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RESOLUTION PROVIDING FOR THE ISSUANCE, SALE AND DELIVERY OF GENERAL OBLIGATION STEAM UTILITY REVENUE BONDS, SERIES 2024A, IN AN AMOUNT NOT TO EXCEED $4,100,000; ESTABLISHING THE TERMS AND FORM THEREOF; CREATING A DEBT SERVICE FUND THEREFOR; AND PROVIDING FOR AWARDING THE SALE THEREOF.
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CITY PROPOSAL:
BE IT RESOLVED, by the City Council (the “City Council”) of the city of Duluth, St. Louis County, Minnesota (the “City”), as follows:
Section 1. Purpose and Authorization.
1.01 Under and pursuant to the provisions of Section 55 of the City Charter, Minnesota Laws 1979, Chapter 113, and Minnesota Statutes, Chapter 475, and other pertinent provisions of said Charter and Statutes, the City is authorized to issue general obligation revenue bonds to provide funds for the improvements of the municipal steam plant (including bonds representing part of the interest costs of the issue, within the limitations specified in Minnesota Statutes, Section 475.56), 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.
1.02 The City Council has, by Ordinance No. 10849 adopted September 11, 2023 (the “Ordinance”), ordered the issuance, sale and delivery of general obligation steam utility revenue bonds in a maximum amount of $4,500,000 of the City for the payment of costs of improvements to the municipal steam utility located in the downtown area of Duluth (the “Municipal Steam Utility”), and for payment of part of the interest costs of the Bonds, as hereinafter defined. The improvements to the Municipal Steam Utility include the capital maintenance improvements to the steam plant and distribution system, including control upgrades, meters and distribution line improvements (the “Project”).
1.03 The City has heretofore issued and sold Taxable General Obligation Steam Utility Revenue Bonds, Series 2015D, dated November 5, 2015 (the “2015D Bonds”), now outstanding in the amount of $2,270,000 and Taxable General Obligation Steam Utility Revenue Bonds, Series 2020D, dated October 21, 2020 (the “2020D Bonds”), now outstanding in the amount of $9,230,000. Under the provisions of the resolution authorizing the 2015D Bonds and the 2020D Bonds, the City reserved the privilege of issuing additional bonds payable from said net revenues on a parity with the 2015D Bonds and the 2020D Bonds.
As set out in the Ordinance, the City has reserved the right and privilege of issuing additional bonds and of pledging and appropriating the net revenues of the Municipal Steam Utility for payment thereof.
1.04 The City Council hereby determines that it is necessary and expedient to issue and sell General Obligation Steam Utility Revenue Bonds, Series 2024A, of the City in a principal amount not to exceed $4,100,000 (the “Bonds”) pursuant to the above-described authority, to provide funds to finance the Project, for capitalized interest and for payment of the costs of issuing the Bonds. The sale of the Bonds shall be contingent upon favorable market conditions, as determined by the city administrator or by the finance director, as further described below.
1.05 Provisions of the Internal Revenue Code of 1986, as amended (the “Code”), limits the types of expenditures and operations of financed facilities, such as the Municipal Steam Utility, to be financed with bonds issued on a tax-exempt basis. Due to the operations of the Municipal Steam Utility with a private manager and the method of establishing rates and charges, for the Bonds to be issued on a tax-exempt basis, the Bonds are being issued pursuant to Section 142(a)(9) and (g) of the Code as exempt facility bonds to finance local district heating and cooling facilities. The City applied for and received on January 9, 2024, an allocation of the State of Minnesota’s annual volume cap in the amount of $4,100,000. The Council, pursuant to a Notice of Public Hearing published in the City’s official newspaper on January 27, 2024, held a public hearing on February 12, 2024 on the advisability of issuing the Bonds under the Code as tax-exempt facilities bonds. Pursuant to this resolution, the Council determined to proceed with the issuance of the Bonds as tax-exempt obligations under and pursuant to the Code.
