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7.1 SR 08-05-2024city of El �. To City Council Meeting Date August 5, 2024 Item Description Resolution 24-47 Spectrum High School Conduit Bonds Action Requested Request for Action Item Number 7.1 Prepared By Cal Portner, City Administrator Reviewed by Cal Portner Tina Allard Adopt, by motion, Resolution 24-47 consenting to and approving the issuance by the City of Bethel of its Charter School Lease Revenue Obligations and taking other actions with respect thereto. Background/Discussion Spectrum High School is planning an addition and upgrades to their school facilities located at 17823 and 17796 Industrial Circle NW in Elk River. They plan to issue conduit bonds to fund the project. They propose to issue tax-exempt charter school lease revenue bonds through the City of Bethel, MN. Because the facilities are located within Elk River, Spectrum needs host approval for the issuance. The City of Elk River has provided host approval for two previous bond issuances. During the previous approval processes, the city requested a Payment in Lieu of Fees (PILOF) as they were purchasing a property that would be taken off the tax roles. For this action, they are building on existing property, so there is no property tax impact to request a PILOF. Financial Impact There is no financial or other impact on the City of Elk River. Mission/Policy/Goal EII< River Mission Statement Attachments I . Spectrum School Resolution 2. Letter Regarding Host Approval The Elk River Vision A welcoming 6ommuni�, with revolutionary and spirited mourcyidum, exceptional service, and community P� d W E R E D 0d engagement that encourages and inspires prosperityJNPqU 159 CITY OF ELK RIVER, MINNESOTA RESOLUTION NO. 24-47 RESOLUTION CONSENTING TO AND APPROVING THE ISSUANCE BY THE CITY OF BETHEL OF ITS CHARTER SCHOOL LEASE REVENUE OBLIGATIONS AND TAKING OTHER ACTIONS WITH RESPECT THERETO WHEREAS, the City of Elk River, Minnesota (the "City") is a statutory city and political subdivision duly organized and existing under the laws of the State of Minnesota; and WHEREAS, pursuant to Minnesota Statutes, Sections 469.152 through 469.1655, as amended (the "Act"), the City is authorized to carry out the public purposes described in the Act by providing for the issuance of revenue bonds to provide funds to finance revenue producing enterprises, whether or not operated for profit; and WHEREAS, Minnesota Statutes, Section 471.656, as amended, authorizes a municipality to issue obligations to finance the acquisition or improvement of property located outside of the corporate boundaries of such municipality if the governing body of the city in which the property is located consents by resolution to the issuance of such obligations; and WHEREAS, Spectrum Building Company (the "Company"), a Minnesota nonprofit corporation and an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the "Code"), has requested that the City of Bethel, Minnesota (the "City of Bethel") issue its revenue bonds, in one or more series, as taxable or tax-exempt obligations (the "Bonds"), in a principal amount not to exceed $10,000,000, and loan the proceeds thereof to the Company to: (i) finance the acquisition, construction, renovation, improvement, and equipping of its existing public charter school campus located at 17823 and 17796 Industrial Circle NW in the City, including but not limited to an approximately 45,000 square foot addition to its existing facility and renovation of and improvements to the existing facility for use as a public charter school for students in grades 6-12 (the "Project"); (ii) finance capitalized interest during the construction of the Project, if necessary; (iii) fund any required reserves; and (iv) pay costs of issuance of the Bonds; and WHEREAS, the Project will be owned by the Company and leased to and operated by Spectrum High School, a Minnesota nonprofit corporation and public charter school (the "School"), pursuant to a lease agreement; and WHEREAS, Section 147(f) of the Code and regulations promulgated thereunder require that prior to the issuance of the Bonds, the City Council of the City (the "City Council") consent to the issuance of the Bonds by the City of Bethel after conducting a public hearing thereon preceded by publication of a notice of public hearing (in the form required by Section 147(f) of the Code and applicable regulations) in a newspaper of general circulation within the City at least seven (7) days prior to the public hearing date; and WHEREAS, a notice of public hearing was published at least seven (7) days before the regularly scheduled meeting of the City Council on the date hereof in the Star News, the official newspaper of and a newspaper of general circulation in the City, with respect to the required public hearing under Section 147(f) of the Code; and BE250-29-964435.v2 Page 106 of 159 WHEREAS, on the date hereof, the City Council conducted a public hearing at which a reasonable opportunity was provided for interested individuals to express their views, both orally and in writing, on the following: (i) consent to the issuance of the Bonds by the City of Bethel pursuant to the requirements of Section 147(f) of the Code and the regulations promulgated thereunder; and (ii) approval of the issuance of the Bonds by the City of Bethel to finance the Project; and NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF ELK RIVER, MINNESOTA, AS FOLLOWS: 1. The City Council finds that it is in the best interest of the City to approve the issuance of the Bonds by the City of Bethel to finance the Project and hereby consents to the issuance of the Bonds by the City of Bethel for the purposes set forth above in an aggregate principal amount not to exceed $10,000,000. 