HomeMy WebLinkAbout7B, Northwestern College Conduit Debt Interest Rate Mode Change�
EN HILLS
Request for Council Ac�ion
Prepared By: Sue Iverson, Director of Finance Council Meeting Date: September 12, 2011
and Administrative Services
Northwestern College Conduit Debt rnterest Rate Mode Change
Bucigeted Amaunt: Actual Arriount: Funding Source:
N/A N/A N/A
Recommendation:
I. A motion fo approve Resolution 2011-044, a resolution approving the conversion of the City's
adjustable rate revenue bonds (Norihwestern College Project), Series 2010, to a var�able rate
mode; and appro�uing and authorizing the execution and delivery of documents related thereto.
Supllortin� Documents:
1. Memarandum dated September 12, 2011 from Sue I�erson.
2. Meanorandum dated Se�tember 8, 2011 from Julie Eddington, Kennedy & Graven.
3. Resolution 2011-044.
�
EN H�I.LS
MEMORANDUM
DATE: Se�tember 12, 2011
TO: Hanorable Mayor ar�d City Counciimembers
Patrick Klaers, City Administratar
FROM: Sue Iverson, Director of Finance and Administrative Sexvices
SUBJECT: Northwestern College Conduit Debt I�terest Rate Mode Change
Back�round
In Navember 2010, the Ciiy issued Bonds far the benefit of Northweste� College to
iinance a portion of �he casts of constructing and equippi�g the student center. The
bonds were originally issued in a shart-term �xed i�ierest rate mode and privately placed
with M&I Marshall & Ilsley Bank. The Project has been completed and Northwestern
College would like to convert the zntexest rate on the bonds to a variable rate of interest
that resets on a weekly basis.
Discussion
Far ta�c purpos�s this will cause a refunding of the current bond issue and a"reissuance"
of the bonds but it �vill not affect the City's ability to issue debt in this caiendar year nor
will it have az�y affect on the Presbyterian Homes Conduit deb� issue. The Ciry Cauncil
is asked to approve the interest rate rnode c�ange and the xeoffering of the bonds to the
public.
Attached is a letter from the City's bond counsel, Julie Eddington, Kennedy & Graven,
and she will also be in attendance at ihe Council zz►eeting to answer any questions. A
represeniaiive from Narth�c�vestern College, Doug Schraeder, wil� also be present to
answer any questions abaut the project.
Counci� Action Requested
A motion to approve Resolution 201 �-044, a resolution appraving the conversion of the
Ciry's adjustable rate revenue bonds (Northwestern College Project), Series 2010, to a
variable rate mode; and appraving and authorizing the executian and delivery of
doc�ments related thereto.
City Council Meeting
P:IAdminlCouncillAgendas & Packet Information120111Nothwestern Co�lege Conduit Debit Made Change.doc
Page i of 1
ORices in 470 UrS., Bank Plaza
200 5autEi Sixth 5treet
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Sairit Paszl {G12) 337•93F1D srfephone
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AfEitmar'svcAction, Equal Oppoc[uniry Employcr
JULTE A. EDbuvG'�oH
Attorn.eyaf T�w
DiiecE Dial .(51Zj`337=9213
Emuil: jeddingtou�kennedy-gtaiven.com
Septem�er 8, 2011 .
Sue Iversan
Finance DireetorlTreas�arer
Ciiy of Arden Hills
1245 West Highway 9b
ArdenHills.,.MN SSI.12 �
Re: $B,��O,OOQ City of Arden Hills, Minnesota.Adjustalile I�ate Revenue Boncis {Northwestern
College Prnject), Series 2D10
Dear Sue,
E�cl�sed please find #he fis�a.l resoluti�n (tlie "Resoiution") propased ta be oansidered by the
Cii,y Council (tlie "Counail") af the City of Arde:n Hills, 1Vlinnesota (tt�e "City"} at iis r.egu[ariy
sehednleclmeeting onMonday, Septeznber 12, 2�1.1, iri corinection with an inierestrate inpd� Glian�e
for the xbove x�%renced bonds {the "Bonds"), The:Resolufio�. pro�ides approval. for the in#erest ra#e
mode cl�ange and authorizes the Mayar and City Ad�ninistrafor to execute certain documents reia#ed
to �e ohange in the interest�rate mode of tlie Bonds and �he seoffering of`the Borids. to .tkie publia, A
brief explanation ofthe financing and the interest rate mode ehange fallnws.
