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City Council Resolution 2017-38CITY OF MONTICELLO, MINNESOTA RESOLUTION NO. 2017-38 RESOLUTION AUTHORIZING THE ISSUANCE, SALE, AND DELIVERY OF A REVENUE NOTES AND APPROVING THE FORM OF AND AUTHORIZING THE EXECUTION AND DELIVERY OF THE NOTES AND RELATED DOCUMENTS BE IT RESOLVED by the City Council (the "Council") of the City of Monticello. Minnesota (the "City") as follows: Section 1. Recitals. 1.01. Statutory Authority. The City is a statutory city and political subdivision duly organized and existing under the Constitution and laws of the State of Minnesota. Pursuant to Minnesota Statutes, Sections 469.152 through 469.1655, as amended (the "Act"), the City is authorized to issue revenue obligations to finance and refinance, in whole or in part, the cost of the acquisition, construction, reconstruction, improvement, betterment, or extension of a "project," defined in the Act, in part, as any properties, real or personal, used or useful in connection with a revenue producing enterprise. 1.02. The Facilities. SRCS Building Company, a Minnesota nonprofit corporation (the "Company"), owns the buildings located at 411, 500, and 503 Maple Street in the City (collectively, along with all related facilities and improvements thereto, the "School Facilities") for educational purposes. The Company currently leases the School Facilities to Swan River Montessori Charter School, a Minnesota nonprofit corporation (the "School"), for the operation of a preschool and elementary school, and will continue to lease the School Facilities to the School pursuant to a Lease Agreement between the Company and the School. 1.03. The Notes. The Company has requested that the City issue its Educational Facilities Revenue Note (Swan River Charter School Project), Series 2017A (the "Series 2017A Note"), in the original aggregate principal amount not to exceed $1,000,000 and its Educational Facilities Revenue Note (Swan River Charter School Project), Series 2017B (the "Series 2017B Note" and collectively with the Series 2017A Note, the "Notes"), in the original aggregate principal amount not to exceed $1,300,000. The proceeds derived from the sale of the Notes will be loaned to the Company pursuant to a Loan Agreement, to be dated on or after July 15, 2017 (the "Loan Agreement"), between the City and the Company, to (i) refinance outstanding debt of the Company which previously financed the acquisition, renovation, construction and equipping of the School Facilities; (ii) finance certain capital improvements to the School Facilities; and (iii) pay the costs of issuance of the Notes (the "Project"). The Notes are proposed to be purchased by Sherburne State Bank, a Minnesota banking corporation (the "Lender"). 5024570 GAF MN 190-155 1.04. Tax -Exempt Status of Company and the School. The Company and the School have both represented to the City that they are exempt from federal income taxation under Section 501(a) of the Internal Revenue Code of 1986, as amended (the "Code"), as a result of the application of Section 501(c)(3) of the Code. 1.05. Loan Repayments. The loan repayments to be made by the Company under the Loan Agreement will be fixed so as to produce revenue sufficient to pay the principal of, premium, if any, and interest on the Notes when due. The City will assign its rights to the basic payments and certain other rights under the Loan Agreement to the Lender, pursuant to the terms of a Pledge and Assignment Agreement, to be dated on or after July 15, 2017 (the "Pledge and Assignment of Loan Agreement"), between the City, the Company, and the Lender. The Company's obligation to make loan repayments under the Loan Agreement will be secured by: (i) a Combination Mortgage, Security Agreement, Assignment of Rents and Fixture Financing Statement, to be dated on or after July 15, 2017 (the "Series 2017A Mortgage"), relating to the Series 2017A Note from the Company to the Lender; (ii) a Combination Mortgage, Security Agreement, Assignment of Rents and Fixture Financing Statement, to be dated on or after July 15, 2017 (the "Series 2017B Mortgage" and together with the Series 2017A Mortgage, the "Mortgage"), relating to the Series 2017B Note from the Company to the Lender; (iii) an Assignment of Lease, to be dated on or after July 15, 2017 (the "Assignment of Lease"), from the Company to the Lender; (iv) a Pledge and Covenant Agreement, to be dated on or after July 15, 2017 (the "Pledge Agreement-), between the School and the Lender, pledging certain revenues of the School, including money due to the School from the State of Minnesota Lease Aid Payment Program; and (v) other security provided or arranged by the Borrower or the School. 1.06. Disbursement of Note Proceeds. The proceeds of the Notes will be disbursed by the Lender to the Company pursuant to the Loan Agreement. 