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HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 05/05/2009 - SECOND READING OF ORDINANCE NO. 035, 2009, AUTHORI ITEM NUMBER: 8 AGENDA ITEM SUMMARY DATE: May 5, zoos FORT COLLINS CITY COUNCIL STAFF: Chuck Seest SUBJECT Second Reading of Ordinance No. 035,2009,Authorizing the Issuance and Sale of the City of Fort Collins,Colorado,Revenue Bond(Larimer Center for Mental Health Project)Series 2009,in a Total Principal Amount Not to Exceed$1,400,000;Making Determinations as to Sufficiency of Revenues and as to Other Matters Related to the Project and Approving the Form and Authorizing the Execution of Certain Documents Relating Thereto. RECOMMENDATION Staff recommends adoption of this Ordinance on Second Reading. EXECUTIVE SUMMARY This Ordinance, unanimously adopted on First Reading on April 21, 2009, authorizes the issuance of tax-exempt private activity bonds in an amount not to exceed $1,400,000 for the Larimer Center for Mental Health project(a non-profit corporation). Under State Statute,the City can utilize its tax exempt status and issue revenue bonds.for financing a project that will induce a non-profit corporation to locate, expand or remain within its boundaries. From a financial standpoint, the issuance of tax exempt revenue, as compared to conventional financing, will result in cashflow savings of$315,000 and present value savings of$194;000 over the life of the bonds. These bonds are not an obligation of the City of Fort Collins. ATTACHMENTS 1. Copy of First Reading Agenda Item Summary - April 21, 2009. (w/o original attachments) ATTACHMENT ITEM NUMBER: 11 AGENDA ITEM SUMMARY DATE: April 21, 2009 FORT COLLINS CITY COUNCIL STAFF: Chuck Seest I I 1:J 7� (7 SUBJECT First Reading of Ordinance No. 035, 2009, Authorizing the Issuance and Sale of the City of Fort Collins,Colorado,Revenue Bond(Latimer Center for Mental Health Project)Series 2009,in a Total Principal Amount Not to Exceed$1,400,000;Making Determinations as to Sufficiency of Revenues and as to Other Matters Related to the Project and Approving the Form and Authorizing the Execution of Certain Documents Relating Thereto. RECOMMENDATION Staff recommends adoption of the Ordinance on First Reading. �� -'Audit! r This item was presented to the City Council d�Finarice Committee on March 16, 2009 and recommended for consideration by the fu11�Council at its regular meeting. EXECUTIVE SUMMARY 1� This Ordinance would authorize the issuance of revenue bonds in an amount not to exceed $1,400,000 of 501(c)(3) for the Larimer Center for Mental Health project(anon-profit corporation). Under State Statute,the City can utilize its tax exempt status and issue revenue bonds for financing a project that will induce a non-profit corporation to locate,expand or remain within its boundaries. From a financial standpoint, the issuance of tax exempt revenue as compared to conventional financing will result in cashflow savings of$315,000 of present value savings of$194,000 over the life of the bonds. These bonds are not an obligation of the City of Fort Collins. BACKGROUND _ V IL THE PROJECT L/ U Under the federal and state laws governing the use of tax-exempt private activity bonds, the City may issue the bonds,but may not use its own revenues to support the project. The revenue required to repay the bonds will be derived from the revenues received by operations of the Larimer Center for Mental Health. In the event of default on a bond payment, the bondholders may accelerate the bonds and make them immediately due and payable and exercise all remedies under the financing agreement on the deed of trust. The total amount of private activity bonds to be issued will not exceed $1,400,000. The project proponent, Larimer Center for Mental Health will use the bond April 21, 2009 -2- Item No. 11 proceeds for repayment of a line of credit used to acquire and make improvements to a building located at 125 Crestridge Street in the City of Fort Collins. The facility is used for administrative purposes as well as the delivery of mental health services to residents of the community. THE CITY'S ROLE IN ISSUANC OF 0(C) ON4;S Under the federal tax laws and�lhe_Golora�do.R'e'vised.Statutes,-the City's role in this transaction is to be