6. EDSR 04-12-2010ITEM ~ 6.
/i
cty or
El ,~ REQUEST FOR ACTION
River
To Item Number
Economic Develo ment Authori
Agenda Section Meeting Date Prepared by
Administration Aril 12, 2010 Tim Simon, Finance Director
Item Description Reviewed by
Prepayment and Redemption of the 2002A and
Defeasance
,
2002B lease revenue bonds Reviewed by
Action Requested
The Economic Development Authority is asked to approve a Resolution Providing For The Defeasance,
Prepayment And Redemption Of Certain Outstanding Bonds Of The Elk River Economic Development
Authority, Minnesota, And Authorizing Execution Of Supplemental Indentures And An Escrow
Agreement.
Background/Discussion
In 2002, the Economic Development Authority (EDA) issued lease revenue bonds for the construction
of the public safety building where police and fire services are located (2002A bonds) and the City Hall
expansion where Elk River Municipal Utilities (ERMU) located adjacent to City Hall (2002B bonds). The
City and ERMU make rent payments (debt payments) to cover the principle and interest on the bonds.
The City levies the debt service payments for the 2002A bonds and ERMU makes payments on the
2002B bonds allocated to the water and electric fund.
The City has decided to terminate the Lease purchase agreement and purchase the City Hall Facility and
the Public Safety Facility bonds by refunding the 2002A and 2002B bonds. The City on March 15, 2010
approved the sale of the General Obligation Capital Improvement Plan Bonds, Series 201-0A to refund
the 2002A and 2002B bonds for interest cost savings. These bonds will be advance refunded ahead of
the cross over date in 2013 and will remain with an escrow agent until such time as the old bonds axe
defeased.
In addition, the City bond rating was upgraded to AA+ when we had a rating call on the 2010A bonds.
Financial Impact
EDA - No financial impact since the City previously levied for the 2002A bonds and Elk River
Municipal Utilities paid the principle and interest on the 2002B bonds.
City - A principle and interest reduction of $325,734.03 over the remaining years of the bonds. The true
interest cost on the 2010A bonds are 2.878 percent.
Attachments
• Resolution Providing Fox The Defeasance, Prepayment And Redemption Of Certain Outstanding
Bonds Of The Elk River Economic Development Authority, Minnesota, And Authorizing
Execution Of Supplemental Indentures And An Escrow Agreement.
Action Motion by Second by Vote
Follow Up
Extract of Minutes of Meeting of the
Board of Commissioners of the Elk River Economic
Development Authority, Sherburne County, Minnesota
Pursuant to due call and notice thereof, a regular meeting of the Board of Commissioners of
the Elk River Economic Development Authority, Minnesota, was duly held in the City Hall in the
City of Elk River, on April 12, 2010, commencing on or after 5:30 P.M.
The following members were present:
and the following were absent:
Member introduced the following resolution and moved its adoption:
RESOLUTION NO.
RESOLUTION PROVIDING FOR THE DEFEASANCE, PREPAYMENT AND
REDEMPTION OF CERTAIN OUTSTANDING BONDS
OF THE ELK RIVER ECONOMIC DEVELOPMENT
AUTHORITY, MINNESOTA, AND
AUTHORIZING EXECUTION OF SUPPLEMENTAL
INDENTURES AND AN ESCROW AGREEMENT
BE IT RESOLVED By the Board of Commissioners (the "Board") of the Elk River
Economic Development Authority, Sherburne County, Minnesota (the "Authority") as follows:
Section 1. Background; Findings.
