DISCLAIMER

 

FINANCE COMMITTEE


08-030-O

ORDINANCE NO. __________


AN ORDINANCE AUTHORIZING THE ISSUANCE, SALE AND DELIVERY OF UP TO $41,500,000 GENERAL OBLIGATION DECC IMPROVEMENT BONDS OF THE CITY OF DULUTH UPON TERMS AND CONDITIONS TO BE PROVIDED BY RESOLUTIONS OF THE CITY COUNCIL, PLEDGING CERTAIN FOOD AND BEVERAGE SALES TAX RECEIPTS AND OTHER REVENUES.

CITY PROPOSAL:

The city of Duluth does ordain:

     Section 1. Bond purpose and authorization.

     1.01 The city council has determined it to be necessary and expedient and in the public interest that the city finance a portion of the costs to design, construct, furnish and equip renovations to the Duluth Entertainment Convention Center, including a new arena (the project).

     1.02 Under the provisions of Minnesota Laws 1974, Chapter 130, the city council may by ordinance provide for the issuance of general obligation bonds to provide the funds necessary to match state, private or federal grant funds for projects within the city’s boundaries, which bonds are to be supported by the full faith and credit of the city and are to be issued subject to the provisions of Minnesota Statutes, Section 475, except that they may exceed the limitations in Minnesota Statutes, Section 475.53, by an amount not to exceed $2,000,000, and they may not be issued if the city’s contribution to the project, including the proceeds of the bonds, exceeds 60 percent of the total project cost where such contribution is used to match state or federal grants, or 70 percent where it is used to match government and private grants, or 80 percent where it is used to match private grants alone. The project is of the nature contemplated by said law. The Duluth entertainment and convention center authority (the authority) has been awarded a grant from the state of Minnesota of funds in aid of the project. The state grant of $38,000,000 requires a local match to complete the construction and equipping of the project, and the proceeds of bonds to be issued by the city in an amount not to exceed $41,500,000, together with the state grant, will be sufficient to pay the total project costs. The amount of the city’s contribution, from the proceeds of the bonds or otherwise, will not exceed the limitations set forth in said law.

     1.03 Pursuant to the authority herein recited, the city council hereby authorizes and directs the issuance and sale of general obligation DECC improvement bonds of the city of Duluth in an amount not to exceed $41,500,000, and pledges the full faith and credit and taxing powers of the city irrevocably for the payment of the principal and interest when due on such bonds.

     Section 2. Terms of bonds.

     2.01 The city council shall, by resolution or resolutions, provide for the issuance and sale of such bonds in one or more series and shall fix the precise maturities, interest rates, redemption provisions and other terms and conditions of such bonds, and prescribe the form thereof, and offer to sell such bonds in such a manner and at such time or times as shall be deemed in the public interest, all in accordance with the provisions of Minnesota Statutes, Chapter 475 and of Laws 1974, Chapter 130, and of other applicable laws.

     Section 3. REVENUES AND ACCOUNTS.

     3.01 The city hereby creates the 2008 DECC improvement capital project fund to which there shall be credited all or a portion of the proceeds of the bonds, as provided by council resolution, together with any additional funds which may be available and are appropriated for the project or which may be advanced to such fund on condition that such amounts be reimbursed from bond proceeds.

     3.02 the city council may, by resolution or resolutions, establish such further accounts and credit monies from the proceeds of the bonds herein authorized to accounts, all in accordance with Section 54 of the City Charter and Chapter 475 of Minnesota Statutes.

     Section 4. Pledge of revenues; sales tax pledge.

     4.01 There shall be and is hereby pledged (i) the proceeds of the additional three-quarters of one percent sales tax revenues, as authorized by Laws of Minnesota 1980, Chapter 511, Section 1, Subdivision 2, and Section 3, as amended, including Laws of Minnesota 2008, Chapter 154, Article 5, Section 2, authorized for the project (the 0.75% food and beverage tax); and (ii) certain revenues of the authority pledged to the city for payment of the bonds, collectively, in amounts sufficient to produce sums not less than five percent in excess of the amounts of principal and interest on such bonds as such principal and interest respectively become due. Until the bonds to be issued hereunder are fully paid or duly called for redemption, the city will also maintain a separate debt service account within the debt service fund created by Section 54 of the City Charter, to be used solely for the payment of the interest and the principal, respectively, as such principal and interest become due and payable, on the bonds issued hereunder. If the balance is ever insufficient to pay all principal and interest then due on the bonds issued hereunder, the Treasurer shall nevertheless provide sufficient money from any other funds of the city which are available for that purpose, and such other funds shall be reimbursed from such debt service account when the balance therein is sufficient. Under the plan of finance for the project, the city and the authority will enter into an agreement where the authority will provide annually from its revenues, including tourism tax revenues (the revenues), an amount which together with the 0.75% food and beverage tax, will be sufficient to pay the principal and interest on the bonds. Accounts for the revenues and the 0.75% food and beverage tax receipts shall be established by council resolution, and such funds shall be paid when collected into such accounts. It is estimated that the revenues and the 0.75% food and beverage tax receipts herein pledged and appropriated to said debt service fund will be received at the times and in amounts not less than five percent in excess of the amounts needed to meet when due the principal and interest payments thereon and, accordingly, no tax is presently levied for this purpose. It is recognized, however, that the city’s liability on the bonds is not limited to the revenues and the 0.75% food and beverage tax receipts so pledged, and the city council covenants and agrees that it will levy upon all taxable property within the city, and cause to be extended, levied and collected, any taxes found necessary for full payment of the principal of and interest on the bonds, without limitation as to rate or amount. After this ordinance has been published and becomes effective, the city council shall by resolution fix the precise aggregate amount of the revenues and the 0.75% food and beverage tax receipts pledged for payment of principal and interest on such bonds for each of the respective years required to comply with the provisions of this ordinance.

     Section 5. Certificate of proceedings.

     5.01 The city clerk is directed to file with the county auditor of St. Louis County a certified copy of this ordinance, and such other information as the county may require, and to obtain from the county auditor a certificate stating that the bonds herein authorized have been duly entered on his register.

     5.02 The officers of the city and the county auditor are authorized and directed to prepare and furnish to the purchasers of the bonds, and to bond counsel, certified copies of all proceedings and records of the city relating to the authorization and issuance of the bonds and such other affidavits and certificates as may reasonably be required to show the facts relating to the legality and marketability of the bonds as such facts appear from the official books and records in the officers’ custody or are otherwise known to them. All such certified copies, certificates and affidavits, including any heretofore furnished, constitute representations of the city as to the correctness of the facts recited therein and the action stated therein to have been taken.

     Section 6. Effective date.

     6.01 That this ordinance shall take effect 30 days after its passage and publication.


FINANCE

 

STATEMENT OF PURPOSE:  This ordinance authorizes the issuance of general obligation bonds in an amount not to exceed $41,500,000 to provide the local match for a State of Minnesota grant for improvements to the Duluth Entertainment Convention Center. The principal and interest will be payable from the additional 0.75% food and beverage sales tax receipts and certain revenues of the Duluth entertainment and convention center authority.