the Issuer of the Bonds. City staff has also reviewed the application and related financial statements of the Larimer Center for Mental Health. THE BONDS SHALL BE SPECIAL, LIMITED OBLIGATIONS OF THE CITY. THE CITY WILL NOT BE OBLIGATED TO PAY THE BONDS OR THE INTEREST THEREON,EXCEPT FROM THE ASSETS OR REVENUES PLEDGED THEREFOR. IN NO EVENT SHALL THE STATE, THE CITY (OTHER THAN THE FROM THE BORROWER'S ASSETS PLEDGED THEREFORE)OR ANY POLITICAL SUBDIVISION THEREOF BE LIABLE FOR THE BONDS, AND THE BONDS SHALL NOT CONSTITUTE A DEBT OF THE STATE,THE CITY OR ANY SUCH POLITICAL SUBDIVISION THEREOF. The proceeds of the Bonds will be loaned to Larimer Center for Mental Health according to the terms of the Financing Agreement to provide the financing of the project. SOURCES AND USES The estimated sources and userof�fur6llaltingtTothe Bonds are summarized below: Estimated Amount SOURCES OF FUNDS: Proceeds of Series 2009 Bonds $1,400,000 USES OF FUNDS: Deposit to Project Fund: $1,370,000 For payment of Costs of Issuance, including Underwriter's fee 30,000 TOTAL USES\OF FUN'D�� ) ) $1 400.000 Sources and uses are estimates and may change prior to second reading. April 21, 2009 -3- Item No. 11 STRUCTURE OF BOND ISSUE The objective of this financial transaction is to achieve the lowest possible borrowing costs for the Project through tax-exempt financings In return for-theta `exempt financing, the City is able to assist and retain a non-profit entity that has been a long}standmgymember of the community. According to the City of Fort Collins policies=regarding issuance of tax-exempt financing for this type of project, the City charges an issuer's fee when the bonds are issued. This fee is estimated to be $1,400 based on the projected debt service. GENERAL DESCRIPTION OF BOND PROCEEDINGS In connection with the issuance of the Revenue Bonds,the City Council will consider First Reading of an ordinance authorizing the bonds. On May 4th at 5:30 at the City Hall, 300 La Porte Avenue, a Tax Equity and Fiscal Responsibility Act of 1982("TEFRA")Hearing will be conducted allowing the general public opportunity to comment on the bond issuance and nature of the project. Any comments received will be reported back to the Council at Second Reading of the Ordinance on May 5, 2009. ATTACHMENTS �'�} 7��77 7- 1. Powerpoint presentatiin givenoto C_ounjil Fit nce Committee on March 16, 2009. 2. Council Finance Committee Minutes, March 16, 2009. 3. Larimer Center for Mental Health Board of Directors. ORDINANCE NO. 035, 2009 AN ORDINANCE AUTHORIZING THE ISSUANCE AND SALE OF THE CITY OF FORT COLLINS, COLORADO, REVENUE BOND (LARIMER CENTER FOR MENTAL HEALTH PROJECT) SERIES 2009, IN A TOTAL PRINCIPAL AMOUNT NOT TO EXCEED $1,400,000; MAKING DETERMINATIONS AS TO SUFFICIENCY OF REVENUES AND AS TO OTHER MATTERS RELATED TO THE PROJECT AND APPROVING THE FORM AND AUTHORIZING THE EXECUTION OF CERTAIN DOCUMENTS RELATING THERETO. WHEREAS, the City of Fort Collins, Colorado (the "Issuer"), is authorized by the provisions of the County and Municipality Development Revenue Bond Act, article 3 of title 29, Colorado Revised Statutes, as amended (the "Act"), to issue revenue bonds for the purpose of financing projects to be located inside or within eight (8) miles of the boundaries of the Issuer for the purposes enumerated in the Act, to enter into financing agreements with others for the purpose of providing revenues to pay such bonds, and further to secure the payment of such bonds; and WHEREAS, the Act provides that title to any project may at all times remain in the name of the user of the project; and WHEREAS, Larimer Center for Mental Health, a Colorado nonprofit corporation and an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the "Borrower"), has requested that the Issuer issue its revenue bond in accordance with the Charter and the Act, such bond to be designated the City of Fort Collins, Colorado, Revenue Bond (Larimer Center for Mental Health Project) Series 2009 (the "Bond"), the proceeds of which shall be loaned to the Borrower for the purposes of(i) refinancing an existing line of credit currently held with First National Bank (the "Bank"), the proceeds of which were used for the acquisition of and improvements to a building located at 125 Crestridge