In 2002, the City of Rocklin (City) annexed the Northwest Rocklin Annexation Area into the City with the recognition of the need for construction of an offsite sewer trunk line upgrade to support additional development in the area.
In 2013, the City prepared a fee nexus study and established the Whitney Ranch Trunk Sewer Project Impact Fees to provide a funding source for the Northwest Rocklin Sewer Annexation Construction. Subsequently, the City executed an agreement with the South Placer Municipal Utility District for the funding and construction of the Northwest Rocklin Sewer Annexation Construction on February 11, 2014.
The total estimated project cost is $1.75 million. This estimate consists of the construction management/administration, project design, and construction costs. To date, approximately $652,000 is available in the Whitney Ranch Trunk Sewer Fund (306), requiring additional funding of approximately $1.1 million to complete the Project. The City will be utilizing other funding sources to advance the project expenses and will be repaid from the Sewer Trunk Project Fund over time with interest as the impact fees are collected from the remainder of development. Additional details are provided in the report for the construction bid award for the Northwest Rocklin Sewer Annexation Construction Project on the September 13, 2022 City Council agenda.
The proposed reimbursement resolution can provide another funding option for the Project from future Community Facilities District No. 10 (Whitney Ranch) bonds if additional funding is needed to reimburse advances made with City funds. The IRS allows a bond issuer to use the proceeds of its bond issuance to reimburse expenditures made prior to the time bonds are issued, but only so long as the City expresses an intent to do so prior to the actual issuance of the bonds.
A reimbursement resolution is the required expression of intent and is needed if the City desires to use bond proceeds to reimburse itself for costs it actually pays prior to the issuance of bonds. It then can use the bond proceeds to reimburse itself for costs of the project paid up to 60 days prior to the date the resolution is adopted, subject to certain limitations, the main one being: reimbursement (bond issuance) must occur not later than 18 months after the later of (i) the date on which the expenditure is paid, or (ii) the date on which the project is placed in service, but in no event more than 3 years after the expenditure was paid. No reimbursement resolution is required for reimbursement of soft costs (with a 20% limit for soft costs older than 60 days prior to the resolution) or if a developer, rather than the City, is to be reimbursed. The resolution is not required for reimbursement of “soft” costs (e.g., design, environmental review), however, it is good practice to adopt the resolution well in advance of the expenditure of “hard” costs (e.g., construction, utility relocation).
In order to reimburse from proceeds of the proposed tax-exempt bonds, the City has been advised by its bond counsel that the Council should adopt a resolution indicating the City’s intent to so reimburse. There is no consequence to the City if bonds are ultimately not issued.
The proposed resolution meets the IRS requirement enabling the reimbursement for prior expenditures. The reimbursement will be only from proceeds of the bonds and is not a general obligation of the City.