ADMINISTRATION - Joe Huss, Finance Director
Title
APPROVE ISSUANCE OF CAPITAL NOTES TO FUND CABLE TV RELATED IMPROVEMENTS
Background
North Metro TV (NMTV), the City’s cable television administrator, is seeking to replace a number of major components and several video systems in an effort to upgrade to high definition (HD) standards. The cost of the improvements is estimated at $2 million. Initially, the Cable Commission considered the issuance of bonds by NMTV to fund the project. In order for this to occur, the Joint Powers Agreement (JPA) governing the members of NMTV, which currently only allows the issuance of debt for the construction of the NMTV building, would need to be amended to allow for a debt issuance for the proposed HD upgrades. However, because of considerable savings in interest expense, the Commission is now seeking to finance the HD upgrade project through the issuance of either a capital note or equipment certificate by the City of Circle Pines. While Circle Pines would be the issuer of the note, all other member cities would issue a note or certificate payable to Circle Pines for the city’s share of the debt payment. Since Blaine, the largest member of NMTV, generates roughly 54% of the Commission’s total franchise fees collected, Blaine’s share of the debt repayment would be roughly 54% of the total. While the notes would require all cities to pledge the full faith and credit and taxing authority of their respective city to repay the debt, it is expected that franchise fees will be more than sufficient to cover not only the debt repayment, but also all operating costs of NMTV and allow for no reduction in the amount of fees that are annually passed on to members.
The following resolution provides authorization for:
1. The City of Circle Pines to issue general obligation capital notes on behalf of NMTV and its members to fund improvements for cable television equipment; and
2. The City of Blaine to issue general obligation capital notes to repay Circle Pines for Blaine’s share of the Circle Pines capital note payments.
The exhibits following the resolution are complete as to form with certain amounts left blank until the notes are fully executed and closed. Council is asked to approve the resolution and notes as to form.
Recommendation
By motion, approve the following resolution
Body
RESOLUTION CONCURRING IN THE ISSUANCE OF THE $_________________ GENERAL OBLIGATION CAPITAL NOTES, SERIES 2016A BY THE CITY OF CIRCLE PINES, MINNESOTA, AND AUTHORIZING EXECUTION OF A $____________ GENERAL OBLIGATION CAPITAL NOTE, SERIES 2016A AND LEVYING A TAX FOR THE PAYMENT THEREOF
A. WHEREAS, the City of Blaine, Minnesota (the "City") is a member of the North Metro Telecommunications Commission, an organization formed with the Cities of Circle Pines, Blaine, Centerville, Ham Lake, Lexington, Lino Lakes and Spring Lake Park, Minnesota (together with the City, the "Joint Cities") by the execution of a Joint and Cooperative Agreement for the Administration of a Cable Communication System (the "Agreement") for which the general purpose is to monitor the operation and activities of cable communications (the "Project") as more particularly described in the Agreement; and
A. WHEREAS, the City of Circle Pines, Minnesota (the "Issuer") will issue its $_________________ General Obligation Capital Notes, Series 2016A (the "Issuer Notes") pursuant to a resolution adopted ________, 2016 (the "Issuer Note Resolution") to finance the Joint Cities share of the costs to finance the acquisition of capital equipment for the Project (the "Equipment"); and
B. WHEREAS, in order to induce the Issuer to issue the Issuer Notes to finance the acquisition of the Equipment it is proposed that the City will issue its General Obligation Capital Note, Series 2016A in the amount of $____________ (the "City Note"), pursuant to Minnesota Statutes, Chapter 475 and Minnesota Statutes, Section 412.301, to pay its share of the debt service on the Issuer Notes; and
C. WHEREAS, each piece of equipment to be financed by the Issuer Notes has an expected useful life at least as long as the term of the Issuer Notes; and
D. WHEREAS, the amount of the City Note does not exceed one-quarter of one percent (0.25%) of the market value of the taxable property in the City; and
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Blaine, Minnesota, as follows:
1. Approval and Form of City Note. The issuance of the City Note to the Issuer is hereby approved. The City Note shall be in fully registered form without interest coupons and shall be dated, mature, bear interest, be subject to redemption and be payable as provided in the form attached hereto as Exhibit A, with such amendments thereto as shall be deemed desirable or necessary by the Mayor and [Clerk] (hereby authorized to execute the City Note by their manual signatures), as evidenced by their execution thereof.