1.07. Documents. Forms of the following documents have been submitted to the City and are now on file with the City: (i) the form of the Notes; (ii) the Loan Agreement; (iii) the Pledge and Assignment of Loan Agreement; (iv) the Mortgage; and (v) the Assignment of Lease. 1.08. Public Hearing. (a) Section 147(f) of the Internal Revenue Code of 1986, as amended (the "Code"), and regulations promulgated thereunder, requires that prior to the issuance of the Notes, the Council approve the Notes after conducting a public hearing thereon. Section 469.154, subdivision 4 of the Act requires that prior to submitting an application to the Minnesota Department of Employment and Economic Development ("DEED") for approval of the Project, the Council must conduct a public hearing on the proposal to undertake projects authorized to be financed under the terms of the Act. (b) A notice of public hearing (the "Public Notice") was published in the Monticello Times, the official newspaper and a newspaper of general circulation in the City, with respect to (i) the required public hearing under Section 147(f) of the Code; (ii) the required public hearing under Section 469.154, subdivision 4 of the Act; and (iii) the 502457v3 GAF MN 190-155 2 approval of the issuance of the Notes. The Public Notice was published at least fourteen (14) days prior to the date of the public hearing. On the date hereof, the Council conducted a public hearing at which a reasonable opportunity was provide for interested individuals to express their views, both orally and in writing, with respect to the proposed issuance of the Notes and the location and nature of the Project. Section 2. Issuance of the Notes. 2.01. Findings. The Council hereby finds, determines, and declares that: (a) The issuance and sale of the Notes, the execution and delivery by the City of the Notes, the Loan Agreement, and the Pledge and Assignment of Loan Agreement, and the performance of all covenants and agreements of the City contained in the Loan Agreement and the Pledge and Assignment of Loan Agreement are undertaken pursuant to the Act. (b) The refinancing of outstanding taxable debt of the Borrower which previously financed the acquisition, construction and equipping of the School Facilities, and the financing of certain capital improvements to the School Facilities, furthers the economic development purposes stated in Section 469.152 of the Act, constitutes a and a revenue producing "project,'' as defined in Section 469.153, subdivision 2(b) of the Act. (c) The loan repayments to be made by the Company under the Loan Agreement are fixed to produce revenues sufficient to provide for the prompt payment of principal of, premium, if any, and interest on the Notes issued under this resolution when due, and the Loan Agreement also provides that the Company is required to pay all expenses of the operation and maintenance of the School Facilities, including, but without limitation, adequate insurance thereon and insurance against all liability for injury to persons or property arising from the operation thereof, and all lawfully imposed taxes and special assessments levied upon or with respect to the School Facilities and payable during the term of the Loan Agreement. (d) As provided in the Loan Agreement, the Notes shall not be payable from nor charged upon any funds other than the revenues pledged to its payment, nor shall the City be subject to any liability thereon, except as otherwise provided in this paragraph. No holder of the Notes shall ever have the right to compel any exercise by the City of its taxing powers to pay any of the Notes or the interest or premium thereon, or to enforce payment thereof against any property of the City except the interests of the City in the Loan Agreement and the revenues and assets thereunder, which will be assigned to the Lender under the Pledge and Assignment of Loan Agreement. The Notes shall not constitute a charge, lien, or encumbrance, legal or equitable, upon any property of the City, except the interests of the City in the Loan Agreement, and the revenues and assets thereunder, which will be assigned to the Lender under the Pledge and Assignment of Loan Agreement. The Notes shall recite that the Notes are issued pursuant to the Act, and that the Notes, including interest and premium, if any, thereon, are payable solely from the revenues and assets pledged to the payment thereof, and the Notes shall not 5024570 GAF MN 190-155 3 constitute a debt of the City within the meaning of any constitutional or statutory limitations. 