5.4. SR 01-05-1998,._.,y of
Item # 5.4.
MEMORANDUM
iver
TO:
FROM:
Mayor and City Council
Lori Johnson, Finance Director
DATE:
January 5, 1998
SUBJECT:
Resolution Awarding the Sale of the
City's $225,000 General Obligation
Equipment Certificate of 1998; and
Fixing Form and Specifications;
Directing its Execution and Delivery;
and Providing for its Payment - (for the
Elk River Municipal Utilities)
In January, 1997, the Elk River Municipal Utilities Commission authorized
the purchase of a 69 KV transformer and requested that the city issue an
equipment certificate for its payment. The transformer is due to be delivered
next week, and in preparation, the necessary certificate documents have been
prepared. The Utilities does not have legal authority to issue equipment
certificates because a levy is required so City Council approval is necessary.
The Municipal Utilities selected First National Bank of Elk River to purchase
the $225,000 certificate at an interest rate of 4.68% and a final maturity of
August 1, 2002. The payment schedule for this certificate is somewhat
unique because the payments will actually come from electric revenues
rather than a tax levy. However, the certificate requires that taxes be levied
for the payment of principal and interest thereby delaying the first principal
payment until August 1, 1999, when the first scheduled tax levy, if actually
levied, would be available for payment. Because electric revenues will be
available for payment prior to that time, the bank has agreed to accept
principal pre-payments.
During budget discussions for taxes payable in 1999, the City Council will be
asked to eliminate the 1999 levy for this equipment certificate due to the
planned pre-payment of the certificate with electric revenues. All future
scheduled levies are planned to be eliminated as the Municipal Utilities will
make the payments.
Action Requested
The City Council is asked to approve the attached resolution awarding the
sale of $225,000 in General Obligation Equipment Certificates for the
purpose of funding the purchase of a 69 KV transformer.
13065 Orono Parkway · P.O. Box 490 · Elk River, MN 55330 · TDD & Phone: (612) 441-7420 · Fax: (612) 441-7425
CITY OF ELK RIVER
COUNTY OF SHERBURNE
STATE OF MINNESOTA
RESOLUTION 98-
RESOLUTION AWARDING THE SALE OF THE CITY'S $225,000
GENERAL OBLIGATION EQUIPMENT CERTIFICATE OF 1998;
FIXING ITS FORM AND SPECIFICATIONS;
DIRECTING ITS EXECUTION AND DELIVERY;
AND PROVIDING FOR ITS PAYMENT
BE IT RESOLVED by the City Council (The "Council") of the City of Elk River,
Minnesota (the "City"), as follows:
1. It is hereby determined:
(a)
It is necessary and expedient to issue the City's $225,000 General
Obligation Equipment Certificate of 1998 (the "Certificate") pursuant
to Minnesota Statutes, Section 412.301, to finance the costs of the
acquisition of the following item of capital equipment for the City's
Municipal Utilities Commission (hereinafter referred to as the
"Equipment"): a 69 KV transformer for the municipal electric utility.
(b)
The Equipment has an expected useful life at least as long as the final
maturity of the Certificate, and the $225,000 amount of the Certificate
does not exceed 0.25% of the market value of the taxable property in
the City.
(c)
The City is authorized pursuant to Minnesota Statutes, Section 475.60,
Subdivision 2(2), to negotiate the sale of the Certificate without public
notice and sale because the $225,000 principal amount of the
Certificate, when combined with any amounts of other obligations
which the City has negotiated and sold without public sale pursuant to
said Subdivision within the last 12 months, does not exceed $1,200,000.
2. The offer of First National Bank of Elk River, in Elk River, Minnesota (the
"Purchaser"), to purchase the Certificate is hereby accepted, such offer being to purchase
the Certificate at a price of $225,000 par, the Certificate to be subject to the terms and
conditions herein provided.
3. The City shall forthwith issue and sell its $225,000 General Obligation
Equipment Certificate of 1998. The Certificate shall be dated January 6, 1998 (or as soon
372500.1
thereafter as settlement can be arranged with the Purchaser), shall be a single, fully
registered obligation without interest coupons, shall bear interest payable on August 1, 1998,
and semiannually thereafter on each February 1 and August 1, and shall mature and bear
interest as provided in the form of the Certificate set out in paragraph 5 of this Resolution.
Each scheduled principal payment of the Certificate shall be subject to prepayment
in whole or in multiples of $500 at the option of the City at any time upon prior written
notice to the Registered Owner thereof, at par plus accrued interest to date of redemption.
If less than all of the outstanding principal of the Certificate is to be prepaid, the City may
select which principal maturities, or portions thereof, to be prepaid. Interest on the
Certificate shall be calculated on the basis of a 360-day year consisting of 12 months of 30
days each.