In Nflvember 2010, tk�e Ciiy issued the Bands for the benefit of Narthwestern Gollege; a
Minnesota nonprofit corpara#ian {tl�e "$orrower"� to finance a portian af t�e costs oi the
eo�►s4rue�ion and equipping of an approxiinately 7U,004 square faot student c.entsz, w�uch incl.udes
new dining facilities, an expanded campus stare,: sludent Tounges, study areas, of�ee :space for
student organiza�ians, classroorns, aud meeting .spaees, ta �e located at on the gortion. af �he
`Northwesferra Campus lo�atad within the City (the "�'rojec�").
'I`he Bonds were vriginaily issued in a shrn�t-#errn fxed interest ra�t-e rriode anei pri�ately
pIaced with M&I Marshali & T1s1ey Bank: The Project has been oompl�t�d and the Barrawer now �
praposes to conYert the inierest rate an the Bonds to a var�able rat�: o� intere•st with an interest rate
t13a� reseks on a vvee%ly basis. P�suant tn the Trr�st Indenture �eauted sn conjtmctinn. with. the
issuance of the.Bonds, in arder to convert the int�rest ra�e on tlze. Bonds to a variable in#erest �:t�, fihe
Borrower must deiiver a le#�er of credit to the Trustee for the $onds azxd ari the date the interest.rate
mode co�versian takes place, all the Bonds ar� subject to mandatary purc�ase (aIl bondhol��rs �nust
tender their i�onds to ihe.Trustee). The Borrower has arranged for BMO. Hamis Bank, N.A to i"s.siie a
ietter of credit to secure fihe Borrower's obIigations #o. pay fihe principal of and in.f�rest on the Bonds,
The progosed interest rate conversion is .expe.cted to occur on September 29, 2011 (the "Canversion
Date"), and on such date hondholders v�rili ba requir�;d to:#ender their Bands to the Trustee. Orice the
mandatory ten.de�r af all Bonds occurs, the:Borrower l�as arranged for M&I �'inanciai Advisors, Tnc.
to reoffex'fhe Bonris for sale to �e pulilic.
The provision of the l�tter of ar�dit as security far the paymen,t. of debt service on the Bonds
wili cause a"reissuance" of d�e Sonds for t� pui�poses puisuanf to �ecti�n 1.1OQ1-3 af tl�e Treasi�ry
Regtilations gro�ulgated under the InternaI Rev�nue Goc�e of 198b, as amez�ded, and #herefore, for
ta.� purposes, the Bonds wiIl be treated as,; if they are refunded ari tlie Conversi:on. Date. The
reissuance of the Bonds will not affeet the City's ability �o issue up ta $I O.;UOQ,000-of bank-qnalified
debt in.this catendar year.
Tn order to efFect the interest rate xrcode conversi� and in#e�rate the �erms: of. ihe letter of
credit vvifh th� Tnast iridenture and Loan Agreeme�it executed at the tirne the Bonds:were-originally
issueci, a First Amendrnenx to Trf.isi Indenture and a"First Amenc�nent to Loan .Agreemenf liaye been
r�rra�ted and are on fle vvith fihe City; Ti� addztian,, a new fom� of the Bonds that iricoiparates the new
varia��e anterest rat� and ad�itio�al. certificates and forms re�a�ed. to the interest rate mode conversican.
and the.reissuance of the IIonds Iiave been prepared.
Other than;the changas:to the Bonds xnen�ianed ahoye, #he Bonds wil.t remain in plac:e antl
all the covenan�s af the doo�men#s. execuied in conjwncfian.�vitli tiie Bands vviil rernain in places T1ie
Bonds are conddit revenue liartds seeured soIely by the revenues :d�ived from the Loan Agreement
executed by tha Barrower. and fiom other security prorrided by the. Borrower (ineluding t�e letter of
credit). The Bonds.do not coiisfiitute a g�nerai or moral abliga#ian of t�e City and are not secured by
or payable. frorn any property or assets of the City (other than the interes#s of the City in the Loan.
