Res 2014-27
RESOLUTION NO. 2014 - 27
RESOLUTION APPROVING THE ISSUANCE AND SALE OF AN
EDUCATIONAL FACILITIES REVENUE NOTE, SERIES 2014 AND
AUTHORIZING THE EXECUTION OF DOCUMENTS RELATING THERETO
(TOTINO-GRACE HIGH SCHOOL PROJECT)
WHEREAS
:
(a)Minnesota Statutes, Section 469.152 to 469.1655, as amended (the "Act"),
relating to municipal industrial development, gives municipalities the power to issue revenue
obligations for the purpose of financing industrial development and to enter into agreements
necessary or convenient in the exercise of the powers granted by the Act;;
(b)The City Council of the City of Fridley, Minnesota (the City”) has
received from Grace High School d/b/a Totino-Grace High School, a Minnesota nonprofit
corporation organized under the laws of the State of Minnesota (the “Borrower”), a proposal that
the City assist in financing a Project hereinafter described through the issuance of a revenue note,
as further defined below, the “Note”, pursuant to the Act;
(c)The City desires to facilitate the selective development of the community,
retain and improve the tax base, and help to provide the range of services and employment
opportunities required by the population, including educational services; and the Project will
assist the City in achieving those objectives and will enhance the image and reputation of the
community;
(d)The project to be financed by the Note is (i) refinancing of the Borrower's
existing taxable debt issued pursuant to a Promissory Note dated as of January 27, 2010, as
amended by an Allonge thereto dated as of June 2, 2011, the proceeds of which (a) refinanced a
tax-exempt note issued by the City in 2002 to finance the non-religious portions of the
renovation and equipping of, and construction of additions to, the Borrower's high school, known
as Totino-Grace High School, including, but not limited to, the construction and equipping of a
new electrical and heating plant, the construction of an additional 60 space surface parking lot,
and the refinancing of prior debt which was used to finance a new library, science lab, offices
and stadium (the "School Facilities"), (b) financed the construction of additional classrooms, art
rooms, and other improvements to the School Facilities, together with all other site
improvements sufficient to meet zoning requirements, and (c) refinanced the acquisition of an
automobile; and (ii) financing interior fire sprinkler improvements and gymnasium
improvements to the School Facilities (the "Project"). The School Facilities are owned and
operated by the Borrower. The land constituting the 40-acre campus located at 1350 Gardena
Avenue NE in the City is owned by the Archdiocese of Saint Paul and Minneapolis, a Minnesota
diocesan religious corporation, and leased to the Borrower pursuant to a ground lease;
(e)The City has been advised by representatives of the Borrower that
conventional, commercial financing to pay the capital cost of the Project is available only on a
limited basis and at such high costs of borrowing that the economic feasibility of operating the
Project would be significantly reduced;
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(f)Based on representations of the Borrower, no public official of the City
has either a direct or indirect financial interest in the Project nor will any public official either
directly or indirectly benefit financially from the Project; and
(g)A public hearing on the Project was held this date, after notice was
published and materials made available for public inspection at the City Hall, all as required by
the Act and Section 147(f) of the Internal Revenue Code of 1986, as amended, at which public
hearing all those appearing who desired to speak were heard and written comments were
accepted.
NOWTHEREFORE BE IT RESOLVED
by the City Council of the City of Fridley,
Minnesota (the “City”), as follows:
SECTION 1.
LEGAL AUTHORIZATION AND FINDINGS.
1.1Findings. The City hereby finds, determines and declares as follows:
(a)The City is a municipal corporation and a political subdivision of the State
of Minnesota and is authorized under the Act to assist the project referred to herein, and
to issue and sell the Note, as hereinafter defined, for the purpose, in the manner and upon
the terms and conditions set forth in the Act and in this Resolution.
(b)The issuance and sale of the Educational Facilities Revenue Note, Series
2014 (Totino-Grace High School Project) (the “Note”) by the City, pursuant to the Act, is
in the best interest of the City, and the City hereby determines to issue the Note and to
sell the Note to North American Banking Company in Roseville, Minnesota, or another
bank in Minnesota (the “Lender”), as provided herein. The City will loan the proceeds of
the Note (the “Loan”) to the Borrower in order to finance the Project.