4. Both principal of and interest on the Certificate shall be payable by the City
Finance Director, who shall also act as registrar and transfer agent (the "Certificate
Registrar") for the Certificate.
5. The Certificate shall be substantially the following form:
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[Form of Certificate]
No. R-1
$225,000
UNITED STATES OF AMERICA
STATE OF MINNESOTA
COUNTY OF SHERBURNE
CITY OF ELK RIVER
GENERAL OBLIGATION
EQUIPMENT CERTIFICATE OF 1998
KNOW ALL BY THESE PRESENTS that the City of Elk River, Sherburne County,
Minnesota, acknowledges itself to be indebted and, for value received, hereby promises to
pay to First National Bank of Elk River, or its registered assigns (the "Registered Owner"),
the Principal Sum of TWO HUNDRED TWENTY-FIVE THOUSAND DOLLARS
($225,000) on August 1 in the years and principal amounts, respectively, as follows:
Year
Principal Amount
1999 $52,500
2000 55,000
2001 57,500
2002 60,000
or on any earlier date on which the principal amounts of this Certificate may be and shall
have been duly called for prepayment, and to pay interest to the Registered Owner from the
date hereof on the principal amounts hereof until the same are paid at the rate of four and
sixty-eight hundredths percent (4.68%) per annum, interest to maturity payable on August
1, 1998, and on each February 1 and August 1 thereafter (the "Interest Payment Dates").
Interest shall be calculated on the basis of a 360-day year consisting of 12 months of 30 days
each. The City Finance Director will pay the interest due on this Certificate on each
Interest Payment Date by mailing or delivering a check or draft made payable to the person
that was the Registered Owner at the end of the day preceding such Interest Payment Date.
Both principal of and interest on this Certificate are payable in any coin or currency of the
United States of America which on the date of payment is legal tender for public and
private debts. At the time of final payment of all principal of and interest on this
Certificate, the Registered Owner shall surrender this Certificate to the City Finance
Director.
Each scheduled principal payment of this Certificate is subject to prepayment at the
option of the City at any time in whole or in multiples of $500 at par plus accrued interest
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to the date of prepayment, upon prior written notice to the Registered Owner. If less than
all of the outstanding principal of the Certificate is to be prepaid, the City may select which
principal maturities, or portions thereof, to be prepaid.
This Certificate is issued by the City pursuant to and in full conformity with the
Constitution and laws of the State of Minnesota for the purpose of providing funds to
finance costs of acquiring certain capital equipment of the City. This Certificate constitutes
a general obligation of the City, and to provide moneys for the prompt and full payment of
the principal hereof and the interest thereon, as the same become due, the full faith and
credit and taxing powers of the City have been and are hereby irrevocably pledged.
This Certificate may be assigned but upon such assignment the assignor shall
promptly give written notice thereof to the City at the office of the City Finance Director,
and the assignee shall surrender this Certificate to the City Finance Director either in
exchange for a new fully registered Certificate or for transfer of this Certificate on the
registration records. Each such assignee shall take this Certificate subject to this condition.
The City shall treat the Registered Owner as the absolute owner of this Certificate for
purposes of paying the principal of and interest on this Certificate and for all other purposes
whatsoever.
This Certificate has been designated by the City as a "qualified tax-exempt obligation"
for purposes of Section 265(b)(3) of the Internal Revenue Code of 1986, as amended.
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 have
happened, and to be performed precedent to and in the issuance of this Certificate have
been done, have happened, and have been performed in regular and due form, time, and
manner as required by law; and that this Certificate, together with all other indebtedness of
the City outstanding on the date hereof, does not cause the indebtedness of the City to
exceed any constitutional or statutory limitation thereon.
IN WITNESS WHEREOF, the City of Elk River, Sherburne County, Minnesota, by
its City Council, has caused this Certificate to be executed by the manual signatures of its
Mayor and City Administrator; has caused the official seal of the City to be impressed upon
this Certificate; and has caused this Certificate to be dated ., 1998.
City Administrator
Mayor
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CERTIFICATE OF REGISTRATION
It is hereby certified that the foregoing Certificate was as of the latest date specified
below registered in the name of the last Registered Owner noted below and that, at the
request of said Registered Owner of this Certificate, the undersigned City Finance Director
has as of said applicable date registered the Certificate as to principal and interest in the
name of such Registered Owner, as indicated in the registration blank below, on the books
kept by the undersigned for such purposes.
NAME OF
REGISTERED OWNER
DATE OF
REGISTRATION
SIGNATURE OF CITY
FINANCE DIRECTOR
First National Bank
of Elk River
., 1998
(End of Form of Certificate)
372500.1 5
6. The City Finance Director shall obtain a copy of the proposed approving legal opinion
of bond counsel for the Certificate, Briggs and Morgan, St. Paul, Minnesota, and shall cause
such opinion to be filed in the offices of the City.