Agreement) and wi1T not b.e secured by any tax�rtg power of.ttie City. The reissuance af the Bands
wi11 not, a.fffect tl�e Cify's ability to issue bank-�ualifxad c�ebt:3n this calendar year:nor will it have any
adverse impact on thc credit rating of �e City, everi in the ev�nt t�af the �orrower encounters
financisl difficulties rnrith respect to the fanili#ies financed with the groceeds of the Bands.
Plsase con�act me if you: Y�ave':.anY ques�ions rega7rdixiig: t�e i�iterest rate made change or the
x�issuanoe of #he Bonds. I will be.attending t�e City CounciL mee#u�g.x�e�cf w�eek in case there are an�
quastions. In addition, Dot�g Schzoeder, the Chief F�t�anoial Officer of Norihwestem College, will
also atkend the City Council meetin� if there axe any questions regarc�ing:tl� Projec#.
KENNEDY & GRAVEN, CHARTERED
,
3ulie �ddington
�
EN HILL�
CITY OF ARDEN H�LLS
COUNTY OF RAMSEY
STATE OF 1VIiNNESOTA
RESOLUTION NO. 2�I1.-044
APPROVING THE CONVERSION OF THE CITY'S ADJUSTABLE RATE
REVENUE BONDS {NORTHWESTERN COLLEGE PROJECT), SERIES 20�0,
TO A VAR.�ABLE RA.TE M�DE; AND APPROVING AND AUTHORIZING THE
EXECUTIUN AND DELiVERY 4F D4CUMENTS RELATED THERETO
WHEREAS, pursuant to Mintiesota Statutes, Sectzons 469.152 through �69.1b51, as amended
(the "Act"), resoiutions of the City of Arden Hills, Minnesota {the "City") adopted by the City Council on
November 30, 2Q09, March 29, 2010, and Navembar 15, 2010 {collectively, the "Resolutions"), and a
Trust Indenture dated as of Novem.ber 1, 20] 0(the "�riginal Indenture"), between the City and U.S. Bank
National Association, as t�rustee {the "Trustee"}, the City issued its Adjustable Rate Revenue Bonds
(Northwestern College Project), Series 20I0 (the "Series 2010 Bonds"), in the original aggregate
principa[ amount of $8,000,000, on behalf of Nor�l�westarn College, a Minnesota nonprofit corporation
(the "Borrower"); and
WIIEREA5, proceeds of the Series 20IO Bonds w�re Ioaned to t�.e Borrower pursuant to the
terms of a Loan Agreement, datad as of Novenaber 1, 2010 (the "Original Loan Agreement"}, betweer� the
Issuer and the Borrower, to finance the acquisition, construction and equipping of a portion of ari
appraximately 70,000 square foot student center iacility, providing new dining faci�ities, an expar�ded
campus store, student lounges, study areas, of�ce space for student organizations, classrooms, and
meeting spacas, located on the portion of the Northwestern Campus located within the City. The portion
of the student ce�ter facility financed with the proceeds of the Series 2010 Bonds includes student
lounges, study areas, student development offices and meeting space for student organizations, co:m tx�on
areas, of�ices, the print shop, mail and shipping areas, receiving area, a conference room, the bookstore,
the bookstore storage area, baokstore �quiprtient, the telecommunications room, and a proportionate share
of the mechanical room, etectrical, elevators, stairs, bathrooms, janitors' closets, hallways, furniture,
signage, generat equipment and furniture, site work, technology wiring, and technology ec�uipinent
(collectively, the "Praject"); and
W[�REAS, the Series 201Q Bonds presently bear interest at the Flex Private Placement Rate
Mode, as defined in the ir�denture, but the Borrower has determined to convert the Series 2010 Bonds to a
Weekly Mode, as defined in the Indenture (the "Conversian"}; and
WIIEREAS, pursuant to Section 6.01 and Section 4.45 of t�e Original Indenture, prior to the
Conversion, a Letter of Credit naust be delivered �o the Trustee to secure the Series 2010 Bonds; and
WHEREAS, Section bAl of the Original Ir�denture also reyuires a mandatory tender of aII
Series 2010 Bonds at any time a Letter of Credit (or Substitute Letter af Credit) is delivered to secure the
Series 2010 Bonds and such rr�andatary t�nder is sch.eduled to occur on or after 5eptember 29, 2411; and
WHEREAS, the Borrower �as arranged for a Letter of Credit (the "Letter of Credit") to be issued
