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Home My WebLink About21-Finance ,. - . CITY OF SAN BERNARDINO - REQUEST FOR COUNCIL ACTION From: Barbara Pachon, Finance Director Subject: Resolution of the City of San Bernardino relating to financing of certain projects establishing compliance with reimbursement regulations under the Internal Revenue Code. Dept: Finance O""'-""'L t:. I ~I. f .J-i Date: 12/03/01 Synopsis of Previous Council Action: 7-8-1998 Master Lease with FMLC approved, resolution #98-178 6,5,2001 Purchase of 4 Fire apparatus from Pierce Mfg., resolution #2001.132 11.5,01 Amendment of FMLC master lease agreement, resolution #2001-334 Recommended motion: 1) Adopt Resolution. 2) Authorize the Director of Finance to amend the FY 2001-02 Budget to reflect the capital expenditure of $935,500 for Fire Department apparatus and the corresponding reimbursement of $935,500 that the City will receive from the financing proceeds. ~~ ~t~~~ Contact person: Barbara Pachon, Director of Finance Phone: 5242 Supporting data attached: Reimbursement resolution Ward: FUNDING REQUIREMENTS: Amount: $935,500 Source: lease-financing proceeds FI..n'.'~ Council Notes: ~~ .. '2il:J l-:S~ Agenda Item No. Z. / 12. .. 3 .. 0 I . < STAFF REPORT SUBJECT: Resolution of the City of San Bernardino relating to financing of certain projects establishing compliance with reimbursement regulations under the Internal Revenue Code. BACKGROUND: In order to finalize the purchase and financing of the four (4) fire apparatus approved by the Mayor and Council at the 6/5/01 Council meeting, the City is required to adopt a "reimbursement resolution" to establish compliance with Internal Revenue Service (IRS) regulations. At the June 5th Council Meeting, the Mayor and Council approved the Fire Department's purchase of four (4) new fire apparatus from Pierce Manufacturing (Resolution 2001-132). The resolution also authorized the Purchasing Manager to obtain rate quotes to finance the purchase of the apparatus from financing companies with Council approved master-lease agreements in place with the City. The Finance Department issued a request for financing rate quotations in September. FMLC was determined to be the lowest and best financing provider and was awarded the bid to fmance the fire apparatus. FMLC has a master-lease in existence with the City that was approved on July 8th, 1998 (Resolution #98-178) and amended at the November 5th 2001 Council meeting. Once an organization enters into an agreement with a manufacturer to produce expensive, customized equipment like fire apparatus, it is usually required that the organization making the purchase pay for a portion or all of the costs up front (upon receipt of a performance bond from the manufacturer) depending upon the specifics of the agreement. The manufacturer's (Pierce) price for the four- (4) new fIre apparatus includes a $29,047.00 discount for paying for the equipment in advance of delivery. Because Pierce's price is contingent upon advanced payment of the apparatus prior to delivery and final acceptance, the City must pay for the equipment up front and then get reimbursement from the financing proceeds through FMLC, The City will pay $935,449.95 up front to Pierce and will receive reimbursement from FMLC in two payments, Upon funding of the lease, the City will receive our fIrst reimbursement for the cost of the chassis, $426,216. The second and final disbursement for the remaining $509,233.95 will be reimbursed to the City upon final acceptance of the equipment. (The balance of the fInancing proceeds, $162,468.50, will be disbursed upon fmal acceptance of the ancillary equipment, directly to the vendors, and will not be part of any prepayment or reimbursement program.) FINANCIAL IMPACT: A budget amendment is needed to reflect the $935,500 that the City will expend up front to pay Pierce and to also reflect the corresponding $935,500 that the City will receive as reimbursement from the financing proceeds, Interest earned on the fInancing proceeds will be used to reimburse the City for interest lost on funds used to pay for the equipment up front. RECOMMENDED MOTIONS: I. Adopt Resolution, 2. Authorize the Director of Finance to amend the FY 2001-02 Budget to reflect the capital expenditure of $935,500 for Fire Department apparatus and the corresponding reimbursement of $935,500 that the City will receive from fInancing proceeds. - '- c - '- RESOLUTION N~ (Q) [? V , 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 RESOLUTION OF THE CITY OF SAN BERNARDINO RELATING TO FINANCING OF CERTAIN PROJECTS ESTABLISHING COMPLIANCE WITH REIMBURSEMENT REGULATIONS UNDER THE INTERNAL REVENUE CODE. BE IT RESOLVED BY THE MAYOR AND COMMON COUNCIL OF THE CITY OF SAN BERNARDINO AS FOLLOWS: SECTION I Recitals: The Internal Revenue Services has issued Section 1.150.2 of the Income Tax regulations (the "Regulations") dealing with the issuance of obligations, all or a portion of the proceeds of which are to be used to reimburse the Lessee for project expenditures made by the Lessee prior to the date of issuance of the obligations. The Regulations generally require that the Lessee, as issuer of the obligations, make a declaration of its official intent to reimburse itself for such prior expenditures out