3.3. SR 04-19-2010Elk REQUEST FOR ACTION
River
To Item Number
Ma or & Ci Council 3.3.
Agenda Section Meeting Date Prepared by
Consent Apri119, 2010 Catherine Mehelich, Director of
Economic Develo ment
Item Description Reviewed by
Amendment to City's Conduit Bonding Policy Lori ohnson, Ci Administrator
Reviewed by
Action Requested
Approve amendment to the administrative fee charged in the City's Conduit Bonding Policy.
Background/Discussion
In August 2001, the City Council adopted a Conduit Bonding Policy that allows a developer or business
to borrow larger sums of money at a lower interest rate. The City's role in issuing conduit bonds is
minimal. The majority of the work is done by the bond underwriters, who ensure that the project and the
use of funds comply with IRS tax code. Developers are responsible for all costs incurred to utilize this
financing tool in addition to an administrative fee.
Now after having issued a number of conduit bonds in the past several years, staff is recommending an
amendment to increase the administrative fee charged from'/z of 1% of the bond request, to a rate of 1%
of the bond request. The amendment makes the policy consistent with past practice in more recent years
and future intent of the program.
Financial Impact
The amendment increases the administrative fee paid by developers/businesses to the City to utilize this
financing tool. The rate is consistent with other cities.
Attachments
• City of Elk River Conduit Bonding Policy, Amended Apri12010
Action Motion by Second by Vote
Follow Up
S:\Communiry Development\Economic Development\Conduit Bonding\Action Requested 4.19.10.doc
CITY OF ELK RIVER
Conduit Bonding Policy
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PURPOSE
Under the Minnesota Municipal Industrial Development Act, Minnesota Statutes,
Sections 469.152 to 469.165 (the "IDR Act"), the City of Elk River has authority to issue
industrial development, and health care facility bonds or notes to attract or promote
economically sound industry, commerce and health care in the City.
Under Minnesota Statutes, Chapter 462C (the "Housing Act"), the City is authorized to issue
housing revenue bonds to finance multi-family residential housing projects for low and moderate
income persons and elderly persons. Projects must be embodied in a Housing Program, as
defined in the Housing Act.
The Council is aware that such financing for certain private activities may be of benefit to the
City and will consider requests for conduit bonding subject to this Policy.
It is the judgment of the Council that conduit bonding is to be used on a selective basis to
encourage certain development that offers benefit to the City as a whole, including significant
employment and housing opportunities. It is the applicant's responsibility to demonstrate the
benefit to the City, both in writing and at the public hearing. The applicant should understand
that although approval may have been granted previously by the City for the issuance of
financing for a similar project or a similar debt structure, the Council is not bound by that earlier
approval. Each application will be judged on the merits of the project as it relates to the public
purposes of the Housing Act or the IDR Act and benefit to the City at the time the request for
financing is being considered.
GUIDELINES
A. Standards
Applications must meet all of the following standards to be eligible for consideration:
1. The applicant shall divulge that private activity conduit bonding will be requested
at the time of application for rezoning or site plan approval.
2. The project must meet the objectives of and be otherwise consistent with the
IDR Act or the Housing Act and any other controlling laws.
3. The projects must be compatible with the Comprehensive Plan and the
development plans and objectives of the City.
4. A project application requesting a public offering must provide reasonable
assurance of security resulting in at least an A rating.
5. A project application must demonstrate equity participation in the form of cash
or depreciable assets.
6. Industrial and health care projects must not be speculative, i.e., they must either
be for the applicant's sole use or 60% of the square footage must be pre-leased.
7. The use of conduit bonding for commercial development shall be limited to the
presently developed areas for the purpose of accomplishing redevelopment or
revitalization.
8. The total principal amount of tax exempt obligations for a single project will be
limited to the sum of the following costs:
a. Land or land improvements.
b. New construction or existing building improvements for a new,
redeveloped, or expanded business or housing project.
c. Capital equipment and machinery for manufacturing purposes.
d. Fees fox professional services associated with the project.
e. Bond issuance costs and capitalized interest during construction.
Those applications that exceed the minimum standards will generally be considered more
favorably than those that only meet these standards.