by BMO Ha�-t�zs Bank N.A., a national banking association (the "Bank") for the benefit af the Trustee to
secure the Series 2010 Bonds. Th� Letter of Credit is proposed to be delivered to the Trustee and become
effective on or after September 29, 201 L The Letter of Credit will be delivered pursuant to the terms of
the Reimbursement Agreement, to be dated on or after September l, 2Q11 (the "Reimbursernent
Agreetnent"}, between the Borrower and the Bank; and
WIIEREAS, the City has been advised by its bond counsel t�at the provision of the Letter of
Credit as security for the Series 2010 Bonds will cause a"reissuance" af the Series 2Q10 Bonds for t�
purposes pursuant to Section L1001-3 of the Treasury Regulations pro�nulgated under the Internal
Revenue Code of 1986, as amendec�, and therefore, for tax purpases, the 5eries 20Id Bonds wiIl be
treated as if they were refunded on the da#e of the Conversion; and
WHEREA�, the Barrawer will enter into a Bond Purchase Agreemen�, to be dated an or after
September 1, 20ll (the "Bond Purchase Agreement"), with M&I Financial Advisors, Inc. (the
"Underwriter"), pursuant to which the Und�rwriter will purchase the Series 2010 Bonds following the
mandatory tender of the Series 2010 Bonds; and
WHEREA�, ir� order for the Series 2010 Bonds to be soId to the public %ilowing the Canversion,
a Reoffering Circular has been prepared and is pr�posed to be t�istributed to potential purchasers; and
WHEREAS, the Borxower wil� enter into a Remarketing Agreement, to be dated on or after
September l, 2011 {the "Aemarketing Agreement"), with BMO Capital Markets GKST Inc., acting as
remarketing agent {the "Remark.eting Agent"), which sets out #he duties and obligations of the
Remarketing Agent ta remarket the Series 2010 Bonds following the Conversion; and
WIIEREAS, in conjunction with the Conversion, t,he mandatory tender of ihe Series 2010 Bonds,
and the issuance of the Letter of Credit, the City, as issuer of the Series 2410 Bonds, must approve certain
actions of the parties and execute various docut�aent amendments to incorporate the terms of the
Conversion and Letter of Credit into the doc�ments related to the Series 2� 10 Bonds; and
NOW, THEREFORE, BE IT RE50LVED by the City Co�ncil of ihe City of Arden Hills,
Minnesota, as follows:
L The City CounciI hereby consents to the Conversion of the Series 2010 Bonds on or after
September 29, 2011, and to the reof%ring of th� Scries 2010 Bonds to the public.
2. The City Council acknowledges the issuance af tlie Letter of Credit by the Bank to be
delivered to �ae Trustee as security for the �eries 2010 Bonds.
3. The City Council hereby approves the changes made fio the Series 2010 Bonds to
incarporate the terrr�s of the Conversion and the issuance of the Letter o� Credit, substantially in the form
on file with tlie City on the date hereof, which is hereby approved, witi� such changes as shall be approved
by the City Administrator and Kennedy & Graven, Chartered, as bond counsel io the City ("Bond
Counsel"); provided that the execution there�f by the Mayor and the City Ad�ninistrator shall be
conclusive evidence of such approval.
4. The City Council hereby approves the First Amendment to Trust Indenture, to be dated
on or after Septernber 1, 2011 (the "First Amendment io Indenture"}, between the Ci�ty and the Trustee,
and the First Amendment #o Loan Agreemenfi, to be dated on or after �epte�nber 1, 201 i(the "First
2
Amendz�nent to Loan Agreement"), between the City and the Borrower, substantially in the forms on file
with t�e City on the date hereof, which are hereby approved, with such changes as shall be approved by
#he City Administrator and Bond Counsel, including but noi limited to any changes deemed necessary by
Bond Counsel in order to obtain a rating from Moody's Investors Service, as rating agency; provided that
the execution thereof by the Mayor and the City Administrator shall be conclusive evidence of such
approval.