2.02. Issuance and Sale of the Notes. The City hereby authorizes the issuance of the Notes in the aggregate principal amount not to exceed $2,300,000, in one or more series, in the forms, and with the terms set forth in the form of the Notes now on file with the City. The aggregate principal amount of the Notes, the interest rate of the Notes, the terms for adjustment of the interest rate on the Notes, the date of the documents referenced in this resolution and the Notes, and the terms of redemption of the Notes may be established or modified with the approval of the City. The execution and delivery of the Notes shall be conclusive evidence that the City has approved such terms as subsequently established or modified. The offer of the Lender to purchase the Notes at the price of par plus accrued interest, if any, to the date of delivery at the interest rate or rates specified in the Notes is hereby accepted. Upon approval of the Project by DEED, the Mayor of the City (the "Mayor") and the City Administrator of the City (the "City Administrator") are authorized and directed to prepare and execute the Notes as prescribed in the Loan Agreement and the Notes shall be delivered to the Lender. The Mayor and City Administrator are hereby authorized to execute and deliver any agreements with any depository institution, including any representation letter or amendment to any existing representation letter, in the event the City and the Lender elect to register the Notes in book -entry form. 2.03. Special, Limited Obligation of City. The Notes shall be special, limited obligations of the City, and the principal of, premium, if any, and interest on the Notes shall be payable solely from the proceeds of the Notes, the revenues derived from the Company pursuant to the Loan Agreement, and the security provided by the Company in accordance with the terms of the Loan Agreement, the Mortgage, the Assignment of Lease, the Pledge Agreement, and any and all other security of any kind or nature provided by the Company to the Lender. The Notes will be subject to the provisions of a Tax Certificate, to be dated on or after July 15, 2017 (the "Tax Certificate"), by the Company and the School. 2.04. Approval of Documents. The Loan Agreement and the Pledge and Assignment of Loan Agreement are hereby approved in substantially the forms on file with the City on the date hereof. The terms of the Loan Agreement and the Pledge and Assignment of Loan Agreement may be established or modified with the approval of the City. The execution and delivery of such documents shall be conclusive evidence that the City has approved such terms as subsequently established or modified. The Mayor and City Administrator are authorized and directed to execute and deliver the Loan Agreement and the Pledge and Assignment of Loan Agreement and such other documents as may be necessary to close the issuance of the Notes. Copies of all of the documents necessary to the transaction herein described shall be delivered, filed, and recorded as provided herein and in the Loan Agreement. 2.05. Certifications of the City. The Mayor, City Administrator, and Finance Director of the City and other- officers, employees, and agents of the City are hereby authorized and directed to prepare and furnish to bond counsel and the Lender certified copies of all proceedings and records of the City relating to the issuance of the Notes, including a certification of this resolution. Such officers, employees, and agents are hereby authorized to execute and deliver, 5024570 GAF MN 190-155 4 on behalf of the City, all other certificates, instruments, and other written documents that may be requested by bond counsel, the Lender, or other persons or entities in conjunction with the issuance of the Notes. Without imposing any limitation on the scope of the preceding sentence, such officers, employees, and agents are specifically authorized to execute and deliver one or more certificates of the City, an endorsement of the City to the Tax Certificate, an Information Return for Tax -Exempt Private Activity Bond Issues, Form 8038, and all other documents and certificates as shall be necessary and appropriate in connection with the issuance, sale, and delivery of the Notes. The City hereby authorizes Kennedy & Graven, Chartered, acting as bond counsel, to prepare, execute, and deliver its approving legal opinion with respect to the Notes. 2.06. Security for the Notes. The City hereby authorizes the Company to provide such security for payment of its obligations under the Loan Agreement and for payment of the Notes, including the Mortgage, the Assignment of Lease, and the Pledge Agreement, as is agreed upon by the Company and the Lender, and the City hereby approves the execution and delivery of such security. 2.07. DEED Application. As required by the terms of Section 469.154 of the Act, the employees, officers, and agents of the City are hereby authorized and directed to submit an application to DEED for approval of the Project and the issuance of the Notes. 2.08. Bank Qualification Designation. The City hereby designates the Notes as "qualified tax-exempt obligations" pursuant to Section 265(b)(3) of the Code. Section 3. Miscellaneous. 