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7.3. SR 08-21-2017 Request for Action To Item Number Mayor and Council 7.3 Agenda Section Meeting Date Prepared by Public HearingsAugust 21, 2017Lori Ziemer, Finance Director Item Description Reviewed by Spectrum School Project Host Approval and Cal Portner, City Administrator Agreement for Payment in Lieu of Fees Reviewed by Action Requested  Adopt, by motion, a resolution granting host approval to the issuance of charter school lease revenue bonds under Minnesota Statutes, Sections 469.152 - 469.1655.  Approve, by motion, an agreement for payment in lieu of fees. Background/Discussion On April 17, 2017, the City Council approved a Conditional Use Permit (CUP) for Spectrum High School to establish an institutional use at 17823 Industrial Circle allowing them to purchase and expand its educational opportunities into a third location. Spectrum High School has requested the City of Bethel to provide conduit debt financing on behalf of their project. The issuance of the charter school lease revenue bonds by the City of Bethel does not constitute any obligation of the City of Elk River and are payable solely from revenues pledged by Spectrum High School. Per state and federal law, the governmental entity with jurisdiction over the project site must hold a public hearing and give host 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. 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 $42,462.46 due within 10 days of receiving the property tax exemption from Sherburne County. The funds will be released from escrow once the property tax exemption is received from the county. The amount was determined based on city taxes for the acquired property over a four year period, as indicated in their CUP approval. The fee agreement does not waive any future fees the school might incur from the city. Attachments  Resolution giving host approval and consenting to the issuance of charter school lease revenue bonds (Spectrum Building Company) under Minnesota Statutes, Sections 469.152- 469.1655.  Agreement for payment in lieu of fees. The Elk River Vision A welcoming community with revolutionary and spirited resourcefulness, exceptional service, and community engagement that encourages and inspires prosperity 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 in the City Hall in said City on Monday,August 21,2017, commencing at 6:00 P.M. The following members were present: and the following were absent: Member introduced the following resolution and moved its adoption: Resolution No. 17- Resolution Giving Host Approval and Consenting to the Issuance by the City of Bethel of Charter School Lease Revenue Bonds (Spectrum Building Company) Under Minnesota Statutes, Sections 469.152-469.1655 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. 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 City is a municipality, statutory city, and political subdivision duly organized and existing under the laws of the State of Minnesota. Under the Constitution and laws of the State of Minnesota, particularly Minnesota Statutes, Sections 469.152- 469.1655, as amended (the "Act"), a municipality is authorized to issue revenue bonds to finance or refinance any properties, real or personal, used or useful in connection with a revenue producing enterprise engaged in any business. Under the provisions of the Act, a municipality may enter into an agreement whereby one municipality issues its revenue bonds in behalf of one or more other municipalities. Also, under Minnesota Statutes, Section 471.656, as amended, a municipality may issue obligations to finance or refinance the acquisition or improvement of real property located outside of the corporate boundaries of such municipality if the governing body of the municipality 1 in which the real property is located consents by resolution to the issuance of such obligations by the other municipality. Section 2. Description of the Project. (a) Under the terms of Resolution No. 2012-123 adopted by the Board of Commissioners of Anoka. County, a county and political subdivision of the State of Minnesota (the "Prior Issuer"), on August 28, 2012, and under the provisions of an Indenture of Trust, dated as of December 1, 2012 (the "Prior Indenture"), between the Prior Issuer and Wells Fargo Bank, National Association (the "Prior Trustee"), the Prior Issuer issued its: (i) Charter School Lease Revenue Bonds (Spectrum Building Company), Series 2012A (the "Series 2012A Bonds"), in the original aggregate principal amount of $11,095,000; and (ii) Taxable Charter School Lease Revenue Bonds (Spectrum Building Company), Series 2012B (the "Series 2006B Bonds"), in the original aggregate principal amount of $205,000 (the Series 2012A Bonds and the Series 2012B Bonds are hereinafter referred to collectively as the "Series 2012 Bonds"). The proceeds of the Series 2012 Bonds were loaned to Spectrum Building Company, a Minnesota nonprofit corporation (the "Company"), and were applied by the Company to finance the acquisition and equipping of an existing school facility located at 17796 Industrial Circle Northwest in the City of Elk River of approximately 60,000 square feet and approximately 37 acres for athletic fields located at 10189 181st Avenue NW in