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6.0. SR 11-25-1996~ty of iver ITEM 6. MEMORANDUM FROM: DATE: SUBJECT: Mayor & City Council Lori Johnson, Asst. City Administrator/ Finance Director November 25, 1996 1996 Equipment Certificates The 1996 budget included equipment certificate expenditures in the amount of $107,950. The 1996 tax levy resolution included a levy of $30,000 for the 1996 equipment certificate. Instead of applying the $30,000 to debt payments on the equipment certificate, the amount was used to pay for a portion of the purchases made in 1996. Therefore, the equipment certificate can be issued in the reduced amount of $81,000. Attached is a Resolution Awarding the Sale of the City's $81,000 General Obligation Equipment Certificate of 1996 Fixing its Form and Specifications, Directing its Execution and Delivery, and Providing for its Payment. The Bank of Elk River has offered to purchase the certificate in an interest rate of 5 percent. Attached are a copy of the resolution and the equipment certificate budget page for your information. Action Requested The City Council is asked to approve the attached resolution awarding the sale of the city's $81,000 general obligation equipment certificate of 1996. councilX96eqptct.doc 13065 Orono Parkway · P.O. Box 490 · Elk River, MN 55330 · (612) 441-7420 · Fax: (612) 441-7425 EQUIPMENT CERTIFICATES - CAPITAL OUTLAY CAPITAL OUTLAY TOTAL CAPITAL OUTLAY: Heavy Machinery Motor Vehicles Other Equipment EQUIPMENT EXPENDITURES BY DEPARTMENT Police Vehicles Park Front Mounted Mower 1993 1994 1995 1996 ACTUAL ACTUAL ADOPTED PROPOSED $109,500 $83,500 $117,300 $107,950 $109,500 $83,500 $117,300 $107,950 EXPENDITURE ANALYSIS $0 76,000 $107,950 76.00~) 76,000 31,950 $107,950 62. CITY OF ELK RIVER COUNTY OF SHERBURNE STATE OF MINNESOTA RESOLUTION 96- RESOLUTION AWARDING THE SALE OF THE CITY'S $81,000 GENERAL OBLIGATION EQUIPMENT CERTIFICATE OF 1996; 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 $81,000 General Obligation Equipment Certificate of 1996 (the "Certificate,,) pursuant to Minnesota Statutes, Section 412.301, to finance the costs of the acquisition of the following items of capital equipment for the City (hereinafter referred to as the "Equipment"): police vehicles and a park tractor. (b) The Equipment, on an average basis, has an expected useful life at least as long as the final maturity of the Certificate, and the $81,000 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 $81,000 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 $81,000 par, the Certificate to be subject to the terms and conditions herein provided. 3. The City shall forthwith issue and sell its $81,000 General Obligation Equipment Certificate of 1996. The Certificate shall be dated November 26, 1996 (or as soon thereafter as 336657.1 settlement can be arranged with the Purchaser), shall be a single, fully registered obligation without interest coupons, shall bear interest payable on August 1, 1997, and semiannually thereafter on each February 1 and August 1, and shall mature and bear interest as provided in the form of the Certificate set out in paragraph 5 of this Resolution. 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. o form: The Certificate shall be substantially the following 336657.1 2 No. R-1 [Form of Certificate] UNITED STATES OF AMERICA STATE OF MINNESOTA COUNTY OF SHERBURNE CITY OF ELK RIVER $81,000 GENERAL OBLIGATION EQUIPMENT. CERTIFICATE OF 1996 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 EIGHTY-ONE THOUSAND DOLLARS ($81,000) on February 1 in the years and principal amounts, respectively, as follows: Year Principal Amount 1998 $20,250 1999 20,250 2000 20,250 2001 20,250 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 five percent (5.00%) per annum, interest to maturity payable on August 1, 1997, and on each February 1 and August 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. 336657.1 3 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 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 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. 336657.1 4 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 November 26, 1996. City Administrator Mayor ~ERTIFICATE 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 , 1996 SIGNATURE OF CITY FINANCE DIRECTOR (End of Form of Certificate) 336657.1 5 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 hereinafter or hereafter levied by the City for the purpose of paying the principal of and interest on the Certificate; (2) second, the ad valorem taxes levied for the Certificate pursuant to Resolution No. 96-81, adopted by the Council on September 9, 1996; 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. 336657.1 6 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 there 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: Year of Tax Year of Tax Levy Collection Amount 1997 1998 $20,739 1998 1999 22,857 1999 2000 21,794 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 foregoing ad valorem tax levies) 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. 336657.1 7 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. 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 (if any) to the United States if and to the extent that the Certificate does not qualify for available exceptions. The City does not expect to qualify for the small issuer exception to the federal arbitrage rebate requirements because it is currently expected that the aggregate face amount of all tax-exempt obligations (other than private activity bonds) issued by the City (and all entities subordinate to, or treated as one issuer with, the City) during the 1996 calendar year will exceed $5,000,000. The City may avail itself of such other exceptions to arbitrage rebate as may be available. 16. The City hereby designates the Certificate as a "qualified tax-exempt obligation" within the meaning of Section 265(b) (3) of the Code and represents that: (a) the reasonably anticipated amount of tax-exempt obligations (other than private activity bonds, treating qualified 501(c) (3) bonds as not being private activity bonds) which will be issued by the City (and all entities subordinate to, or treated as one issuer with, the City) during calendar year 1996 will not exceed $10,000,000; and (b) not more than $10,000,000 of obligations issued or to be issued by the City during calendar year 1996 have been designated for purposes of Section 265(b) (3) of the Code. The City shall use its best efforts to comply with any federal procedural requirements which may apply in order to effectuate the designation made by this paragraph. 336657.1 8 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 November 25, 1996. 336657.1 9 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 $81,000 General Obligation Equipment Certificate of 1996. Said Resolution was duly adopted by the Elk River City Council at a regular or special meeting of the Council held on November 25, 1996. 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. WITNESS MY HAND officially as the City Clerk of the City of Elk River, Minnesota, this 25th day of November, 1996. (SEAL) City Clerk City of Elk River, Minnesota 336657.