2. The Bonds are to be issued by the City of Bethel pursuant to the Act. The Bonds will constitute special, limited obligations of the City of Bethel secured solely by revenues derived from the operation of the Project and other security provided by the Company and the School, including but not limited to a mortgage on the land and buildings comprising the Project. The Bonds will not constitute a general or moral obligation of the City or the City of Bethel and will not be secured by any taxing powers of the City or the City of Bethel. 3. The Mayor and the City Administrator are hereby authorized and directed to execute and deliver any documents deemed necessary to fulfill the intentions of this resolution. 4. The Mayor and City Administrator and other 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. 5. The Company will, upon demand, reimburse the City for costs paid or incurred by the City in connection with this resolution. This resolution shall be in full force and effect from and after its passage. Approved by the City Council of the City of Elk River, Minnesota this 5th day of August, 2024. ATTEST: City Clerk Mayor BE250-29-964435.v2 2 Page 107 of 159 150 South Fifth Street, Suite 700 Minneapolis, MN 55402 (612) 337-9300 telephone �uY• (612) 337-9310 fax f www.kermedy-graven.com Affirmative Action, Equal Opportunity Employer C H A R T E R E D GINA A. FIORINI Attorney at Law Direct Dial (612) 337-9210 Email: gfiorini(a)kennedy-graven.com July 30, 2024 Cal Portner, City Administrator City of Elk River 13065 Orono Parkway Elk River, MN 55330 Re: Resolution providing host approval for a charter school project located in the City of Elk River Dear Mr. Portner, Spectrum Building Company (the `Borrower" or "Company"), a Minnesota nonprofit corporation and an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the "Code"), is proposing to assist Spectrum High School, a Minnesota nonprofit corporation, an organization described in Section 501(c)(3) of the Code, and a public charter school (the "School'), in financing the acquisition, construction, renovation, improvement, and equipping of its existing public charter school campus (the "Original Facility") located at 17823 and 17796 Industrial Circle NW in the City of Elk River, Minnesota (the "City"), including but not limited to an approximately 45,000 square foot addition to its existing facility and renovation of and improvements to the existing facility for use as a public charter school for students in grades 6-12 (the "Project"). The Project will be owned by the Borrower and leased to and operated by the School. To finance the Project, the Borrower and the School have requested that the City of Bethel, Minnesota (the "City of Bethel") issue one or more series of taxable or tax-exempt charter school lease revenue bonds (the "Series 2024 Bonds") in the approximate principal amount not to exceed $10,000,000 and loan the proceeds thereof to the Borrower. In 2017, the City of Bethel issued its Charter School Lease Revenue Bonds (Spectrum High School Project), Series 2017A and Taxable Series 2017B (collectively, the "Series 2017 Bonds") to: (i) refund certain obligations previously issued by Anoka County, Minnesota, and thereby refinance the Original Facility and another facility owned by the Borrower and leased to and operated by the School located at 11044 Industrial Circle NW in the City, and (11) finance the acquisition of certain land located in the City for use by the School and the renovation of and addition to the Original Facility. The Series 2024 Bonds will be issued as additional bonds on a parity basis with the Series 2017 Bonds under the documents relating to the Series 2017 Bonds. In order for the City of Bethel to issue the Series 2024 Bonds, the City must hold a public hearing and grant "host approval" for the issuance of the Series 2024 Bonds under Minnesota Statutes, Sections 469.152 through 469.1655, as amended, Minnesota Statutes, Section 471.656, as amended, and Section 147(f) the Code and related Treasury Regulations. Enclosed is a resolution for consideration by the City Council on August 5, 2024, following the public hearing, which will provide host approval for the Project and the issuance of the Series 2024 Bonds by the City of Bethel. BE250-29-964449.v2 Page 108 of 159 The Bonds will be issued as conduit revenue obligations of the City of Bethel secured solely by the revenues derived from the loan or other revenue agreements executed by the Borrower and from other security provided by the Borrower. The Bonds will not constitute a general or moral obligation of the City, will not be secured by or payable from any property or assets of the City, and will not be secured by any taxing power of the City. The Bonds will not be subject to any debt limitation imposed on the City and the issuance of the Bonds will not have any adverse impact on the credit rating of the City, even in the event that the Borrower or the School encounters financial difficulties with respect to the Project. The issuance of the Bonds by the City of Bethel will not negatively affect the issuance of any general obligation bonds by the City or their designation as bank qualified for purposes of Section 265(b)(3) of the Code. I will attend the City Council meeting on August 5, 2024, and can answer any questions that may arise during the meeting. Sincerely, Gina Fiorim BE250-29-964449.v2 Page 109 of 159