10-25-2021 BPU RPT 11 - Laserfiche WebLink

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RIVERSIDE PUBLIC UTILITIES Board Memorandum BOARD OF PUBLIC UTILITIES DATE: OCTOBER 25, 2021 SUBJECT: APPROVAL OF REIMBURSEMENT RESOLUTION FOR ELECTRIC UTILITY CAPITAL PROJECTS ISSUE: Consider approval of the Electric Utility Reimbursement Resolution to provide the use of future -Year Capital RECOMMENDATION: That the Board of Public Utilities recommend that the City Council adopt the Electric Utility Reimbursement Resolution to provide the future option of using bond funds for capital financing requirements, with the understanding that reserve funds will be used for capital needs in the interim period. BACKGROUND: US Treasury Regulation Section 1.150-2 requires the City of Riverside adopt a formal declaration of intent to reimburse expenditures with future bond proceeds. The Electric Utility Reimbursement Resolution serves as a formal declaration, allowing the Electric Utility to reimburse capital expenditures made up to 60 days prior to the adoption of the resolution to the time of bond issuance. Without the resolution, only expenditures made on or after the issuance of bonds would be eligible for reimbursement. DISCUSSION: The Electric Utility requires capital improvement projects to maintain system reliability, serve new residential and commercial developments, and refurbish the electric system. Because these capital improvements are long-term in nature, they are primarily funded through bonds. The basic philosophy of using bonded indebtedness for capital projects is to ensure generational equity. The repayment of the bonds is made over the life of the project (20 to 30 years) and is repaid by a future generation of ratepayers that receive the benefits of the project. Historically, 65% to 70% of the Electric CIP has been funded by bonds, and typically the Electric Utility has issued bonds every two to four years to fund its Board and City Council approved Five-Year CIP. Adopting the Reimbursement Resolution allows the Electric Utility to continue to fund critical capital expenditures with the intent to reimburse these projects with bond proceeds. This provides the flexibility to enter the securities market and issue bonds at the most optimal time. The last new