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RESOLUTION AUTHORIZING THE ISSUANCE AND SALE OF A $1,938,000 TAXABLE GRANT ANTICIPATION REVENUE NOTE SERIES 2024F, AND PROVIDING FOR ITS PAYMENT.
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CITY PROPOSAL:
BE IT RESOLVED, by the city council of the city of Duluth, Minnesota (the “City”), as follows:
Section 1. Note Purpose and Authorization.
1.01 Under and pursuant to the provisions of Section 55 of the City Charter, Minnesota Statutes, Sections 444.075, 475.61, subdivision 5, and Chapter 475, and other pertinent provisions of said Charter and statutes, the City is authorized to issue its revenue note to provide funds for the payment of costs of improvements to the municipal water utility, which bonds or notes shall be a specific lien upon the water utility (the “Water Utility”). The City has applied for and received a commitment from the Minnesota Public Facilities Authority (the “PFA”) for a grant and loan for the Project, as hereinafter defined.
1.02 The city council has, by Ordinance No. 24-048-O adopted October 28, 2024 (the “Ordinance”), ordered the issuance, sale and delivery of Taxable Grant Anticipation Revenue Notes, in one or more series, in an amount not to exceed $8,218,142 for the payment of improvements to the Water Utility, for replacement of lead service lines as identified in the city’s applications to the Authority, including for the following project:
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High Priority |
(1690011-17) |
Duluth LSLR Phase 5 |
(the “Project”).
1.03 The City authorizes the issuance and sale of a taxable grant anticipation note under the Ordinance to be designated the “Taxable Grant Anticipation Note, Series 2024F” in the principal amount of $1,938,000 (the “Note”) for the Project to the PFA, in substantially the form attached hereto as Exhibit A, pursuant to a Minnesota Public Facilities Authority Master Loan (Bond Purchase) and/or Grant Agreement dated September 16, 2024, between the PFA and the City (the “Master Agreement”) and the Project Order ID Duluth LSLR 04 (MDH Project ID 1690011-17) between the PFA and the City (the “Project Order”), both in substantially the forms attached hereto as Exhibits B and C, and which are authorized and approved.
1.04 The principal of and interest on the Note shall be paid primarily from the LSLR Grant (defined below), Net Revenues (defined below) of the Water Utility, or long-term definitive obligations which the City shall offer for sale in advance of the maturity of the Note if not paid from the LSLR Grant or Net Revenues.
1.05 Pursuant to the Project Order, the PFA will award a grant to the City in the amount of the Note (the “LSLR Grant”), which will be used to pay the principal and interest due on the Note.
Section 2. Execution and Delivery of Note, Master Agreement, and Project Order.
2.01 The Note to be issued hereunder shall be dated as of the date of delivery to PFA, shall be issued in the principal amount of $1,938,000, in fully registered form and lettered and numbered R-1. The Note shall not bear interest. The Note is payable as to principal only on the Maturity Date, as set forth on Exhibit A to the Note. If the principal only payments are paid by check and mailed to the registered holder of the Note, such payment shall be mailed by the City at least five business days prior to the payment date.
2.02 The Note shall be prepared for execution in accordance with the approved form and shall be signed by the manual signature of the mayor and attested by the manual signature of the clerk. In case any officer whose signature shall appear on the Note shall cease to be an officer before delivery of the Note, such signature shall nevertheless be valid and sufficient for all purposes, the same as if such officer had remained in office until delivery. The Master Agreement and the Project Order shall be prepared for execution in accordance with the approved form and shall be signed by the manual or electronic signature of the mayor and attested by the manual or electronic signature of the clerk. All actions of the officers of the City regarding the Master Agreement and Project Order are ratified, confirmed and approved as of the date of the Master Agreement or Project Order.
2.03. 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 shall provide for the registration of transfers of ownership of the Note. The Note shall be initially registered in the name of the PFA and shall be transferable upon the register by the PFA 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 clerk, duly executed by the PFA or its duly authorized agent.
2.04. Delivery of the Note shall be made at a place mutually satisfactory to the City and the PFA. The Note shall be furnished by the City without cost to the PFA. The Note, when prepared in accordance with this Resolution and executed, shall be delivered to the PFA by and under the direction of the finance director. Disbursement of the proceeds of the Note shall be made pursuant to the Master Agreement and Project Order.
2.05. In the event of an inconsistency between a provision of this Resolution and a provision of the Master Agreement, the provision of the Master Agreement shall govern.
Section 3. Revenues, Accounts and Covenants.
3.01 The city council covenants and agrees with the PFA and with its taxpayers that it will impose and collect just and equitable charges for all use and for the availability of all facilities of the Water Utility at the times and in the amounts required to pay the normal, reasonable and current expenses of operating and maintaining such facilities, and also to produce Net Revenues at least adequate at all times to pay the principal due on the Note and the principal and interest due on all other bonds and notes heretofore or hereafter issued and made payable from said Net Revenues, and will operate the Water Utility and segregate and account for the revenues thereof as provided in this section.