(c)Pursuant to a Loan Agreement (the “Loan Agreement”) to be entered into
between the City and the Borrower, the Borrower has agreed to repay the Note in
specified amounts and at specified times sufficient to pay in full when due the principal
of, premium, if any, and interest on the Note. In addition, the Loan Agreement contains
provisions relating to the maintenance and operation of the School Facilities,
indemnification, insurance, and other agreements and covenants which are required or
permitted by the Act and which the City and the Borrower deem necessary or desirable
for the financing of the Project. A draft of the Loan Agreement has been submitted to the
City Council.
(d)Pursuant to a Pledge Agreement (the “Pledge Agreement”) to be entered
into between the City and the Lender, the City has pledged and granted a security interest
in all of its rights, title, and interest in the Loan Agreement to the Lender (except for
certain rights of indemnification and to reimbursement for certain costs and expenses). A
draft of the Pledge Agreement has been submitted to the City Council.
(e)Pursuant to an Amended and Restated Mortgage, Security Agreement,
Assignment of Leases and Rents, and Fixture Financing Statement (the “Mortgage”) to
be executed by the Borrower in favor of the Lender, the Borrower has secured payment
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of amounts due under the Loan Agreement and Note by granting to the Lender a
mortgage and security interest in the property described therein. A draft of the Mortgage
has been submitted to the City Council.
(f)Pursuant to an Amended and Restated Security Agreement (the “Security
Agreement”) to be executed by the Borrower in favor of the Lender, the Borrower has
further secured payment of amounts due under the Loan Agreement and Note by granting
to the Lender a security interest in certain personal property described therein. A draft of
the Security Agreement has been submitted to the City Council.
(g)The Note will be a special, limited obligation of the City. The Note shall
not be payable from or charged upon any funds other than the revenues pledged to the
payment thereof, nor shall the City be subject to any liability thereon. No holder of the
Note shall ever have the right to compel any exercise of the taxing power of the City to
pay the Note or the interest thereon, nor to enforce payment thereof against any property
of the City. The Note shall not constitute a debt of the City within the meaning of any
constitutional or statutory limitation.
(h)On the basis of information available to the City it appears, and the City
hereby finds, that the Project constitutes properties, real and personal, used or useful in
connection with one or more revenue producing enterprises, whether or not operated for
profit, within the meaning of an educational facility as described in Minnesota Statutes,
Section 469.153, subdivision 2(b) of the Act; that the Project furthers the purposes stated
in the Act; that the availability of the financing under the Act and the willingness of the
City to furnish such financing will be a substantial inducement to the Borrower to
undertake the Project, and that the effect of the Project, if undertaken, will be to assist in
the prevention of the emergence of blighted and marginal land, to help prevent chronic
unemployment, to help the surrounding area retain and eventually improve the tax base,
to provide the range of service and employment opportunities required by the population,
to help prevent the movement of talented and educated persons out of the state and to
areas within the State where their services may not be as effectively used, to promote
more intensive development and use of land within the City and surrounding
communities, and to provide available adequate educational services to residents of the
State at a reasonable cost.
(i)It is desirable, feasible, and consistent with the objects and purposes of the
Act to issue the Note for the purpose of financing the costs of the Project.
SECTION 2.
THE NOTE.
2.1Authorized Amount and Form of Note. The Note is hereby approved and shall be
issued pursuant to this Resolution in substantially the form submitted to the City Council with
such appropriate variations, omissions, and insertions as are necessary and appropriate and are
permitted or required by this Resolution, and in accordance with the further provisions hereof;
and the total aggregate principal amount of the Note that may be outstanding hereunder is
expressly limited to $6,800,000, unless a duplicate Note is issued pursuant to Section 2.7. The
Note shall bear interest at a fixed rate as set forth therein.
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2.2The Note. The Note shall be dated as of the date of delivery to the Lender, shall
be payable at the times and in the manner, shall bear interest at the rate, and shall be subject to
such other terms and conditions as are set forth therein.
2.3Execution. The Note shall be executed on behalf of the City by the signatures of
its Mayor and the City Manager and shall be sealed with the seal of the City; provided that the
seal may be intentionally omitted as provided by law. In case any officer whose signature shall
appear on the Note shall cease to be such officer before the delivery of the Note, such signature
shall nevertheless be valid and sufficient for all purposes, the same as if had remained in office
until delivery. In the event of the absence or disability of the Mayor or the City Manager such
officers of the City as, in the opinion of the City Attorney, may act in their behalf, shall without
further act or authorization of the City Council execute and deliver the Note.
