RESOLUTION AUTHORIZING THE EXECUTION OF A JOINT POWERS AGREEMENT AND THE ISSUANCE AND SALE OF $225,000 GENERAL OBLIGATION REVENUE NOTE, SERIES 2000, AND PROVIDING FOR ITS PAYMENT.BY COUNCILOR HOGG:
BE IT RESOLVED, by the city council (the "Council") of the city of Duluth, Minnesota (the "City"), as follows:
Section 1. Authorization and Sale of Note.
A. The City, the Town of Duluth and the Town of Lakewood, Minnesota (the "Towns") (the City and the Towns are herein referred to collectively as the "Municipalities") are working cooperatively through a joint powers board referred to as the North Shore Wastewater Board created pursuant to Minnesota Statutes, Section 471.59, to plan, design and construct a wastewater collection system for the North Shore planning area (the "Wastewater Collection System").
B. Local funds contributed by the Municipalities were used to produce a waste water facilities plan in 1998, but additional funds are needed to complete planning and design of the Wastewater Collection System.1.02. Note for Planning and Design of Wastewater Collection System. It is hereby found and determined to be necessary and in the best interest of the City and the Towns and the residents of the City and the Towns to sell and issue a general obligation revenue note of the City to the Minnesota Public Facilities Authority (the "Lender") in the amount of $225,000 to finance the Project, all pursuant to Minnesota Statutes, Chapter 475, Sections 115.46 and 444.075, the Joint Powers Agreement and subject to execution by the Lender and the State of Minnesota of a project loan agreement further described below.
C. The Municipalities have submitted a petition to the Minnesota Pollution Control Agency for the creation of the Duluth/North Shore Sanitary District (the "Sanitary District"), pursuant to Minnesota Statutes, Sections 115.18 through 115.37. The Sanitary District will own and operate the Wastewater Collection System. It is anticipated that the proceedings for creation of Sanitary District will be completed by late spring in the year 2000.
D. The City has applied to the Minnesota Public Facilities Authority (the "PFA") on behalf of the Municipalities, for financial assistance to be used for the reimbursement or payment of design, engineering and legal costs incurred in anticipation of construction of the Wastewater Collection System (the "Project") and creation of the Sanitary District.
E. The Municipalities estimate that it will require financial assistance from the PFA in the amount of $225,000 in order to undertake the Project.
F. Pursuant to a Joint Powers Agreement between Municipalities, the form of which is on file in the office of the Clerk and which has been presented to the City Council (the "Joint Powers Agreement"), the City has agreed to borrow the sum of $225,000 from the Minnesota Public Facilities Authority (the "PFA") in order to pay the cost of the Project. The Towns have approved the Joint Powers Agreement.
G. Pursuant to the Joint Powers Agreement, the Town of Duluth has agreed to pay its proportionate share of the borrowing from the PFA in the event the Sanitary District is not created. Saint Louis County has made an appropriation of funds to pay the Town of Lakewood's proportionate share of the borrowing from the PFA in the event the Sanitary District is not created. It is anticipated that the Sanitary District will assume the City's obligations to the PFA upon its creation.
1.03. Joint Powers Agreement. The Joint Powers Agreement is hereby made a part of this Resolution as though fully set forth herein and is hereby approved in substantially the form presented to the City Council. The Mayor and the Clerk are authorized and directed to execute, acknowledge, and deliver the Joint Powers Agreement on behalf of the City with such changes, insertions, and omissions therein as bond counsel may hereafter deem appropriate, such execution to be conclusive evidence of approval of such document in accordance with the terms hereof.
1.04. Issuance and Sale of Note. The City hereby authorizes the issuance and sale of its $225,000 General Obligation Revenue Note, Series 2000 (the "Note"), in substantially the form attached hereto as Attachment A for the purposes specified in Section 1.01 above to the Lender pursuant to a Public Facilities Authority Project Loan Agreement and General Obligation Revenue Bond Purchase Agreement between the Lender and the City, in substantially the form presented to the Council and on file with the Clerk (the "Loan Agreement"), which is hereby authorized and approved.
Section 2. Execution and Delivery of Note and Loan Agreement.
2.01. Terms. The Note to be issued hereunder will be dated as of the date of it delivery and issuance to the Lender, will be issued in the principal amount of $225,000, in fully registered form and lettered and numbered R-1. Principal payments will be made in the respective years and amounts set forth on Exhibit A to the Note.