1.06 The City Council hereby finds and determined as follows:
(a) The Bonds shall be dated the date of issuance and shall bear interest at the rates determined by the successful bidder. Interest shall be payable on February 1 and August 1 (each an “Interest Payment Date”) commencing on February 1, 2025.
(b) The Bonds shall mature on the dates and in the amounts set forth in the Terms of Proposal (the “Official Terms”) attached hereto as Exhibit A (as may be adjusted) and as described in a Certificate as to Terms of Bond Sale to be executed by the city administrator or the finance director; provided, however, the total amount of the Bonds shall not exceed $4,100,000, subject to adjustment for a premium sale price as permitted by Section 475.60 of the Act and the final maturity of the Bonds shall not be later than February 1, 2044. The City, through the finance director, reserves the right to issue or to not issue the Bonds based on applicable market conditions.
1.07 The Official Terms as set forth on Exhibit A hereto are approved, subject to the changes permitted below. Bids for the Bonds will be received on a date and time determined by the finance director on the terms and conditions set forth in the Official Terms, which terms and conditions may be modified by the finance director after consulting with the City’s municipal advisor, based on market conditions, so long as the sale of the Bonds occurs on or before July 1, 2024, and so long as the true interest cost of the Bonds does not exceed 5.00%. As authorized by Section 475.60 of the Act, the City Council hereby delegates to the city administrator and the finance director, or either of them, authority to consider the bids and award the sale of the Bonds, and upon acceptance of the best bid meeting the requirements of this resolution, the city administrator and the finance director, or either of them, shall execute on behalf of the City an agreement to sell the Bonds to the successful bidder.
1.08 The City has retained Ehlers & Associates, Inc., Roseville, Minnesota (“Ehlers”), as an independent municipal advisor to the City, and pursuant to Section 475.60, Subd. 2, paragraph (9) of the Act, Ehlers is hereby authorized to solicit bids for the sale of the Bonds on behalf of the City in accordance with the directions of the finance director.
1.09 The City staff, in cooperation with Ehlers, is authorized and directed to prepare on behalf of the City an official statement for the sale of the Bonds and to obtain ratings of the Bonds.
Section 2. Terms of Bonds.
2.01 (a) The Bonds maturing in the years 2028 through 2034 shall not be subject to optional redemption and prepayment before maturity, but those maturing in the years 2035 through 2044 shall be subject to redemption and prepayment at the option of the City on February 1, 2034, and on any date thereafter, in whole or in part, and if in part, by lot as to Bonds maturing in the same year, at a price equal to the principal amount thereof plus accrued interest to the redemption date.
(b) In the event any of the Bonds are called for redemption, notice thereof identifying the Bonds to be redeemed will be given by the Bond Registrar by mailing a copy of the redemption notice by first class mail (postage prepaid) at least 30 days but not more than 60 days prior to the date fixed for redemption to the registered owner of each Bond to be redeemed at the address shown on the registration books kept b the Bond Registrar; provided, however, that so long as the Bonds are registered in the name of Cede & Co. as nominee of The Depository Trust Company, Jersey City, New Jersey (“DTC”), notice of redemption shall be given in accordance with the terms of the Representation Letter hereinafter described. Failure to give notice by mail to any registered owner, or any defect therein, will not affect the validity of any proceeding for the redemption of Bonds not affected by such defect or failure. Bonds so called for redemption will cease to bear interest after the specified redemption date, provided that the funds for the redemption are on deposit with the place of payment at that time.
(c) If less than all the Bonds of a maturity are called for redemption while the Bonds are registered in the name of Cede & Co., the City or the Bond Registrar designated below will notify DTC of the particular amount of such maturity to be prepaid. DTC will determine by lot the amount of each beneficial ownership interest in such maturity to be redeemed. If less than all the Bonds of a maturity are called for redemption and the Bonds are not registered in the name of Cede & Co., the Bond Registrar will determine by lot or other manner deemed fair the amount of each maturity to be redeemed. All prepayments shall be at a price equal to the principal amount thereof plus accrued interest.
