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6.3. SR 09-19-2011REQUEST FOR ACTION TO ITEM NUMBER Ma or & Ci Council 6.3. AGENDA SECTION MEETING DATE PREPARED BY Administration Se tember 19, 2011 Tim Simon, Finance Director ITEM DESCRIPTION REVIEWED By Resolution Authorizing the Issuance and Sale of Revenue Robert Thistle, Interim City Bonds, Series 2011 (Evans Park Inc. Project) -Public Hearing Administrator REVIEWED B ACTION REQUESTED The City Council is asked to adopt a resolution authorizing the issuance and sale of revenue bonds, series 2011 (Evans Park Inc. Project) BACKGROUND/DISCUSSION On August 12, 2011, Evans Park Inc. made application to the City for conduit bonding for approximately $3.8 million for the acquisition, construction, and equipping of a 30-unit memory care addition and certain other capital improvements to the existing 60-unit assisted living facility. In 1998, the City issued conduit bonding to build the 60-unit assisted living facility. As a result, the applicant is very familiar with the conduit bonding process. On September 6, 2011, the City Council approved a resolution calling for a public hearing on the issuance of revenue bonds and ratifying the publication of a notice of hearing. These bonds will be special, limited obligation of the City, and no holder of any bond will ever have the right to compel any exercise of the taxing power of the City to pay the Bonds or the interest. Most recently the City has issued conduit bonding for the following projects: Dove Tree Apartments (2010), Metal Craft (2008) and Birchwood Apartments (2007). FINANCIAL IMPACT It is important to reemphasize that there will be no impact to the City, since this request is for a revenue bond (conduit financing), with the City not having to pledge any considerations for its debt payment. In addition, Guardian Angels of Elk River has paid an initial $5,000 application fee. Consistent with the City's Conduit Bonding Policy, the City will also require one percent of the issuance amount of the bonds be paid at closing to the City's Development Fund, and all out-of-pocket expenses for legal fees to underwrite the bond will be paid by the applicant. ATTACHMENTS Resolution authorizing the issuance and sale of revenue bonds, series 2011 (Evans Park Inc. Project) Action Motion by Second by Vote N:\Public Bodies\City Council\Council RCA\Agenda Packet\09-19-2011\GuazdianAngleconduitbondsissuance[1].docx Follow Up N:\Public Bodies\Ciry Council\Council RCA\Agenda Packet\09-19-2011\GuazdianAngleconduitbondsissuance[lJ.docx EXTRACT OF MINUTES OF A MEETING OF THE CITY COUNCIL OF THE CITY OF ELK RIVER, MINNESOTA Pursuant to due call and notice thereof, a regular or special meeting of the City Council of the City of Elk River, Minnesota, was duly held in the City Hall in said City on Monday, September 19, 2011, commencing at 6:30 P.M. The following Councilmembers were present: and the following were absent: Member introduced the following resolution and moved its adoption: RESOLUTION NO. 11- RESOLUTION AUTHORIZING THE ISSUANCE AND SALE OF REVENUE BONDS, SERIES 2011 (EVANS PARK, INC. PROJECT) (a) WHEREAS, Minnesota Statutes, Chapter 462C (the "Act"), confers upon cities the powers conferred by the Act, which include the power to issue revenue bonds to finance a program for the purposes of planning, administering, making or purchasing loans with respect to one or more combination multifamily housing and health care developments within the boundaries of the city; and (b) WHEREAS, Evans Park, Inc., a Minnesota nonprofit corporation (the "Borrower") has requested that the City of Elk River, Minnesota (the "City") issue its combination multifamily housing and health care revenue bonds to provide financing, in whole or in part, for a Project (as defined below); and (c) WHEREAS, the proposal for the financing of the Project by the issuance of the revenue bonds is described and set forth in a Housing Program (the "Housing Program"); a public hearing on the- Housing Program and Project was held by the City Council on the date hereof, following duly published notice; and (d) WHEREAS, the City's Revenue Bonds, Series 2011 (Evans Park, Inc. Project) will be issued in one or more series in an aggregate principal amount not to exceed $3,800,000, and will include a pledge of, among other things, revenues of the Project (the "Bonds"); and (e) WHEREAS, the Borrower has requested that the Bonds be issued pursuant to a Trust Indenture between the City and Wells Fargo Bank, National Association (the "Trustee"), dated on or after October 1, 2011(the "Indenture"); and (f) WHEREAS, the City, the Borrower, and Northland Securities, Inc. (the "Underwriter") have agreed upon sufficient details of the Bonds and to enable the City to adopt this final bond resolution (the "Resolution") on this date. NOW THEREFORE BE IT RESOLVED by the City Council of the City of Elk River, Minnesota, as follows: 391851v2 JSB EL185-16 1. Proposal for Issuance of Bonds. For the purpose of providing funds to finance the acquisition, construction and equipping of a combination multifamily housing and health care facility, consisting of an approximately 30-unit memory care addition and certain other capital improvements to the existing 60-unit assisted living facility located at 13439 185th Lane NW in the City (the "Project) there is hereby authorized the