2.02. Execution. The Note and the Loan Agreement will be prepared for execution in accordance with the approved forms and signed by the manual signature of the Mayor and attested by the manual signature of the Clerk. If any officer whose signature appears on the Note ceases to be an officer before delivery of the Note, such signature will nevertheless be valid and sufficient for all purposes, as if such officer had remained in office until delivery.
2.03. Bond Registrar; Registration. The Council hereby designates the Treasurer as bond registrar, paying agent and transfer agent for the Note. The City will cause to be kept at its offices a register in which, subject to such reasonable regulations as the City may prescribe, the City will provide for the registration of transfers of ownership of the Note. The Note will be initially registered in the name of the Lender and will be transferable upon the register by 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 Treasurer, duly executed by the Lender or its duly authorized agent.
2.04. Delivery. Delivery of the Note will be made at a place mutually satisfactory to the City and the Lender. The Note will be furnished by the City without cost to the Lender. The Note, when prepared in accordance with this Resolution and executed, will be delivered to the Lender by and under the direction of the Treasurer. Disbursement of the proceeds of the Note will be made pursuant to the Loan Agreement.
2.05. Loan Agreement to Govern. In the event of an inconsistency between a provision of this Resolution and a provision of the Loan Agreement, the provision of the Loan Agreement will govern.
Section 3. Accounts and Tax Levies.
3.01. Public Service Sewer Utility Fund; Accounts Established. The City will continue to operate its Sewer Utility Operating Account within the Public Service Sewer Utility Fund (the "Sewer Fund") maintained under Section 54 of the City Charter, to which will be credited all gross revenues of the Sewer Utility (the "Utility"), and out of which will be paid all normal and reasonable expenses of current operations of the Utility and all money received from the sale of any facilities or equipment of the Utility. There are hereby created in the Sewer Fund the following accounts: the 2000 State Public Facilities Authority Note Construction Fund and the 2000 State Public Facilities Authority Note Debt Service Fund.
3.02. Construction Fund. Each disbursement of proceeds of the Note which is received pursuant to the terms of the Loan Agreement will be credited to a separate construction fund, which is hereby created and designated as the "2000 State Public Facilities Authority Note Construction Fund" (the "Construction Fund") and which will be a subfund of the Sewer Fund. Monies on deposit in the Construction Fund will be used from time to time to pay the capital costs of the Project, including but not limited to costs of planning, engineering, legal, financial advisory, and other professional services, printing and publication costs, and costs of issuance of the Note, as such payments become due. Upon completion of the Project, any amounts left in the Construction Fund will be transferred to the Debt Service Fund described below.
3.03. Debt Service Fund. A separate debt service fund is hereby created and designated as the "2000 State Public Facilities Authority Note Debt Service Fund" (the "Debt Service Fund"), which will be a special separate restricted subfund of the Sewer Fund. The Treasurer shall transfer from the Sewer Utility Operating Account to the Debt Service Fund amounts of the net revenues sufficient for the payment of all interest and principal then due on the Note. The money in the Debt Service Fund may be used for no purpose other than the payment of principal and interest on the Note and other notes similarly authorized; provided, however, that if any payment of principal or interest becomes due when there is not sufficient money in the Debt Service Fund, the Treasurer is directed to pay the same from any other funds of the City and said funds will be reimbursed for such advance from the Debt Service Fund when a sufficient balance is available therein. The City further irrevocably appropriates to the Debt Service Fund for payment of the principal of and interest on the Note:
A. any balances available in the Sewer Fund after sufficient revenues have been set aside for or used for payment of the normal, reasonable and current expenses of operating and maintaining the Utility which balances are hereby deemed net revenues solely to the extent allocated to pay the principal of and interest on the Note when due; the portion of such payments allocated to the Note will be transferred to the Debt Service Fund no later than the last business day of the month in which such payments are received;
B. all sums collected from the taxes, if any, extended and assessed under the provisions of Sections 3.05 and 3.06;
C. all income and gain from investment of the Debt Service Fund; and3.05. Appropriation; No Tax Levy.
D. any funds remaining in the Construction Fund after acquisition and installation of the Project and payment of the costs thereof.