3.01. Agreements Binding. All agreements, covenants, and obligations of the City contained in this resolution and in the above -referenced documents shall be deemed to be the agreements, covenants, and obligations of the City to the full extent authorized or permitted by law, and all such agreements, covenants, and obligations shall be binding on the City and enforceable in accordance with their terms. No agreement, covenant, or obligation contained in this resolution or in the above -referenced documents shall be deemed to be an agreement, covenant, or obligation of any member of the Council, or of any officer, employee, or agent of the City in that person's individual capacity. Neither the members of the Council nor any officer executing the Notes shall be liable personally on the Notes or be subject to any personal liability or accountability by reason of the issuance of the Notes. 3.02. Rights Conferred. Except as herein otherwise expressly provided, nothing in this resolution or in the Loan Agreement, expressed or implied, is intended or shall be construed to confer upon any person, firm, or corporation other than the City and the registered and beneficial owners of the Notes, any right, remedy, or claim, legal or equitable, under and by reason of this resolution or any provision hereof or of the Loan Agreement or any provision thereof, this resolution, the Loan Agreement and all of their provisions being intended to be, and being for the sole and exclusive benefit of the City and the registered and beneficial owners of the Notes issued under the provisions of this resolution and the Loan Agreement, and the Company to the extent expressly provided in the Loan Agreement. 502457v3 GAF MN 190-155 5 3.03. Validity. In case any one or more of the provisions of this resolution, or of the documents mentioned herein, or of the Notes issued hereunder shall for any reason be held to be illegal or invalid, such illegality or invalidity shall not affect any other provision of this resolution, or of the aforementioned documents, or of the Notes, but this resolution, the aforementioned documents, and the Notes shall be construed and endorsed as if such illegal or invalid provisions had not been contained therein. If for any reason the Mayor or the City Administrator, or any other officers, employees, or agents of the City authorized to execute certificates, instruments, or other written documents on behalf of the City, shall for any reason cease to be an officer, employee, or agent of the City after the execution by such person of any certificate, instrument, or other written document, such fact shall not affect the validity or enforceability of such certificate, instrument, or other- written document. If for any reason the Mayor or the City Administrator is unable to execute and deliver the documents referred to in this resolution, such documents may be executed by any mernber of the City Council or any officer of the City delegated the duties of the Mayor or the City Administrator with the same force and effect as if such documents were executed and delivered by the Mayor or the City Administrator. 3.04. Costs. The Borrower will pay the administrative fees of the City and pay, or, upon demand, reimburse the City for payment of.. any and all costs incurred by the City in connection with financing the Project and issuing the Notes, whether or not the Notes are issued. 3.05. Commitment Conditional. The adoption of this resolution does not constitute a guaranty or firm commitment that the City will issue the Notes as requested by the Borrower. The City retains the right in its sole discretion to withdraw from participation and accordingly not to issue the Notes, or issue the Notes in an amount less than the amount referred to herein, should the City at any time prior to issuance thereof determine that it is in the best interest of the City not to issue the Notes, or to issue the Notes in an amount less than the amount referred to in Section 1.03 hereof, or should the parties to the transaction be unable to reach agreement as to the terms and conditions of any of the documents required for the transaction. 3.06. Effective Date. This resolution shall be in full force and effect from and after its approval. The approvals contained in the resolution are effective for one year after the date hereof. (The remainder of this page is intentionally left blank.) 502457v3 GAF MN 190-155 6 Adopted by the City Council of the City of Monticello, Minnesota this 10th day of July, 2017. Mayor ATTEST: City'AdWnistrator 502457v3 GAF MN 190-155 CERTIFICATION STATE OF MINNESOTA COUNTY OF WRIGHT I hereby certify that the foregoing is a true and correct copy of Resoh tion 2017-38 duly passed, adopted and approved by the Monticello City Council at their meeting on July 10, 2017 and recorded in minutes of said meeting. n Notary Public: :/,k - a" Date:/1-xz 11 A r �' VICKI JAN LEERHOFF .� _ NOTARY PUBLIC MffrIN 80TAoyayaM