6.2. SR 02-22-2005
Item 6.2.
MEMORANDUM
TO: Mayor and City Council
FROM: Lori Johnson, Director of Finance and Administrative Services
DATE: February 22, 2005
SUBJECT: Public Hearing on a Proposal for Private School Facility for the
Church of St. Andrew for the St. Andrew's School
A public hearing has been scheduled for Tuesday to discuss the Church of St. Andrew's
request for the city to flllance up to $1.5 million in tax exempt bonds for the flllancing of the
non-religious portions of the renovation, equipping of, and construction of additions to the
St. Andrew's school. Since the time that the public hearing was scheduled, St. Andrew's has
approached staff requesting that the tax exempt fInancing be increased from $1.5 million to
$2.5 million. Because the requested increase is in excess of ten percent of the original
request, the increase needs Council approval.
As you know, one of the city's main concerns when issuing tax exempt bonds for other
entities is making sure the city will still meet the bank qualifIed status by issuing less than ten
million dollars in debt. In 2005 the city is issuing several bonds including flllancing for
Westbound Liquor, the 2005 Street Rehabilitation Project, and the annual equipment
certifIcates. These issues will total less than $3.5 million, leaving room for $6.5 million of
additional flllancing under the bank qualifIed limit. Bryan Adams has stated that Elk River
Municipal Utilities will not be requesting flllancing for any projects or equipment in 2005. At
this time I am not aware of any other improvement projects or development projects that
would require city flllancing; therefore, increasing the amount available to St. Andrew's to
$2.5 million should not affect the city's bank qualifIed status. However, as in the past, the
agreement between the city and the Church of St. Andrew will be written such that if it does,
the church will be responsible for the additional interest cost paid by the city because of loss
of bank qualifIed status.
If the Council agrees to increase the bond to $2.5 million, the attached resolut.on calling for
a new public hearing on the increased amount needs to be approved. Representatives of St.
Andrew's have requested that the hearing scheduled for February 22,2005, take place even if
the Council agrees to increase the flllancing amount and a second public hearing is called.
Mr. Tom Kaempffer, Parish Business Administrator, will be at the public hearing on
February 22,2005, to address any questions from the Council or the public regarding this
issue.
Action Requested
The City Council must hold a public hearing for the initial request to issue $1.5 million in tax
exempt bonds for the Church of St. Andrew. Second, the Council is asked to consider the
Church of St. Andrew's request to increase the fmancing to $2.5 million. If the Council
agrees to the increase, the attached resolution scheduling a second public hearing for March
21,2005, needs to be approved.
NOTICE OF PUBLIC HEARING
ON A PROPOSAL FOR A COMMERCIAL
FACILITIES DEVELOPMENT PROJECT
Notice is hereby given that the City Council of the City of Elk River, Minnesota (the
"City"), will meet at the Council Chambers of City Hall, 13065 Orono Parkway in the City at 6:30
p.m. on Monday, March 21, 2005, to consider the proposal of The Church of St. Andrew, a
Minnesota nonprofit religious corporation (the "Borrower"), that the City allow the financing of the
non-religious portions of the renovation and equipping of, and construction of additions to, a
school for kindergarten through 6th grade known as St. Andrew School, owned and operated by the
Borrower and located at 428 Irving Avenue in the City (the "Project") through the issuance of
revenue bonds, the proceeds of which will be loaned to the Borrower to pay a portion of the costs
of the Project and will be repaid by the Borrower.
The maximum aggregate estimated principal amount of bonds or other obligations
of the City to be issued to finance the Project is $2,500,000.
The bonds or other obligations if and when issued will not constitute a charge, lien
or encumbrance upon any property of the City and such bonds or obligations will not be a charge
against the City's general credit or taxing powers but will be payable from sums to be paid by the
Borrower pursuant to a revenue agreement.
A draft copy of the proposed application to the Commissioner of the Department of
Employment and Economic Development, State of Minnesota, for approval of the projects,
together with all attachments and exhibits thereto, is available for public inspection from 8:00 a.m.
to 4:30 p.m., Monday through Friday, at the City Hall in the City.
Comments concerning these applications may be presented at the public hearing or
flied with the City Clerk until 4:30 p.m. on the day of the hearing. Ea.ch response will be considered
before any formal action is taken by the City Council. If there are questions concerning these
applications call the City Clerk at (763) 635-1000.
Joan Schmidt, City Clerk
Dated this
day of
,2005.
