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10.81 <br />REPORT <br />Tp the Honorable Mayor and City Council <br />From the City Manager <br />February 3, 2003 <br />Subject <br />Recycled Water Project <br />Recommendation <br />It is recommended that the City Council adopt a resolution that will preserve the City's <br />ability to fund the construction of the proposed recycled water project with debt. <br />Background <br />The City has been exploring the feasibility of constructing the infrastructure needed to <br />deliver recycled water from the South Bayside System Authority to certain users of non - <br />potable water. The estimated cost of this project is $43.6 million and if aoaroved will likely <br />be financed from a variety of sources including grants, retained earnings in the water fund, <br />and the issuance of bonds. <br />Prior to issuing bonds, the City may incur project costs that it may ultimately want to <br />recover from the issuance of tax exempt debt. U.S. Treasury Department regulations <br />require that the governing body of bond issuer adopt a "reimbursement resolution" in <br />advance of expending such amounts should the issuer desire to recover those amounts <br />from a tax exempt bond issue. Generally, any "soft" costs such as design and engineering <br />costs may be reimbursed from a bond issued without adopting a reimbursement resolution <br />while "hard" costs such as construction costs expended before bonds are issued may only <br />be recovered if a "reimbursement resolution" is adopted prior to their expenditure. <br />Alternative <br />The City Council may elect not to adopt this resolution. Should the Council not adopt this <br />resolution the project financing will rely more upon retained earnings and grants and less <br />upon debt. This, however, might restrict the scope and timing of the project. <br />Fiscal Impact <br />There are no additional costs generated by adopting this resolution as Council is not <br />approving the project at this time. By adopting this resolution, the City Council is merely <br />preserving the option to reimburse the water fund for eligible costs that are incurred priorto <br />the issuance of bonds, but does not commit the City to doing so. <br />Brian Pbnty <br />Director of Finance and Financial Planning <br />EdwarcEv'& <br />City Manager <br />