issuance, sale and delivery of the Bonds in an aggregate principal amount not to exceed $3,800,000 at an average rate per annum thereon not to exceed 7.00%, the proceeds of which, together with funds provided by the Borrower, shall be used to finance the Project. The proceeds of the Bonds will be disbursed pursuant to a Disbursing Agreement among the Borrower, the Trustee and a disbursing agent (the "Disbursing Agreement"). The Bonds shall be special obligations of the City payable solely from the funds pledged therein. The Bonds are not to be payable from nor charged upon any funds of the City other than the revenues pledged to their payment, nor is the City subject to any liability thereon; no holders of the Bonds shall ever have the right to compel any exercise of the taxing power of the City to pay any of the principal of, premium, if any, or interest on the Bonds; the Bonds shall not constitute a charge, lien or encumbrance, legal or equitable, upon any property of the City, and each Bond shall recite that the Bonds, including interest thereon, are payable solely from the revenues pledged to the payment thereof and that no Bond shall constitute a debt of the City within the meaning of any constitutional or statutory limitation. The Bonds shall contain a recital that they are issued pursuant to the Act and such recital shall be conclusive evidence of the validity and regularity of the issuance thereof. 2. Bond Structure. Pursuant to a Loan Agreement, to be dated on or after October 1, 2011, the City will loan the proceeds of the Bonds to the Borrower to finance a portion of the Project (the "Series 2011 Loan Agreement"). The payments to be made by the Borrower under the Series 2011 Loan Agreement are fixed so as to produce revenue sufficient to pay the principal of, premium, if any, and interest on the Bonds when due. When executed, the right, title and interest of the City in, to and under, among other things, the Series 2011 Loan Agreement (except as therein provided) will be assigned to the Trustee pursuant to the Indenture. It is further proposed that the Borrower will execute a Combination Mortgage, Security Agreement and Fixture Financing Statement and Assignment of Leases and Rents which the City will assign to the Trustee as security for payment of the Bonds and the Series 1998 Bonds (the "Series 2011 Mortgage"). The Borrower's obligations under the Series 2011 Loan Agreement will be secured under the Series 2011 Mortgage equally and ratably with the Borrower's obligations under the Loan Agreement dated as of August 1, 1998 (the "Series 1998 Loan Agreement"), between the City and the Borrower, pursuant to the Intercreditor and Parity Agreement (the "Intercreditor Agreement") among the Borrower, the Trustee and Wells Fargo Bank, National Association (the "Series 1998 Trustee") as trustee under the Trust Indenture dated as of August 1, 1998 between the City and the Series 1998 Trustee (the "Series 1998 Indenture"). The Borrower has determined that the Series 2011 Loan Agreement meets the requirements for Additional Parity Indebtedness pursuant to the Series 1998 Loan Agreement. The Bonds will be further secured by a Guaranty Agreement between Guardian Angels of Elk River, Inc. and the Trustee (the "Guaranty"). The Guaranty does not secure the Series 1998 Bonds. The Bonds will be purchased by the Underwriter pursuant to a Bond Purchase Agreement among the City, the Underwriter and the Borrower (the "Bond Purchase Agreement"). The Bonds shall be in such principal amounts, shall beax interest at the rates, shall be numbered, shall be dated, shall mature, shall be subject to redemption prior to maturity, and shall be in such form and have such other details and provisions as may be prescribed in the Indenture the form of which is on file with the -City. 391851v2 JSB EL185-16 2 3. Unrated Debt After review by the City's financial advisor and based on the Borrower's operating history in the City and ability to meet the requirements for issuing additional bonds under the Series 1998 Indenture, the City hereby authorizes the issuance of the Bonds as unrated debt and waives the standard set forth in Section A.4. under the heading Guidelines in the City's Conduit Bonding Policy. 4. Housing Program. The Housing Program is hereby adopted, ratified, and approved in all respects without amendment. The preparation of the Housing Program is hereby ratified, confirmed, and approved. The City Administrator is hereby authorized to do all other things and take all other actions as may be necessary or appropriate to carry out the Housing Program in accordance with the Act and any other applicable laws and regulations. 5. Forms of Documents Submitted. Forms of the following documents have been submitted to the City Council for approval: (a) the Bond Purchase Agreement; (b) the Series 2011 Loan Agreement; (c) ~ the Series 2011 Mortgage; (d) the Intercreditor Agreement; (e) the Guaranty Agreement; (f) the Indenture; and (g) the Disbursing Agreement. 