2.4Delivery of Initial Note. Before delivery of the Note there shall be filed with the
Lender (except to the extent waived by the Lender) the following items:
(1)an executed copy of each of the following documents:
(a)the Loan Agreement;
(b)the Pledge Agreement;
(c)the Mortgage; and
(d)the Security Agreement.
(2)an opinion of Counsel for the Borrower as prescribed by the Lender and
Bond Counsel;
(3)the opinion of Bond Counsel as to the validity and tax exempt status of the
Note;
(4)a 501(c)(3) determination letter from the Internal Revenue Service
evidencing that the Borrower is exempt from income taxation under Section 501(c)(3) of
the Code;
(5)such other documents and opinions as Bond Counsel may reasonably
require for purposes of rendering its opinion required in subsection (3) above or that the
Lender may reasonably require for the closing.
2.5Disposition of Proceeds of the Note. Upon delivery of the Note to Lender, the
Lender shall, on behalf of the City, disburse the proceeds of the Note for redemption of the Prior
Note and for payment of Project Costs in accordance with the terms of the Loan Agreement.
2.6Registration of Transfer. The City will cause to be kept at the office of the City
Clerk a Note Register in which, subject to such reasonable regulations as it may prescribe, the
City shall provide for the registration of transfers of ownership of the Note. The Note shall be
initially registered in the name of the Lender and shall be transferable upon the Note Register by
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the Lender in person or by its agent duly authorized in writing, upon surrender of the Note
together with a written instrument of transfer satisfactory to the City Clerk, duly executed by the
Lender or its duly authorized agent. The following form of assignment shall be sufficient for
said purpose.
For value received ___________ hereby sells, assigns and transfers unto
________________ the within Note of the City of Fridley, Minnesota, and does
hereby irrevocably constitute and appoint ___________________ attorney to
transfer said Note on the books of said City with full power of substitution in the
premises. The undersigned certifies that the transfer is made in accordance with
the provisions of Section 2.9 of the Resolution authorizing the issuance of the
Note.
Dated:
Registered Owner
Upon such transfer the City Clerk shall note the date of registration and the name and address of
the new Lender in the applicable Note Register and in the registration blank appearing on the
Note.
2.7Mutilated, Lost or Destroyed Note. In case the Note issued hereunder shall
become mutilated or be destroyed or lost, the City shall, if not then prohibited by law, cause to
be executed and delivered, a new Note of like outstanding principal amount, number and tenor in
exchange and substitution for and upon cancellation of such mutilated Note, or in lieu of and in
substitution for such Note destroyed or lost, upon the Lender’s paying the reasonable expenses
and charges of the City in connection therewith, and in the case of a Note destroyed or lost, the
filing with the City of evidence satisfactory to the City with indemnity satisfactory to it. If the
mutilated, destroyed or lost Note has already matured or been called for redemption in
accordance with its terms it shall not be necessary to issue a new Note prior to payment.
2.8Ownership of Note. The City may deem and treat the person in whose name the
Note is last registered in the Note Register and by notation on the Note whether or not such Note
shall be overdue, as the absolute owner of such Note for the purpose of receiving payment of or
on account of the Principal Balance, redemption price or interest and for all other purposes
whatsoever, and the City shall not be affected by any notice to the contrary.
2.9Limitation on Note Transfers. The Note will be issued to an “accredited investor”
and without registration under state or other securities laws, pursuant to an exemption for such
issuance; and accordingly the Note may not be assigned or transferred in whole or part, nor may
a participation interest in the Note be given pursuant to any participation agreement, except to
another “accredited investor” or “financial institution” in accordance with an applicable
exemption from such registration requirements and with full and accurate disclosure of all
material facts to the prospective purchaser(s) or transferee(s).
2.10Issuance of a New Note. Subject to the provisions of Section 2.9, the City shall,
at the request and expense of the Lender, issue a new note, in aggregate outstanding principal
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amount equal to that of the Note surrendered, and of like tenor except as to number, principal
amount, and the amount of the periodic installments payable thereunder, and registered in the
name of the Lender or such transferee as may be designated by the Lender.
SECTION 3.
GENERAL COVENANTS.
3.1Payment of Principal and Interest. The City covenants that it will promptly pay or
cause to be paid the principal of and interest on the Note at the place, on the dates, solely from
the source and in the manner provided herein and in the Note. The principal and interest are
payable solely from and secured by revenues and proceeds derived from the Loan Agreement
and the Pledge Agreement, which revenues and proceeds are hereby specifically pledged to the
payment thereof in the manner and to the extent specified in the Note, the Loan Agreement and
the Pledge Agreement; and nothing in the Note or in this Resolution shall be considered as
assigning, pledging or otherwise encumbering any other funds or assets of the City.
