7.1 SR 07-16-2012REQUEST FOR ACTION
To ITEM NUMBER
Ma or and Ci Council 7.1
AGENDA SECTION MEETING DATE PREPARED BY
Public Hearin ul 16, 2012 Tim Simon, Finance Director
ITEM DESCRIPTION REVIEWED By
Host Approval Request -Spectrum High School Project Cal Portner, Ci Administrator
REVIEWED BY
ACTION REQUESTED
Adopt resolution giving host approval to the issuance of charter school lease revenue bonds
under Minnesota statutes, sections 469.152 through 469.1651.
Consider approval of payment in lieu of fees agreement.
BACKGROUND/DISCUSSION
At the June 11, 2012, City Council work session, the Council reviewed the request by Spectrum High
School for a Host Approval Agreement.
Spectrum High School currently leases a building at 17796 Industrial Circle NW in Elk River and operates
a 6-12 grade charter school under a Conditional Use Permit.
Under state statute, charter schools cannot own land or facilities, and must form a separate affiliate tax-
exempt entity to own a school building. The school has formed a new tax-exempt entity and is seeking a
partner to issue conduit bonds (not to exceed $11.4 million) on their behalf for acquisition and equipping
of the current building, to purchase another parcel of land, to complete the build-out of the existing
school, and to develop athletic facilities on the new parcel.
Because the city has already approved tax-exempt financing for the public works facility and a refunding
bond in 2012, we are not able to issue the amount of conduit bonds needed without exceeding our $10
million bank-qualified limit. Anoka County has given preliminary approval to issuance of conduit bonds
on their behalf.
Per state and federal law, the governmental entity with jurisdiction over the project site must hold a
public hearing and give approval to the issuance of the bonds even if the bonds are issued by another
issuer. The city, county, and state meet the host jurisdiction requirement. Holding a public hearing as a
host assumes no risk to the city with regard to bonds or die bonduig process.
The attached agreements have been reviewed by the city's bond attorney.
FINANCIAL IMPACT
The School has proposed a lump sum payment in lieu of a fee (PILOF) in the amount of $194,276 due
within 10 days of receiving the property tax exemption from Sherburne County. The funds will be
P~DWERED B~
N:\PubGc Bodies\City Council\Council RCA\Agenda Packet\U7-1G-2012\Hostappro~-alrequest071G.docx ~~ /~ ~, i~~
released from escrow once the property tax exemption is received from the county. The fee agreement
does not waive any future fees the school might incur from the city.
The lease revenue bonds issued would be no obligation of the City of Elk River.
ATTACHMENTS
Resolution Giving Host Approval to the Issuance of Charter School Lease Revenue Bonds
under Minnesota Statutes, Sections 469.152 Through 469.1651 (Spectrum High School
Project)
Payment in Lieu of Fees Agreement
Action Motion by Second by Vote
Follow Up
N:\PubGc Bodies\City Council\Council RCA\Agenda Packet\07-1G-2012\I Iostappro~-alreyuest071G.docs
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 meeting of the City Council of the City
of Elk River, Minnesota, was duly held at the City Hall in said City on Monday, July 16, 2012, at
6:30 P.M.
The following members were present:
and the following were absent:
Member introduced the following resolution and moved its adoption:
RESOLUTION NO.
RESOLUTION GIVING HOST APPROVAL TO THE ISSUANCE
OF CHARTER SCHOOL LEASE REVENUE BONDS UNDER MINNESOTA
STATUTES, SECTIONS 469.152 THROUGH 469.1651
(SPECTRUM HIGH SCHOOL PROJECT)
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.
404390v2 JSB EL185-19
RESOLUTION GIVING HOST APPROVAL TO THE ISSUANCE
OF CHARTER SCHOOL LEASE REVENUE BONDS UNDER MINNESOTA
STATUTES, SECTIONS 469.152 THROUGH 469.1651
(SPECTRUM HIGH SCHOOL PROJECT)
BE IT RESOLVED, by the City Council (the "Council") of the City of Elk River,
Minnesota (the "City") as follows:
Section 1. General Recitals. The purpose of Minnesota Statutes, Sections 469.152
through 469.1651 as amended, (the "Act"), is, among other things, to promote the welfare of the
State of Minnesota (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.
Section 2. Description of the Project.