6. Findin s. It is hereby found, determined and declared that: (a) the Project furthers the policies of the Act; (b) the Project promotes the public welfare by providing necessary multifamily rental housing and health care facilities, so that adequate multifamily rental housing and health care facilities are available to residents of the City at a reasonable cost; (c) the Act authorizes the acquisition, construction and installation of the facilities and equipment to be financed by the Bonds, the issuance and sale of the Bonds, the execution and delivery by the City of the Bond Purchase Agreement, the Series 2011 Loan Agreement, and Indenture (collectively, the "Financing Documents"), the performance of all covenants and agreements of the City contained in the Financing Documents, and the performance of all other acts and things required under the constitution and laws of the State of Minnesota to make the Financing Documents and Bonds valid and binding obligations of the City in accordance with their terms; (d) it is desirable that the Series 2011 Bonds be issued by the City upon the terms set forth in the Indenture; 391851v2 JSB EL185-16 3 (e) the payments under the Series 2011 Loan Agreement are fixed to produce revenue sufficient to provide for the prompt payment of principal of, premium, if any, and interest on the Series 2011 Bonds issued under the Indenture when due, and the Series 2011 Loan Agreement and Indenture also provide that the Borrower is required to pay all expenses of the operation and maintenance of the facilities to be financed by the Bonds, including, but without limitation, adequate insurance thereon and insurance against all liability for injury to persons or property arising from the operation thereof, and any taxes and special assessments levied upon or with respect to the premises of said facilities and payable during the term of the Series 2011 Loan Agreement and Indenture; (f) as provided therein and in the Series 2011 Loan Agreement and Indenture, the Bonds are not to be payable from or charged upon any funds other than the revenue pledged to the payment thereof; the City is not subject to any liability thereon; no holder of any Bond shall ever have the right to compel any exercise by the City of any 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 Series 2011 Loan Agreement which has been 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 Series 2011 Loan Agreement which has been assigned to the Trustee under the Indenture; the Bonds shall recite that the Bonds do not constitute or give rise to a pecuniary liability or moral obligation of the City, the State of Minnesota or any political subdivision, and that the Bonds, including interest thereon, are payable solely from the revenues pledged to the payment thereof; and the Bonds shall not constitute a debt of the City within the meaning of any constitutional or statutory limitation. 7. Approval of Forms; Execution. Subject to the provisions of Sections 12 and 13 hereof, the forms of the Financing Documents and exhibits thereto and all other documents listed in Section 6 hereof are approved substantially in the form submitted. Subject to the provisions of Section 12 hereof, the Financing Documents, in substantially the forms submitted, are directed to be executed in the name and on behalf of the City by the Mayor and the City Administrator. Subject to the provisions of Section 12 hereof, the Bonds are to be in executed the name of and on behalf of the City by the Mayor and the City Administrator, and are to be delivered to the Trustee for authentication and delivery to the Underwriter. Any other City documents and certificates necessary to the transaction described above maybe executed by one or more officers of the appropriate City, including but not limited to the City Administrator or Finance Director. Copies of all of the documents necessary to the transaction herein described shall be delivered, filed and recorded as provided herein and in the Financing Documents. 8. Official Statement. The City hereby consents to the preparation and distribution of the Official Statement for the Bonds; provided that it is understood that the City has relied upon the Borrower and the Underwriter and legal counsel retained by them to assure the accuracy and completeness of ,the information set forth in the Official Statement and that therefore the City has not made, and will not make, any representations or warranties with respect to the information contained therein, except under the heading "The Issuer". The drafts of the Official Statement on file with the City are hereby designated as "near final" offering memoranda for purposes of Rule 15-c2-12 of the Securities Exchange Commission. 391851v2 JSB EL185-16 4 9. Issuance. The City shall proceed forthwith to issue the Bonds, in the forms and upon the terms set forth in the Indenture and this Resolution, if and to the extent the City officers determine to proceed with the Project which determination shall be deemed made upon execution of the Financing Documents by the City officers. The Bonds shall be payable or prepayable at such time or times, shall bear interest at such rates and shall be subject to such other terms and conditions as set forth therein which the Underwriter, the Borrower and the City shall agree to, which agreement shall be deemed to have been made upon execution and delivery of the Bonds by the City officers. The City officers are authorized and directed to execute and deliver the Bonds as prescribed in the Indenture and this Resolution. 