2. Debt Service Account. There is hereby created the General Obligation Capital Note, Series 2016A Debt Service Account (the "Debt Service Account"), to be administered and maintained by the [Finance Director] as a bookkeeping account separate and apart from all other accounts maintained in the official financial records of the City. The Debt Service Account shall be maintained in the manner herein specified until the City Note and the interest thereon have been fully paid. There are hereby pledged and there shall be credited to the Debt Service Account collections of all taxes herein or hereafter levied by the City for the payment of the City Note and interest thereon and any and all other moneys which are properly available and are appropriated by the governing body of the City to the Debt Service Account. The Debt Service Account shall be used solely to pay the principal and interest on the City Note.
3. Tax Levy; Coverage Test. To provide moneys for payment of the principal and interest on the City Note there is hereby levied upon all of the taxable property in the City a direct annual ad valorem tax which shall be spread upon the tax rolls and collected with and as part of other general property taxes in the City for the years and in the amounts as follows:
Year of Tax Levy Year of Tax Collection Amount
20___-20___ 20__-20__ (See attached Levy Schedule)
The tax levies are such that if collected in full will produce the 105% of the amount needed to meet when due the principal and interest payments on the City Note. The tax levies shall be irrepealable so long as the City Note is outstanding and unpaid, provided that the City reserves the right and power to reduce the levies in the manner and to the extent permitted by Minnesota Statutes, Section 475.61, Subdivision 3.
4. General Obligation Pledge. For the prompt and full payment of the principal and interest on the City Note, as the same respectively become due, the full faith, credit and taxing powers of the City shall be and are hereby irrevocably pledged. If the balance in the Debt Service Account is ever insufficient to pay all principal and interest then due on the City Note and any other bonds payable therefrom, the deficiency shall be promptly paid out of any other funds of the City which are available for such purpose, and such other funds may be reimbursed with or without interest from the Debt Service Account when a sufficient balance is available therein.
5. Redemption. The Note is subject to redemption and prepayment without penalty at the option of the City (a) on ___________ 1, 20___ and on any date thereafter at a price of par plus accrued interest; and (b) on any date prior to _______________ 1, 20___ at a price of par plus accrued interest together with any additional amount necessary to defease the portion of Issuer Notes equal to the outstanding principal amount of the City Note, all in accordance with the Issuer Note Resolution. Redemption may be in whole or in part, upon 30 days' prior written notice to the Owner. If redemption is in part, the City may select the specific principal installments hereof, or applicable portions thereof, to be prepaid.
6. Defeasance. When the City Note has been discharged as provided in this paragraph, all pledges, covenants and other rights granted by this resolution to the registered owner of the City Note shall, to the extent permitted by law, cease. The City may discharge its obligations with respect to the City Note which is due on any date by irrevocably depositing with the City [Finance Director] on or before that date a sum sufficient for the payment thereof in full; or if the City Note should not be paid when due, it may nevertheless be discharged by depositing with the City [Finance Director] a sum sufficient for the payment thereof in full with interest accrued to the date of such deposit. The City may also discharge its obligations with respect to the City Note called for redemption on any date when it is prepayable according to its terms, by depositing with the City [Finance Director] on or before that date a sum sufficient for the payment thereof in full, provided that notice of redemption thereof has been duly given. The City may also at any time discharge its obligations with respect to the City Note, subject to the provisions of law now or hereafter authorizing and regulating such action, by depositing irrevocably in escrow, with a suitable banking institution qualified by law as an escrow agent for this purpose, cash or securities described in Minnesota Statutes, Section 475.67, Subdivision 8, bearing interest payable at such times and at such rates and maturing on such dates as shall be required, without regard to sale and/or reinvestment, to pay all amounts to become due thereon to maturity or, if notice of redemption as herein required has been duly provided for, to such earlier redemption date.
7. Refunding of Issuer Notes. The City acknowledges that the Issuer Notes are subject to redemption in connection with refunding in accordance with the Issuer Note Resolution. Upon any refunding of the Issuer Notes, the City will issue a replacement City Note with a payment schedule adjusted to reflect the City's proportionate share of debt service due and payable on the Issuer's refunding bond.
