City Council Meeting - FINAL

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Meeting Date: 02/07/2023  
From: Rick Tadder, Management Services Director

Consideration and Adoption of Resolution No. 2023-04:  A resolution of the Flagstaff City Council, declaring, for purposes of Section 1.150 2 of the Federal Treasury Regulations, official intent to be reimbursed in connection with certain capital expenditures related to the November 2022 election for proposition 441 and 442 projects as approved by voters, and establishing an effective date.
1) Read Resolution No. 2023-04 by title only
2) City Clerk reads Resolution No. 2023-04 by title only (if approved above)
3) Adopt Resolution No. 2023-04
Executive Summary:
This resolution will allow the City to reimburse itself for expenditures made on November ballot measure projects that are currently being planned or may be 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 of resolution is adopted. Without the resolution, only City construction expenditures incurred after the issuance of debt would be allowed.
Financial Impact:
This reimbursement resolution does not have any direct financial impact; however, it allows the City to move forward with capital expenditures prior to completion of future financing.  
Policy Impact:
Connection to PBB Priorities/Objectives, Carbon Neutrality Plan & Regional Plan:
Carbon Neutrality:
Community Resilience, Housing for All, Clean Electricity, Healthy Forests and Open Spaces, and Health and Safety

Priority Based Budgeting: 
Safe and Healthy Community, Sustainable, Innovative Infrastructure, and Livable Community

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 efficient delivery of services.
Goal WR.5. Manage watersheds and stormwater to address flooding concerns, water quality, environmental protections, and rainwater harvesting.
Goal LU.13. Increase the variety of housing options and expand opportunities for employment and neighborhood shopping within all suburban neighborhoods.
Goal NH.3. Make available a variety of housing types at different price points, to provide housing opportunity for all economic sectors.
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.
Has There Been Previous Council Decision on This:
Options and Alternatives:
  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.
Proposition 441
On November 8, 2022, a general election was held by the City of Flagstaff whereby the citizens authorized the Investing in City of Flagstaff wildfire suppression, stormwater flood mitigation, and wastewater treatment infrastructure ballot measure.  Voters authorized the issuance of $57,285,000 in general obligation debt.  The debt service payments will be made from secondary property taxes.

Proposition 442
On November 8, 2022, a general election was held by the City of Flagstaff whereby the citizens authorized the Creating rental and homeownership opportunities for residents of Flagstaff ballot measure.  Voters authorized the issuance of $20,000,000 in general obligation debt.  The debt service payments will be made from secondary property taxes.
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 or chargeable with a proper election) under general federal income tax guidelines.

Expanded Financial Considerations:
Utilizing a reimbursement resolution allows the City to issue debt at the appropriate time.  In addition, there is value in not issuing debt for capital project prior to construction because the City will not incur interest expense. 
Community Involvement:
Involve, Collaborate, Empower:  The ballot measures were developed with the support of the community and utilizing community members on the Citizen Bond Advisory Committee.  The voters had an opportunity to decide the ballot measures. 
Res. 2022-04


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