7. The Certificate shall be executed on behalf of the City by the manual signatures of
the Mayor and the City Administrator and shall be duly registered by the manual signature
of the City Finance Director as Certificate Registrar. The official seal of the City shall be
impressed upon the Certificate. The Certificate, when fully executed and sealed, shall be
delivered by the City Finance Director to the Purchaser upon receipt of the purchase price
thereof, and the Purchaser shall not be obligated to see to the proper application thereof.
8. The proceeds of the Certificate shall be deposited in and expended from a
separate capital account or subaccount of the City to provide financing for the Equipment.
The City Finance Director shall establish and maintain a separate debt service account or
subaccount (the "Debt Service Account") for the payment of the Certificate. The Debt
Service Account shall be maintained to pay the debt service on the Certificate and any
additional obligations of the City which may hereafter be made payable therefrom.
9. The Debt Service Account shall be held in trust by the City for the benefit of
the Registered Owner from time to time of the Certificate, as hereinafter provided. Until
the principal of and interest on the Certificate are paid, or until the Certificate is otherwise
discharged as hereinafter provided, there shall be credited to and maintained in the Debt
Service Account (1) first, the proceeds of the general ad valorem taxes hereinafter or
hereafter levied by the City for the purpose of paying the principal of and interest on the
Certificate; (2) second, the funds to be provided to the City from the Elk River Municipal
Utilities Commission to pay the debt service in the Certificate; and (3) third, any other funds
which are properly available and are appropriated by the Council to the Debt Service
Account. The aforesaid funds, when deposited in the Debt Service Account, shall be used
only and exclusively for, and are hereby pledged to, the payment of the principal of and
interest on the Certificate, when due, and such other obligations of the City as may be made
payable therefrom. If any payment of principal or interest shall become due when there are
not sufficient funds in the Debt Service Account to pay the same, the City Finance Director
shall pay such principal or interest from the general fund or other available fund of the City,
and such fund shall be reimbursed for such advances from the proceeds of the ad valorem
taxes levied for such purpose, when collected.
10. The full faith and credit and taxing powers of the City are hereby pledged to the
payment of the principal of and interest on the Certificate, and in the event of any current
or anticipated deficiency of funds in the Debt Service Account of amounts needed to make
any such payment, when due, the City Council shall levy ad valorem taxes on all taxable
property in the City in the amount of such deficiency.
372.500.1 6
11. To provide moneys for payment of the principal of and interest on the Certificate
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:
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Year of Tax Year of Tax
Levy_ Collection Amount
1998 1999 $61,801.50
1999 2000 61,786.00
2000 2001 123,057.50
The foregoing tax levies shall be irrepealable so long as the Certificate 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.
12. It is hereby determined that the funds available to the Debt Service Account
pursuant to this Resolution (including from the foregoing ad valorem tax levies and
including the available capitalized interest provided to the City by the Elk River
Municipal Utilities Commission for the first two interest payments on the Certificate) will
be in amounts not less than 5% in excess of the amount needed to meet, when due, the
principal of and interest on the Certificate. The City Finance Director is directed to file
a certified copy of this Resolution with the County Auditor of Sherburne County and to
obtain the certificate of the County Auditor required by Minnesota Statutes, Section
475.63.
13. The officers of the City are hereby authorized and directed to prepare and
furnish upon request to the Purchaser and to the attorneys approving the Certificate,
certified copies of proceedings and records of the City relating to the Certificate and to
the financial condition and affairs of the City, and to furnish such other certificates,
affidavits, and transcripts as may be required to show facts within their knowledge or as
shown by the books and records in their custody and under their control relating to the
validity and marketability of the Certificate, and such instruments, including any
heretofore furnished, shall be deemed representations of the City as to the facts stated
therein.
14. The City covenants and agrees with the Registered Owner from time to time
of the Certificate that the City will not take or permit to be taken by any of its officers,
employees, or agents any action which would cause the interest on the Certificate to
become generally subject to taxation under the Internal Revenue Code of 1986, as
amended (the "Code"), and regulations issued thereunder, as now existing or as hereafter
amended or proposed and in effect at the time of such action, and that the City will take,
or it will cause to be taken, all affirmative actions within its power which may be
necessary to insure that such interest will not become subject to income taxation under
the Code.
