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Resolution No. 2019-018RESOLUTION NO. 2019-18 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF VERNON DECLARING THE CITY'S OFFICIAL INTENT TO REIMBURSE EXPENDITURES FROM THE PROCEEDS OF OBLIGATIONS TO BE ISSUED BY THE CITY OF VERNON, A RELATED PARTY OR OTHER AFFILIATE, AND APPROVING CERTAIN RELATED ACTIONS WHEREAS, the City of Vernon ("City") is a chartered municipal corporation of the State of California that owns and operates a system for the production, purchase, distribution and sale of water; and WHEREAS, the City, or an affiliate or related party to the City (any such party, including the City, the "Issuer"), expects to undertake the acquisition, construction or installation of (i) water wells and reservoirs and related facilities and improvements, and (ii) other facilities and improvements related to the City's water system, including tanks, pumps, generators, pipes, fences and equipment (the "Project"), using revenues, proceeds from bonds or other borrowing, and/or other funds; and WHEREAS, the Issuer expects to pay certain expenditures related to the Project prior to the issuance of debt (such expenditures, the "Reimbursement Expenditures"); and WHEREAS, the Issuer reasonably expects to issue obligations in an amount not to exceed $15,000,000 (the "Obligations") and to use all or a portion of the proceeds of the Obligations to reimburse the Reimbursement Expenditures that are paid before the date of issuance or delivery of the Obligations; and WHEREAS, United States Treasury Regulations Section 1.150-2 provides generally that proceeds of tax-exempt obligations are not deemed to be expended when such proceeds are used for reimbursement of expenditures made prior to the date of issuance of such obligations unless certain procedures are followed, among which is a requirement that (with certain exceptions), prior to the payment of any such expenditure, the issuer must declare its official intent to reimburse such expenditure with proceeds of such obligations; and WHEREAS, it is in the public interest and for the public benefit that the City declare its official intent to use all or a portion of the proceeds of the Obligations to reimburse the Reimbursement Expenditures that are paid by the Issuer before the date of issuance of the Obligations; and WHEREAS, proceeds of the Obligations will be allocated to the Reimbursement Expenditures no later than 18 months after the later of (i) the date the cost is paid, or (ii) the date the Project (or each component thereof) is placed in service or abandoned, but in no event more than three years after the cost is paid; and WHEREAS, by memorandum dated June 18, 2019, Vernon Public Utilities has recommended the City Council declare the City's official intent to reimburse expenditures from the proceeds of obligations to be issued by the City, a related party or other affiliate, and approving certain related actions; and WHEREAS, the City Council of the City of Vernon desires and declares its official intent to use all or a portion of the proceeds of the Obligations to reimburse the Reimbursement Expenditures that are paid before the date of issuance of the Obligations. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF VERNON AS FOLLOWS: SECTION 1: The City Council of the City of Vernon hereby finds and determines that the above recitals are true and correct. SECTION 2: The City Council of the City of Vernon finds - 2 - that this action is not subject to the California Environmental Quality Act (CEQA), because establishment of a government funding mechanism that does not identify individual specific projects to be constructed with the funds is not itself a "project" as defined by CEQA and the CEQA Guidelines. SECTION 3: The City Council of the City of Vernon hereby declares its official intent to use all or a portion of the proceeds of the Obligations to reimburse the Reimbursement Expenditures that are paid before the date of issuance of the Obligations. SECTION 4: The City hereby declares that it reasonably expects (i) to pay the Reimbursement Expenditures prior to the date of issuance of the Obligations and (ii) to use all or a portion of the proceeds of the Obligations for reimbursement of the Reimbursement Expenditures that are paid by the Issuer before the date of issuance of the Obligations. This declaration is made solely for purposes of establishing compliance with the requirements of United States Treasury Regulations Section 1.150-2. This