B. Additional Review Standards
Those applications meeting all of the standards listed above will be further reviewed to
determine compliance with the following additional review standards. Applications
meeting more of the following standards will generally be considered before those that
only meet some of them or meet them less extensively:
1. Facilitation of the City's development or redevelopment objectives.
2. The number and type of additional jobs created or retained in the City.
3. For housing projects, the number, type and affordability of new or newly
available housing units.
4. The projected increase in property tax revenue.
5. The amount of equity participation above 20%.
6. The quality of the project, as represented by renderings, site plans, the
applicant's record of development, etcetera.
7. The project's impact on additional City services. .-{, Deleted: nu~5tzooi
2
The view of individuals and businesses expressed at the public hearing on the project
will also be considered.
C. Procedural Provisions
A project will not be given final approval until all City planning and zoning
requirements have been met and all related permits and approvals have been
issued: Planning and zoning matters may be considered simultaneously with
preliminary approval of the project.
2. City officials will not deliver documents for the issuance of tax exempt
obligations until all required fees have been paid by the applicant to the City.
The Council resolution giving preliminary approval to a project shall specify:
a. That the approval given terminates one year from the date of the
resolution and may be renewed only upon request of the applicant.
b. That the applicant agrees to pay all required fees and reimburse the City
for any and all costs inured by it in the financing, whether of not the
bonds are issued.
c. That the City reserves the right in its sole discretion to withdraw the
preliminary approval at any time prior to the issuance of the obligations of
the project.
4. The Director of Economic Development is responsible for the administration
and processing of applications for conduit bonding. The Director of Economic
Development is to prepare and revise from time to time, necessary application
forms and informational material in order to carry out the objectives of this
policy.
5. The following fees for the processing of applications are established:
a. A fee of $5000 due upon the submission of the application, and
b. t)i~e ercent ?1~of the principal amount of the bond due upon issue of -{Deleted: One t,~tfofone
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the bond.
The City is to be reimbursed and held harmless for any out-of-pocket expenses
related to the conduit bonding including, but not limited to the City's issuer
counsel and other legal fees, financial analyst fees, bond counsel fees, and the
Cit~s administrative expenses in connection with the application. The applicant
must execute a letter to the City undertaking to pay all such expenses even if they
exceed the deposit.
6. The applicant must select a financial advisor or underwriter reasonably acceptable
to the City to assist the applicant in preparing all necessary
application documents and materials. The financial adviser will submit ,-d, deleted: nu~sc zoos
3 i~~tw~no
a letter that establishes the financial feasibility of the project. Applications may, in
the alternative, include a signed letter from a responsible financial institution or
underwriter indicating that the project is economically feasible and viable and
stating that bonds can be successfully sold fox the project or that an individual or
institution intends to purchase all of the bonds.
All documents shall be subject to the review and comment of the City's own
bond or issuer's counsel
The applicant must receive approval from the appropriate state agencies,
secure financing and commence construction within one year of the date of the
resolution giving preliminary approval to the project or the housing program.
The Council may approve an extension of the preliminary approval.
D. Miscellaneous Matters
1. Refunding -The Council may approve the refunding of an obligation upon a
showing by the applicant of substantial debt service savings and/or the removal
of bond covenants significanfly impairing the financial feasibility of the project. A
fee of $5000 will be charged.
2. Subsequent Proceedings -Where changes to the underlying documents or
credit facilities of outstanding bond issues are to be made and require Council
action, a fee of $5000 will be charged. No formal application form is required.
3. Deadlines -The Council conducts all conduit bonding matters at
regularly scheduled Council meetings held on the second, third, and fourth
Monday of each month. Documents for Council consideration must be at the
City office sufficiently in advance for comments, corrections, and placement on
the agenda. In the case of a publicly offered bond issue, the documents, when
submitted, may specify a maximum price and maximum effective interest rate if
prices and rates have not yet been established.
4. Public Hearings -Published and mailed notice of any required public
hearing may be set and arranged administratively by city staff.
E. Modification of Policy
This policy is intended as a general guide to be followed by the City Council in
considering applications fox conduit bond financing. It is not binding on the Council and
may be modified by the Council in the case of any projects for which, at the sole
discretion of the Council, such modification is deemed necessary ox appropriate in the
interest of the City.
Anie,~cied: 1 ri12010
Adopted: August 20. 2001
. -) Deleted: Augusx 2001
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