372500.1 8
15. Tax-Exempt Status of the Bonds; Rebate. The City shall comply with
requirements necessary under the Code to establish and maintain the exclusion from
gross income under Section 103 of the Code of the interest on the Certificate, including
without limitation (1) requirements relating to temporary periods for investments, (2)
limitations on amounts invested at a yield greater than the yield on the Certificate, and
(3) the rebate of excess investment earnings to the United States if the Certificate
(together with other obligations reasonably expected to be issued and outstanding at one
time in this calendar year) exceed the small-issuer exception amount of $5,000,000, or do
not otherwise qualify for available exceptions. For purposes of qualifying for the small-
issuer exception to the federal arbitrage rebate requirements, the City hereby finds,
determines and declares that (1) the Certificate is issued by a governmental unit with
general taxing powers, (2) the Certificate is not a private activity bond, (3) ninety-five
percent (95%) or more of the net proceeds of the Certificate are to be used for local
governmental activities of the City (or of a governmental unit the jurisdiction of which is
entirely within the jurisdiction of the City), and (4) the aggregate face amount of all
tax-exempt bonds (other than private activity bonds) issued by the City (and all entities
subordinate to, or treated as one issuer with, the City) during the 1998 calendar year is
not reasonably expected to exceed $5,000,000, all within the meaning of Section
148(f)(4)(D) of the Code.
16. The City hereby designates the Certificate as a "qualified tax-exempt
obligation" within the meaning of Section 265(b)(3) of the Code and represents that:
(a) the reasonably anticipated amount of tax-exempt obligations (other than
private activity bonds, treating qualified 501(c)(3) bonds as not being private activity
bonds) which will be issued by the City (and all entities subordinate to, or treated as one
issuer with, the City) during calendar year 1998 will not exceed $10,000,000; and
(b) not more than $10,000,000 of obligations issued or to be issued by the City
during calendar year 1998 have been designated for purposes of Section 265(b)(3) of the
Code.
The City shall use its best efforts to comply with any federal procedural requirements
which may apply in order to effectuate the designation made by this paragraph.
17. When any obligation of the Certificate has been discharged as provided in this
paragraph, all pledges, covenants and other rights granted by this Resolution to the
registered owner of the Certificate (with respect to the obligation thereof so defeased)
shall, to the extent permitted by law, cease. The City may at any time discharge any or
all of such obligation(s) with respect to the Certificate, subject to the provisions of law
now or hereafter authorizing or regulating such action, by depositing irrevocably in
escrow, with a suitable institution qualified by law as an escrow agent for this purpose,
372500.1 9
cash or securities which are backed by the full faith and credit of the United States of
America, bearing interest payable at such times and at such rates and maturing on such
dates and in such amounts as shall be required and sufficient, subject to sale and/or
reinvestment in like securities, to pay said obligation(s), which may include any interest
payment on such Certificate and/or principal amount due thereon at a stated maturity (or
if irrevocable provision shall have been made for permitted prior redemption of such
principal amount, at such earlier redemption date).
18. With respect to the Equipment, the City has complied and will continue to
comply with the "Reimbursement Regulations" provided in United States Treasury
Regulations Section 1.150-2. In particular, except where the following may not be
required by said Regulations (e.g., with respect to certain "preliminary expenditures"), to
the extent that any of the proceeds of the Certificate will be used to reimburse the City
for a cost of the Equipment theretofore paid and temporarily financed by the City out of
other City funds, prior to the initial payment thereof (or within applicable time limits
thereafter) the City has made or will have made a duly qualifying statement of its official
intent to bond for such costs; otherwise, the proceeds of the Certificate are to be used
for initial payment, and not for such reimbursement, of costs of the Equipment.
19. The Council hereby finds that the Certificate is exempt from continuing
disclosure requirements of Rule 15c2-12 of the Securities and Exchange Commission
because the Certificate is issued in the aggregate principal amount of less than
$1,000,000. Consequently, the City is not covenanting to provide and will not provide
annual financial information, notices of certain material events or any other disclosure or
information which would otherwise be required by that Rule.
Adopted by the Elk River City Council on January 5, 1998.
372500.1 10
CERTIFICATION
I, the undersigned City Clerk of the City of Elk River, Minnesota, do hereby certify
the following:
The foregoing is true and correct copy of a Resolution on file and of record in the
offices of the City, which Resolution relates to the issuance by the City of its $225,000
General Obligation Equipment Certificate of 1998. Said Resolution was duly adopted by
the Elk River City Council at a regular or special meeting of the Council held on January
5, 1998. Said meeting was duly called and regularly held and was open to the public and
was held at the place at which meetings of the Council are regularly held, a quorum of
the Council being present and acting throughout. Councilmember
moved the adoption of the Resolution, which motion was seconded by Councilmember
A vote being taken on the motion, the following
members of the Council voted in favor of the Resolution:
and the following voted against the same:
Whereupon said Resolution was declared duly passed and adopted. The Resolution is in
full force and effect and no action has been taken by the Council which would in any way
alter or amend the Resolution.
WITNESS MY HAND officially as the City Clerk of the City of Elk River,
Minnesota, this __ day of January, 1998.
(SEAL)
City Clerk
City of Elk River, Minnesota
372500.1