1.01. (a) The Elk River Economic Development Authority, Minnesota (the
"Authority") previously issued its Public Safety Building Lease Revenue Bonds, Series 2002A
(City of Elk River, Minnesota Lease Obligation), dated September 1, 2002 (the "Series 2002A
Bonds"), pursuant to a Mortgage and Security Agreement and Trust Indenture, dated September
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1, 2002, between the Authority and U.S. Bank National Association, as trustee (the "Trustee")
(the " 2002A Indenture") and a resolution adopted by Authority on August 12, 2002 (the "Series
2002A Bond Resolution"). The proceeds of the Series 2002A Bonds were used for construction
and furnishing of a certain public safety facility (the "Safety Facility"). The City currently leases
the Safety Facility pursuant to a Lease Agreement, dated September 1, 2002 (the "Lease
Agreement"), between the Authority, as lessor, and the City, as lessee. The City has determined
to terminate the Lease Agreement and purchase the Safety Facility from the Authority by
refunding the Series 2002A Bonds, which are currently outstanding in the principal amount of
$5,840,000
(b) The Authority also previously issued its City Hall Expansion Revenue Bonds,
Series 20028 (City of Elk River Lease Purchase Obligation), dated September 1, 2002 (the
"Series 20028 Bonds"), pursuant to a Trust Indenture, dated November 1, 1991, as supplemented
by a Supplement to Trust Indenture dated December 1, 1997, and further supplemented by a
Supplement to Trust Indenture dated September 1, 2002, between the Authority and U.S. Bank
National Association (formerly First Trust National Association), as trustee (the "Trustee")
(collectively the "20028 Indenture") and a resolution adopted by Authority on August 12, 2002
(the "Series 20028 Bond Resolution"). The proceeds of the Series 20028 Bonds were used for
the expansion of the City Hall, including related furnishings, equipment and site improvements
(the "City Hall Facility"). The City currently leases the City Facility pursuant to a Lease
Purchase Agreement, dated November 1, 1991, as supplemented by a Supplement to Lease
Purchase Agreement dated December 1, 1997, as further supplemented by a Supplement to Lease
Purchase Agreement dated September 1, 2002 (collectively the "Lease Purchase Agreement"),
between the Authority, as lessor, and the City, as lessee. The City has determined to terminate
the Lease Purchase Agreement and purchase the City Hall Facility from the Authority by
refunding the Series 20028 Bonds, which are currently outstanding in the principal amount of
$1,270,000.
(c) Pursuant to a resolution adopted by the City Council of the City on March 15,
2010, the City has determined to issue its General Obligation Capital Improvement Plan Bonds,
Series 2010A (the "Bonds") in the aggregate principal amount of $7,370,000, and use a portion
of the proceeds of such bonds to finance the acquisition of the Safety Facility and the City Hall
Facility and refund the outstanding Series 2002A Bonds and Series 20028 Bonds issued by the
Authority.
(d) Article X of the 2002A Indenture provides that, following the satisfaction of
certain conditions, the Series 2002A Bonds may be defeased and will no longer be considered
outstanding under the 2002A Indenture. Those conditions include the Authority depositing with
the Trustee cash and/or obligations sufficient to pay and discharge the entire indebtedness on the
Series 2002A Bond, providing the Trustee with an opinion of counsel of bond counsel, and the
providing the Trustee with a certificate of the Authority indicating all conditions precedent to
defeasance are satisfied.
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(e) Article X of the 20028 Indenture provides that, following the satisfaction of
certain conditions, the Series 20028 Bonds may be defeased and will no longer be considered
outstanding under the 20028 Indenture. Those conditions include the Authority depositing with
the Trustee cash and/or obligations sufficient to pay and discharge the entire indebtedness on the
Series 20028 Bonds, providing the Trustee with an opinion of counsel of bond counsel, and the
providing the Trustee with a certificate of the Authority indicating all conditions precedent to
defeasance are satisfied.
(f) It is necessary to amend Article X of both the 2002A Indenture and the 20028
Indenture to .provide for investment of the defeasance escrow account in obligations authorized
pursuant to Minnesota Statutes, Section 475.67, Subd. 8.
(g) The proposed defeasance of the Series 2002A Bonds and the Series 20028 Bonds is
consistent with the covenants made with the holders of the Series 2002A Bonds and the Series
2002E Bonds and results in the reduction of debt service cost to the City. The Authority hereby
consents to the defeasance and prepayment of the Series 2002A Bonds and the Series 20028
Bonds.
Section 2 Escrow; Defeasance.
2.01. To accomplish defeasance of the Series 2002A Bonds and the Series 20028 Bonds,
there is established an Escrow Account (the "Escrow Account") with the Trustee, acting as escrow
agent (the "Escrow Agent") pursuant to an Escrow Agreement, as of April 1, 2010, among the
Authority, the City, and the Escrow Agent.