3.2Performance of and Authority for Covenants. The City covenants that it will
faithfully perform at all times any and all covenants, undertakings, stipulations and provisions
contained in this Resolution, in the Note executed, authenticated and delivered hereunder and in
all proceedings of the City Council pertaining thereto; that it is duly authorized under the
Constitution and laws of the State of Minnesota including particularly and without limitation the
Act, to issue the Note authorized hereby, pledge the revenues and assign the Loan Agreement in
the manner and to the extent set forth in this Resolution, the Note, the Loan Agreement and the
Pledge Agreement; that all action on its part for the issuance of the Note and for the execution
and delivery thereof has been duly and effectively taken; and that the Note in the hands of the
Lender is and will be a valid and enforceable special limited obligation of the City according to
the terms thereof.
3.3Enforcement and Performance of Covenants. The City agrees to enforce all
covenants and obligations of the Borrower under the Loan Agreement, upon request of the
Lender and being indemnified to the satisfaction of the City for all expenses and claims arising
therefrom, and to perform all covenants and other provisions pertaining to the City contained in
the Note and the Loan Agreement and subject to Section 3.4.
3.4Nature of Security. Notwithstanding anything contained in the Note, the Loan
Agreement, the Pledge Agreement, or any other document referred to in Section 2.4 to the
contrary, under the provisions of the Act the Note may not be payable from or be a charge upon
any funds of the City other than the revenues and proceeds pledged to the payment thereof, nor
shall the City be subject to any liability thereon, nor shall the Note otherwise contribute or give
rise to a pecuniary liability of the City or, to the extent permitted by law, any of the City’s
officers, employees and agents. No holder of the Note shall ever have the right to compel any
exercise of the taxing power of the City to pay the Note or the interest thereon, or to enforce
payment thereof against any property of the City other than the revenues pledged under the
Pledge Agreement; and the Note shall not constitute a charge, lien or encumbrance, legal or
equitable, upon any property of the City; and the Note shall not constitute a debt of the City
within the meaning of any constitutional or statutory limitation; but nothing in the Act impairs
the rights of the Lender to enforce the covenants made for the security thereof as provided in this
Resolution, the Loan Agreement, and the Pledge Agreement, and in the Act, and by authority of
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the Act the City has made the covenants and agreements herein for the benefit of the Lender;
provided that in any event, the agreement of the City to perform or enforce the covenants and
other provisions contained in the Note, the Loan Agreement, and the Pledge Agreement, shall be
subject at all times to the availability of revenues under the Loan Agreement sufficient to pay all
costs of such performance or the enforcement thereof, and the City shall not be subject to any
personal or pecuniary liability thereon.
3.5Qualified Tax Exempt Obligation. In order to qualify the Note as a “qualified
tax-exempt obligation” within the meaning of Section 265(b)(3) of the Internal Revenue Code of
1986, as amended (the “Code”), the City hereby makes the following factual statements and
representations;
(a)the Note is not treated as a “private activity bond” under Section 265(b)(3)
of the Code;
(b)the City hereby designates the Note as a qualified tax-exempt obligation
for purposes of Section 265(b)(3) of the Code;
(c)the reasonably anticipated amount of tax-exempt obligations (other than
obligations described in clause (ii) of Section 265(b)(3)(C) of the Code) which will be
issued by the City (and all entities whose obligations will be aggregated with those of the
City) during the calendar year 2014 will not exceed $10,000,000;
(d)not more than $10,000,000 of obligations issued by the City during the
calendar year 2014 have been designated for purposes of Section 265(b)(3) of the Code;
and
(e)the aggregate face amount of the Note does not exceed $10,000,000.