A. The full faith and credit and taxing powers of the City are irrevocably pledged for the prompt and full payment of the principal of and interest on the Note, as such principal and interest respectively become due.3.06. General Obligation. In the event the monies and payments appropriated to the Debt Service Fund in Section 3.03 hereof are insufficient to pay principal of and interest on the Note as the same become due, the City is required by law and by contract with the holder of the Note and hereby obligates itself to levy and cause to be extended, assessed and collected any additional taxes found necessary for full payment of the principal of and interest on the Note.
B. The monies and payments appropriated to the Debt Service Fund in Section 3.03, are estimated to be not less than five percent in excess of the principal and interest on the Note when due, and accordingly, no tax is levied at this time.
3.07. Investments. Subject to the requirements of Section 7 of this Resolution, monies on deposit in the Construction Fund and the Debt Service Fund may, at the discretion of the Treasurer, be invested in any securities permitted by Minnesota Statutes, Chapter 118A and in accordance with resolutions of the City; provided, however, such investments must mature at such times and in such amounts as will permit payments by the City for authorized purposes, when due.
Section 4. Registration of Note. The Clerk or his designee is directed to file with the County Auditor of St. Louis County, Minnesota, a certified copy of this Resolution, together with such other information as the County Auditor may desire concerning the Note issued hereunder and obtain from the Auditor a certificate that the Note has been entered on the Auditor's register. If any taxes are required to be levied under Section 3.05 hereof, the County Auditor will assess and extend each year the amount, or the reduced amount certified by the Treasurer. The County Auditor will certify to the Treasurer the assessed valuation of taxable property within the City each year, and may each extend and assess the full amount of the taxes to be levied that the Treasurer computes and certifies to the County Auditor.
Section 5. Authentication of Note Transcript.
5.01. Official Proceedings. The officers of the City and the Auditor of St. Louis County, Minnesota, are authorized and directed to furnish to the Lender certified copies of proceedings and information in their official records relevant to the authorization and issuance of the Note and the execution and delivery of the Loan Agreement, and such certificates and affidavits as to other matters appearing in their official records or otherwise known to them as may be reasonably required to evidence the validity and security of the Note, and all such certified copies, certificates, and affidavits, including any heretofore furnished, constitute representations and recitals of the City as to the correctness of all facts stated therein and the completion of all proceedings stated therein to have been taken.
5.02. Absent or Disabled Officers. In the event of the absence or disability of the Mayor or the Clerk, such officers or members of the Council as in the opinion of the City's attorney, may act in their behalf, must without further act or authorization, execute and deliver the Note, and do all things and execute all instruments and documents required to be done or executed by such absent or disabled officers.
Section 6. Covenants. The Council covenants and agrees with the holders of the Note that so long as any payments under the Note remain outstanding and unpaid, it will keep and enforce the following covenants and agreements through the Council.
A. The City will continue to maintain and efficiently operate the Utility as a public utility and convenience free from competition of other like utilities, and will cause all revenue therefrom to be deposited in bank accounts and credited to the Utility funds and accounts as herein above provided, and will make or authorize no expenditures from those funds and accounts except for a duly authorized purpose and in accordance with this Resolution.Section 7. Tax Covenants.
B. The City will also maintain or cause to be maintained the Debt Service Fund as a separate account in the Sewer Fund and will cause monies to be credited thereto from time to time out of net revenues from the Utility in sums sufficient to pay principal and interest on the Note when due.
C. The City will keep and maintain or cause to be maintained proper and adequate books and records of accounts separate from all the records of the City in which will be complete and correct entries as to all transactions relating to the Utility, collections and disbursements of funds appropriated for payment of the Note, monies on hand, and which must be open to inspection and copying in accordance with the Loan Agreement and by the Lender or the Lender's agent or attorney at any reasonable time, and it will furnish certified transcripts therefrom upon request and upon payment of a reasonable fee therefor and said account will be audited at least annually by a qualified public accountant and statements of such audit and report will be furnished to the Lender in accordance with the requirements of the Loan Agreement.
D. The City will cause persons handling revenues of the Utility to be bonded in reasonable amounts for the protection of the City and the Lender, and will cause the funds collected on account of the operations of the Utility to be deposited in a bank whose deposits are guaranteed under the Federal Deposit Insurance Law.