2.02 Interest will be computed on the basis of a 360-day year of twelve 30-day months and will be rounded pursuant to the rules of the municipal securities rulemaking board. The Bond Registrar designated below shall make all interest payments with respect to the Bonds by check or draft mailed to the registered owners of the Bonds shown on the bond registration records maintained by the Bond Registrar at the close of business on the 15th day (whether or not a business day) of the month next preceding the Interest Payment Date at such owners’ addresses shown on such bond registration records.
2.03 (a) The Bonds shall be prepared for execution in accordance with the approved form and shall be signed by the manual or facsimile signature of the mayor and attested by the manual or facsimile signature of the city clerk. In case any officer whose signature or a facsimile of whose signature shall appear on the Bonds shall cease to be an officer before delivery of the Bonds, such signature or facsimile shall nevertheless be valid and sufficient for all purposes, as if he or she had remained in office until delivery.
(b) The city clerk is authorized and directed to obtain a copy of the approving legal opinion of Fryberger, Buchanan, Smith & Frederick, P.A. of Duluth, Minnesota, and cause the opinion to be attached to each Bond.
2.04 The City hereby appoints Bond Trust Services Corporation, in Roseville, Minnesota, as registrar, authenticating agent, paying agent and transfer agent for the Bonds (such bank or its successor is herein referred to as the “Bond Registrar”). To provide for the Bond Registrar services, the mayor and the city clerk are authorized and directed to execute an agreement relating to paying agent, registrar and transfer agency. No Bond shall be valid or obligatory for any purpose until the Bond Registrar’s authentication certificate on such Bond, substantially set forth in Section 3.01 hereof, shall have been duly executed by an authorized representative of the Bond Registrar. Authentication certificates on different Bonds need not be signed by the same representative. The manual signature of one officer of the City or the executed authentication certificate on each Bond shall be conclusive evidence that it has been authenticated and delivered under this resolution.
2.05 (a) In order to make the Bonds eligible for the services provided by DTC, the City has previously agreed to the applicable provisions set forth in the blanket issuer letter of representations which has been executed by the City (the “Representation Letter”).
(b) Notwithstanding any provision herein to the contrary, so long as the Bonds shall be in Book-Entry Form, the provisions of this Section 2.05 shall govern.
(c) All of the Bonds shall be registered in the name of Cede & Co., as nominee for DTC. Payment of interest on and principal of any Bond registered in the name of Cede & Co. shall be made by wire transfer or New York Clearing House or equivalent same day funds by 10:00 a.m. CT or as soon as possible thereafter following the Bond Registrar’s receipt of funds from the City on each Interest Payment Date to the account of Cede & Co. on each Interest Payment Date at the address indicated in or pursuant to the Representation Letter.
(d) DTC (or its nominees) shall be and remain recorded on the Bond Register as the holder of all Bonds which are in Book-Entry Form. No transfer of any Bond in Book-Entry Form shall be made, except from DTC to another depository (or its nominee) or except to terminate the Book-Entry Form. All Bonds of such stated maturity of any Bonds in Book-Entry Form shall be issued and remain in a single bond certificate registered in the name of DTC (or its nominee); provided, however, that upon termination of the Book-Entry Form pursuant to the Representation Letter, the City shall, upon delivery of all Bonds of such series from DTC, promptly execute, and the Bond Registrar shall thereupon authenticate and deliver, Bonds of such series to all persons who were beneficial owners thereof immediately prior to such termination; and the Bond Registrar shall register such beneficial owners as holders of the applicable Bonds.
The Bond Registrar shall maintain accurate books and records of the principal balance, if any, of each such outstanding Bond in Book-Entry Form, which shall be conclusive for all purposes whatsoever. Upon the authentication of any new bond in Book-Entry Form in exchange for a previous bond, the Bond Registrar shall designate thereon the principal balance remaining on such bond according to the Bond Registrar’s books and records.