3.6Approval of Program. The City has established a governmental program of
acquiring purpose investments for qualified 501(c)(3) projects. The governmental program is
one in which the following requirements of §1.148-1(b) of the federal regulations relating to tax-
exempt obligations shall be met:
(a)the program involves the origination or acquisition of purpose
investments;
(b)at least 95% of the cost of the purpose investments acquired under the
program represents one or more loans to a substantial number of persons representing the
general public, states or political subdivisions, 501(c)(3) organizations, persons who
provide housing and related facilities, or any combination of the foregoing;
(c)at least 95% of the receipts from the purpose investments are used to pay
principal, interest, or redemption prices on issues that financed the program, to pay or
reimburse administrative costs of those issues or of the program, to pay or reimburse
anticipated future losses directly related to the program, to finance additional purpose
investments for the same general purposes of the program, or to redeem and retire
governmental obligations at the next earliest possible date of redemption;
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(d)the program documents prohibit any obligor on a purpose investment
financed by the program or any related party to that obligor from purchasing bonds of an
issue that finances the program in an amount related to the amount of the purpose
investment acquired from that obligor; and
(e)the City shall not waive the right to treat the investment as a program
investment.
SECTION 4.
MISCELLANEOUS.
4.1DEED Application. The financing of the Project by the issuance of the Note by
the City is subject to, among other things, (a) the approval of the Project by the City and the
Minnesota Department of Employment and Economic Development, (b) final approval by the
City, the Borrower and the Lender as to the ultimate details of the financing, and (c) review and
approval of the proposed Project by Bond Counsel.
4.2Reimbursement. In anticipation of the approval of the Project by the Department
of Employment and Economic Development and all other necessary entities and the issuance of
the Notes to finance all or a portion of the Project, and in order that completion of the Project
will not be unduly delayed when approved, the City hereby authorizes the Borrower, in
accordance with the provisions of the Act and subject to the terms and conditions imposed by the
Lender, to provide for the acquisition, construction, and equipping of the improvements to the
School Facilities by such means as shall be available to the Borrower and in the manner
determined by the Borrower, and without advertisement for bids as may be required for the
construction and acquisition of other municipal facilities; the City hereby ratifies, affirms, and
approves all actions heretofore taken by the Borrower consistent with and in anticipation of such
authority; and the Borrower is hereby authorized to make such expenditures and advances
toward payment of that portion of the costs of the improvements to the School Facilities to be
financed from the proceeds of the Notes as the Borrower considers necessary, including the use
of interim, short-term financing, subject to reimbursement from the proceeds of the Notes if and
when delivered but otherwise without liability on the part of the City.
4.3Severability. If any provision of this Resolution shall be held or deemed to be or
shall, in fact, be inoperative or unenforceable as applied in any particular case in any jurisdiction
or jurisdictions or in all jurisdictions or in all cases because it conflicts with any provisions of
any constitution or statute or rule or public policy, or for any other reason, such circumstances
shall not have the effect of rendering the provision in question inoperative or unenforceable in
any other case or circumstance, or of rendering any other provision or provisions herein
contained invalid, inoperative, or unenforceable to any extent whatever. The invalidity of any
one or more phrases, sentences, clauses or paragraphs in this Resolution contained shall not
affect the remaining portions of this Resolution or any part thereof.
4.4Authentication of Transcript. The officers of the City are directed to furnish to
Bond Counsel certified copies of this Resolution and all documents referred to herein, and
affidavits or certificates as to all other matters which are reasonably necessary to evidence the
validity of the Note. All such certified copies, certificates and affidavits, including any
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heretofore furnished, shall constitute recitals of the City as to the correctness of all statements
contained therein.
4.5Authorization to Execute Agreements. The forms of the proposed Loan
Agreement and the Pledge Agreement are hereby approved in substantially the form presented to
the City Council, together with such additional details therein as may be necessary and
appropriate and such modifications thereof, deletions therefrom and additions thereto as may be
necessary and appropriate and approved by Bond Counsel prior to the execution of the
documents. The Mayor and the City Manager are authorized to execute the Loan Agreement and
the Pledge Agreement and such other documents as Bond Counsel consider appropriate in
connection with the issuance of the Note, in the name of and on behalf of the City. In the event
of the absence or disability of the Mayor or the City Manager such officers of the City as, in the
opinion of the City Attorney, may act on their behalf, shall without further act or authorization of
the City Council do all things and execute all instruments and documents required to be done or
executed by such absent or disabled officers. The execution of any instrument by the appropriate
officer or officers of the City herein authorized shall be conclusive evidence of the approval of
such documents in accordance with the terms hereof.
PASSED AND ADOPTED BY THE CITY COUNCIL OF THE CITY OF FRIDLEY THIS
TH
10 DAY OF MARCH 2014.
_______________________________________
Scott J. Lund, Mayor
ATTEST:
Debra A. Skogen, City Clerk
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