10. Records and Certificates. The Officials and other officers of the City are authorized and directed to prepare and furnish to the Underwriter certified copies of all proceedings and records of the City relating to the Bonds, and such other affidavits and certificates as may be required to show the facts relating to the legality of the Bonds as such facts appear from the books and records in the officers' custody and control or as otherwise known to them; and all such certified copies, certificates and affidavits, including any heretofore furnished, shall constitute representations of the City as to the truth of all statements contained therein. 11. ChangLes in Forms Approved; Absent and Disabled Officers. The approval hereby given to the various documents referred to above includes approval of 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 legal counsel to the City and the appropriate City staff person or officers authorized herein to execute or accept, as the case may be, said documents prior to their execution; and said officers or staff members are hereby authorized to approve said changes on behalf of the City. 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 document in accordance with the terms hereof. In the event of absence or disability of the officers, any of the documents authorized by this Resolution to be executed may be executed without further act or authorization of the City Council by any member of the City Council or any duly designated acting official, or by such other officer or officers of the City Council as, in the opinion of the City Attorney, may act in their behalf. 12. Future Amendments. The authority to approve, execute and deliver future amendments to Financing Documents entered into by the City in connection with the issuance of the Bonds and consents required under the financing documents is hereby delegated to the Mayor and City Administrator, subject to the following conditions: (a) such amendments or consents do not require the consent of the respective holders of the Bonds or such consent has been obtained; (b) such amendments or consents to not materially adversely affect the interests of the City; (c) such amendments or consents do not contravene or violate any policy of the City, and (d) such amendments or consents are acceptable in form and substance to the counsel retained by the City to review such amendments. The authorization hereby given shall be further construed as authorization for the execution and delivery of such certificates and related items as may be required to demonstrate compliance with the agreements being amended and the terms of this Resolution. The execution of any instrument by the Mayor and City Administrator shall be conclusive evidence of the approval of such instruments in accordance with the terms hereof. In the absence of the Mayor and/or City Administrator, any instrument authorized by this paragraph to be executed and delivered may be executed by the officer of the City authorized to act in his or her place and stead. 391851v2 JSB EL185-16 5 13. Indemnification by Borrower. It is understood and agreed that the Borrower shall indemnify the City against all liabilities, losses, damages, costs and expenses (including attorney's fees and expenses incurred by the City) arising with respect to the Project or the Bonds, as provided for and agreed to by and between the Borrower and the City in the Loan Agreement. 14. Headings; Terms. Paragraph headings in this Resolution are for convenience of reference only and are not a part hereof, and shall not limit or define the meaning of any provision hereof. Capitalized terms used but not defined herein shall have the meanings given them in the Indenture and Series 2011 Loan Agreement. 15. Qualified Tax Exempt Obli ag tion. In order to qualify the Bonds as "qualified tax- exempt obligations" within the meaning of Section 265(b)(3) of the Internal Revenue Code of 1986, as amended (the "Code"), the City hereby designates the Bonds as qualified tax-exempt obligations for purposes of Section 265(b)(3) of the Code and in connection therewith makes the following factual findings; (a) the Bonds will be issued after August 7, 1986; (b) the Bonds are not treated as "private activity bonds" under Section 265(b)(3) of the Code; (c) 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 (d) 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. The motion for the adoption of the foregoing resolution was duly seconded by member and after full discussion thereof and upon vote being taken thereon, the following voted in favor thereof: and the following voted against the same: Whereupon said resolution was declared duly passed and adopted this 19a' day of September, 2011. John J. Dietz, Mayor ATTEST: Tina Allard, City Clerk 391851v2 JSB EL185-16 6 STATE OF MINNESOTA COUNTY OF SHERBURNE CITY OF ELK RIVER I, the undersigned, being the duly qualified and acting City Clerk of the City of Elk River, DOES HEREBY CERTIFY that I have compared the attached and foregoing extract of minutes with the original thereof on file in my office, and that the same is a full, true and complete transcript of the minutes of a meeting of the City Council of said City duly called and held on the date therein indicated, insofar as such minutes relate to authorizing the issuance of the City's revenue bonds to finance a memory care addition and renovations to an existing assisted living facility for Evans Park, Inc. WITNESS my hand this day of September, 2011. City Clerk 391851v2 JSB EL185-16 $