Street, Fort Collins, Colorado and (ii) paying certain costs relating to the issuance of the Bond (collectively, the "Project"); and WHEREAS, a Financing Agreement, to be dated as of May 1, 2009 (the "Agreement"), among the Issuer, the Borrower and the Bank has been submitted to the City Council (the "Council") and filed in the office of the Fort Collins City Clerk (the "Clerk"), and is there available for public inspection; and WHEREAS, the Council desires at this time to authorize the issuance of the Bond, for the purpose of the Project; and WHEREAS, a public hearing concerning the proposed Bonds and the nature and location of the Project is scheduled to be held on May 4, 2009, and such public hearing in accordance with Section 147(f) of the Internal Revenue Code of 1986 will be required as condition to the issuance and sale of the Bonds; and WHEREAS, it is necessary or desirable to authorize the issuance of the Bond by Ordinance and to approve the form and authorize the execution of the Agreement. BE IT ORDAINED BY THE COUNCIL OF THE CITY OF FORT COLLINS AS FOLLOWS: Section 1. Determinations. It is hereby found, determined and declared, that: (a) The City is a duly organized and existing home rule municipality of the State of Colorado, created and operating pursuant to Article XX of the Constitution of the State of Colorado and the home rule charter of the City (the "Charter") and is authorized under the Act and the Supplemental Public Securities Act, part 2 of article 57 of title 11, Colorado Revised Statutes (the "Supplemental Act") to issue and sell its economic development revenue bonds in 2 the form of one or more debt instruments, such as the Bond, for the purpose, in the manner and upon the terms and conditions set forth in the Act, the Supplemental Act , this Ordinance, and in the Agreement. (b) The financing of the Project will promote the public health, welfare, safety, convenience and prosperity and promote and develop trade or other economic activity by inducing a non-profit corporation to locate, expand or remain in the Issuer and the State of Colorado to secure and maintain a balanced and stable economy for the Issuer and the State of Colorado. (c) The maximum amounts necessary in each year to pay the principal of and interest on the Bond and the interest rate or rates to be borne by the Bond are as provided in the Agreement- (d) The payments required in the Agreement to be made are sufficient to pay the principal of and interest on the Bond when due, and to pay all other costs required in the Agreement to be paid, including all sums referred to in paragraphs (b), (d) and(e) of this section. (e) No reserve funds have been established pursuant to the Agreement- (1) The Agreement provides that the Borrower shall maintain the Project in good repair and carry all proper insurance with respect thereto. (g) The Agreement requires that the Borrower pay the taxes and other governmental charges with respect to the Project, including taxes and charges which the taxing entities specified in C.R.S. Section 29-3-120 are entitled to receive, and sufficient revenues for such purpose are thereby provided. Section 2. Issuance and Sale of Bond. The Issuer shall issue its Revenue Bond (Latimer Center for Mental Health Project) Series 2009, to be in registered form and to be dated 3 as provided in the Agreement, in a total principal amount not to exceed $1,400,000, for the purposes, in the forms and upon the terms set forth in this Ordinance and the Agreement, including the form of the Bond as set forth in the Agreement. The Bond shall be payable in the manner and to the persons set forth in the Agreement and the form of the Bond set forth therein. The maximum net effective interest rate authorized for the Bond shall not exceed 12% per annum, until the date of maturity. The Council hereby elects to apply all of the Supplemental Act to the issuance of the Bonds Section 3. Approvals and Authorizations. The form of the Agreement, including the form of Bond (collectively, the "Issuer Documents") are hereby approved. "file City Manager of the City of Fort Collins, Colorado or any other Council Member and the City Clerk are hereby authorized and directed to execute the Issuer Documents and to affix the seal of the Issuer