(a) Spectrum Building Company (the "Borrower"), a Minnesota nonprofit
corporation and organization described in Section 501(c)(3) of the Internal Revenue Code of
1986, as amended (the "Code") has proposed that the County of Anoka, Minnesota (the "Issuer")
issue revenue bonds under the Act, in one or more series, in an aggregate amount not to exceed
$11,400,000 (the "Bonds") to finance (i) the acquisition and equipping of an existing
approximately 60,000 square foot school facility (the "Schoolhouse") located at 17796 Industrial
Circle Northwest in the City, the acquisition of land, and the installation of certain infrastructure
improvements and an athletic field (the "Facility"); (ii) the funding of a debt service reserve
fund; (iii) payment of a portion of the interest on the Bonds; and (iv) payment of the costs of
issuing the Bonds (collectively, the "Project"). The Facility will be owned by the Borrower and
leased to and operated by the Spectrum High School, a Minnesota nonprofit corporation (the
"School").
(b) The City has been advised that the Bonds or other obligations, as and when
issued, will not constitute a charge, lien or encumbrance upon any property of the City or the
Issuer, except the Project and the revenues to be derived from the Project. Such Bonds or
obligations will not be a charge against the general credit or taxing powers of the City or the
Issuer, but is payable from sums to be paid by the Borrower pursuant to a revenue agreement.
Section 3. Recital of Representations Made by the Borrower.
(a) The Borrower has agreed to pay any and all costs incurred by the City in
connection with the issuance of the Bonds, whether or not such issuance is carried to completion.
(b) The Borrower has represented to the City that 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.
Section 4. Public Hearin.
(a) As required by the Act and Section 147(f) of the Code a Notice of Public Hearing
was published in the City's official newspaper and newspaper of general circulation, for a public
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404390v2 JSB EL185-19
hearing on the proposed issuance of the Bonds and the proposal to undertake and finance the
Project.
(b) As required by the Act and Section 147(f) of the Code the City Council has on
this same date held a public hearing on the issuance of the Bonds and the proposal to undertake
and finance the portion of the Project located within the jurisdictional limits of the City, at which
all those appearing who desired to speak were heard and written comments were accepted.
Section 5. Host Ap rp oval. The City Council hereby gives the host approval required
under Section 147(f) of the Code and, pursuant to Minnesota Statutes §471.656, Subd. 2(2), the
City Council hereby consents to the issuance of the Bonds.
Section 6. Approval of PILOF Pam. In connection with the approval granted
herein to the issuance of the Bonds, and the anticipated exemption of the Facility from property
taxes due to the acquisition of the Facility by the Borrower, the City Council hereby accepts, as a
condition to the approval granted by this Resolution, payment of $194,276 in accordance with an
Agreement for Payment in Lieu of Fees to be executed by the Borrower and the City (the
"PILOF Agreement").
Section 7. Authorization to Execute Agreements. The form of the proposed PILOF
Agreement is 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 the City's Bond Counsel prior to the execution of the PILOF Agreement, and the
Mayor and City Clerk of the City are authorized to execute the PILOF Agreement in the name of
and on behalf of the City and such other documents and certificates as the City's Bond Counsel
considers appropriate in connection with the issuance of the Bonds. In the event of the absence
or disability of the Mayor 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 and certificates in accordance with the terms hereof.
Passed and adopted this 16th day of July, 2012.
John J. Dietz, Mayor
ATTEST:
Tina Allard, City Clerk
404390v2 JSB EL185-19
STATE OF MINNESOTA
COUNTY OF SHERBURNE
CITY OF ELK RIVER
I, the undersigned, being the duly qualified and acting Clerk of the City of Elk River,
Minnesota, DO 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 granting host approval to the
issuance of revenue bonds for a project in the City.
WITNESS my hand this 16t~' day of July, 2012.
Tina Allard, City Clerk
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404390v2 JSB EL185-19
AGREEMENT FOR PAYMENT IN LIEU OF FEES
BETWEEN
THE CITY OF ELK RIVER, MINNESOTA
AND
SPECTRUM BUILDING COMPANY
This Agreement for Payment in Lieu of Fees ("Agreement") is made this day of
2012 between the City of Elk River, a Minnesota municipal corporation
("City") and Spectrum Building Company a Minnesota non-profit corporation ("SBC"), City and
SBC are jointly hereinafter referred to as the "Parties."
