MEMORANDUM TO: Mayor and City Council FROM: Pete Strecker, Assistant Finance Director MEETING DATE: December 11, 2017 RE: Resolution #167, Series of 2017 - Wheeler Fund Advance to Water Utility Fund REQUEST OF COUNCIL: The proposed resolution provides for an interfund advance of $2,515,000 between the Wheeler Opera House Fund and the Water Utility Fund. Said advance would equate to the remaining balance associated with the acquisition of the Woody Creek parcel as a future municipal water storage site. PREVIOUS COUNCIL ACTION: At the Council meeting held November 13, Staff received direction to proceed with the acquisition of the Woody Creek parcel utilizing an internal loan from the Wheeler Opera House Fund. DISCUSSION: November 7 election results reflected public sentiment to not issue general obligation bonds to finance the Woody Creek parcel acquisition. In order to cover the total $2,815,000 associated with due diligence work and final purchase price of the parcel, City Council has directed staff to initiate an internal advance (or loan) from the Wheeler Opera House Fund to the Water Utility Fund. Said advance of $2.515 million will allow for the preservation of the targeted annual 25% reserve requirement within the Water Utility Fund by spreading the cost of the acquisition over multiple years. The proposed advance would be re-paid by the Water Utility Fund over a 10-year period, at an internal borrowing rate set equal to the 10-year Treasury yield (2.325% is the current estimated rate), with equal annual payments of $284,770. RECOMMENDED ACTION: Staff proposes the internal borrowing between the Wheeler Opera House Fund and Water Utility Fund be approved. ALTERNATIVES: The Council can revise this recommended action as it sees fit. The Water Utility Fund can cover the remaining cost of the acquisition, but will do so by depleting a significant amount of its targeted reserve balance. Future Council action would then be needed to restore the balance within a 3-year period per the City’s financial policies, as current revenue expectations would not achieve this alone. PROPOSED MOTION: “I move to adopt Resolution #167, Series of 2017 which approves the use of an internal advance of $2,515,000 between the Wheeler Opera House Fund and Water Utility Fund, as proposed.” CITY MANAGER COMMENTS: Page - 1