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RESOLUTION EXPRESSING THE INTENT OF THE CITY OF DULUTH TO ISSUE TAX-EXEMPT GENERAL OBLIGATION STEAM UTILITY REVENUE BONDS
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CITY PROPOSAL:
BE IT RESOLVED by the City Council (the “Council”) of the City of Duluth (the “City”):
Section 1. Statement of Facts. Fryberger, Buchanan, Smith & Frederick, P.A. (“Bond Counsel”) has informed the City that:
(a) Under and pursuant to the provisions of Chapter VIII, Section 55 of the City Charter, Minnesota Laws, 1979, Chapter 113 and Chapter 475 of Minnesota Statutes and other pertinent provisions of said Charter and statutes (collectively, the “Act”), the City is authorized to issue its general obligation revenue bonds (the “Bonds”) to provide funds for the improvement of the municipal steam plant, which Bonds shall be a specific lien upon such plant and may be payable primarily from net revenues to be derived from service charges pledged for their payment; and
(b) Certain provisions of the Internal Revenue Code of 1986, as amended (the “Code”) limit the types of expenditures that may be financed by the Bonds on a tax-exempt basis; and
(c) The Bonds, if and when issued, will be general obligations of the City payable primarily from the net revenues of the City’s Municipal Steam Utility, as defined below;
(d) The Municipal Steam Utility is operated under a management agreement with Ever-Green Energy, Inc., a Minnesota corporation (the “Corporation”), such management agreement does not constitute a “Qualified Management Agreement” under 26 CFR § 1.141-3(4);
(e) Rates and charges for use of the Municipal Steam Utility are not charged in a generally applicable and uniform manner as required by 26 CFR § 1.141-3(c)(2), instead rates are charged on a negotiated contract bases, with different rates applying to each user; and
(f) The interest on which Bonds is intended to be excluded from gross income for federal income tax purposes pursuant to Section 142(a)(9) and (g) of the Code.
Section 2. The City and the Project.
(a) The City is proposing to issue tax exempt bonds pursuant to provisions of the Act and other applicable Minnesota laws for the purpose of making capital improvements to the municipal steam utility, which includes steam and hot water for heating and cooling, located in the downtown area of Duluth (the “Municipal Steam Utility”), including but not limited to, the capital maintenance improvements to the steam plant and distribution system, including but not limited to, control upgrades, meters, and distribution line improvements (collectively, the “Project”). The Project will be owned by the City, and operated and managed by the Corporation.
Section 3. Preliminary Intent.
(a) The City declares its preliminary intention to proceed to finance the Project and authorize the issuance of its tax-exempt Bonds for the purpose of defraying all or a portion of the cost of the Project.
(b) The Bonds shall be issued in such an amount or amounts as is necessary to defray all or a portion of the cost of the Project, presently estimated not to exceed $4,500,000.
(c) The issuance and sale of each series of such tax-exempt Bonds will be authorized by a subsequent ordinance and resolution of the City at a meeting to be held for such purpose.
Section 4. Application for Bond Issuing Authority. The City intends to take or cause to be taken such actions as the City shall deem necessary and appropriate, upon the recommendation of Bond Counsel, including, in particular, to: (a) apply for an allocation or allocations of annual volume cap in accordance with the requirements of Chapter 474A, Minnesota Statutes, and (b) hold a public hearing on the proposal to undertake and finance the Project, in accordance with the requirements of federal and state law.
Statement of Purpose
STATEMENT OF PURPOSE: This resolution expresses the intent to issue tax-exempt general obligation steam utility revenue bonds in an amount not exceeding $4,500,000 for improvements to the municipal steam utility, which includes steam and hot water for heating and cooling, located in the downtown area and are payable primarily from net revenues of such steam utility. The improvements to such steam plant include capital maintenance improvements to the steam plant and its distribution system