E. The City will keep the wastewater collection facilities insured at all times against loss by fire, tornado and other risks customarily insured against with an insurer or insurers in good standing in such amounts as are customary for like utilities to protect the Lender and the City from any loss due to such casualty and will apply the proceeds of such insurance to make good any such loss.
F. The City and each and all of its officers will punctually perform all duties of reference to the Utility as required by law.
G. The City will impose and collect charges of the nature authorized by Minnesota Statutes, Section 444.075, at the times and in the amounts required to produce net revenues, which along with the monies appropriated pursuant to Section 3.03 of this Resolution, will be adequate to pay all principal and interest when due on the Note, and to create and maintain such reserves securing said payments as may be provided in this Resolution.
7.01. Lender's Bonds. The City agrees to cooperate with the Lender as necessary to maintain the tax-exempt status of any bonds issued by the Lender either to fund the Note or which are secured by the Note (the "Bonds"). The City specifically agrees:
A. Any sums from time to time held by or under the control of the City which would constitute "gross proceeds" of the Bonds ("Gross Proceeds"), as defined in the Internal Revenue Code of 1986, as amended, and the regulations in effect with respect thereto (the "Code") will not be invested at a yield in excess of the applicable yield on the Bonds. Disbursements of proceeds of the Note will not be reinvested by the City. In addition, said Gross Proceeds will not be invested in obligations or deposits issued, guaranteed or insured by the United States or any agency or instrumentality thereof if and to the extent that such investment would cause the Bonds to be "federally guaranteed" within the meaning of Section 149(b) of the Code.7.02. General. The City covenants and agrees with the Lender that the City will (i) take all action on its part necessary to cause the interest on the Note to be exempt from federal income taxes including, without limitation, restricting, to the extent necessary, the yield on investments made with the proceeds of the Note and investment earnings thereon, making required payments to the federal government, if any, and maintaining books and records in a specified manner, where appropriate, and (ii) refrain from taking any action which would cause interest on the Note to be subject to federal income taxes, including, without limitation, refraining from spending the proceeds of the Note and investment earnings thereon on certain specified purposes.
B. The City hereby covenants not to use the Project or to cause or permit it or any of it to be used, or to enter into any deferred payment arrangements for the cost of such Project, in such a manner as to cause any Bonds to be "private activity bonds" within the meaning of Sections 103 and 141 through 150 of the Code.
C. With respect to any Gross Proceeds, the City will comply with requirements necessary under the Code to establish and maintain the exclusion from gross income under Section 103 of the Code and the interest on any Bonds, including without limitation requirements relating to temporary periods for investments, limitations on amounts invested at a yield greater than the yield on the Bonds, and the rebate of excess investment earnings to the United States.
D. The City will comply with such instructions as may be provided from time to time by the Lender with respect to gross proceeds of Bonds.
7.03. Arbitrage Covenant. No portion of the proceeds of the Note will be used directly or indirectly to acquire higher yielding investments or to replace funds which were used directly or indirectly to acquire higher yielding investments, except (i) for a reasonable temporary period until such proceeds are needed for the purpose for which the Note was issued, and (ii) in addition to the above, in an amount not greater than the lesser of five percent of the proceeds of the Note or $100,000. To this effect, any proceeds of the Note and any sums from time to time held in the Debt Service Fund (or any other City account which will be used to pay principal and interest to become due on the Note) in excess of amounts which under the applicable federal arbitrage regulations may be invested without regard as to yield will not be invested at a yield in excess of the applicable yield restrictions imposed by the arbitrage regulations on such investments after taking into account any applicable temporary periods or minor portion made available under the federal arbitrage regulations.
7.04. Rebate Exemption. Pursuant to Section 1.148-7(d) of the federal arbitrage regulations, relating to exception from rebate for certain proceeds spent within a specified time frame, the City hereby covenants that the proceeds of the Note and investment earnings thereon will be allocated to Project costs and costs of issuance of the Note in accordance with the following schedule measured from the date of closing and delivery of the Note:
A. at least 15 percent within 6 months (the first spending period);provided that the Note will not fail to satisfy the spending requirement herein specified as a result of reasonable retainage not exceeding five percent of the proceeds of the Note if such amount is allocated to Project costs within 30 months of the date of closing and delivery of the Note.
B. at least 60 percent within 12 months (the second spending period); and
C. 100 percent within 18 months (the third spending period);