Item: 9.1 PUBLIC HEARING - Joe Huss, Finance
Title
AUTHORIZING THE ISSUANCE OF $3,000,000 REVENUE NOTE OR OTHER OBLIGATION ON BEHALF OF THE NATIONAL SPORTS CENTER FOUNDATION.
Background
Earlier this year, representatives from the National Sport Center (NSC) presented a proposal to construct and equip a 20,000 square-foot indoor sports and exhibit hall facility to be located adjacent to the existing Schwan Center. The proposal included a request for the City to provide assistance with the issuance of a revenue note or other obligation in an amount not to exceed $3,000,000 pursuant to Minnesota Statutes, Sections 469.152 to 469.1651, as amended. The Project will be owned by the Minnesota Amateur Sports Commission and operated by the NSC.
The City would issue what are commonly known as Conduit Debt bonds. The bonds would be issued pursuant to IRS regulations and State of Minnesota statutes, chapter 469. The note or other obligations if and when issued will not constitute a charge, lien or encumbrance upon any property of the City except the Project, and such note or obligations will not be a charge against the City's general credit or taxing powers, but will be payable by the NSC pursuant to a revenue agreement.
Schedule of Actions
A. Conduct Public Hearing
B. By motion, approve attached resolution
Body
WHEREAS,
(a) The purpose of Minnesota Statutes, Chapter 469.152 to 469.1651 (the "Act"), as found and determined by the legislature, is to promote the welfare of the state by the active attraction and encouragement and development of economically sound industry and commerce to prevent so far as possible the emergence of blighted and marginal lands and areas of chronic unemployment;
(b) Factors necessitating the active promotion and development of economically sound industry and commerce are the increasing concentration of population in the metropolitan areas and the rapidly rising increase in the amount and cost of governmental services required to meet the needs of the increased population and the need for development of land use which will provide an adequate tax base to finance these increased costs and the need for access to employment opportunities for such population;
(c) The City Council of the City of Blaine, Minnesota (the "City") has received from The National Sports Center Foundation, a Minnesota nonprofit corporation organized under the laws of the State of Minnesota (the "Borrower"), a proposal that the City assist in financing a Project hereinafter described through the issuance of a revenue note, as further defined below, the "Note", pursuant to the Act;
(d) The City desires to facilitate the selective development of the community, retain and improve the tax base and help to provide the range of services, facilities and employment opportunities required by the population, including amateur sports and recreational facilities; and the Project will assist the City in achieving those objectives and will enhance the image and reputation of the community;
(e) The Project to be financed or refinanced by the Note is the acquisition, construction and equipping of an approximately 20,000 square foot indoor sports and exhibit hall facility (the "Project"). The Project will be owned by the Minnesota Amateur Sports Commission and and operated by the Borrower;
(f) The City has been advised by representatives of the Borrower that conventional, commercial financing to pay the capital cost of the Project is available only on a limited basis and at such high costs of borrowing that the economic feasibility of operating the Project would be significantly reduced;
(g) Based on representations of the Borrower, no public official of the City has either a direct or indirect financial interest in the Project nor will any public official either directly or indirectly benefit financially from the Project; and
(h) A public hearing on the Project was held on this date, after notice was published and materials made available for public inspection at the City Hall, all as required by the Act and Section 147(f) of the Internal Revenue Code of 1986, as amended, at which public hearing all those appearing who desired to speak were heard and written comments were accepted.
NOW THEREFORE BE IT RESOLVED by the City Council of the City of Blaine, Minnesota (the "City"), as follows:
SECTION 1. LEGAL AUTHORIZATION AND FINDINGS.
1.1 Findings. The City hereby finds, determines and declares as follows:
(a) The City is a municipal corporation and a political subdivision of the State of Minnesota and is authorized under the Act to assist the revenue producing project herein referred to, and to issue and sell the Note, as hereinafter defined, for the purpose, in the manner and upon the terms and conditions set forth in the Act and in this Resolution.