No beneficial owner (other than DTC) shall be registered as the holder on the Bond Register for any Bond in Book-Entry Form or entitled to receive any bond certificate. The beneficial ownership interest in any Bond in Book-Entry Form shall be recorded, evidenced and transferred solely in accordance with the Book-Entry System.
Except as expressly provided to the contrary herein, the City and the Bond Registrar may treat and deem DTC to be the absolute owner of all Bonds of each series which are in Book-Entry Form (i) for the purpose of payment of the principal of and interest on such Bond, (ii) for the purpose of giving notices hereunder, and (iii) for all other purposes whatsoever.
(e) The City and the Bond Registrar shall each give notices to DTC of such matters and at such times as are required by the Representation Letter, including the following:
(i) with respect to notices of redemption; and
(ii) with respect to any other notice required or permitted under this Bond Resolution to be given to any holder of a Bond.
All notices of any nature required or permitted hereunder to be delivered to a holder of a Bond in Book-Entry Form shall be transmitted to beneficial owners of such Bonds at such times and in such manners as shall be determined by DTC, the participants and indirect participants in accordance with the Book-Entry System and the Representation Letter.
(f) All payments of principal, redemption price of and interest on any Bonds in Book-Entry Form shall be paid to DTC (or Cede & Co.) in accordance with the Book-Entry System and the Representation Letter in same day funds by wire transfer.
2.06 The City shall cause to be kept by the Bond Registrar a bond register in which, subject to such reasonable regulations as the Bond Registrar may prescribe, the City shall provide for the registration of the Bonds and the registration of transfers of the Bonds entitled to be registered or transferred as herein provided. In the event of the resignation or removal of the Bond Registrar or its incapability of acting as such, the bond registration records shall be maintained at the office of the successor Bond Registrar as may be appointed by the City Council. Upon surrender for transfer of any Bond at the principal corporate office of the Bond Registrar, the City shall execute and the Bond Registrar shall authenticate, if required by law or this resolution, and deliver, in the name(s) of the designated transferee or transferees, one or more new Bonds of the like aggregate principal amount, as requested by the transferor.
2.07 Each Bond delivered upon transfer of or in exchange for or in lieu of any other Bond shall carry all of the rights to interest, accrued and unpaid and to accrue, which are carried by such other Bond. Each Bond shall be dated by the Bond Registrar as of the date of its authentication. The City and the Bond Registrar shall not be required to make any transfer or exchange of any Bonds called for redemption or to make any such exchange or transfer of the Bonds during the 15 days next preceding the date of the mailing of the notice of redemption in the case of a proposed redemption of the Bonds.
2.08 The City and the Bond Registrar may treat the person in whose name any Bond is registered as the owner of such Bond for the purpose of receiving payment of principal of and interest on such Bond and for all other purposes whatsoever, whether or not such Bond be overdue, and neither the City nor the Bond Registrar shall be affected by notice to the contrary.
2.09 The principal of and interest on the Bonds shall be payable by the Bond Registrar, as paying agent, in such funds as are legal tender for the payment of debts due the United States of America. The City shall pay the reasonable and customary charges of the Bond Registrar for the disbursement of principal and interest.
2.10 Delivery of the Bonds and payment of the purchase price shall be made at a place mutually satisfactory to the City and the purchaser. Printed or typewritten and executed Bonds shall be furnished by the City without cost to the purchaser. The Bonds, when prepared in accordance with this resolution and executed, shall be delivered by or under the direction of the finance director to the purchaser upon receipt of the purchase price plus accrued interest.
Section 3. Form of the Bonds.
3.01 The Bonds shall be printed or typewritten in substantially the following form:
UNITED STATES OF AMERICA
STATE OF MINNESOTA
COUNTY OF ST. LOUIS
CITY OF DULUTH
GENERAL OBLIGATION STEAM UTILITY REVENUE BOND
SERIES 2024A
R-__ $_______
|
Interest Rate |
Maturity Date |
Date of Original Issue |
CUSIP |
|
_____% |
February 1, 20__ |
February 28, 2024 |
___________ |
REGISTERED OWNER: CEDE & CO.