the City of Elk River (the "Series 2012 Project"). (b) Under the terms of Resolution No. 2014-43 adopted by the Board of Commissioners of the Prior Issuer on April 22, 2014, and under the provisions of the Prior Indenture and a First Supplemental Indenture of Trust, dated as of June 1, 2014 (the "First Supplemental Indenture"), between the Prior Issuer and the Prior Trustee, the Prior Issuer issued its: (i) Charter School Lease Revenue Bonds (Spectrum Building Company) Series 2014A, in the original aggregate principal amount of$3,880,000; and (ii) Charter School Lease Revenue Bonds (Spectrum Building Company) Series 2014B, in the original aggregate principal amount of $205,000 (the Series 2014A Bonds and the Series 2014B Bonds are hereinafter referred to collectively as the "Series 2014 Bonds"). The proceeds of the Series 2014 Bonds were loaned to the Company and were applied by the Company to finance the acquisition, renovation, and equipping of certain units within a common interest condominium complex located at 11044 Industrial Circle NW in the City of Elk River for use as a sixth grade educational center and gymnasium (the "Series 2014 Project"). (c) The Company has requested that the City of Bethel, Minnesota (the "City of Bethel") issue revenue obligations,in one or more series, as taxable or tax-exempt obligations (the "Bonds"), in an aggregate principal amount not to exceed $27,500,000, for the purposes of, among other things: (i) defeasing, redeeming, and prepaying the outstanding Series 2012 Bonds; (ii) defeasing, redeeming, and prepaying the outstanding Series 2014 Bonds; (iii) financing the acquisition of ten (10) acres of undeveloped land located north of 181st Avenue NW in the City of Elk River adjacent to the existing athletic fields of the Company and the acquisition of four (4) acres of land at 17823 Industrial Circle NW in the City of Elk River on which an existing building is located and the renovation of the existing building and the addition of a gymnasium and field for use as a school building for 7th and 8th grade students (the "Series 2017 Project"); (iv) funding a debt service reserve fund to secure the timely payment of the Bonds; (v) paying a portion of the interest on the Bonds; and (vi) paying a portion of the costs of issuing the Bonds. 2 (d) The Series 2012 Project, the Series 2014 Project, and the Series 2017 Project (collectively, the "Project") will be owned by the Company and leased to and operated by Spectrum High School, a Minnesota nonprofit corporation (the "School"), as a public charter school. (e) 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 City of Bethel, except the Project and the revenues derived from the Project. Such Bonds or obligations shall not be a charge against the general credit or taxing powers of the City or the City of Bethel, but are payable solely from revenues of the Company or security provided by the Company. Section 3. Representations Made by the Company (a) The Company 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 Company has represented to the City that no public official of the City has either a direct or indirect financial interest in the Project or the Bonds, nor will any public official of the City either directly or indirectly benefit financially from the Project or the issuance of the Bonds. Section 4. Public Hearing (a) As required by Section 147(f) of the Internal Revenue Code of 1986, as amended (the "Code"), a Notice of Public Hearing was published in the official newspaper of the City and a newspaper of general circulation in the City (the Star Nea)s) with respect to a public hearing on the proposed issuance of the Bonds and the financing and refinancing of the Project. (b) As required by Section 147(f) of the Code, the City Council of the City has on this date held a public hearing on the issuance of the Bonds by the City of Bethel and on the financing and refinancing of the Project with the proceeds of the Bonds. At the public hearing all persons appearing who desired to speak were heard and any written comments were accepted. Section 5. Host Approval. The City Council of the City hereby consents to the issuance of the Bonds by the City of Bethel and grants host approval with respect to the issuance of the Bonds by the City of Bethel and the financing and refinancing of the Project. Section 6. Approval of PILOF Payments. In connection with the approval granted herein to the issuance of the Bonds, and the anticipated exemption of the Project from property taxes due to the ownership of the Project by the Company and use of the Project by the School as a public charter school, the City Council hereby accepts, as a condition to the consent and approval granted by this Resolution,payment of a fee to the City upon a determination that the property on which the Series 2017 Project is to be located is exempt from real estate taxation. The terms and conditions for payment of such fee are set forth in an Agreement for Payment in Lieu of Fees to be executed by the Company and the City (the "PILOF Agreement") in the form now on file with the City. The PILOF Agreement is hereby approved in the form now on file with the City, 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 the City Clerk of the City are authorized to