(b) The issuance and sale of the Sports Facility Revenue Note, Series 2011 (NSC Sports Exposition Center Project) (the "Note") by the City, pursuant to the Act, is in the best interest of the City, and the City hereby determines to issue the Note and to sell the Note to Anchor Bank, N.A. in Blaine, Minnesota, or another bank in Minnesota (the "Lender"), as provided herein. The City will loan the proceeds of the Note (the "Loan") to the Borrower in order to finance the Project.
(c) Pursuant to a Loan Agreement (the "Loan Agreement") to be entered into between the City and the Borrower, the Borrower has agreed to repay the Note in specified amounts and at specified times sufficient to pay in full when due the principal of, premium, if any, and interest on the Note. In addition, the Loan Agreement contains provisions relating to the maintenance and operation of the Project, indemnification, insurance, and other agreements and covenants which are required or permitted by the Act and which the City and the Borrower deem necessary or desirable for the financing of the Project. A draft of the Loan Agreement has been submitted to the City Council.
(d) Pursuant to a Pledge Agreement (the "Pledge Agreement") to be entered into between the City and the Lender, the City has pledged and granted a security interest in all of its rights, title, and interest in the Loan Agreement to the Lender (except for certain rights of indemnification and to reimbursement for certain costs and expenses). A draft of the Pledge Agreement has been submitted to the City Council.
(e) The Note will be a special, limited obligation of the City. The Note shall not be payable from or charged upon any funds other than the revenues pledged to the payment thereof, nor shall the City be subject to any liability thereon. No holder of the Note shall ever have the right to compel any exercise of the taxing power of the City to pay the Note or the interest thereon, nor to enforce payment thereof against any property of the City. The Note shall not constitute a debt of the City within the meaning of any constitutional or statutory limitation.
(f) On the basis of information available to the City it appears, and the City hereby finds, that the Project constitutes properties, real and personal, used or useful in connection with one or more revenue producing enterprises within the meaning of Subdivision 2(b) of Section 469.153 of the Act; that the Project furthers the purposes stated in Section 469.152; that the availability of the financing under the Act and willingness of the City to furnish such financing will be a substantial inducement to the Borrower to undertake the Project, and that the effect of the Project, if undertaken, will be to assist in the prevention of the emergence of blighted and marginal land, to help prevent chronic unemployment, to help the surrounding area retain and eventually improve the tax base, to provide the range of service and employment opportunities required by the population, to help prevent the movement of talented and educated persons out of the state and to areas within the State where their services may not be as effectively used, and to promote more intensive development and use of land within the City and surrounding communities.
(g) It is desirable, feasible and consistent with the objects and purposes of the Act to issue the Note, for the purpose of financing the costs of the Project.
1.2 Authorization and Ratification of Project. In anticipation of the approval of the Project by the State of Minnesota, Department of Employment and Economic Development and all other necessary entities and the issuance of the Note to finance all or a portion of the Project, and in order that completion of the Project will not be unduly delayed when approved, the City hereby authorizes the Borrower, in accordance with the provisions of the Act and subject to the terms and conditions imposed by the Lender, to provide for the acquisition, construction and equipping of the Project by such means as shall be available to the Borrower and in the manner determined by the Borrower, and without advertisement for bids as may be required for the construction and acquisition of other municipal facilities; the City hereby ratifies, affirms, and approves all actions heretofore taken by the Borrower consistent with and in anticipation of such authority; and the Borrower is hereby authorized to make such expenditures and advances toward payment of that portion of the costs of the Project to be financed from the proceeds of the Note as the Borrower considers necessary, including the use of interim, short term financing, subject to reimbursement from the proceeds of the Note if and when delivered but otherwise without liability on the part of the City
SECTION 2. THE NOTE.
2.1 Authorized Amount and Form of Note. The Note is hereby approved and shall be issued pursuant to this Resolution in substantially the form submitted to the City Council with such appropriate variations, omissions and insertions as are necessary and appropriate and are permitted or required by this Resolution, and in accordance with the further provisions hereof; and the total aggregate principal amount of the Note that may be outstanding hereunder is expressly limited to $3,200,000, unless a duplicate Note is issued pursuant to Section 2.7. The Note shall bear interest at a variable rate as set forth therein, not greater than 4.5% per annum for the first five years after its original date of issuance.
