.
That the Council adopt the attached resolution declaring its intent to reimburse costs associated with the Town Operations Center capital project from the proceeds of Certificates of Participation to be issued to finance the project.
A RESOLUTION DECLARING OFFICIAL INTENT TO REIMBURSE EXPENSES FOR THE PROPOSED TOWN OPERATIONS CENTER CAPITAL PROJECT FROM A FINANCING CONTRACT (2003-11-10/R-3)
WHEREAS, the Town of Chapel Hill desires to construct certain Town facilities through use of an installment contract such as Certificates of Participation (the Borrowing); and
WHEREAS, the Town has determined that the construction of a Town Operations Center is needed to provide essential Transit, Public Works and Public Housing maintenance services for the citizens of Chapel Hill; and
WHEREAS, the Town proposes to finance the construction of the Town Operations Center through an installment contract such as the issuance of Certificates of Participation that spreads the cost of the Project over a twenty to thirty year period.
NOW, THEREFORE, BE IT RESOLVED by the Council of the Town of Chapel Hill that, pursuant to the requirements of the United States Treasury Regulations Section 1.150-2, that the Council intends this resolution to constitute a Declaration of Official Intent to Reimburse under such Treasury Regulations Section.
BE IT FURTHER RESOLVED that:
1 Expenditures to be incurred. The Issuer anticipates incurring expenditures (the “Expenditures”) for the construction of the Project,
2 Plan of Finance. The Issuer intends to finance the costs of the Project with the proceeds of debt to be issued by the Issuer (the “Borrowing”) the interest on which is to be excluded from gross income for Federal income tax purposes.
3 Maximum Principal Amount of Debt to be Issued. The maximum principal amount of the Borrowing to be incurred by the Issuer to finance the Project is $42,700,000.
4 Declaration of Official Intent to Reimburse. The issuer hereby declares its official intent to reimburse itself with the proceeds of the Borrowing for any of the Expenditures incurred by it prior to the issuance of the Borrowing.
BE IT FURTHER RESOLVED that the Council authorizes the Town Clerk to certify a copy of this resolution for the N. C. Local Government Commission.
This the 10th day of November, 2003.