10.B.
City Council Meeting - FINAL
- Meeting Date:
- 05/21/2013
- From:
- Barbara Goodrich, Management Services Director
Information
TITLE:
Consideration and Adoption of Resolution No. 2013-11: A resolution of the Mayor and Council of the City of Flagstaff, Arizona, declaring, for 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 installation of three solar photo-voltaic systems.
RECOMMENDED ACTION:
1) Read Resolution No. 2013-11 by title only
2) City Clerk reads Resolution No. 2013-11 by title only (if approved above)
3) Adopt Resolution No. 2013-11
2) City Clerk reads Resolution No. 2013-11 by title only (if approved above)
3) Adopt Resolution No. 2013-11
Policy Decision or Reason for Action:
Approval of this resolution will allow the City to reimburse itself for expenditures made on behalf of three solar photo-voltaic systems planned for installation should the close of the financing not coincide with the construction timing.
Financial Impact:
Incurred expenditures will be reimbursed from the capital lease proceeds.
Connection to Council Goal:
Effective governance
Has There Been Previous Council Decision on This:
Yes.
May 7, 2013: First read of ordinance authorizing the Lease/Purchase agreement
April 2, 2013: Capital financing award to Banc of America Public Capital
March 15, 2010: Solar system installation award to Ameresco
May 7, 2013: First read of ordinance authorizing the Lease/Purchase agreement
April 2, 2013: Capital financing award to Banc of America Public Capital
March 15, 2010: Solar system installation award to Ameresco
Options and Alternatives:
- Approve the Reimbursement Resolution
- Do not approve the Reimbursement Resolution
Background/History:
In November 2009, staff was directed to develop renewable energy systems on City property. In March 2010 , a solar installation contract was awarded to Ameresco (formerly APS Energy Services). Two phases have been completed and this financing is for the third phase which includes the Aquaplex, the Rio de Flag Wastewater Treatment Facility, and the Wildcat Treatment Facility totaling 802 kilowatts.
The first two phases were funded through Power Purchase Agreements (PPA). Under this model, the City does not retain an ownership interest in the solar systems but is provided a flat electricity rate for a 20 year period. The City will own the solar equipment installed as part of Phase 3. The City chose this financing model for Phase 3 primarily due to higher incentives and other cost savings that will generate overall savings to the City in excess of the cost of financing and the cost of power as offset through the incentives.
The City has awarded the lease purchase financing to Banc of America Public Capital. The City anticipates closing this loan on or about either May 24, 2013 or June 21, 2013. The reimbursement resolution is proposed as a backup measure in case any delays are encountered with the June closing date.
The first two phases were funded through Power Purchase Agreements (PPA). Under this model, the City does not retain an ownership interest in the solar systems but is provided a flat electricity rate for a 20 year period. The City will own the solar equipment installed as part of Phase 3. The City chose this financing model for Phase 3 primarily due to higher incentives and other cost savings that will generate overall savings to the City in excess of the cost of financing and the cost of power as offset through the incentives.
The City has awarded the lease purchase financing to Banc of America Public Capital. The City anticipates closing this loan on or about either May 24, 2013 or June 21, 2013. The reimbursement resolution is proposed as a backup measure in case any delays are encountered with the June closing date.
Key Considerations:
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 so chargeable with a proper election) under general federal income tax guidelines.
Expanded Financial Considerations:
The reimbursement resolution may be needed if there is any delay in the final closing of the financing agreement. The City would reimburse itself for any hard construction costs incurred before the closing. The City will then be responsible for paying the capital lease payments on a monthly basis for 15 years upon the project completion, estimated to be October 2013.
Community Benefits and Considerations:
This resolution allows capital project timing to not be hampered by the schedule needed to close financing.
Community Involvement:
Inform
Expanded Options and Alternatives:
- Approve the Reimbursement Resolution
- Do not approve the Reimbursement Resolution
Council Action:
Adopted - 05/21/2013 - EAB