Consideration and Adoption of Resolution No. 2018-18:  Resolution of the City Council of the City of Flagstaff, Arizona, declaring, for the purposes of Section 1.150-2 of the Federal Treasury Regulations, official intent to be reimbursed in connection with certain capital expenditures relating to the Flagstaff Watershed Protection Project, Public Safety/City Operations Communication System, Water Projects and Wastewater Projects, and establishing an effective date.

This resolution will allow the City to reimburse itself for expenditures made on voter-approved projects and water and wastewater projects that are currently being planned or under construction in advance of issuing the debt (bonds) for the projects.  Federal regulations provide that the City may reimburse itself for expenditures incurred prior to the issuing of debt so long as this type resolution is adopted.  Without the resolution, only City expenditures incurred after issuance of debt would be allowed.

City expenditures to be reimbursed with debt obligation are budgeted in FY 2018 for the Flagstaff Watershed Protection Project (407-03-425-varies), Public Safety/City Operations Communication System (001-04-061-0220-2-4229), Water projects (202-08-370-varies) and Wastewater projects (203-08-375-varies).  There is no cost to approving this resolution. 
 

None

Council Goals:

Environmental and Natural Resources: Actively manage and protect all environmental and natural resources.

Transportation and Other Public Infrastructure-Deliver quality community assets and continue to advocate and implement a highly performing multi-modal transportation system.

Regional Plan:
 

Goal E&C.3. Strengthen community and natural environment resiliency through climate adaptation efforts.

Goal WR.2. Manage a coordinated system of water, wastewater, and reclaimed water utility service facilities and resources at the City level and identify funding to pay for new resources.

Goal WR.4. Logically enhance and extend the City’s public water, wastewater, and reclaimed water services including their treatment, distribution, and collection systems in both urbanized and newly developed areas of the City to provide an efficient delivery of services.

Goal E&C.3. Strengthen community and natural environment resiliency through climate adaptation efforts.

Goal PF.2. Provide sustainable and equitable public facilities, services, and infrastructure systems in an efficient and effective manner to serve all population areas and demographics.

Yes.  The City Council approves annual budgets and awards contracts for the expenditures being reimbursed by debt financing.  Voters approved the Flagstaff Watershed Protection Project and the Public Safety/City Operations Communication System.   Council approved water and wastewater rates which included debt financing for capital projects.

1. Approve the Reimbursement Resolution: This is the best option to allow the City the greatest flexibility to issue debt when it is most advantageous while allowing construction expenditures to occur; or
2. Do not approve the Reimbursement Resolution:  If not approved, staff will need to quickly bring back a debt issuing ordinance for Council and would issue debt at the earliest possible time or projects would need to be delayed.

Flagstaff Watershed Protection Project
On November 6, 2012, a general election was held by the City of Flagstaff whereby the citizens authorized the Flagstaff Watershed Protection Project ballot measure.  This is was to protect our local watershed through the management of the forest areas on City, State, and Federal lands.  Voters authorized the issuance of $10,000,000 in general obligation debt. The City has issued $2,000,000 in general obligation debt in March 2013 and $2,000,000 in general obligation debt in July 2016.  We are planning on issuing the remaining $6,000,000 in debt during Fiscal Year 2019.   The debt service payments will be made from secondary property taxes.

Public Safety/City Operations Communication System
On November 6, 2012, a general election was held by the City of Flagstaff whereby the citizens authorized the Public Safety/City Operations Communications System ballot measure.  This is to upgrade the communication system in partnership with Northern Arizona University.  Voters authorized the issuance of $4,720,000 in general obligation debt. The City has issued $3,952,287 in general obligation debt in September 2011 and $405,000 in general obligation debt in September 2011.  We are planning on issuing the remaining $362,713 in debt during Fiscal Year 2019.   The debt service payments will be made from secondary property taxes.

Water and Wastewater Projects Financing
On April 19, 2016, Council adopted new rates for water and wastewater.  The rates were based on a formal rate analysis completed by a consultant.  The rate study included issuance of debt to finance water and wastewater capital projects.  Both water and wastewater rate studies estimated that the City would issue debt as early as the Fiscal Year 2016.  Both the Water Fund and Wastewater Funds were able to maintain adequate fund balance without financing projects until Fiscal Year 2019.  We are planning on issuing up to $5,000,000 for water projects and up to $4,500,000 for wastewater projects in Fiscal Year 2019.  The debt service payments will be made from water and wastewater revenues.

IRS regulations are very specific as to what capital expenditures are eligible for reimbursement. These expenditures must be any cost of a type that is properly chargeable to a capital account (or would be or chargeable with a proper election) under general federal income tax guidelines.

Inform: This resolution informs the community of its intent to reimburse construction projects with future debt issuances.
Empower: The Citizens of Flagstaff approved the Flagstaff Watershed Protection Project and the Public Safety/City Communication System at the November 2012 election.