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HomeMy WebLinkAbout4H, Resolution 2010-061 Giving Final Approval to the Proposed Issuance of Revenue Notes for NorthwesternRecommendation: 1 dWEHILLS Request for Council Action Prepared By: Sue Iverson, Finance Director /Treasurer Resolution 2010 -061 Giving Final Approval to the Proposed Issuance of Revenue Notes for Northwestern College Budgeted Amount: N/A Actual Amount: N/A Council Meeting Date: November 15, 2010 Funding Source: N/A Approve Resolution 2010 -061, a resolution approving the issuance, sale, and delivery of Adjustable Rate Revenue Bonds 9Northwestern college Project), Series 2010, for the benefit of Northwestern College, payable solely from revenues pledged pursuant to an indenture; approving the form of and authorizing the execution and delivery of the bonds and related documents; and providing for the security, rights, and remedies with respect to the bonds. Supporting Documents: 1. See the attached memo from Sue Iverson, dated November 15, 2010. 2. See attached memo from Julie Eddington, Kennedy Graven, dated November 9, 2010. 3. Resolution 2010 -061. DATE: March 29, 2010 �I�EN HILLS MEMORANDUM TO: Honorable Mayor and City Council Members Patrick Klaers, City Administrator FROM: Sue Iverson, Finance Director/Treasurer SUBJECT: Final Approval for Northwestern College Conduit Debt Background The City Council held a public hearing and provided preliminary approval for the issuance of tax exempt obligations for the benefit of Northwestern College on November 30 2009. On March 29, 2010, the City Council provided final approval for the issuance of these notes pursuant to a loan agreement. At that time, the tax exempt notes were to be placed with friends and alumni of the Borrower. Northwestern College requested this financing for a new facility Community Life Commons (student union) for its campus. The maximum amount of financing requested is $9,000,000. The zoning of this project is under the terms and conditions of the PUD agreement between the College and the City approved in October, 2007. The City will be reimbursed and held harmless for all out -of- pocket expenses related to the financing according to the City's application process and the application filed. According to the City's policy, the City will receive 1/8 of 1% (.125 of the outstanding principal balance of the bonds annually, the first year this would amount to $11,250 and the bonds are from 5 to 25 years. Current Discussion The Borrower has determined that it is not in their best interest to continue with the type of a financing structure approved by the City Council on March 29, 2010, so they have negotiated with M &I Bank to purchase tax exempt bonds with a different financing structure. The City's fee will be 118 of one percent per year on the outstanding principal balance (estimated that $8,000,000 of bonds will be issued). This will be paid semi annually on November 1 and May 1 each year. The proposed estimated prorated fee paid at closing on November 18 is $4,777.78. City Council Meeting Metro- inet.us \ardenhills\Admin \Council\Agendas Packet Information\20 1 0\ 11 -15 -10 Special Mtg \Northwestern_College_Conduit Debt.doc Page 1 of 2 The City's bond counsel had reviewed the initial application and had filled out the required DEED application. The City Council adopted Resolution 2009 -029 on October 26, 2009 calling for a public hearing on November 30, 2009. The City held a public hearing on November 30, 2009, and gave preliminary approval to the proposed issuance of bonds at that same meeting. Attached are a resolution and a memo from the City's Bond Counsel detailing the newly structured bond issuance and requested final approval. A copy of Northwestern College's application and attachments (including the DEED application), was provided to the City Council in the October 26, 2009 agenda packet. Council Action Council to adopt Resolution 2010 -061, a resolution approving the issuance, sale, and delivery of Adjustable Rate Revenue Bonds (Northwestern College Project), Series 2010, for the benefit of Northwestern College, payable solely from revenues pledged pursuant to an indenture; approving the form of and authorizing the execution and delivery of the bonds and related documents; and providing for the security, rights, and remedies with respect to the bonds. City Council Meeting Metro- inet.us \ardenhills\Admin \Council\Agendas Packet Information\20 1 0\ 11 -15 -10 Special Mtg \Northwestern College__Conduit Debt.doc Page 2 of 2 Attachment A Memo from Julie Eddington