declaration does not bind the City or the Issuer to make any expenditure, incur any indebtedness, or proceed with the Project. SECTION 5: All actions heretofore taken by the officers, employees and agents of the City with respect to the actions set forth above are hereby approved, confirmed and ratified. - 3 - SECTION 6: The City Clerk of the City of Vernon shall certify to the passage, approval and adoption of this resolution, and the City Clerk, of the City of Vernon shall cause this resolution and the City Clerk's certification to be entered in the File of Resolutions of the Council of this City. APPROVED AND ADOPTED this 18th day of June, 2019. ATTEST: Maria E. Ayala, City Clerk APPROVE AS TO FORM: r Brian Byun, Senior Deputy City Otorney Name: Melis Ybarra Title: Mayor / - 4 - STATE OF CALIFORNIA ) ) ss COUNTY OF LOS ANGELES ) I, Maria E. Ayala, City Clerk of the City of Vernon, do hereby certify that the foregoing Resolution, being Resolution No. 2019-18, was duly passed, approved and adopted by the City Council of the City of Vernon at a regular meeting of the City Council duly held on Tuesday, June 18, 2019, and thereafter was duly signed by the Mayor or Mayor Pro-Tem of the City of Vernon. Executed this 18th day of June, 2019, at Vernon, California. (SEAL) - 5 - L't?� Maria E. Ayala, City Clerk STAFF REPORT 06/18/19, MEA City Council Agenda Item Report Agenda Item No. COV-266-2019 Submitted by: Todd Dusenberry Submitting Department: Public Utilities Meeting Date: June 18, 2019 SUBJECT A Resolution Declaring the City's Official Intent To Reimburse Expenditures from the Proceeds of Obligations to be Issued by the City of Vernon, a Related Party or Other Affiliate, and Approving Certain Related Actions Recommendation: A. Find that adoption of the proposed Resolution does not constitute a "project" pursuant to section 15378(b)(2) of the Guidelines to the California Environmental Quality Act ("CEQA'), because the intent to reimburse expenditures from the proceeds of obligations merely establishes a government funding mechanism that does not identify individual specific projects to be constructed with the funds; and B. Adopt a Resolution declaring the City's official intent to reimburse expenditures from the proceeds of obligations to be issued by the C ity of Vernon, a related party or other affiliate, and approving certain related actions. Background: The City of Vernon's Public Utilities Department (VPU) owns and operates a domestic water system that provides approximately 6,900 acre-feet of potable water to its customer base. Vernon is entitled to an annual Allowed Pumping Allocation (APA) of 7,539 acre-feet. VPU uses a combination of imported surface water purchased from Central Basin Municipal Water District (CBMWD) at a cost of$1,185 per acre-foot and groundwater that requires a Replenishment Assessment (RA) payment to the Water Replenishment District (WRD) of$339 per acre-foot. The major components of the water system consist of eight active groundwater production wells, one stand-by well, three booster plants with 14 active booster pumps, eight storage reservoirs, and approximately 49 miles of distribution pipeline. Due to the overall age of facilities and deferred maintenance, many of the water facilities have fallen into disrepair. Mechanical breakdowns occur frequently on many of the ground water wells. Most of these facilities require repair or rehabilitation. Currently, half ofthe City's ground water wells are out of service, and as a result, the City is serving its customer base with groundwater from the four remaining wells and supplementing it on an as -needed basis with costly imported surface water from CBMWD. The City seeks to obtain a bond in an amount not -to -exceed $15,000,000 to finance the VPU Water Division's attached Three -Year Capital Improvement Plan (CIP). This plan will address the dare state of the ground water pumping facilities, add reliability and capacity, decrease dependence on more expensive imported water and facilitate more efficient water system operations. In order to secure bond financing, a water rate study will be conducted and the necessary resulting water rate increase will enable the Water Enterprise to make debt service coverage and pay offthe bond. VPU presented an overview ofthese plans during the May 9, 2019 Business and Industry Commission (BIC) Meeting, which was well received by the Commission. Due to the state of the current Water Division facilities, repairs, rehabilitation and replacement