8. Certificate of Registration and Levy of Ad Valorem Taxes. The City [Clerk] is hereby directed to file a certified copy of this resolution with the County Auditor of ___________ County, together with such other information as the County Auditor shall require, and to obtain from the County Auditor the certificate that the City Note has been entered in the County Auditor's Bond Register and that the tax levy required by law has been made.
9. Records and Certificates. The officers of the City are hereby authorized and directed to prepare and furnish to the original purchaser of the Issuer Notes, and to the attorneys approving the legality of the issuance of the City Note, certified copies of all proceedings and records of the City relating to the Issuer's Note and to the financial condition and affairs of the City, and such other affidavits, certificates and information as are required to show the facts relating to the legality and marketability of the City Note as the same appear from the books and records under their custody and control or as otherwise known to them, and all such certified copies, certificates and affidavits, including any heretofore furnished, shall be deemed representations of the City as to the facts recited therein.
10. Severability. If any section, paragraph or provision of this resolution shall be held to be invalid or unenforceable for any reason, the invalidity or unenforceability of such section, paragraph or provision shall not affect any of the remaining provisions of this resolution.
11. Headings. Headings in this resolution are included for convenience of reference only and are not a part hereof, and shall not limit or define the meaning of any provision hereof.
PASSED by the City Council of the City of Blaine this 18th day of February, 2016
EXHIBIT A
UNITED STATES OF AMERICA
STATE OF MINNESOTA
___________ COUNTY
CITY OF _______________
$____________ GENERAL OBLIGATION CAPITAL NOTE, SERIES 2016A
The City of _______________, _____________ County, Minnesota (the "City"), certifies that it is indebted and for value received promises to pay to the City of Circle Pines, Minnesota, or assigns duly certified on the Certificate of Registration attached to and made a part of this Note (the "Owner"), in the manner hereinafter set forth, the $____________ principal amount of this Note in the principal installments due on the first day of each month in the years and in the amounts, respectively, as follows, with each such principal installment bearing interest until paid in the amounts as follows:
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Month/Day/Year |
Principal Installment |
Interest Payment |
Month/Day/Year |
Principal Installment |
Interest Payment |
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Interest shall be payable monthly on the first day of each month, commencing ____________ 1, 20__, and shall be calculated on the basis of a 360 day year consisting of twelve 30 day months. At the time of final payment of all principal of and interest on this Note, the Owner shall surrender this Note to the City [Finance Director] at the City Hall, in _______________, Minnesota. Notwithstanding anything to the contrary herein, the City's proportionate share of any amount transferred from the Capital Account to the Debt Service Account (as such terms are defined in the Issuer Note Resolution, defined hereinafter) upon completion of the Project shall be applied as a credit against the principal or interest payment or payments due on this Note after such transfer. The term "proportionate share" means the original principal amount of this Note as a share of the original principal amount of the Issuer Note.
Manner of Payment. The principal of and interest on this Note are payable when due by check or draft mailed or otherwise delivered by or on behalf of the City [Finance Director] to the Owner hereof as of the end of the fifteenth (15th) day of the month, whether or not a business day (the "Record Date"), immediately preceding the applicable payment due date; provided that if the City shall be in default in payment of interest due on said date, whenever money becomes available for payment of such defaulted interest, the City [Finance Director] shall establish a special Record Date with respect to the payment thereof and shall mail written notice of the special Record Date not less than fifteen (15) days prior to such date to the person that was the Owner of the Note as of the close of business of the City on the fifth (5th) business day of the City preceding such mailing, and the Owner as of the special Record Date shall be entitled to receive the payment of such defaulted interest. All principal of and interest on this Note are payable in any coin or currency of the United States of America which on the date of payment is legal tender for the payment of public and private debts.
Date of Payment Not a Business Day. If the nominal date for payment of any principal of or interest on this Note shall not be a business day of the City or of the Owner, then the date for such payment shall be the next such business day and payment on such business day shall have the same force and effect as if made on the nominal date of payment.