CHAR TER ED November 9, 2010 Offices in Minneapolis Saint Paul St. Cloud Sue Iverson Finance Director/Treasurer City of Arden 1245 West Highway 96 Arden Hills, IVIN 55112 470 U.S. Bank Plaza 200 South Sixth Street Minneapolis, MN 55402 (612) 337-9300 telephone (612) 337-9310 fax SVNVW. kettnedy-graven.cotn Affirmative Action, Equal Opportunity Employer Re: $9,000,000 Adjustable Rate Revenue Bonds (Northwestern College Project), Series 2010 Dear Sue, JULIE A. EDDINGTON Attorney at Law Direct Dial (612) 337-9213 Email: jecldington@kennedy-graven.eorn Enclosed please find the final resolution (the "Resolution") proposed to be considered by the City Council (the "City Council") of the City of Arden Mills, Minnesota (the "City") at its special meeting on Monday, November 15, 2010, in connection with the above-referenced bond issue (the "Bonds"). The Resolution provides final approval to the issuance, delivery, and sale of the Bonds in an aggregate principal amount not to exceed $9,000,000 under Minnesota Statutes, Sections 469.152 through 469.1651, as amended (the "Act") and provides approval to the documents related thereto. A brief explanation of the financing follows. The City Council held a public hearing and provided preliminary approval for the issuance of tax-exempt obligations for the benefit of Northwestern College, a Minnesota nonprofit corporation (the "Borrower") on November 30, 2009. On March 29, 2010, the City Council provided final approval for the issuance of tax-exempt notes pursuant to a loan agreement. Al that time, the notes were to be placed with friends and alumni of the Borrower. Following the approval of the tax- exempt notes, the Borrower determined it was not in the best interest of the Borrower to continue with that type of financing structure. The Borrower subsequently negotiated with M&I Bank to purchase tax-exenlpt bonds with a different financing structure, which is described below. The Bonds are proposed to be issued pursuant to a Trust Indenture, dated on or after November 1, 2010, between the City and U.S. Bank National Association, as trustee (the "Trustee"). It is further imposed that the proceeds of the Bonds be loaned to the Borrower pursuant to the terns of a Loan Agreement, dated on or after November 1, 2010 (the "Loan Agreement"), between the City and the Borrower. The proceeds of the loan will be applied to finance a portion of the costs of the construction and equipping of an approximately 70,000 square foot facility, which will provide new dining facilities, an expanded campus store, student lounges, study areas, office space for student organizations, classrooms, and meeting spaces, to be located at on the portion of the Northwestern Campus located within the City (the "Project"). A portion of the proceeds of the loan will also be applied to paynlent of the costs of issuance of the Bonds. The Bonds are proposed to be privately placed with M&I Bank (the "Purchaser") and will bear interest at a variable rate. The Indenture allows the Bonds to convert to different types of interest rates, including a variable rate supported by a letter of credit. It is the intent of the Borrower that once the liquidity market opens up again, the Bonds will be converted to a variable rate secured by a letter of credit provided by M&I Bank. The Bonds are proposed to be issued as tax-exempt obligations, the interest on which is not includable in gross income for federal income tax purposes. If the Bonds are authorized to be issued by the City Council, the Bonds will be issued as conduit revenue Bonds secured solely by the revenues derived from the Loan Agreement executed by the Borrower and from other security provided by the Borrower. The Bonds will not constitute a general or moral obligation of the City and will not be secured by or payable Ii any property or assets of the City (other than the interests of the City in the Loan Agreement) and will not be secured by any taxing power of the City. The Bonds will not be subject to any debt limitation imposed on the City and the issuance of the Bonds will not have any adverse impact on the credit rating of the City, even in the event that the Borrower encounters financial difficulties with respect to the facilities to be financed with the proceeds of the Bonds. Pursuant to the American Recovery and Reinvestment Tax Act of 2009, each 501(c)(3) organization has the ability to designate up to $30,000,000 in tax-exempt obligations as "bank qualified" in the calendar year 2010. During 2010, each municipality has the same ability to designate up to $30,000,000 in tax-exempt obligations as "bank qualified." Thus, the issuance of the Bonds will not adversely affect the ability of the City to issue bank-qualified obligations in calendar year 2010. Please contact me if you have any questions regarding the Bonds or this financing. GRAVEN, CHARTERED Attachment B Resolution 2010 -061 APPROVING THE ISSUANCE, SALE, AND DELIVERY OF ADJUSTABLE RATE REVENUE BONDS (NORTHWESTERN COLLEGE PROJECT), SERIES 2010, FOR THE BENEFIT OF NORTHWESTERN COLLEGE, PAYABLE SOLELY FROM REVENUES PLEDGED PURSUANT TO AN INDENTURE; APPROVING THE FORM OF AND AUTHORIZING THE EXECUTION AND DELIVERY OF THE BONDS AND RELATED DOCUMENTS; AND PROVIDING FOR THE SECURITY, RIGHTS, AND REMEDIES WITH RESPECT TO THE BONDS BE IT RESOLVED by the City Council of the City of Arden Hills, Minnesota (the "City as follows: Section 1. Recitals. IW NHILLS CITY OF ARDEN HILLS, MINNESOTA RESOLUTION NO. 2010-061 1.01. Pursuant to Minnesota Statutes, Sections 469.152 through 469.1651, as amended (the "Act the City is authorized to issue revenue bonds to finance, in whole or in part, the cost of the acquisition, construction, reconstruction, improvement, betterment or extension of a project, defined in the Act as including any properties, real or personal, used or useful in connection with a revenue producing enterprise. 1.02. Northwestern College, a Minnesota nonprofit corporation (the "Borrower has proposed that the City issue tax exempt revenue obligations (the "Bonds pursuant to the Act in one or more series in the approximate principal amount not to exceed $9,000,000 and loan the proceeds thereof to the Borrower to finance the acquisition, construction and equipping of a portion of an approximately 70,000 square foot student center facility, which will provide new dining facilities, an expanded campus store, student lounges, study areas, office space for student organizations, classrooms, and meeting spaces, to be located on the portion of the Northwestern Campus located within the City. The portion of the student center facility to be financed with the proceeds of the Bonds will include student lounges, study areas, student development offices and meeting space for student organizations, common areas, offices, the print shop, mail and shipping areas, receiving area, a conference room, the bookstore, the bookstore storage area, bookstore equipment, the telecommunications room, and a proportionate share of the mechanical room, electrical, elevators, stairs, bathrooms, janitors' closets, hallways, furniture, signage, general equipment and furniture, site work, technology wiring, and technology equipment (collectively, the "Project 1.03. On November 30, 2009, pursuant to Section 147(0 of the Internal Revenue Code of 1986, as amended (the "Code and regulations promulgated thereunder, the City Council of the City (the "Council conducted a duly noticed public hearing (the "Public Hearing at which a reasonable opportunity was provided for interested individuals to express their views, both orally and in writing, on the proposed issuance of the Bonds to finance the acquisition, construction, and equipping of the Project and to pay certain costs related to the issuance of the Bonds. The Public Hearing was preceded by publication of a notice of public hearing (in the form 1 required by Section 147(0 of the Code and applicable regulations) in a newspaper of general circulation at least fourteen (14) days prior to the Public Hearing date. 1.04. Pursuant to the requirements of Section 469.154 of the Act, the City prepared and submitted an Application (the "Application to the Minnesota Department of Employment and Economic Development "DEED for approval of the Project. On April 13, 2010, following the submission of the Application, the Commissioner of DEED approved the Project. 1.05. The Borrower has proposed that the Bonds be issued and sold to M &I Marshall Ilsley Bank, a state banking corporation organized under the laws of the State of Wisconsin (the "Purchaser 1.06. The Bonds will be issued under a Trust Indenture, dated on or after November 1, 2010 (the "Indenture between the City and U.S. Bank National Association (the "Trustee and the Bonds will be designated as the Adjustable Rate Revenue Bonds (Northwestern College Project), Series 2010, or such other name as may be designated by appropriate officers of the City. 1.7. The proceeds derived from the sale of the Bonds to the Purchaser are proposed to be loaned to the Borrower under the terms of a Loan Agreement, dated on or after November 1, 2010 (the "Loan Agreement between the City and the Borrower, and will be applied by the Borrower, together with other funds of the Borrower, to finance the acquisition, construction and equipping of the Project and the payment of certain expenses incurred in connection with the issuance of the Bonds. 