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Home My WebLink AboutCC Reso 2025-59 - Authorizing Interfund Loan from Fund 130 to WastewaterRESOLUTION NO. 2025-59 r-- A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF UKIAH AUTHORIZING AN INTERFUND LOAN FROM THE PENSION DEBT SERVICE FUND (FUND 130) TO THE WASTEWATER UTILITY ENTERPRISE FUND AND APPROVING THE INTERFUND LOAN AGREEMENT AND AMORTIZATION SCHEDULE WHEREAS, the Wastewater Utility Enterprise Fund requires temporary financing for eligible utility purposes, including cash -flow stabilization and capital project timing; and WHEREAS, the Pension Debt Service Fund (Fund 130) was established to accumulate resources for the repayment of the City's Pension Obligation Bonds and maintains cash reserves in excess of near -term debt service requirements; and WHEREAS, the City's long-term pension funding structure and stable annual debt service schedule allow Fund 130 to temporarily loan excess liquidity to other City funds without impairing its ability to meet annual Pension Obligation Bond (POB) payments or related fiduciary responsibilities; and WHEREAS, the Finance Director recommends a ten-year interfund loan in the amount of $3,000,000, with the first five years interest -only and interest calculated annually based on the PMIA Average Annual Yields; and WHEREAS, the City Council desires to authorize the loan and approve the Interfund Loan Agreement attached as Exhibit A and the illustrative Amortization Schedule attached as Exhibit B. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Ukiah that: 1. An interfund loan from the Pension Debt Service Fund (Fund 130) to the Wastewater Utility Enterprise Fund in the amount of $3,000,000 is hereby authorized. 2. The Interfund Loan Agreement attached hereto as Exhibit A is approved. 3. The illustrative Amortization Schedule attached hereto as Exhibit B is acknowledged for planning purposes only. 4. The Finance Director is authorized and directed to implement, record, and administer the loan consistent with Exhibit A. PASSED, APPROVED, AND ADOPTED this 31 day of December, 2025, by the following roll call vote: AYES: Councilmember Rodin, Criss, Orozco, Sher, and Mayor Crane. NOES: None ABSENT: None ABSTAIN: None ATT ST Araceli Sand al, Deputy City Clerk Douglas4l Crane, Mayor Page 1 of 5 Exhibit A — Interfund Loan Agreement Between the Pension Debt Service Fund (Fund 130) (Fund 130) and the Wastewater Utility Fund, City of Ukiah This Interfund Loan Agreement ("Agreement") is entered into by and between the Pension Debt Service Fund (Fund 130) ("Lending Fund") and the Wastewater Utility Enterprise Fund ('Borrowing Fund") of the City of Ukiah ("City"). This Agreement documents the terms under which the Lending Fund will loan certain monies to the Borrowing Fund for allowable enterprise -fund purposes and establishes the obligation of the Borrowing Fund to repay the loan under the terms set forth below. 1. Purpose of the Loan The Borrowing Fund requires temporary financing to support eligible wastewater utility activities, including but not limited to cash -flow stabilization, capital project funding, or timing mismatches between expenditures and revenues. The Lending Fund has sufficient resources legally available for lending, and such loan will not impair its ability to meet debt service or other legally mandated obligations. 2. Loan Amount The Lending Fund agrees to loan the Borrowing Fund $3,000,000 ("Loan Amount"). Funds will be transferred on or about June 30, 2025 3. Interest Rate The loan will accrue interest at a variable rate set annually based on the PMIA Average Annual Yields for the preceding fiscal year, calculated on a simple interest basis. Year 1 will be at the rate of 4.411 % as reported by PMIA for the 2024-25 fiscal year. 4. Repayment Terms The Borrowing Fund agrees to repay the loan as follows: • Repayment Period: The full Loan Amount plus accrued interest shall be repaid no later than ten (10) years from the effective date. • Repayment Schedule: Interest -only payments for the first five (5) years, followed by annual principal amortization payments during years six (6) through ten (10). • Early Repayment: Permitted at any time without penalty. • Sources of Repayment: Wastewater enterprise operations, capital revenues, or other legally permissible enterprise -fund revenue sources. 5. Accounting Treatment • Lending Fund shall record the transaction as "Advance To." • Borrowing Fund shall record the transaction as "Advance From." Page 2 of 5 • Both funds shall record interest revenue/expense consistent with this Agreement. The City shall report the loan in the ACFR in accordance with GASB standards. 6. Term of Agreement This Agreement is effective on the date signed below and remains in effect until the loan has been fully repaid. 7. Amendments Amendments must be in writing and signed by the Finance Director, and if required by City policy, reported to or approved by the City Council. 8. Non -Appropriation The City's obligation to repay is limited to legally available funds of the Wastewater Utility Fund. Nothing in this Agreement constitutes a pledge of the City's full faith and credit. 9. Severability If any provision is held to be invalid, the remaining provisions remain in force. Page 3 of 5 Exhibit B — Amortization Schedule Interfund Loan Amortization Table Loan Amount: $3,000,000 Loan Date: June 30, 2026 First Payment: June 30, 2026 Term: 10 Years (first 5 years interest -only; principal amortized years 6-10) Interest Rate: Variable annually based on PMIAAverage Annual Yields (for the prior fiscal year) Interest Basis: Simple interest (non -compounding) Because the applicable rate resets annually based on the PMIA Average Annual Yields, the amortization schedule is structured as follows with placeholders for annual rates. Fiscal Beginning PMIA Rate Interest Principal Total Annual Ending Year Principal (Prior FY) Due Payment Payment Principal Fiscal Beginning PMIA Rate Interest Principal Total Annual Ending Year Principal (Prior FY) Due Payment Payment -------------------------------------------- Principal ------------------------------------------- FY $3,000,000 4.411 % $132,330 $0 $132,330 2025-26 ' ---------------- $3,000,000 FY $3,000,000 4.411 %* $132,330 $0 $132,330 $3,000,000 2026-27 FY $3,000,000 4.411 %* $132,330 $0 $132,330 $3,000,000 2027-28 FY $3,000,000 4.411 %* $132,330 $0 $132,330 $3,000,000 2028-29 FY $3,000 000 4.411%* $132,330 $0 $132,330 $3,000,000 2029-30 ' FY $3,000,000 % $ $600,000 $ $2,400,000 2030-31 FY $2,400 000 % $ $600,000 $ $1,800,000 2031-32 ' FY $1 800 000 % $ $600,000 $ $1,200, 000 2032-33 ' FY $1 200 000 % $ $600,000 $ $600,000 2033-34 '0 Page 4 of 6 r Fiscal Beginning PMIA Rate Interest Principal Total Annual Year Principal (Prior FY) Due Payment Payment FY $600 000 % $ $600,000 $ 2034-35 ' Ending Principal $0 *Note: This amortization schedule is illustrative only. The Finance Department will update the PMIA rate and calculate required annual payments each fiscal year based on the actual published PMIA Average Annual Yield. A completed amortization table will be prepared each year upon publication of the State Treasurer's PMIAAnnual Yield Report and incorporated into the City's annual financial reporting. Page 5 of 6