RECITALS: SBC has requested that the City provide conduit debt financing by issuing a
501 c3 tax-exempt and taxable lease revenue bonds in the amount not to exceed Eleven Million
Four Hundred Thousand and No/100 Dollars ($11,400,000.00) (the "Bonds"). The proceeds
from the sale of the Bonds shall be used for debt financing for the purchase of property and
renovation of a public schoolhouse located at 17796 industrial Circle N.W. (the SBC Project).
The SBC Project is located on property legally described on Exhibit A attached hereto and
incorporated herein.
The City has declined to be the conduit issuer of the Bonds, but instead has agreed, in accord
with applicable Federal and Minnesota law, to give local host approval to permit the Bonds to be
issued by Anoka County, Minnesota or any other issuer in the event that Anoka County declines.
By granting said host approval, the City will not be eligible to receive funds paid to issuers in
these circumstances.
The Parties have agreed that, as consideration for providing host approval, consideration in the
amount of $194,276 shall be paid to the City not later than 10 days following confirmation by
Sherburne County that the property is real estate tax exempt.
Further, Parties agree and acknowledge that the amount to be paid by SBC to the City is fair and
reasonable notwithstanding that Spectrum High School, tenant of the SBC Project (the
"Tenant"), is a public charter school funded by the State of Minnesota.
1. TAx EXEMPTION. The Parties agree that the payments due under this Agreement
shall be conditioned upon the securing by SBC of a real estate property tax exemption
for the property described on Exhibit A.
2. PAYMENT By SBC TO THE CITY. Upon a determination that the property is exempt
from property tax, as consideration for providing the City providing host approval as
permitted by Minnesota law, SBC shall pay the City the amount of $194,276 not later
than ten (10) business days following receipt by SBC of written confirmation by
Sherburne County that the property is exempt from paying real estate taxes. Further,
upon the closing of the sale of the Bonds and from the proceeds received, the trustee
for the Bonds will hold in reserve said amount pending the written confirmation from
Sherburne County. Such payment shall be in addition to any ordinary and usual
charges by the City for land use approvals, building permits and other approvals, if
any, required by the City.
3. DEFAULT. In the event of a default hereunder, the City may enforce this Agreement
and may exercise any and all rights or remedies permitted by law. SBC agrees to pay
all costs of collection, including attorneys' fees, if any payment is not made when
due, whether suit is brought or not.
4. COMMUNICATIONS. All notices and other communications shall be sufficiently given
when delivered by United States mail or in person to the applicable address stated
below or by such other means as shall provide the sender with documentary evidence
of such delivery. The Parties agree to provide notice of new address to the other
party within ten (10) day of address change.
5. INVALIDITY OR UNENFORCEABILITY. If any provision of this Agreement is held
invalid or unenforceable to any extent, the remainder of this Agreement shall be
enforced as permitted by law.
6. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of the Parties
on the subject matter of this agreement and supersedes all prior contracts, agreements,
whether oral or written with respect thereto. Exhibit A attached hereto is specifically
included in this Agreement.
~. ENFORCEABILITY. Each of the Parties represents and warrants that the execution,
delivery and performance of this Agreement (i) has been duly authorized and does not
require any other consent or approval; (ii) does not violate any article, bylaw or
organizational document or any law, rule, regulation, order or decree by which it is
bound; and (iii) will not result in or constitute a default under any indenture, credit
agreement or other agreement or instrument to which any of them is a party.
Each party represents that this Agreement shall constitute the legal, valid and
binding agreement of the Parties enforceable in accordance with its terms.
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the day and
year first above written.
ADDRESS:
13065 Orono Parkway,
Elk River, Minnesota 55330
Phone:763-635-1000
Fax: 763-635-1090
www.ci.elk-river.mn.us
CITY OF ELK RIVER,
a Minnesota municipal corporation
By:
Its: Mayor
By:
Its: City Clerk
ADDRESS:
17796 Industrial Circle N.W.
Elk River, MN 55330
Phone: 763-241-8703
Fax: 763-633-1380
www.spectrumhighschool.org
SPECTRUM BUILDING COMPANY
a Minnesota non-profit corporation
By: _
Its:
By: _
Its:
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EXHIBIT A
PROPERTY LEGAL DESCRIPTION
Lot 1, Block 1, Eagle Ridge Business Park