MEMORANDUM
TO: Mayor and Town Council
FROM: W. Calvin Horton, Town Manager
SUBJECT: Contingent Authorization to Reimburse Costs for Installment Debt Project
DATE: June 24, 2002
As discussed by the Council at its June 12 budget work session, certain capital improvement projects could be added to the final budget if State legislation is enacted to protect local government funds from seizure by the Governor. One of those potential projects is repair and resurfacing of tennis courts and outdoor basketball courts. The cost of this work would be paid through an installment debt contract. If the Council’s final budget involves this project, the attached resolution would declare the Town’s intent to reimburse all expenses incurred in the planned repair or resurfacing of tennis and basketball courts from the proceeds of an installment financing contract.
The repair and resurfacing of tennis courts at Cedar Falls Park, Phillips School, Oakwood and Umstead Parks and the basketball courts at Hargraves Center and the Estes Drive Community Center (totaling $240,000), as among those projects proposed to be financed. Some of the courts will be resurfaced with a composite resilient material that can be installed only during hot weather, so August would be the best time to have the work done. The courts are in various states of disrepair now; repair or resurfacing would preclude having to completely reconstruct some and would avoid the safety concerns of cracked and uneven surfaces.
U. S. Treasury regulations and guidelines that 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 installment financing for the tennis and basketball court resurfacing project in order to reimburse itself for any costs incurred before the financing is executed from the proceeds of the installment contract.
The attached resolution would satisfy the federal reimbursement requirements by declaring the Town’s intent to finance the project from an installment contract in an amount not to exceed $240,000 for this project contingent upon inclusion in the final budget to be adopted by the Council on July 26, 2002.
If the Council is not able to include the court resurfacing in the final budget, then the following resolution would not be used.
That the Council adopt the attached resolution declaring its intent to reimburse costs associated with tennis and basketball court repair and resurfacing from the proceeds of an installment contract, all contingent upon inclusion of said project in the final budget to be adopted by the Council on July 26, 2002.
A RESOLUTION DECLARING OFFICIAL INTENT TO REIMBURSE EXPENSES OF CAPITAL IMPROVEMENT PROJECT (2002-06-24/R-8)
WHEREAS, the Town of Chapel Hill desires to renovate certain Town facilities through use of installment financing contracts; and
WHEREAS, the Town has determined that the tennis and basketball courts Town-wide, “the Project”, are facilities in need of major capital improvement and repair; and
WHEREAS, the Town proposes to finance this improvement through installment contracts that spread the cost of the Project over a ten 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 capital improvements and repairs to 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 $240,000.
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 Local Government Commission.
This the 24th day of June, 2002.