CITY OF ELK RIVER
RESOLUTION 05-_
A RESOLUTION CALLING FOR A PUBLIC HEARING
ON A PROPOSAL FOR A PRIVATE SCHOOL FACILITY PROJECT
PURSUANT TO MINNESOTA LAW, AND AUTHORIZING
PREPARATION AND PUBLICATION OF A NOTICE OF THE HEARING
WHEREAS, Minnesota Statutes, Sections 469.152 through 469.165 (the "Act"), gives
municipalities the power to issue revenue bonds for the purpose of the 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; and
WHEREAS, the City Council of the City of Elk River, Minnesota (the "City"), has received
from The Church of St. Andrew, a 501 (c) (3) non-profit Minnesota corporation (the "Borrower"), a
proposal that the City assist in financing the non-religious portion of a school project hereinafter
described, through the issuance of its private school facility revenue bonds (which may be in the
form of a single debt instrument) (the "Bonds") pursuant to the Act; and
WHEREAS, before proceeding with consideration of the request of the Borrower it is
necessary for the City to hold a public hearing on the proposal pursuant to Section 469.154,
Subdivision 4, of the Act; and
WHEREAS, Briggs and Morgan, Professional Association, Minneapolis and St. Paul,
Minnesota, acting as bond counsel ("Briggs") prepared, at the direction of City staff, a notice of
public hearing describing the general nature of the proposal and an estimate of the principal amount
of Bonds to be issued to finance the proposal in the form hereto attached.
NOW, THEREFORE, BE IT RESOLVED, by the City Council of the City of Elk River,
Minnesota, as follows:
1. A second public hearing on the proposal of the Borrower with an increased
estimated principal amount of bonds will be held at the time and place set forth in
the notice of public hearing hereto attached.
2. A draft copy of the proposed application to the Commissioner of the Department of
Employment and Economic Development, State of Minnesota, for approval of the
project, together with proposed forms of all attachments and exhibits thereto, shall
be placed on fue in the office of the City Administrator upon publication of the
notice of public hearing.
3. The City Administrator is hereby authorized and directed to cause the notice of the
public hearing to be published once in the official newspaper of the City, a
newspaper of general circulation available in the City, not less than 14 days nor more
S :\Resolutions\2005 Resolutions\Unapproved\StAndrewResFEb22 .DOC
than 30 days prior to the date fIxed for the hearing, substantially in the form of the
attached notice of public hearing.
Adopted this 22nd day of February, 2005, by the City Council of the City of Elk River, Minnesota.
Stephanie Klinzing, Mayor
ATTEST:
Joan Schmidt, City Clerk
S :\Resolutions\2005 Resolutions\Unapproved\StAndrewResFEb22.DOC
Hardoa,t 4. J
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RESOLUTION NO.
RESOLUTION GIVING PRELIMINARY APPROVAL TO A PROJECT
PURSUANT TO MINNESOTASTATUTES, SECTION 469.154,
AND AUTHORIZING THE SUBMISSION OF AN APPLICATION TO THE
MINNESOTA DEPARTMENT OF EMPLOYMENT AND ECONOMIC DEVELOPMENT
AND THE PREPARATION OF NECESSARY DOCUMENTS
(ST. ANDREW SCHOOL PROJECT)
WHEREAS,
(a) The purpose of Minnesota Statutes, Sections 469.152 to 469.165 relating to
municipal industrial development (the "Act") as found and determined by the legislature is to
promote the welfare of 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;
(b) Factors necessitating the active promotion and development of economically
sound industry and commerce are the increasing concentration of population in the metropolitan
areas and the rapidly rising increase in the amount and cost of governmental services required to
meet the needs of the increased population and the need for development of land use which will
provide an adequate tax base to finance these increased costs and access to employment
opportunities for such population;
(c) The City Council of the City of Elk River (the "City") received a proposal
from The Church of S1. Andrew, a nonprofit religious corporation (the "Borrower") that the City
undertake to finance a Project hereinafter described, through the issuance of revenue bonds
(hereinafter the "Bonds" or the" Revenue Bonds") pursuant to the Act;
(d) The City desires to facilitate the selective development of the community and
surrounding area, retain and improve the tax base in the City, and help to provide the range of
services and employment opportunities required by the population; and the Project will assisfthe
City in achieving those objectives. The Project will help to increase assessed valuation in the
City and help maintain a positive relationship between assessed valuation and debt and enhance
the image and reputation of the community;
(e) The Project to be financed by the Bonds is (i) renovation, and constructing
additions to, the S1. Andrew School located at 428 Irving Avenue in the City and (ii) the
acquisition and installation of equipment therein (the "Project"). The Project is expected to
create 1.4 additional new full-time equivalent jobs in addition to the existing 26 jobs;
(f) The City has been advised by representatives of Borrower that conventional,
commercial financing to pay the capital cost of the Project is available only on a limited basis
and at such high costs of borrowing that the economic feasibility of operating the Project would
be significantly reduced;
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(g) 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;
(h) A public hearing on the Project was held on February 22, 2005, pursuant to
published notice as required by the Act and Section 147(f) ofthe Internal Revenue Code of 1986,
as amended.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Elk River,
Minnesota, as follows:
1. The Council hereby indicates its preliminary intent to undertake the Project, and
additional financing therefore, pursuant to the Act, and pursuant to a revenue agreement between
the City and Borrower upon such terms and conditions with provisions for revision from time to
time as necessary, so as to produce income and revenues sufficient to pay, when due, the
principal of and interest on the Bonds in the total principal amount of up to approximately
$1,500,000 to be issued pursuant to the Act to fmance or refinance a portion of the costs of the
construction and installation of the Project.