1.8. The loan repayments to be made by the Borrower under the Loan Agreement will be assigned to the Trustee under the terms of the Indenture. 1.9. The Bonds and the interest and any premium on the Bonds: (i) shall be payable solely from the revenues pledged therefor; (ii) shall not constitute a debt of the City within the meaning of any constitutional or statutory limitation; (iii) shall not constitute nor give rise to a pecuniary liability of the City or a charge against its general credit or taxing powers; and (iv) shall not constitute a charge, lien, or encumbrance, legal or equitable, upon any property of the City other than the City's interest in the Loan Agreement. 1.10. Forms of the following documents have been submitted to the City and are now on file with the City: (i) the Bonds; (ii) the Indenture; and (iii) the Loan Agreement (collectively, the "Bond Documents Section 2. The Bonds. 2.01. The City hereby approves the issuance and sale of the Bonds for the benefit of the Borrower in the maximum aggregate principal amount of $9,000,000 as contemplated by the Bond Documents now on file with the City. The City hereby approves the execution and delivery of the Bonds by the Mayor and the City Administrator of the City. As provided in the Loan Agreement, the Bonds shall not be payable from nor charged upon any funds other than the revenues pledged to their payment, nor shall the City be subject to any liability thereon, except as otherwise provided in this paragraph. No holder of the Bonds shall ever have the right to compel any exercise by the City of its taxing powers to pay any of the Bonds or the interest or premium thereon, or to enforce payment thereof against any property of the City except the interests of the City in the Loan Agreement and the revenues and assets thereunder, which will be assigned to the Trustee under the Indenture. The Bonds shall not constitute a charge, lien, or encumbrance, legal or equitable, upon any property of the City, except the interests of the City in the Loan Agreement, and the revenues and assets thereunder, which will be assigned to the Trustee under the Indenture. The Bonds shall recite that the Bonds are issued pursuant to the Act, and that the Bonds, including interest and premium, if any, thereon, is payable solely from the revenues and assets pledged to the payment thereof, and the Bonds shall not constitute a debt of the City within the meaning of any constitutional or statutory limitations. 2 2.02. The Bonds shall bear interest at an adjustable rate and may be converted to various types of variable rates in accordance with the terms of the Indenture. The Bonds shall be designated, shall be numbered, shall be dated, shall mature, shall be subject to redemption prior to maturity, shall be in such form, and shall have such other terms, details, and provisions as are prescribed in the Indenture, in the form now on file with the City, with such necessary and appropriate variations, omissions, and insertions (including changes to the name of the Bonds, the aggregate principal amount of the Bonds, the stated maturities of the Bonds and the maturity dates of the Bonds, the initial interest rates on the Bonds and the terms for determining the fixed rates or the variable rates on the Bonds, and the terms of optional and mandatory redemption of the Bonds) as the Mayor and the City Administrator of the City, in their discretion, shall determine. The Bonds will be issued as "tax- exempt bonds," the interest on which is not includable in gross income for federal and State of Minnesota income tax purposes. Section 3. Bond Documents. 3.01. The Council hereby authorizes and directs the Mayor and the City Administrator to execute the Indenture, and to deliver the Indenture to the Trustee, and hereby authorizes and directs the execution of the Bonds in accordance with the terms of the Indenture, and hereby provides that the Indenture shall provide the terms and conditions, covenants, rights, obligations, duties, and agreements of the owners of the Bonds, the City, and the Trustee as set forth therein. 