Department of Finance
Reference: Reimbursement Resolution for Water Treatment Plant Financing
To: Mayor Gregory Mills and Members of City Council
Through: Michael P. Martinez, City Manager
Prepared By: Catrina Asher, Director of Finance
Date Prepared: December 17, 2024
PURPOSE
To request Council approval of a reimbursement resolution related to future bond issuance to finance the completion of the Water Treatment Plant project.
BACKGROUND
In 2022, the City began construction on a new Water Treatment Plant. This project anticipated financing through two bond sales, the first of which occurred in November 2022. The timing of the second borrowing would be based on the spend rate of the initial borrowing as well as the availability of other funding sources, including ARPA grants.
The project is currently underway and is ahead of schedule with completion planned for early 2027. At this time, the current bond fund (proceeds from the 2022 borrowing, plus interest earned) is expected to be fully utilized in Q1 2025. Therefore, staff is beginning the process of the second borrowing so that funds will be received in Q1 2025.
The second borrowing will be $85M and is targeted to close in February 2025. The proposed timeline is as follows:
• December 17 City Council Meeting - Reimbursement Resolution
• January 14 Study Session - Project update and financing overview
• January 21 City Council Meeting - Bond Ordinance (Initial)
• January 27 - Rating Agency calls
• February 4 City Council Meeting - Bond Ordinance (Final)
• February 19 - Competitive Bond Sale
• February 27 - Bond Closing & Receipt of Funds
The first step in the borrowing is a Reimbursement Resolution. This is a statement that the City intends to use the proceeds of a future borrowing on costs incurred as of the date of the resolution. This ensures we have no issues with utilizing the future proceeds should the remaining bond funds be spent faster than anticipated or the borrowing is delayed.
The Reimbursement Resolution does not define the bonding parameters or terms. These will be outlined in a future ordinance for City Council’s consideration. The Resolution also does not obligate the City to borrow funds.
CRITERIA BY WHICH COUNCIL MUST CONSIDER THE ITEM
As mentioned previously, this Resolution does not obligate the City to any specific bond terms or issuance. Its purpose is to ensure the City can use future proceeds on current project costs should the current bond fund be depleted faster than anticipated. Without this Resolution, if the current bond fund were to be depleted before additional borrowing could take place, the City would have to identify alternative sources to cover costs incurred in the interim.
FINANCIAL IMPACT
The future borrowing and related debt service has been factored into the City’s multiyear plans for the Water Fund since the project broke ground in 2022 and have been factored into rate projections. The user rates for 2025 were proposed with this financing in mind. Those rates have already been approved and staff is not requesting any changes to those rates at this time.
STAFF RECOMMENDATION
Staff recommends approving the Reimbursement Resolution as proposed.
Attachments:
Ø Reimbursement Resolution
Ø Presentation