thereto, and further to execute and authenticate such other documents, instruments or certificates as are deemed necessary or desirable by bond counsel in order to issue and secure the Bond. Such documents are to be executed in substantially the form hereinabove approved, provided that such documents may be completed, corrected, or revised as deemed necessary by the parties thereto in order to carry out the purposes.of this Ordinance. Copies of all of the documents shall be delivered, filed and recorded as provided therein. The rights, title and interest of the Issuer in the Agreement when executed, shall, by the terms thereof, have been assigned to the Trustee except as therein provided. The proper officers of the Issuer are hereby authorized and directed to prepare and furnish to bond counsel certified copies of all proceedings and records of the Issuer relating to 4 .the Bond and such other affidavits and certificates as may be required to show the facts relating to the authorization and issuance thereof, as such facts appear from the books and records in such officers' custody and control. The approval hereby given to the various documents referred to above include the approval of such additional details therein as may be necessary and appropriate for their completion and such modifications thereof, deletions therefrom, and additions thereto as may be approved by bond counsel prior to the execution of the documents. The execution of' any instrument by the appropriate officers of the Issuer herein authorized shall be conclusive evidence of the approval by the Issuer of such instrument in accordance with the terms hereof. Section 4. Nature of Obligation. Under the provisions of the Act, and as provided in the Agreement and the Bond, the Bond shall be a special, limited obligation of the Issuer payable solely from, and secured by a pledge of, the revenues derived from the Agreement, and any deed of trust provided by the Borrower. "file Issuer will not pledge any of its property or secure the payment of the Bond with its property. The Bond and the interest thereon shall never constitute the debt or indebtedness or a multi-year fiscal obligation or the financial obligation of the State of Colorado or any political subdivision thereof, including the Issuer, within the meaning of any provision or limitation of the Colorado Constitution or statutes of the State of Colorado, and shall not constitute or give rise to a pecuniary liability of the Issuer, its agents, employees or officers, or a charge against its general credit or taxing powers. In entering into the Issuer Documents, the Issuer will not obligate itself, except with respect to the application of the revenues derived from the Agreement and the Bond proceeds. The Issuer will not pay out of its general fund or otherwise contribute any part of the cost of financing the Project. No costs are to be borne by the 5 Issuer in connection with the issuance of the Bond. The Agreement provides that all fees and expenses of the Issuer shall be paid by the Borrower. Section 5. Limitation of Rights. With the exception of any rights herein expressly conferred, nothing expressed or mentioned in or to be implied from the Ordinance or the Bond is intended or shall be construed to give to any person, other than the City, the Borrower and the Bank, any legal or equitable right, remedy or claim under or with respect to this Ordinance or any covenants, conditions and provisions herein contained; this Ordinance and all of the covenants, conditions and provisions hereof being intended to be and being for the sole and exclusive benefit of the City, the Borrower and the Bank as herein provided. Section 6. Pledge of Revenues. The creation, perfection, enforcement, and priority of the pledge of the security to secure or pay the Bond as provided herein and in the Agreement shall be governed by Section 1 1-57-208 of the Supplemental Act. The security for the payment of the Bond, as received by or otherwise credited to the City and the Bank, shall immediately be subject to the lien of such pledge without any physical delivery, tiling, or further act. The lien of such pledge on the security shall have priority over any or all other obligations and liabilities of the City. The lien of such pledge