2.02. On or prior to the date of delivery of the proceeds of the Bonds, the President and
the Secretary are hereby authorized and directed to execute, on behalf of the Authority, the
Escrow Agreement. The Escrow Agreement is hereby approved in substantially the form on file
with the Authority on the date hereof, with such necessary and appropriate variations, omissions,
and insertions as do not materially change the substance thereof, or as the President and the
Secretary, in their discretion, shall determine, and the execution thereof by the President and the
Secretary shall be conclusive evidence of such determination.
2.03. On or prior to the date of delivery of the proceeds of the Bonds, the President and
the Secretary are hereby authorized and directed to execute, on behalf of the Authority, a
Supplement to Trust Indenture dated April 12, 2010 with respect to the 2002A Indenture and a
Supplement to Trust Indenture dated April 12, 2010 with respect to the 20028 Indenture
providing for investment of the Escrow Account in obligations authorized pursuant to Minnesota
Statutes, Section 475.67, Subd. 8 (collectively, the "Supplemental Indentures"). The
Supplemental Indentures are hereby approved in substantially the form on file with the Authority
on the date hereof, with such necessary and appropriate variations, omissions, and insertions as
do not materially change the substance thereof, or as the President and the Secretary, in their
discretion, shall determine, and the execution thereof by the President and the Secretary shall be
conclusive evidence of such determination.
365439v1 JSB EL185-ll
2.04. In addition to the Escrow Agreement and the Supplemental Indentures, the
President and the Secretary are hereby authorized and directed to execute such other documents
which are necessary and appropriate to terminate the Lease Agreement and the Lease-Purchase
Agreement and defease the Series 2002A Bonds and the Series 20028 Bonds, including but not
limited to a termination of the Lease Agreement and the Lease-Purchase Agreement. Such
documents are hereby approved in substantially the forms on file with the Authority on the date
hereof, with such necessary and appropriate variations, omissions, and insertions as do not
materially change the substance thereof, or as the President and the Secretary, in their discretion,
shall determine, and the execution thereof by the President and the Secretary shall be conclusive
evidence of such determination.
2.05. As of the date of execution of the Escrow Agreement (the "Transfer Date") there
will be and are hereby transferred, pledged, and appropriated to the Escrow Account the balance in
the reserve fund for the Series 2002A Bonds, together with interest earnings thereon, for payment of
the principal and interest of the Series 2002A Bonds on and prior to their maturity dates and on the
Redemption Date (as herein defined), as the case may be. It is estimated that such amount, together
with such other amounts as are deposited in accordance with the Escrow Agreement, is adequate
when invested as therein provided to pay the principal of and interest on the Series 2002A Bonds
and the Series 20028 Bonds on and prior to their maturity dates and on the Redemption Date.
Section 3. Redemption of Series 2002A Bonds and the Series 20028 Bonds.
3.01. Series 2002A Bonds and the Series 2002E Bonds maturing on February 1 in the
years 2014 to and including 2023, comprising all of the Bonds subject to redemption, shall. be
prepaid and redeemed on February 1, 2013 (the "Redemption Date") and those Series 2002A Bonds
and the Series 20028 Bonds are hereby called for redemption on the Redemption Date.
3.02. The Escrow Agent (as herein defined) is authorized and directed to mail the notice
of call for redemption of the Series 2002A Bonds and the Series 20028 Bonds in the forms attached
to the Escrow Agreement.
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The motion for the adoption of the foregoing resolution was duly seconded by Member
and upon vote being taken thereon, the following voted in favor thereof:
and the following voted against:
whereupon said resolution was declared duly passed and adopted.
365439v1 JSB EL185-I l
STATE OF MINNESOTA )
COUNTY OF SHERBURNE ) SS.
CITY OF ELK RIVER )
I, the undersigned, being the duly qualified and acting Secretary of the Elk River Economic
Development Authority, Minnesota, do hereby certify that I have carefully compared the attached
and foregoing extract of minutes of a regular meeting of the Board of Commissioners held on April
2010, with the original thereof on file in my office and the same is a full, true and complete
transcript therefrom insofar as the same relates to the defeasance, prepayment and redemption of
$8,000,000 Public Safety Building Lease Revenue Bonds, Series 2002A (City of Elk River,
Minnesota Lease Obligation) and the $1,695,000 City Hall Expansion Revenue Bonds, Series
2002B (City of Elk River Lease Purchase Obligation), of the Authority.
WITNESS My hand as Secretary and this day of , 2010.
Secretary
Economic Development Authority of the
City of Elk River, Minnesota
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