2018.12.17 CC Packet - Laserfiche WebLink

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.,�L CITY OF 14669 Fitzgerald Avenue North, Hugo, MN55038 • (651) 762-6300 • www.ci.hugo.mn.us EST. 1906 TO: Honorable Mayor Tom Weidt and Members of the City Council FROM: Ron Otkin, Finance Director SUBJECT: Bond Reimbursement Resolution DATE: For the City Council Meeting of December 17, 2018 DESIRED COUNCIL ACTION Adoption of Resolution Establishing Procedures Relating to Compliance with Reimbursement Bond Regulations WATER TOWER BID AWARD At their December 17, 2018 meeting, the City Council will consider awarding the bid for Water Tower No. 4. The lowest base bid is $3,521,000. After adding engineering fees (estimated at 25%) the total amount needed will be approximately $4,401,250. CASH ON HAND As of today the Water Construction Fund has $4,552,112. This is an accumulation of infrastructure charges going back to 2010. In short, it took 8 years to reach the current fund balance. After paying for the new tower this fund balance will drop to $150,000. This is a "thin" balance that could preclude the City from undertaking any other significant water projects for some time. FINANCING OPTIONS Aside from using funds on hand to pay for this project, the City does have the option to issue Water Revenue Bonds for all or a portion of the project costs. But the decision to borrow can be delayed for a period of time. Federal treasury regulations permit the City to reimburse itself for project costs from the proceeds of bonds (if the City issues them). Bull this financing option is only available if the City Council passes a "reimbursement resolution" no later than 60 days after the first payment is made to the contractor. The City will then have 18 months after the later of (1) the date of first payment to the contractor or (2) the date the project is placed in service (but in no event more than 3 years after the actual payment) to issue bonds. PROCEDURAL ACTION ONLY Passage of this resolution does not require the City to issue bonds. It only buys the City some time to consider undertaking a bond issuance. It does, however, provide the City with an option if additional funds are needed to undertake water main extensions projects.