3.02. The Mayor and City Administrator of the City are authorized and directed to execute and deliver the Loan Agreement. All of the provisions of the Loan Agreement, when executed and delivered as authorized herein, shall be deemed to be a part of this resolution as fully and to the same extent as if incorporated verbatim herein and shall be in full force and effect from the date of execution and delivery thereof. The Loan Agreement shall be in substantially the form on file with the City on the date hereof, which is hereby approved, with such omissions and insertions as do not materially change the substance thereof, or as the Mayor and the City Administrator, in their discretion, shall determine, and the execution thereof by the Mayor and the City Administrator shall be conclusive evidence of such determination. 3.03. The Bonds shall be special limited obligations of the City, the proceeds of which shall be disbursed pursuant to the terms of the Indenture and the Loan Agreement, and the principal, premium, and interest on the Bonds shall be payable solely from the proceeds of the Bonds, the revenues derived from the Loan Agreement, the money held in the funds and accounts established under the Indenture, and the other sources set forth in the Indenture. 3.04. The Trustee is hereby appointed as the initial paying agent, bond registrar, and tender agent with respect to the Bonds. Section 4. Closing Documents. 4.01. The Mayor and City Administrator of the City and other officers, employees, and agents of the City are hereby authorized and directed to prepare and furnish to bond counsel and the Trustee certified copies of all proceedings and records of the City relating to the issuance of the Bonds, including a certification of this resolution. Such officers, employees, and agents are hereby authorized to execute and deliver, on behalf of the City, all other certificates, instruments, and other written documents that may be requested by bond counsel, the Trustee, or other persons or entities in conjunction with the issuance of the Bonds. Without imposing any limitation on the scope of the preceding sentence, such officers, employees, and agents are specifically authorized to execute and deliver one or more certificates of the City, an Information Return for Tax Exempt Private Activity Bond Issues, Form 803 8 (Rev. June 2010), and an endorsement of the City to the tax certificate of the Borrower. The City hereby approves the execution and delivery by the Trustee of the Indenture, the Tax Exemption Agreement, dated as of November 1, 2010, between the Borrower and the Trustee, and all other instruments, 3 certificates, and documents prepared in conjunction with the issuance of the Bonds that require execution by the Trustee. The City hereby authorizes Kennedy Graven, Chartered, as bond counsel of the City, to prepare, execute, and deliver its approving legal opinion with respect to the Bonds. 4.02. Except as otherwise provided in this resolution, all rights, powers and privileges conferred and duties and liabilities imposed upon the City or the Council by the provisions of this resolution or of the aforementioned documents shall be exercised or performed by the City or by such members of the Council, or such officers, board, body or agency thereof as may be required or authorized by law to exercise such powers and to perform such duties. No covenant, stipulation, obligation, or agreement herein contained or contained in the aforementioned documents shall be deemed to be a covenant, stipulation, obligation, or agreement of any member of the Council, or any officer, agent, or employee of the City in that person's individual capacity, and neither the Council nor any officer or employee executing the Bonds shall be liable personally on the Bonds or be subject to any personal liability or accountability by reason of the issuance thereof. No provision, covenant, or agreement contained in the aforementioned documents, the Bonds, or in any other document relating to the Bonds, and no obligation therein or herein imposed upon the City or the breach thereof, shall constitute or give rise to any pecuniary liability of the City or any charge upon its general credit or taxing powers. In making the agreements, provisions, covenants, and representations set forth in such documents, the City has not obligated itself to pay or remit any funds or revenues, other than funds and revenues derived from the Loan Agreement which are to be applied to the payment of the Bonds, as provided therein and in the Indenture. Section 5. Miscellaneous Provisions. 