5. The Mayor and the City Administrator are hereby designated as the represematives of the
City with respect to the Conversion and the issuance of the Letter of Credit transaction. The Mayor, the
City Adminisfrator, and other officers of the City are authorized and directed to execute and deliver any
and all certificates, agreements, or other docuz�.ents which are required by the Original Indenture, as
amended by the First Amend�nent to Indenture, or any other agreemenis, cer�ificates or docunnents which
are deemed necessary by Bond Counsci to docuznents as are necessary, custamary, or appropriate in
con�ection with the raiss�ance of the Bond, ar are required by bond counsel to complete the Conversion
and establish the vaIidity or en%rceability of the Bond or the exclusion from grass income of interest on
the Bond for purposes of federal income taacation and S�ate of Minnesota taxation {including but not
limited to the execution of an endarsement to the Borrower's Tax Certificate and an Ir�formation Return
for Tax-Exempt Private Activity Bond Issues, Fortn 8038 (Rev. April 201 I).
6. The City Council consents to the sale of the Series 20I0 Bonds to the Underwriter upon
the offer of the Underwriter to purchase the Series 2010 Bonds in accordance with the terms oithe Bond
Purchase Agreement, following the mandatory tender of the Series 201Q Bon.ds on or after
September 29, 2011.
7. The preparation of the Reoffering Circular in conjunction with the rennarketing of the
Series 2010 Bonds is hereby authorized. The City has not participated in the preparation of the
Reoffering Circular and has made no independent investigation with resp�ct to the info�nnation contained
therein, including the appendices thereto, and the City assumes no responsibility for the su�'�'iciency,
accuracy, ar completeness of such information. Subject ta the foregoing, the City k�ereby consents to the
distribution and the use by the Remarketing Agent of the Reoffering Circular in connection with the
remarketing of the Series 20I0 Bonds. The Reoffering Circular is the sole material consented to by the
City for use in conz�ection with the remarketing of the Series 2010 Bonds.
S. The City hereby approves the execution and delivery by the Trustee of the First
Amendment to Indenture, the Continuing Disclasure Agreement, to be dated on ar after September 1,
2011 (the "Continuing Disclosure Agreement"), between the Borrower and the Trustee, the Pledge and
Security Agr�ement, to be dated on ar after Septerriber l, 2011 (the "1'lec�ge Agreement"), bEtween the
Borrawer, the Bank, and the Trustee, and all other instrutx�e�ts, certi�"icates, and documents prepared in
conjunetion with the issuance of the Bonds t�at require execution by the Trustee. The City hereby
authorizes Kennedy & Graven, Chartered, as Bond Counsel of the City, to prepare, execute, and deli�er
its approving legal opinion with respect to t1�e Conversion of the Series 2010 Bands and the issuance of
the L,etter of Credit snd the continued validity and enforceability of the Series 2010 Bonds and the tax-
exempt status of interest on the Series 2010 Bonds.
9. As originally sta#ed in the Resolutions, the Series 20 � 0 Bonds are special, limited
obligatians of the City payable solely from the revenues of the Project. The Series 201Q Bonds do not
constitute an indebtedness, liability, general or moral obligation, or a pledge of the faith and credit or any
taxing powers ai th� City, tlae County of Ramsey, the State of Minnesota, or any political subdivision
thereof. The Series 20I0 Bonds are secured solely by the r�venues derived by the City from the Original
Loan Agreement, as amended by the Fizst Amendment to Loan Agreement, and pledgad to the Series
2010 Bonds pursuant to the �erms of the Pledge Agreement and by revenues and assets pledged or applied
by tlie Borrower to the payment of the Series 2010 Bonds.
10. This resolution shall be in full force and effect from and after its passage.
2011.
Adopted by the City Council of the City of Arden HiIls, Minnesota, this 12th day of September,
CITY OF ARDEN H1LLS, NLINNESOTA
:
Attest:
:
Patrick Klaers, City Administrator/Clerk
David Grant, Mayor
AR240-I1 (JAE)
340469�1