projects are urgent in nature. Expenditures to begin these critical projects will commence prior to receipt of the bond proceeds. The Page 599 of 607 06/18/19, MEA proposed Resolution declares the City's official intent to reimburse expenditures from the proceeds of obligations to be issued by the City of Vernon, a related party or other affiliate, and approve certain related actions. Fiscal Impact: There is no fiscal impact directly associated with the proposed Resolution, as it only declares the City's intent to utilize bond funding once available to replace City reserves used to begin urgently needed capital improvement projects. ATTACHMENTS • 1. Resolution declaring the Citys Official Intent to Reimburse Expenditures from the Proceeds of Obligations to be issued by Vernon • 2. Water Division Projected 3-year Capital Improvements Page 600 of 607 AGENDA ITEM APPROVED 06/18/19, MEA RESOLUTION NO. A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF VERNON DECLARING THE CITY'S OFFICIAL INTENT TO REIMBURSE EXPENDITURES FROM THE PROCEEDS OF OBLIGATIONS TO BE ISSUED BY THE CITY OF VERNON, A RELATED PARTY OR OTHER AFFILIATE, AND APPROVING CERTAIN RELATED ACTIONS WHEREAS, the City of Vernon ("City") is a chartered municipal corporation of the State of California that owns and operates a system for the production, purchase, distribution and sale of water; and WHEREAS, the City, or an affiliate or related party to the City (any such party, including the City, the "Issuer"), expects to undertake the acquisition, construction or installation of (i) water wells and reservoirs and related facilities and improvements, and (ii) other facilities and improvements related to the City's water system, including tanks, pumps, generators, pipes, fences and equipment (the "Project"), using revenues, proceeds from bonds or other borrowing, and/or other funds; and WHEREAS, the Issuer expects to pay certain expenditures related to the Project prior to the issuance of debt (such expenditures, the "Reimbursement Expenditures"); and WHEREAS, the Issuer reasonably expects to issue obligations in an amount not to exceed $15,000,000 (the "Obligations") and to use all or a portion of the proceeds of the Obligations to reimburse the Reimbursement Expenditures that are paid before the date of issuance or delivery of the Obligations; and WHEREAS, United States Treasury Regulations Section 1.150-2 provides generally that proceeds of tax-exempt obligations are not deemed to be expended when such proceeds are used for reimbursement of expenditures made prior to the date of issuance of such obligations Page 601 of 607 AGENDA ITEM APPROVED 06/18/19, MEA unless certain procedures are followed, among which is a requirement that (with certain exceptions), prior to the payment of any such expenditure, the issuer must declare its official intent to reimburse such expenditure with proceeds of such obligations; and WHEREAS, it is in the public interest and for the public benefit that the City declare its official intent to use all or a portion of the proceeds of the Obligations to reimburse the Reimbursement Expenditures that are paid by the Issuer before the date of issuance of the Obligations; and WHEREAS, proceeds of the Obligations will be allocated to the Reimbursement Expenditures no later than 18 months after the later of (i) the date the cost is paid, or (ii) the date the Project (or each component thereof) is placed in service or abandoned, but in no event more than three years after the cost is paid; and WHEREAS, by memorandum dated June 18, 2019, Vernon Public Utilities has recommended the City Council declare the City's official intent to reimburse expenditures from the proceeds of obligations to be issued by the City, a related party or other affiliate, and approving certain related actions; and WHEREAS, the City Council of the City of Vernon desires and declares its official intent to use all or a portion of the proceeds of the Obligations to reimburse the Reimbursement Expenditures that are paid before the date of issuance of the Obligations. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF VERNON AS FOLLOWS: SECTION 1: The City Council of the City of Vernon hereby finds and determines that the above recitals are true and correct. - 2 - Page 602 of 607 AGENDA ITEM APPROVED 06/18/19, MEA SECTION 2: The City Council of the City of Vernon finds that this action is not subject to the California Environmental Quality Act (CEQA), because establishment of a government funding mechanism that does not identify individual specific projects to be constructed with the funds is not itself a "project" as defined by CEQA and the CEQA Guidelines. SECTION 3: The City Council of the City of Vernon hereby declares its official intent to use all or a portion of the proceeds of the Obligations to reimburse the Reimbursement Expenditures that are paid before the date of issuance of the Obligations. SECTION 4: The City hereby declares that it reasonably expects (i) to pay the Reimbursement Expenditures prior to the date of issuance of the Obligations and (ii) to use all or a portion of the proceeds of the Obligations for reimbursement of the Reimbursement Expenditures that are paid by the Issuer before the date of issuance of the Obligations. This declaration is made solely for purposes of establishing compliance with the requirements of United States Treasury Regulations Section 1.150-2. This declaration does not bind the City or the Issuer to make any expenditure, incur any indebtedness, or proceed with the Project. SECTION 5: All actions heretofore taken by the officers, employees and agents of the City with respect to the actions set forth above are hereby approved, confirmed and ratified. - 3 - Page 603 of 607 AGENDA ITEM APPROVED 06/18/19, MEA SECTION 6: The City Clerk of the City of Vernon shall certify to the passage, approval and adoption of this resolution, and the City Clerk, of the City of Vernon shall cause this resolution and the City Clerk's certification to be entered in the File of Resolutions of the Council of this City. APPROVED AND ADOPTED this 18th day of June, 2019. ATTEST: Maria E. Ayala, City Clerk APPROVED AS TO FORM: Brian Byun, Senior Deputy City Attorney - 4 - Name: Title: Mayor / Mayor Pro-Tem Page 604 of 607 AGENDA ITEM APPROVED 06/18/19, MEA STATE OF CALIFORNIA ) ) ss COUNTY OF LOS ANGELES ) I, Maria E. Ayala, City Clerk of the City of Vernon, do hereby certify that the foregoing Resolution, being Resolution No. , was duly passed, approved and adopted by the City Council of the City of Vernon at a regular meeting of the City Council duly held on Tuesday, June 18, 2019, and thereafter was duly signed by the Mayor or Mayor Pro-Tem of the City of Vernon. Executed this 18th day of June, 2019, at Vernon, California. (SEAL) - 5 - Maria E. Ayala, City Clerk Page 605 of 607 AC;FNfIA ITFNA APPRO\/Fn Water Division Projected 3-Year Capital Improvements 06/18/19, MEA Year 1 Year 2 Year 3 Capital Outlay FY 19-20 FY 20-21 FY 21-22 Well 5 Destruction $ 125,000 Well 11 Pump and Motor $ 150,000 Emergency Generator on Well 11 $ 300,000 Well 20 Rehab $ 550,000 Emergency Generator on Well 20 $ 300,000 Well 17 Rehabilitation $ 600,000 Well 22 Drilling and Casing $ 2,050,000 Well 22 Wellhead equipment $ 1,800,000 New Wells Wellhead Engineering & CM $ 215,000 New Wells Drilling & Casing Construction Management $ 155,000 Operations Analysis and MasterPlan $ 300,000 Reservoir condition assessments (6-1MG) $ 12,000 Elevated Tank Upgrades (automation) $ 250,000 Upgrades for 10MG Reservior (automation) $ 234,000 Emergency Generator on Well 22 $ 300,000 Well 15 Rehab $ 500,000 Emergency Generator on Well 15 $ 300,000 Reservoir Demo at Well 20 $ 100,000 BP1, BP2, BP3 Engineering Design $ 300,000 BP1 Pump and Motor Revamp including Right -sizing $ 500,000 Emergency Generator on Booster Plant 1 $ 300,000 BP3 Pump and Motor Revamp including Right -sizing $ 500,000 BP2 Reservoir Supply Redundancy $ 100,000 Repairs Reservoirs BP3 Design & Construction $ 1,000,000 BP2 Pump and Motor Revamp including Right -sizing $ 500,000 Repairs Reservoirs BP2 Design & Construction $ 1,000,000 Dock Demo at OE Clark $ 254,000 Well 23 Drilling and Casing Well 23 Wellhead equipment Emergency Generator on Well 23 AMI Program $ 100,000 $ 100,000 $ 100,000 Electrical Upgrades $ 500,000 $ 225,000 $ 225,000 SCADA $ 250,000 Pilot Main Replacement Program Packers/Exchange and Downey Rd Pipeline Extension Pump House 2 Refurbishment Fence Replacement PP2 & Well 19 Subtotal Capital Outlay $ 7,657,000 $ 3,459,000 $ 3,079,000 Capital Equipment and Vehicles Light Utility Vehicle Meter Readers $ 30,000 $ 30,000 Construction Truck $ 120,000 $ 120,000 Boom Truck $ 260,000 Pax Mixer for 10 MG Reservoir $ 70,000 Auto Chlorination 10 MG Reservoir $ 35,000 Dump Truck $ 80,000 Ford F-250 Utility Truck $ 60,000 Subtotal Capital Equipment and Vehicles $ 595,000 $ 60,000 $ 150,000 Annual Total Cumulative Total $ $ 8,252,000 8,252,000 $ $ 3,519,000 11,771,000 $ 3,229,000 $ 15,000,000