The G.O. Bonds will be repaid through the assessment, levy, and collection of ad valorem tax on all taxable property within the City and the full faith, credit, and taxing power of the City will be pledged to the payment of the principal and interest of the bonds. Issuance costs and expenses will be paid from G.O. Bond proceeds. In accordance with the provision of Section 2-278(b) (Exhibit A) procedures governing the issuance of bonds with respect to bonds subject to a referendum, the Administration’s compliance with paragraphs 1 and 2 of Section 2-278(a) was completed with the adoption of Resolution 2019-30754.
The portion of the projects for which the bonds are to be issued is $19,830,000, as described in Chart 1 below. The City to date has not committed any proceeds for future projects that are to be funded from future bond proceeds.
CHART 1
Declaration of Official Intent
Currently, the Administration is not recommending the immediate issuance of G.O. bonds but to instead request the Commission to authorize for the Administration to execute a Declaration of Official Intent defined as:
“Declaration of Official Intent” means a declaration of intent, in the form, manner and time contemplated in the Reimbursement Regulations, that the advances for expenditures referred to therein are reasonably expected to be reimbursed from the proceeds of Bonds to be issued after those expenditures are paid.”
Issuing G.O. bonds with a prior Declaration of Official Intent can be a cost-effective strategy. A prior Declaration of Official Intent is a legal mechanism that allows an issuer to use its own funds initially for project expenses and later reimburse itself with the proceeds from the sale of tax-exempt G.O. bonds. In this case, the General Fund’s reserves would be utilized to provide the interim funding of the projects.
The Declaration of Official Intent will not be effective unless the bonds providing moneys for the reimbursement are issued and the reimbursement for the projects described in Chart 1 above is made within the applicable period prescribed in the Treasury Regulations – generally, 18 months after the later of the date of the expenditure or the date the Project is placed in service, but in no event later than three years after the date of the expenditure. See attached Exhibit B for Resolution 2016-29612 which authorizes Declarations of Official Intent. The Administration may return at a future date to request an increase in the Tranche 2 authorization as additional projects are ready to proceed.
Some advantages to this approach include:
- Timing and Flexibility: Delaying the issuance of bonds provides the City with flexibility in terms of timing. It allows the City to initiate and fund a project using the City’s reserves while waiting for the most opportune moment to issue long-term bonds. This can be advantageous in instances where market conditions are not favorable or when the project timeline is uncertain.
- Reduced Interest Costs: By using internal funds initially, the City can avoid incurring interest costs associated with long-term debt during the early stages of projects. Taxpayers will not be taxed at this time. Debt service millage will not be increased until after the actual issuance of the Bonds.
- Market Conditions: Delaying the issuance allows the City to monitor and take advantage of favorable market conditions. If interest rates are expected to decrease or if there is increased demand for bonds, the City may be able to secure more favorable terms, ultimately lowering the overall cost of financing.
- Project Initiation Assessment: The delay provides the City with additional time to assess when certain project milestones are reached. This may involve confirming that the project is progressing as planned.
On April 11, 2024, the G.O. Bond Oversight Committee passed a motion endorsing the aforementioned Administration’s strategy.