2. On the basis of information available to this Council it appears, and the Council
hereby finds, that the Project constitutes properties, real and personal, used or useful in
connection with one or more revenue producing enterprises within the meaning of Subdivision
2(b) of Section 469.153 of the Act; that the Project furthers the purposes stated in Section
469.152; that the availability ofthe financing under the Act and willingness of the City to furnish
such financing will be a substantial inducement to Borrower to undertake the Project, and that
the effect of the Project, if undertaken, will be to encourage the development of economically
sound industry and commerce, to assist in the prevention of the emergence of blighted and
marginal land, to help prevent chronic unemployment, to help the surrounding area retain and
improve the tax base and to provide the range of service and employment opportunities required
by the population, to help prevent the movement of talented and educated persons out of the state
and to areas within the State where their services may not be as effectively used, to promote
more intensive development and use of land within the City and surrounding communities and
eventually to increase the tax base of the community.
3. The Project is hereby given preliminary approval by the City subject to final
approval by this Council, Borrower, and the purchaser of the Bonds as to the ultimate details of
the financing of the Project.
4. The Mayor and staff of the City are hereby authorized and directed to submit an
application for approval of a bond project to the Minnesota Department of Employment and
Economic Development for the Project.
5. The Borrower has agreed and it is hereby determined that any and all costs
incurred by the City in connection with the financing ofthe Project, including legal fees, whether
or not the Project is carried to completion; will be paid by the Borrower.
6. Briggs and Morgan, Professional Association, acting as bond counsel, is
authorized to assist in the preparation and review of necessary documents relating to the Project,
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to consult with the City Attorney, the Borrower and the purchaser of the Bonds as to the
maturities, interest rates and other terms and provisions of the Bonds and as to the covenants and
other provisions. of the necessary documents and to submit such documents to the Council for
final approval.
7. Nothing in this resolution or in the documents prepared pursuant hereto shall
authorize the expenditure of any municipal funds on the Project other than the revenues derived
from the Project or otherwise granted to the City for this purpose. The Bonds shall not constitute
a charge, lien or encumbrance, legal or equitable, upon any property or funds of the City except
the revenue and proceeds pledged to the payment thereof, nor shall the City be subject to any
liability thereon. The holder of the Bonds shall never have the right to compel any exercise of
the taxing power of the City to pay the outstanding principal on the Bonds or the interest thereon,
or to enforce payment thereof against any property of the City. The Bonds shall recite in
substance that the Bonds including interest thereon, are payable solely from the revenue and
proceeds pledged to the payment thereof. The Bonds shall not constitute a debt of the City
within the meaning of any constitutional or statutory limitation.
8. In anticipation ofthe issuance ofthe Bonds to finance a portion of the Project, and
in order that completion of the Project will not be unduly delayed when approved, Borrower is
hereby authorized to make such expenditures and advances toward payment of that portion of the
costs of the Project as Borrower considers necessary, including the use of interim, short-term
financing, subject to reimbursement from the proceeds of the Bonds if and when delivered but
otherwise without liability on the part of the City.
9. This resolution shall take effect immediately upon adoption.
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STATE OF MINNESOTA
COUNTY OF SHERBURNE
CITY OF ELK RIVER
I, the undersigned, being the duly qualified and acting Clerk of the City of ,
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 a resolution giving
preliminary approval to an industrial development project.
WITNESS my hand this _ day of February, 2005.
Clerk
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