execute the PILOF Agreement in the name of and on behalf of 3 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 the 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 and delivery of the PILOF Agreement and such other documents and certificates by the City shall be conclusive evidence of the approval of such documents and certificates in accordance with the terms hereof. Section 7. Certified Proceedings. The Council members, officers, employees, and agents of the City are hereby authorized and directed to prepare and furnish to bond counsel and the original purchaser of the Bonds certified copies of all proceedings and records of the City relating to the approval of the issuance of the Bonds,including a certification of this resolution. John J. Dietz,Mayor ATTEST: Tina Allard, City Clerk 4 AGREEMENT 2017-22 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 2017 between the City of Elk River, Minnesota, a Minnesota municipal corporation ("City") and Spectrum Building Company, a Minnesota non-profit corporation ("SBC"). The City and SBC are jointly hereinafter referred to as the "Parties." RECITALS: SBC has requested that the City of Bethel, Minnesota (the "City of Bethel") provide conduit debt financing by issuing 501(c)(3) tax-exempt or taxable charter school lease revenue bonds in an aggregate principal amount not to exceed Twenty Seven Million Five Hundred Thousand and No/100 Dollars ($27,500,000.00) (the "Bonds"). The proceeds from the sale of the Bonds shall be used to (i) defease, redeem, and prepay certain outstanding bonds issued by Anoka County, Minnesota in 2012 to finance the acquisition and equipping of an existing school facility located at 17796 Industrial Circle Northwest in the City of approximately 60,000 square feet, and approximately 37 acres for athletic fields located at 10189 181st Avenue NW in the City; (ii) defease, redeem, and prepay certain outstanding bonds issued by Anoka County, Minnesota in 2014 to finance the acquisition, renovation, and equipping of certain units within a common interest condominium complex located at 11044 Industrial Circle in the City for use as a sixth grade educational center and gymnasium; (iii) finance the acquisition of ten (10) acres of undeveloped land located north of 181st Avenue NW in the City adjacent to the existing athletic fields of SBC and the acquisition of four (4) acres of land at 17823 Industrial Circle NW in the City on which an existing building is located and the renovation of the existing building and the addition of a gymnasium and field for use as a school building for 7th and 8th grade students (the "Series 2017 Project"); (iv) fund a debt service reserve fund to secure the timely payment of the Bonds; (v) pay a portion of the interest on the Bonds; and (vi) pay a portion of the costs of issuing the Bonds. The Series 2017 Project is located on property legally described on Exhibit A attached hereto and incorporated herein(the "Property"). The City has agreed, in accordance with applicable federal and Minnesota law, to give local host approval to permit the Bonds to be issued by the City of Bethel or another issuer in the event that the City of Bethel 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, the SBC shall pay the City $42,462.46 not later than 10 days following a determination by the City that the Property is real estate tax exempt according to Sherburne County records. 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. 505745v2 ELI 85-19 1. TAX EXEMPTION. The Parties agree that the payments due under this Agreement shall be conditioned upon the designation of the Property as exempt from real estate taxation pursuant to Minnesota Statutes, Section 272.02, Subd. 42. 2. PAYMENT BY SBC TO THE CITY. As consideration to the City for providing host approval as permitted by Minnesota law, SBC shall pay the City the amount of $42,462.46 not later than 10 business days following a determination by the City that the Property is real estate tax exempt according to Sherburne County records. In order to provide for such payment, upon the issuance of the Bonds, SBC shall deposit $42,462.46 with the trustee for the Bonds with instructions to hold said amount until the trustee receives notification from the City that such payment is due in accordance with this Agreement. 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 any new address to the other party within 10 days of such 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. 7. 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. 2 505745v2 ELI 85-19 IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the day and year first above written. ADDRESS: CITY OF ELK RIVER, MINNESOTA a Minnesota municipal corporation 13065 Orono Parkway Elk River, Minnesota 55330 Phone: 763-635-1000 Fax: 763-635-1090 www.elkrivermn.gov By: Its: Mayor By: Its: City Clerk 505745v2 ELI 85-19 S-1 ADDRESS: SPECTRUM BUILDING COMPANY a Minnesota non-profit corporation 17796 Industrial Circle N.W. Elk River, MN 55330 Phone: 763-241-8703 Fax: 763-633-1380 www.spectirumhighschool.org By: Its: By: Its: S-2 505745v2 ELI 85-19 EXHIBIT A PROPERTY LEGAL DESCRIPTION The real property situated in the City of Elk River, Sherburne County, State of Minnesota, described as follows: 505745v2 ELI 85-19 A-1