4.1. SR 12-12-2011~l REQUEST FOR ACTION
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River
TO ITEM NUMBER
Ma or and Ci Council 4.1.
AGENDA SECTION MEETING DATE PREPARED BY
Consent December 12, 2011 Tim Simon, Finance Director
ITEM DESCRIPTION REVIEWED By
Adopt a Resolution Approving Consent to a Merger of the Cal Portner, Ci Administrator
Young Men's Christian Association of Metropolitan REVIEWED BY
Minneapolis and Young Men's Christian Association of the
Greater Twin Cities
ACTION REQUESTED
The City Council is asked to adopt a resolution approving consent to merger of the Young Men's
Christian Association of Metropolitan Minneapolis YMCA and Young Men's Christian Association of the
Greater Twin Cities
BACKGROUND/DISCUSSION
Earlier this year, the YMCA announced a merger of the Young Men's Christian Association of
Metropolitan Minneapolis and the YMCA of Greater St. Paul. These two entities are planning to create a
single entity called Young Men's Christian Association of the Greater Twin Cities (Y-GTC). As you
recall, the EDA issued bonds to finance construction of the YMCA facility in Elk River by issuing bonds
in the amount of $12,000,000. Since we have a lease agreement with the YMCA -Minneapolis, we are
consenting to their merger into Y-GTC. The bonds are secured by the full faith and credit of the city.
The EDA has a lease agreement in which the YMCA pays, as "basic rent", one-third of the debt service
on the bonds.
The EDA will review the consent approval on December 12, 2011, at the regular EDA meeting. Since
the bonds are secured by the full faith and credit of the city, the City Council should consider the
attached resolution.
As part of the lease agreement, the EDA must consent to the merger so long as certain conditions were
met. Steve Bubul from Kennedy and Graven has attached a memo outlining the conditions. Mr. Bubul
represented the EDA\city on the original lease. In addition, Mr. Bubul has reviewed all documents and
sees no issue with the consent requested by the YMCA. Therefore, staff recommends approval of the
consent.
FINANCIAL IMPACT
All obligations will remain the same with the merger.
ATTACHMENTS
Resolution Approving Consent to Merger of the Young Men's Christian Association of
Metropolitan Minneapolis and Young Men's Christian Association of the Greater (Twin
Cities)
Memo from Stephen Bubul, Kennedy & Graven
ACt1011 Motion by Second by Vote
11/EIE1 IT
N:\Public Bodies\City Council\Council RCA\Agenda Packet\12-12-2011\CityYMCAmergerconsent[1].docx ~~ w "~"~ ~~'
CITY OF ELK RIVER
RESOLUTION NO. I I -
RESOLUTION APPROVING CONSENT TO MERGER OF THE YOUNG
MEN'S CHRISTIAN ASSOCIATION OF METROPOLITAN
MINNEAPOLIS AND YOUNG MEN'S CHRISTIAN ASSOCIATION
OF THE GREATER TWIN CITIES
BE IT RESOLVED By the City Council ("Council) of the City of Elk River, Minnesota (the
"City") as follows:
Section 1. Recitals.
1.01. The Young Men's Christian Association of Metropolitan Minneapolis ("YMCA")
entered into a Lease Agreement with the Economic Development Authority for the City of Elk River
(the "Authority') dated as of August 20, 2007 (the "Lease"), under which the Authority leases a
recreational facility (the "Project") to YMCA.
1.02. Construction of the Project was financed in part with proceeds of the Authority's
$10,000,000 General Obligation Bonds, Series 2007 and $2,000,000 General Obligation Bonds, Serves
2008A (together, the `Bonds"), which Bonds are secured in part with lease payments under the Lease.
1.03. The YMCA has proposed to merge with the YMCA of Greater St. Paul to form a single
entity known as the Young Men's Christian Association of the Greater Twin Cities ("Y-GTC").
1.04. YMCA has requested that the Authority and city consent to the merger, such that Y-
GTC assumes all obligations of YMCA under the Lease.
1.05. The Council has reviewed a form of Consent to merger of The Young Men's Christian
Association of Metropolitan Minneapolis and Young Men's Christian Association of the Greater Twin
Cities (the "Consent's and has determined that it is in the best interest of the Authority and the City of
Elk River to approve such Consent.
Section 2. City Approval: Further Proceedings.
2.01. The Consent as presented to the Council is hereby in all respects approved, subject to
approval by the board of commissioners of the Authority, and subject to modifications that do not alter
the substance of the transaction and that are approved by the President and Executive Director of the
Authority, provided that execution of the documents by such officials shall be conclusive evidence of
approval.
2.02. City officials are hereby authorized to execute on behalf of the city any documents
requiring execution by the city in order to carry out the transaction described in the Consent.
Approved by the City Council of the City of Elk River, Minnesota this 12'~ day of December,
2011.
John J. Dietz, Mayor
ATTEST:
Tina Allard, City Clerk
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Kennedy
Graven
CHARTERED
470 US Bank Plaza
200 South Sixth Street
Minneapolis MN 55402
(612) 337-9300 telephone
(612) 337-9310 fax
http://www. kennedy-graven. com
MEMORANDUM
TO: Tim Simon, Finance Director
FROM: Stephen Bubul
DATE: December 7, 2011
RE: YMCA Merger
You asked me to explain the proposed consent by the Economic Development Authority
for the City of Elk River (the "Authority") to merger of the Young Men's Christian
Association of Metropolitan Minneapolis and the YMCA of Greater St. Paul. Those two
entities are planning to merge, creating a single entity called Young Men's Christian
Association of the Greater Twin Cities ("Y-GTC").
As you know, the Authority helped finance construction of the YMCA facility in Elk
River (the "Project") by issuing certain general obligation bonds in 2007 and 2008 in an
aggregate principal amount of $12,000,000 (the "Bonds"), after those Bonds were
approved by the voters. The Authority leases the Project to the YMCA under a Lease
Agreement dated August 20, 2007 (the "Lease").' Under the Lease, the YMCA pays, as
"basic rent," an amount equal to one-third of the debt service on the Bonds.
Under the Lease, the YMCA is permitted to merge with another entity, with the
Authority's consent, so long as these conditions are met:
(1) the resulting entity assumes all the obligations of YMCA under the Lease;
(2) after that merger, the resulting party will not be engaged in any trade or
business other than the operation of the Project (as defined the Lease) as permitted under
the Lease;
~ For commissioners who may not know this, I represented the Authority in the negotiation and drafting of
the Lease.
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(3) the successor lessee provides the Authority with a certificate executed by an
authorized representative of the successor lessee that such new lessee has a net worth and
revenues available to pay Basic Rent that are equal to or greater than the net worth and
revenues of the YMCA, immediately prior to the merger; and
(4) YMCA causes to be delivered to the Authority an opinion of bond counsel to
the effect that such merger shall not cause interest on the Bonds to be included in gross
income for federal tax purposes; and
The YMCA has provided forms of all the materials described in points 1 through 4
above, and the Authority expects to receive fully signed copies of the relevant documents
on or before the effective date of the merger (which is December 31, 2011). The bond
counsel opinion will be provided by Gray, Plant, Mooty, Mooty & Bennett, P.A, which is
a nationally recognized bond counsel (as required under the terms of the Lease).
Therefore, in my view it is appropriate for the Authority's board of commissioners to
approve the consent form requested by the YMCA.
If you or commissioners have any questions on this topic, please let me know.
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