shall be valid, binding, and enforceable as against all persons having claims of any kind in tort, contract, or otherwise against the City irrespective of whether such persons have notice of such liens. Section 7. Immunity of Officers. . Pursuant to Section 1 1-57-209 of the Supplemental Act, if a member of the Council, or any officer or agent of the City acts in good faith, no civil recourse shall be available against such commissioner, officer, or agent for payment of the principal of or interest on the Bond. No recourse for the payment of any part of the principal of, 6 premium, if any, or interest on the Bond for the satisfaction of any liability arising from, founded upon or existing by reason of the issue, purchase or ownership of the Bond shall be had against any official, officer, councilmember or agent of the City or the State, all such liability to be expressly released and waived as a condition of and as a part of the consideration for the issue, sale and purchase of the Bond. Section 8. Limitation on Actions. In accordance with the Act, no action shall be brought questioning the legality of any contract, financing agreement, mortgage, proceeding relating to the Bond, or the Project on and after thirty days from the effective date of this Ordinance. Section 9. Validity of Bond. The Bond shall contain a recital that such Bond is issued pursuant to the Act and the Supplemental Act, and such recital shall be conclusive evidence of its validity and of the regularity of its issuance Section 10. Charter. Pursuant to Article XX of the State Constitution and the Charter, all State statutes that might otherwise apply in connection with the provisions of this ordinance arc hereby superseded to the extent of any inconsistencies between the provisions of this ordinance and such statutes. Any such inconsistency is intended by the Council and shall be deemed made pursuant to the Charter. Section 11. Bond Printing and Related Matters. The officers of' the Issuer are hereby authorized and directed to arrange for the printing of the Bond, provided that, subject to Section 3(c) above, the Borrower shall pay for all costs in connection with the preparation and printing of 7 the Bond and no such costs are to be borne by the Issuer. The Bond will be purchased by the Bank in accordance with the Agreement. Section 12. Bond Ordinance Irrepealable. After the Bond is issued, this Ordinance shall constitute an irrevocable contract between the Issuer and the holder(s) of the Bond and shall be and remain irrepealable until the Bond, both principal and interest, shall be fully paid, cancelled and discharged. Section 13. Ratification. All actions heretofore taken by the Issuer and by the officers thereof or on their behalf not inconsistent herewith directed toward the financing of the Project and the issuance and sale of the Bond, or the conduct of a public hearing relating to the issuance of the Bond or the location and nature of the Project, are hereby ratified, approved and confirmed. Section 14. Repealer. All acts, orders, ordinances, or parts thereof, taken by the Issuer and in conflict with this Ordinance, are hereby repealed except that this repealer shall not be construed so as to revive any act, order, ordinance, or part thereof heretofore repealed. Section 15. Other Matters. By the passage of this Ordinance, the Council does not intend to approve, nor is it approving hereby, any matters relating to licensing, permitting, subdivision zoning, planning or landscaping of the Project. Approval of such matters must be obtained under normal procedures of the Issuer. Section 16. Severability. If any paragraph, clause, section or provision of this Ordinance, except Section 4 hereof, is judicially adjudged invalid or unenforceable, such judgment shall not affect, impair or invalidate the remaining paragraphs, clauses, sections or provisions hereof. 8 Section 17. Effective Date. This Ordinance shall be effective ten days after its passage. [The balance of this page is intentionally blank] 9 INTRODUCED, READ, APPROVED ON FIRST READING AND ORDERED PUBLISHED this 21" day of April, A.D. 2009. Mayor ATTEST: W A City Clerk 10 READ, APPROVED ON SECOND READING AND ORDERED PUBLISHED this 5th day of May, A.D. 2009. Mayor ATTEST: City Clerk 11