3.02 The City will place all such charges, when collected, and all money received from the sale of any facilities or equipment of the Water Utility in a separate Water Utility Operating Account within the Public Utility Water Fund maintained under Section 54 of the City Charter. Except as provided in this section, this account shall be used only to pay claims duly approved and allowed for payment of expenses which, under generally accepted accounting principles, constitute normal, reasonable and current expenses of operating and maintaining the Water Utility, and to maintain such reasonable reserves for such expenses as the proper City official shall determine to be necessary from time to time in accordance with policies established by the city council. Sums from time to time on hand in this account, in excess of sums required to make such payments and maintain such reserves, constitute the “Net Revenues,” a portion of which are herein pledged and appropriated to pay the principal of the Note when due.
3.03 The City hereby creates a separate construction account (the “Construction Account”) within the Public Utility Water Fund to which there shall be credited the proceeds of the Note as received, together with investment income thereon and any additional funds which may be available and are appropriated for improvements to the Project. This account shall be used only to pay expenses duly approved and allowed which, under generally accepted accounting principles, constitute capital expenditures for the completion of the Project and costs of the issuance of the Note.
3.04 Until the Note issued hereunder is fully paid or duly called for redemption, or otherwise discharged, the City will also maintain a separate debt service account (the “Water Debt Service Fund”) in the Public Utility Water Fund to be used solely for the payment of the principal, as such principal becomes due and payable, on the Note and principal of and interest on any other bonds or notes which have been or may be issued and made payable from said Net Revenues of the Water Utility. All investment income on funds in the Water Debt Service Fund are pledged to payment of the Note and other bonds and notes payable from the Water Debt Service Fund. The proceeds of the LSLR Grant are irrevocably pledged to the Water Debt Service Fund for payment of the Note. If proceeds of the LSLR Grant are insufficient to pay principal of the Note when due, the finance director shall transfer from the Water Utility Operating Account to the Water Debt Service Fund amounts of Net Revenues sufficient for the payment of principal then due on the Note and principal of and interest on other bonds and notes payable from the Water Debt Service Fund. Such transfers shall be made at the times and in the amounts determined by the finance director, in accordance with policies established by resolutions of the city council.
3.05 Surplus utility revenues from time to time received in the Water Utility Operating Account, in excess of payments due from and reserves required to be maintained in the Water Utility Operating Account and in the Water Debt Service Fund, may be used for necessary capital expenditures for the improvement of the municipal Water Utility, for the prepayment and redemption of bonds or notes constituting a lien on the Water Utility, and for any other proper municipal purpose consistent with policies established by resolutions of the city council.
3.06 Monies on deposit in the Construction Account and the Water Debt Service Fund may, at the discretion of the City, be invested in securities permitted by Minnesota Statutes, Chapter 118A; provided, that any such investments shall mature at such times and in such amounts as will permit payment of the Project costs and/or the principal and interest on the Note and bonds or notes payable from the Water Debt Service Fund when due, as applicable.
3.07 In accordance with its statutory duties under Minnesota Statutes, Section 475.61, Subdivision 5, the City covenants and agrees with the holders of the Note that if the Note cannot be paid at maturity from the LSLR Grant and Net Revenues or from other funds appropriated by the City, the Note will be paid from the proceeds of definitive obligations which the City Council shall offer for sale in advance of the maturity of the Note.
Section 4. Certificate of Proceedings.
4.01 The clerk is directed to file with the county auditor a certified copy of this resolution and such other information as the county auditor may require, and to obtain from the county auditor a certificate stating that the Note herein authorized has been duly entered on his register.
4.02 The officers of the City are authorized and directed to prepare and furnish to the purchaser and to bond counsel certified copies of all proceedings and records of the City relating to the authorization and issuance of the Note and other affidavits and certificates as may reasonably be requested to show the facts relating to the legality and marketability of the Note as such facts appear from the official books and records of the officers’ custody or otherwise known to them. All of such certified copies, certificates and affidavits, including any heretofore furnished, constitute representations of the City as to the correctness of facts recited therein and the actions stated therein to have been taken.
STATEMENT OF PURPOSE: This resolution establishes the terms and form of the $1,938,000 Taxable Grant Anticipation Revenue Note, Series 2024F (the “Note”), to be issued to the Minnesota Public Facilities Authority (the “Authority”). The Note does not bear interest. The proceeds of the Note will be used for improvements to the water utility system, consisting of replacing lead drinking water service lines for the property addresses listed in the MDH Project Certification, as amended, including any related design and engineering, inspection, project compliance costs, and other eligible items.
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