3.7. SR 06-10-2002Item # 3.7.
MEMORANDUM
TO:
Mayor and City Council
FROM:
Lori Johnson, Finance Director
DATE:
June 10, 2002
SUBJECT:
Consider Resolution Awarding Sale of the City's $500,000
General Obligation Equipment Certificate of 2002; Fixing its
Form and Specifications; Directing its Execution and Delivery;
and Providing for its Payment
The Elk River Municipal Utilities (ERMU) has asked that the city issue equipment certificates
on its behalf to finance electric substation improvements as approved by the Utilities
Commission. ERMU does not have statutory authority to issue debt so, as in the past, the city
will issue the certificate, and ERMU will be responsible for payment of the debt.
The attached resolution states that taxes will be levied for the payment of these equipment
certificates, this is a legal requirement of issuing the certificates. However, these levies will be
cancelled annually as the debt payments will be made with electric utility revenues.
Action Requested
The City Council is asked to approve the attached resolution awarding the sale of the city's
$500,000 General Obligation Equipment Certificate of 2002; fixing its form and
specifications; directing its execution and delivery; and providing for its payment.
s:\council\lori\equipccrtificatc02.doc
CITY OF ELK RIVER
COUNTY OF SHERBURNE
STATE OF MINNESOTA
RESOLUTION 02-
RESOLUTION AWARDING THE SALE OF THE CITY'S $500,000
GENERAL OBLIGATION EQUIPMENT CERTIFICATE OF 2002;
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 $500,000 General
Obligation Equipment Certificate of 2002 (the "Certificate") pursuant to
Minnesota Statutes, Section 412.301, to finance the costs of the City's
acquisition of an electric substation for the City's municipal electric
system and utility (hereinafter referred to as the "Equipment").
(b)
The Equipment has an expected useful life at least as long as the final
maturity of the Certificate, and the $500,000 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 $500,000 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 The 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 $500,000 par, the Certificate to be subject to the terms and conditions herein provided.
3. The City shall forthwith issue and sell its $500,000 General Obligation Equipment
Certificate of 2002. The Certificate shall be dated June 17, 2002 (or as soon thereafter as
settlement can be arranged with the Purchaser), shall be a single, fully registered obligation
without interest coupons, shall bear interest payable on February 1, 2003, and semiannually
thereafter on each August 1 and February 1, and shall mature and bear interest as provided in the
form of the Certificate set out in paragraph 5 of this Resolution.
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The Certificate shall be subject to redemption in whole or in part at the option of the City
at any time, in inverse order of the principal maturities thereof, upon prior written notice to the
Registered Owner thereof, at par plus accrued interest to date of redemption. 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
$500,000
UNITED STATES OF AMERICA
STATE OF MINNESOTA
COUNTY OF SHERBURNE
CITY OF ELK RIVER
GENERAL OBLIGATION
EQUIPMENT CERTIFICATE OF 2002
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
The Bank of Elk River, or its registered assigns (the "Registered Owner"), the Principal Sum of
FIVE HUNDRED THOUSAND DOLLARS ($500,000) on February 1 in the years and principal
amounts, respectively, as follows:
Year
Principal Amount
2004 $125,000
2005 125,000
2006 125,000
2007 125,000
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 ninety
hundredths percent (4.90%) per annum, interest to maturity payable on February 1, 2003, and on
each August 1 and February 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.
This Certificate is subject to prepayment at the option of the City at any time, in inverse
order of the principal maturities hereof, in whole or in part, at par plus accrued interest to the
date of prepayment, upon prior written notice to the Registered Owner.
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
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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 not 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 June 17, 2002.
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
The Bank of Elk River
DATE OF
REGISTRATION
SIGNATURE OF CITY
FINANCE DIRECTOR
June 17, 2002
(End of Form of Certificate)
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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 levied by the City for the purpose
of paying the principal of and interest on the Certificate, including if applicable and necessary
prior tax levies, if any, made for that purpose (and made in anticipation of the issuance of the
Certificate); (2) second, amounts of capitalized interest, if necessary, needed to pay the interest
first coming due on 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.
11. To provide moneys for payment of the principal of and interest on the Certificate
them 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
Levy
Year of Tax Collection
Amount
2002 2003 $ 182,700
2003 2004 147,328
2004 2005 140,897
2005 2006 137,681
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 ad valorem tax levies herein and heretofore made
and other funds appropriated by the council for payment of debt service 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.
Without limitation of the foregoing, the City shall not enter into any lease, use agreement,
management or operation contract or other agreement respecting the Equipment or any portion
thereof which would adversely affect the exemption from federal income tax of the interest on
the Certificate, taking into account and observing the requirements of Revenue Procedure 97-13
of the Internal Revenue Service and any similar or other applicable revenue procedures or
guidelines relating to leases, management contracts and service contracts involving facilities
financed with tax-exempt obligations.
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15. 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. For 2002, the
City does not expect to qualify for the $5,000,000 small-issuer exception to arbitrage rebate.
16. The City is not designating the Certificate as a "qualified tax-exempt obligation"
under Section 265(b)(3) of the Code.
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, 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 June 10, 2002.
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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 $500,000 General
Obligation Equipment Certificate of 2002. Said Resolution was duly adopted by the Elk River
City Council at a regular or special meeting of the Council held on June 10, 2002. 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.
this
WITNESS MY HAND officially as the City Clerk of the City of Elk River, Minnesota,
__ day of June, 2002.
(SEAL)
City Clerk
City of Elk River, Minnesota
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9818.71
JPO -04051
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