10-24-2022 BPU RPT 05 - Laserfiche WebLink

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RIVERSIDE PUBLIC UTILITIES Board Memorandum BOARD OF PUBLIC UTILITIES DATE: OCTOBER 24, 2022 SUBJECT: REIMBURSEMENT RESOLUTION FOR WATER UTILITY CAPITAL PROJECTS ISSUE: Consider approval of the Water Utility Reimbursement Resolution to provide the use of future bond proceeds for capital financing requirements for the Water -Year Capital RECOMMENDATION: That the Board of Public Utilities recommend that the City Council adopt the Water 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 Water Utility Reimbursement Resolution serves as a formal declaration, allowing the Water 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 Water Utility requires capital improvement projects to maintain system reliability, increase capacity to serve new residential and commercial developments, and refurbish the existing system. Because these capital improvements are long-term in nature, they are primarily funded through bonds. The philosophy of using bonded indebtedness for capital projects is that repayment of the bond is made over the useful life of the project (usually 20 to 30 years). Historically, the Water 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 Water 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 for the utility. The last new money bond issuance was in February 2019. The City issued $114,215,000 in bonds to refund existing debt, unwind swap agreements, and to fund future capital projects; $52,194,000 of those bond proceeds were set aside for new capital expenditures.