2.2 The Note. The Note shall be dated as of the date of delivery to the Lender, shall be payable at the times and in the manner, shall bear interest at the rate, and shall be subject to such other terms and conditions as are set forth therein.
2.3 Execution. The Note shall be executed on behalf of the City by the signatures of its Mayor and the Manager, Finance Director, or City Clerk and shall be sealed with the seal of the City; provided that the seal may be intentionally omitted as provided by law. In case any officer whose signature shall appear on the Note shall cease to be such officer before the delivery of the Note, such signature shall nevertheless be valid and sufficient for all purposes, the same as if had remained in office until delivery. In the event of the absence or disability of the Mayor or the Manager, Finance Director, or City Clerk such officers of the City as, in the opinion of the City Attorney, may act in their behalf, shall without further act or authorization of the City Council execute and deliver the Note.
2.4 Delivery of Initial Note. Before delivery of the Note there shall be filed with the Lender (except to the extent waived by the Lender) the following items:
(1) an executed copy of each of the following documents:
(a) the Loan Agreement;
(b) the Pledge Agreement;
(2) an opinion of Counsel for the Borrower as prescribed by the Lender and Bond Counsel;
(3) the opinion of Bond Counsel as to the validity and tax exempt status of the Note;
(4) a 501(c)(3) determination letter from the Internal Revenue Service evidencing that the Borrower is exempt from income taxation under Section 501(c)(3) of the Code;
(5) such other documents and opinions as Bond Counsel may reasonably require for purposes of rendering its opinion required in subsection (3) above or that the Lender may reasonably require for the closing.
2.5 Disposition of Proceeds of the Note. Upon delivery of the Note to Lender, the Lender shall, on behalf of the City, disburse the proceeds of the Note for payment of Project Costs in accordance with the terms of the Loan Agreement.
2.6 Registration of Transfer. The City will cause to be kept at the office of the Finance Director a Note Register in which, subject to such reasonable regulations as it may prescribe, the City shall provide for the registration of transfers of ownership of the Note. The Note shall be initially registered in the name of the Lender and shall be transferable upon the Note Register by the Lender in person or by its agent duly authorized in writing, upon surrender of the Note together with a written instrument of transfer satisfactory to the Finance Director, duly executed by the Lender or its duly authorized agent. The following form of assignment shall be sufficient for said purpose.
For value received ___________ hereby sells, assigns and transfers unto ________________ the within Note of the City of Blaine, Minnesota, and does hereby irrevocably constitute and appoint ___________________ attorney to transfer said Note on the books of said City with full power of substitution in the premises. The undersigned certifies that the transfer is made in accordance with the provisions of Section 2.9 of the Resolution authorizing the issuance of the Note.
Dated:
Registered Owner
Upon such transfer the Finance Director shall note the date of registration and the name and address of the new Lender in the applicable Note Register and in the registration blank appearing on the Note.
2.7 Mutilated, Lost or Destroyed Note. In case the Note issued hereunder shall become mutilated or be destroyed or lost, the City shall, if not then prohibited by law, cause to be executed and delivered, a new Note of like outstanding principal amount, number and tenor in exchange and substitution for and upon cancellation of such mutilated Note, or in lieu of and in substitution for such Note destroyed or lost, upon the Lender's paying the reasonable expenses and charges of the City in connection therewith, and in the case of a Note destroyed or lost, the filing with the City of evidence satisfactory to the City with indemnity satisfactory to it. If the mutilated, destroyed or lost Note has already matured or been called for redemption in accordance with its terms it shall not be necessary to issue a new Note prior to payment.
2.8 Ownership of Note. The City may deem and treat the person in whose name the Note is last registered in the Note Register and by notation on the Note whether or not such Note shall be overdue, as the absolute owner of such Note for the purpose of receiving payment of or on account of the Principal Balance, redemption price or interest and for all other purposes whatsoever, and the City shall not be affected by any notice to the contrary.