5.01. Except as herein otherwise expressly provided, nothing in this resolution or in the aforementioned documents, expressed or implied, is intended or shall be construed to confer upon any person, firm, or corporation, other than the City or any holder of the Bonds issued under the provisions of this resolution, any right, remedy, or claim, legal or equitable, under and by reason of this resolution or any provisions hereof, this resolution, the aforementioned documents and all of their provisions being intended to be and being for the sole and exclusive benefit of the City and any holder from time to time of the Bonds issued under the provisions of this resolution. 5.02. In case any one or more of the provisions of this resolution, other than the provisions contained in the first sentence of Section 3.03 hereof, or of the aforementioned documents, or of the Bonds issued hereunder shall for any reason be held to be illegal or invalid, such illegality or invalidity shall not affect any other provision of this resolution, or of the aforementioned documents, or of the Bonds, but this resolution, the aforementioned documents, and the Bonds shall be construed and endorsed as if such illegal or invalid provisions had not been contained therein. 5.03. The Bonds, when executed and delivered, shall contain a recital that they are issued pursuant to the Act, and such recital shall be conclusive evidence of the validity of the Bonds and the regularity of the issuance thereof, and that all acts, conditions, and things required by the laws of the State of Minnesota relating to the adoption of this resolution, to the issuance of the Bonds, and to the execution of the aforementioned documents to happen, exist, and be performed precedent to the execution of the aforementioned documents have happened, exist, and have been performed as so required by law. 5.04. The officers of the City, bond counsel, other attorneys, engineers, and other agents or employees of the City are hereby authorized to do all acts and things required of them by or in connection with this resolution, the aforementioned documents, and the Bonds for the full, punctual, and complete performance of all 4 the terms, covenants, and agreements contained in the Bonds, the aforementioned documents, and this resolution. In the event that for any reason the Mayor is unable to execute and deliver the documents referred to in this resolution or carry out any of the other acts provided herein, any persons delegated the duties of the Mayor shall be authorized to act in the capacity of the Mayor and undertake such execution and delivery or acts on behalf of the City with full force and effect, which execution and delivery or acts shall be valid and binding on the City. If for any reason the City Administrator is unable to execute and deliver the documents referred to in this resolution or carry out any of the other acts provided herein, any persons delegated the duties of the City Administrator shall be authorized to act in the capacity of the City Administrator and undertake such execution and delivery or acts on behalf of the City with full force and effect, which execution and delivery or acts shall be valid and binding on the City. 5.05. The City understands that the Borrower will pay directly any and all costs paid or incurred by the City in connection with the transactions authorized by this resolution, whether or not the Bonds are issued. 5.06. The City acknowledges that pursuant to Section 265(b)(3) of the Internal Revenue Code of 1986, as amended by Section 1502 of the American Recovery and Reinvestment Tax Act of 2009, the Borrower has designated the Bonds as "qualified tax exempt obligations" for purposes of Section 265(b)(3) of the Code. 5.07. The City further acknowledges that the Borrower intends to cause the Bonds to be initially issued in a flexible rate mode at the same interest rate through the completion of the acquisition, construction, and equipping of the Project. Once the Project is complete, the Borrower intends to cause the Bonds to be converted to a weekly variable rate or daily variable rate and further intends to obtain a letter of credit to secure the payment of interest on and principal of the Bonds. At the time of such conversion, the City will be required to approve revisions to the Indenture, the Loan Agreement, and the form of Bonds and may be required to execute additional documents related to such conversion. Attest: By Patrick Klaers, City Administrator /Clerk AR200 -9 (JAE) 377253v2 5.08. This resolution shall be in full force and effect from and after its passage. Adopted by the City Council of the City of Arden Hills, Minnesota, this 15th day of November, 2010. CITY OF ARDEN HILLS, MINNESOTA By Stan Harpstead, Mayor 5