Consideration and Adoption of Ordinance No. 2022-07:  An ordinance of the Council of the City of Flagstaff, Arizona approving the form and authorizing the execution and delivery of a loan agreement with the Water Infrastructure Financing Authority of Arizona from its Clean Water Revolving Fund program; delegating the determination of certain matters relating thereto to the Mayor, the City Manager and the Management Services Director of the City; providing the transfer of certain moneys and making certain covenants and agreements with respect thereto; authorizing the taking of all other actions necessary to the consummation of the transactions contemplated by such loan agreement and this ordinance and declaring an emergency.

This ordinance allows for the City of Flagstaff to enter into a loan agreement with the Water Infrastructure Finance Authority (WIFA) for the purpose of financing certain cost of the Rio de Flag Flood Control Project.  An ordinance is required to borrow money, pursuant to City Charter ARTICLE VI - FINANCE AND TAXATION, Section 5 - WHEN ACTIONS ARE TO BE TAKEN BY ORDINANCE.

At the second read of this Ordinance, staff is seeking Council’s approval to adopt the Ordinance with an emergency clause.  The Ordinance would be required to be adopted with a vote of three fourths of all members elected or appointed to the Council.   Due to the changing financial environment, delay in authorizing the financing will have an impact to the Stormwater Fund and the resources to deliver future projects for health and safety purposes.

The City anticipates a WIFA loan will be issued in April 2022 for the Rio de Flag Project. This will be the first issuance of debt related to the Rio de Flag Flood Control Project.  Debt service has been budgeted in the Stormwater 5-Year Plan.  In December 2018 City Council adopted Stormwater rates to generate revenues sufficient to allow the City to issue approximately $36 million in revenue-backed debt to fund major Stormwater capital improvement projects. 

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PRIORITY BASED BUDGETING KEY COMMUNITY PRIORITIES:
Sustainable, Innovative Infrastructure: Deliver outstanding services to residents through a healthy, well maintained infrastructure system.
Safe & Healthy Community: Foster a safe, secure, and healthy community.

REGIONAL PLAN:
Goal WR.5. Manage watersheds and stormwater to address flooding concerns, water quality, environmental protections, and rainwater harvesting.
Goal WR.6. Protect, preserve, and improve the quality of surface water, groundwater, and reclaimed water in the region.

CARBON NEUTRALITY:
CR-1: Ensure all mitigation actions improve Flagstaff’s ability to adapt to the future.
CR-2: Strengthen existing community systems to create resilience to both short-term shocks and long-term change.

On July 5, 2019 Council adopted Reimbursement Resolution 2019-42 declaring the City's official intent to reimburse itself for an original expenditure with proceeds from a reimbursement bond, for up to $18,000,000 for stormwater projects.

On February 15, 2022 Council adopted Resolution 2022-06 authorizing the City to apply to WIFA for a loan of up to $20,000,000 for the Rio de Flag Flood Control Project.

• Approve the Ordinance as written allowing the City to move forward with the loan agreement. 
• Recommend changes to the Ordinance modifying the loan agreement.  
• Do not approve the authority to enter into a loan agreement. This will delay financing of infrastructure and may result in higher interest rates.

The City of Flagstaff has been working several years with the U.S. Army Corps of Engineers for the construction of the Rio de Flag Flood Control Project. For more information on the project, please visit this website:  https://www.flagstaff.az.gov/4189/Rio-De-Flag-Flood-Control-Project.  As part of the Project Cooperation Agreement, the City of Flagstaff agreed to share cost of the project.  In July 2020, the U.S. Army Corps of Engineers submitted a request for the City of Flagstaff to provide $15,077,177 as part of the cost sharing agreement to provide funding for the continued design and construction of the Rio de Flag Flood Control Project.  The City has always intended on financing this portion of the shared costs.  In addition, the City anticipates financing the cost of future land and right-of-way acquisitions, future studies and various cost required for the project.   

Staff worked with our Financial Advisor, Stifel, Nicolas and Company (Stifel) to determine the best financing approach.  The City and Stifel, contacted the state's Water Infrastructure Financing Authority (WIFA) to discuss the project and financing needs of the City.   WIFA is responsible for helping smaller to medium-sized communities lower the cost of financing water and wastewater projects. WIFA is authorized to finance the construction, rehabilitation and/or improvement of drinking water, wastewater, wastewater reclamation, stormwater and other water quality facilities/projects.  The term of the loan is estimated to be 25 years and may include $1 million or more of forgivable principal (grant funds). WIFA will also provide low-interest rate loans (subsidized by the federal government) and which is currently estimated at less than 2.0%.  Stifel is assisting the City with providing WIFA the required Project Finance Application and related documentation for this project and is anticipated to be discussed and approved at the Arizona Finance Authority Board of Directors meeting in April of 2022.  

The proposed ordinance includes the maximums contemplated to be issued to provide the greatest flexibility in both amount and timing.  While the purpose of this agenda item is to approve an ordinance to allow the City to issue debt, we have included a draft WIFA loan agreement as an informational document you may review. This document has been reviewed by our Financial Advisors and Bond Counsel, Greenberg Traurig, LLP. Once we have WIFA support to move forward with the loan, these documents will be updated to the final form. Final documents will be available upon request to the Management Services Director.

The new loan will be paid through existing Stormwater rates.

The process to authorize the issuance of debt is to INFORM the public.