Issuance; Purpose; General Obligation. This Note is issued as a single instrument under and pursuant to and in full conformity with the Constitution and laws of the State of Minnesota and pursuant to a resolution adopted by the City Council, the governing body of the City, on _______________, 2016 (the "Resolution"), for the purpose of providing money to finance the cost of the acquisition of capital equipment. The terms Issuer Note and Issuer Note Resolution have the meaning provided in the Resolution. This Note constitutes a general obligation of the City, and to provide moneys for the prompt and full payment of its principal, premium, if any, and interest when the same become due, the full faith and credit and taxing powers of the City have been and are hereby irrevocably pledged.
Optional Redemption. The Note is subject to redemption and prepayment without penalty at the option of the City, (a) on ________________ 1, 20__ and on any date thereafter at a price of par plus accrued interest; and (b) on any date prior to ___________ 1, 20__ at a price of par plus accrued interest together with any additional amount necessary to defease the portion of the Issuer Notes equal to the outstanding principal amount of the City Note, all in accordance with the Issuer Note Resolution. Redemption may be in whole or in part, on any date, upon 30 days' prior written notice to the Owner. If redemption is in part, the City may select the specific principal installments hereof, or applicable portions thereof, to be prepaid.
Transfer. This Note is transferable, as provided in the Resolution, upon the Register kept by the City [Clerk] at City Hall upon surrender of this Note together with a written instrument of transfer duly executed by the Owner or the Owner's attorney duly authorized in writing, and thereupon a new, fully registered Note in the same aggregate principal amount shall be issued to the transferee in exchange therefore (or the transfer shall be duly recorded on the Register and the Certificate of Registration hereof), upon the payment of charges and satisfaction of applicable conditions, if any, as therein prescribed; provided that such transfer may occur only with respect to the entire Note and all of the remaining principal amount of the sole final maturity hereof. The City may treat and consider the person in whose name this Note is registered as the absolute Owner hereof for the purpose of receiving payment of or on account of the principal of and interest on this Note (except for the payment of interest to the Owner as of a Record Date) and for all other purposes whatsoever.
IT IS HEREBY CERTIFIED AND RECITED that all acts, conditions and things required by the Constitution and laws of the State of Minnesota to be done, to happen and to be performed, precedent to and in the issuance of this Note, have been done, have happened and have been performed, in regular and due form, time and manner as required by law; that the City has covenanted and agreed with the holder of this Note that it will levy a direct, annual, irrepealable ad valorem tax upon all of the taxable property in the City, without limitation as to rate or amount, for the years and in amounts sufficient to pay the installments of principal and interest on this Note as they respectively become due; and that this Note, together with all other debts of the City outstanding on the date hereof, being the date of its actual issuance and delivery, does not exceed any constitutional or statutory limitation of indebtedness.
IN WITNESS WHEREOF, the City of _______________, ____________ County, Minnesota, by its City Council has caused this Note to be executed on its behalf by the signatures of its Mayor and of its [Clerk], and the corporate seal of the City having been intentionally omitted as permitted by law, all as of _________ __, 2016.
CITY OF _______________, _______ COUNTY MINNESOTA
Mayor
[Clerk]
CERTIFICATE OF REGISTRATION
The transfer of ownership of the principal amount of the attached Note may be made only by the registered owner or the Holder's legal representative last noted below.
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DATE OF REGISTRATION |
REGISTERED OWNER |
SIGNATURE OF CITY [CLERK] |
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, 2016 |
City of ___________ , Minnesota |
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STATE OF MINNESOTA COUNTY AUDITOR'S CERTIFICATE
COUNTY OF ___________ AS TO TAX LEVY AND REGISTRATION
I, the undersigned, being the duly qualified and acting County Auditor of ___________ County, Minnesota, DO HEREBY CERTIFY that on the date hereof there was filed in my office a certified copy of a resolution adopted on _____________, 2016 by the City Council of the City of _________________, Minnesota, authorizing the issuance of a $_______ General Obligation Capital Note, Series 2016A (the "Note"), and levying a tax for the payment thereof, together with full information regarding the Note for which the tax was levied; and the Note has been entered in my Bond Register and the tax levy required by law has been made.
WITNESS my hand and the seal of the County Auditor on _________________, 2016.
________________________________
County Auditor
(SEAL)