of the proceeds of a subsequently issued series of obligations within 60 days after payment of the expenditures, that the obligations be issued and the reimbursement allocation be made from the proceeds of such obligations within the reimbursement period (as defined in the Regulations), and that the expenditures reimbursed be capital expenditures or costs of issuance of the obligations. The Lessee desires to comply with requirements of the Regulations with respect to certain projects to be undertaken within the City of San Bernardino. SECTION 2 Official Intent Declaration: The Lessee expects to make original expenditures with respect to the following described projects prior to the issuance of reimbursement obligations, and the Lessee reasonably expects to issue reimbursement obligations for such projects in the maximum principal amount shown below: 200112002 Proiects Maximum Amount of Obligations Expected to be Issued for Proiect Purchase of 4 fire trucks $935,449.95 "i'LO' i/ 1~/841 ",- '-- c -- '- 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 RESOLUTION OF THE CITY OF SAN BERNARDINO RELATING TO FINANCING OF CERTAIN PROJECTS ESTABLISHING COMPLIANCE WITH REIMBURSEMENT REGULATIONS UNDER THE INTERNAL REVENUE CODE. Other than (i) de minimis amounts permitted to be reimbursed pursuant to Section 1.150 (f)( I) of the Regulations or (ii) expenditures constituting preliminary expenditures as defined in Section 1.150-2 (d)(2) of the Regulations, the Lessee will not seek reimbursement for any original expenditures with respect to the foregoing projects paid more than 60 days prior to the date of adoptions of this resolution. All original expenditures for which reimbursement is sought will be capital expenditures or costs of issuance of the reimbursement obligations. SECTION 3 Budl!etarv Matters: As of the date hereof, there are no Lessee funds reserved, pledged, allocated on a long term basis or otherwise set aside (or reasonably expected to be reserved, pledged, allocated on a long term basis or otherwise set aside) to provide permanent financing for the original expenditures related to the projects, other than pursuant to the issuance of the reimbursement obligations. Consequently, it is not expected that the issuance of the reimbursement obligations will result in the creation of any replacement proceeds. SECTION 4 Reimbursement Allocations: The Lessee's Director of Finance or her designee, shall be responsible for making "reimbursement allocations;" described in the regulations, being generally the transfer of the appropriate amount of proceeds of the reimbursement obligations to reimburse the source of temporary financing used by the Lessee to make payment of the original expenditures related to the projects. Each reimbursement allocation shall be made within 30 days of the date of issuance of the reimbursement obligations, shall be evidenced by an entry on the official books and 2 ,- \- c - -- 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 . RESOLUTION OF THE CITY OF SAN BERNARDINO RELATING TO FINANCING OF CERTAIN PROJECTS ESTABLISHING COMPLIANCE WITH REIMBURSEMENT REGULATIONS UNDER THE INTERNAL REVENUE CODE, records of the Lessee maintained for the reimbursement obligation and shall specifically identify the original expenditures being reimbursed. I HEREBY CERTIFY that the foregoing resolution was duly adopted by the Mayor and Common Council of the City of San Bernardino at a meeting thereof, held on the _ day of , 200 I, by the following vote, to wit: COUNCILMEMBERS AYES NAYS ABSTAIN ABSENT ESTRADA LIEN MCGINNIS SCHNETZ SUAREZ ANDERSON MC CAMMACK Rachel Clark, City Clerk The foregoing resolution is hereby approved this day of 2001. Judith Valles, Mayor City of San Bernardino Approved as to form and legal content: JAMES F. PENMAN City Attorney Br -;f-= 3 .' ," ** FOR OFFICE USE ONLY - NOT A PUBLIC DOCUMENT x* RESOLUTION AGENDA ITEM TRACKING FORM Meeting Date (Date Adopted): 12 - 3 -() \ Item # VOle: Ayes I' 'I Nays ..e- Change to motion to amend original documents: - '2. \ Resolution # __2 00 \: 3(;,3___ Abstain -8-' Absent --G- Reso, # On Attachments: --=- Contract term:- Note on Resolution of Attachment stored separately: ==-- Direct City Clerk to (circle I): PUBLISH, POST, RECORD W:COUNTY NullNoid After:,=_.___,~____, By: _-=.___ Date Sent to Mayor: 1'2.-4-0 \ ResQ, Log Updated "./ Seal Impressed: _,_,_~_".___ Date of Mayor's Signature: 12-:')'''1 Date ofClerklCDC Signature: 12-5-0 1 Dale or Si nature: 60 Day Reminder Letter Sent on 30th day: 90 Day Reminder Letter Sent on 45th day: See Attached: See Attached: See ttached: Date Returned: - Request for Council Action & Staff Report Attached: Yes / Updated Prior Resolutions (Other Than Below): Yes Updated CITY Personnel Folders (6413, 6429. 6433,10584,10585,12634): Yes Updated CDC Personnel Folders (5557): Yes Updated Traffic Folders (3985,8234,655,92-389): Yes No By No ./ By No -L By No ~ By No / Copies Distributed to: Cily Attorney 0;1 Parks & Rec. Code Compliance Dev. Services Police Public Services Water EDA Finance ,/" MIS Others: Notes: BEFORE FILING, REVIEW FORM TO ENSURE ANY NOTATIONS MADE HERE ARE TRANSFERRED TO THE YEARLY RESOLUTION CHRONOLOGICAL LOG FOR FUTURE REFERENCE (Contract Term. etc.) Ready to File: JYIC.. Date: ~ Revised 0111210 I