2.9 Limitation on Note Transfers. The Note will be issued to an "accredited investor" and without registration under state or other securities laws, pursuant to an exemption for such issuance; and accordingly the Note may not be assigned or transferred in whole or part, nor may a participation interest in the Note be given pursuant to any participation agreement, except to another "accredited investor" or "financial institution" in accordance with an applicable exemption from such registration requirements and with full and accurate disclosure of all material facts to the prospective purchaser(s) or transferee(s).
2.10 Issuance of a New Note. Subject to the provisions of Section 2.9, the City shall, at the request and expense of the Lender, issue a new note, in aggregate outstanding principal amount equal to that of the Note surrendered, and of like tenor except as to number, principal amount, and the amount of the periodic installments payable thereunder, and registered in the name of the Lender or such transferee as may be designated by the Lender.
SECTION 3. MISCELLANEOUS.
3.1 Severability. If any provision of this Resolution shall be held or deemed to be or shall, in fact, be inoperative or unenforceable as applied in any particular case in any jurisdiction or jurisdictions or in all jurisdictions or in all cases because it conflicts with any provisions of any constitution or statute or rule or public policy, or for any other reason, such circumstances shall not have the effect of rendering the provision in question inoperative or unenforceable in any other case or circumstance, or of rendering any other provision or provisions herein contained invalid, inoperative, or unenforceable to any extent whatever. The invalidity of any one or more phrases, sentences, clauses or paragraphs in this Resolution contained shall not affect the remaining portions of this Resolution or any part thereof.
3.2 Authentication of Transcript. The officers of the City are directed to furnish to Bond Counsel certified copies of this Resolution and all documents referred to herein, and affidavits or certificates as to all other matters which are reasonably necessary to evidence the validity of the Note. All such certified copies, certificates and affidavits, including any heretofore furnished, shall constitute recitals of the City as to the correctness of all statements contained therein.
3.3 Authorization to Execute Agreements. The forms of the proposed Loan Agreement and the Pledge Agreement are hereby approved in substantially the form presented to the City Council, together with such additional details therein as may be necessary and appropriate and such modifications thereof, deletions therefrom and additions thereto as may be necessary and appropriate and approved by Bond Counsel prior to the execution of the documents. The Mayor and the and the Manager, Finance Director, or Clerk of the City are authorized to execute the Loan Agreement and the Pledge Agreement and such other documents as Bond Counsel consider appropriate in connection with the issuance of the Note, in the name of and on behalf of the City. In the event of the absence or disability of the Mayor or the and the Manager, Finance Director, or City Clerk such officers of the City as, in the opinion of the City Attorney, may act on their behalf, shall without further act or authorization of the City Council do all things and execute all instruments and documents required to be done or executed by such absent or disabled officers. The execution of any instrument by the appropriate officer or officers of the City herein authorized shall be conclusive evidence of the approval of such documents in accordance with the terms hereof.
3.4 Qualified Tax Exempt Obligation. In order to qualify the Note as a "qualified tax-exempt obligation" within the meaning of Section 265(b)(3) of the Internal Revenue Code of 1986, as amended (the "Code"), the City hereby makes the following factual statements and representations;
(a) the Note will be issued after August 7, 1986;
(b) the Note is not treated as a "private activity bond" under Section 265(b)(3) of the Code;
(c) the City hereby designates the Note as a qualified tax-exempt obligation for purposes of Section 265(b)(3) of the Code;
(d) the reasonably anticipated amount of tax-exempt obligations (other than obligations described in clause (ii) of Section 265(b)(3)(C) of the Code) which will be issued by the City (and all entities whose obligations will be aggregated with those of the City) during the calendar year 2011 will not exceed $10,000,000; and
(e) not more than $10,000,000 of obligations issued by the City during the calendar year 2011 have been designated for purposes of Section 265(b)(3) of the Code.
Adopted by the City Council of the City of Blaine, Minnesota, this 6th day of October, 2011.