PRINCIPAL AMOUNT:
The City of Duluth, in St. Louis County, Minnesota (the “City”), for value received, promises to pay to the registered owner specified above, or registered assigns, the principal amount specified above, on the maturity date specified above, and to pay interest on said principal amount to the registered owner hereof from the Date of Original Issue, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, until the principal amount is paid or discharged, said interest being at the rate per annum specified above. Interest is payable semiannually on February 1 and August 1 of each year (each referred to herein as an “Interest Payment Date”) commencing on February 1, 2025. Both principal and interest are payable in lawful money of the United States of America by check or draft at the office of Bond Trust Services Corporation in Roseville, Minnesota, as the registrar, paying agent, transfer agent and authenticating agent (the “Bond Registrar”), or at the office of such successor bond registrar as may be designated by the City Council. The Bond Registrar shall make all interest payments with respect to this Bond directly to the registered owner hereof shown on the bond registration records maintained on behalf of the City by the Bond Registrar at the close of business on the 15th day of the month next preceding the Interest Payment Date (whether or not a business day), at such owner’s address shown on said bond registration records, without, except for payment of principal on the Bond, the presentation or surrender of this Bond, and all such payments shall discharge the obligations of the City to the extent of the payments so made. Payment of principal shall be made upon presentation and surrender of this Bond to the Bond Registrar when due. For the prompt and full payment of such principal and interest as they become due, the full faith and credit of the City are irrevocably pledged.
This Bond is one of a series issued by the City in the aggregate amount of $___________________, all of like date and tenor, except as to number, amount, maturity date, redemption privilege and interest rate, pursuant to: (i) the authority contained in Minnesota Statutes, Chapter 475, and Section 55 of the Home Rule Charter of the City, Minnesota Laws 1979, Chapter 113 and all other laws and Charter provisions thereunto enabling; (ii) Ordinance No. 10849 adopted on September 11, 2023 (the “Ordinance”); and (iii) an authorizing resolution adopted by the governing body of the City on February 12, 2024, and the award of the sale of the Bonds by the City Administrator or the Finance Director of the City, as evidenced by the Certificate as to Terms of Bond Sale dated February ____, 2024 (the “Resolution”), for the purpose of providing funds for improvements to the City’s municipal steam utility located in the downtown area of Duluth and for payment of part of the interest costs of such bond issue.
The Bonds are payable from the net revenues to be derived from the operation of the municipal steam utility of the City located in the downtown area of Duluth, as set forth in the Ordinance and the Resolution to which reference is made for a full statement of rights and powers thereby conferred. In the Ordinance and the Resolution, the City has pledged and appropriated the revenues to be derived from the operation of such municipal steam utility in excess of normal, reasonable and current costs of the operation and maintenance of the municipal steam utility, for the payment of the principal and interest when due on the Bonds, and has covenanted and agreed that it will impose and collect just and equitable charges for all use and for the availability of all facilities of the municipal steam 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 and interest due on the Bonds.
The Bonds maturing in the years ____ and ____ shall be subject to mandatory redemption and redeemed in installments as provided in the Resolution, at par plus accrued interest to the date of redemption.
The Bonds of this series maturing in the years 2028 through 2034 are not subject to redemption before maturity, but those maturing in the years 2035 through 2044 are each subject to redemption and prepayment at the option of the City on February 1, 2034, and on any date thereafter, in whole or in part, and by lot as to Bonds maturing in the same year, at a price equal to the principal amount plus accrued interest to the redemption date.
Not less than 30 nor more than 60 days prior to the date fixed for redemption and prepayment of any Bonds, notice of redemption shall be mailed to each registered owner of a Bond to be redeemed; provided, however, that so long as the Bonds are registered in the name of Cede & Co., as nominee for The Depository Trust Company, Jersey City, New Jersey (“DTC”), notice of redemption shall be given in accordance with the terms of the Blanket Issuer Letter of Representations executed by the City and DTC.
If less than all the Bonds of a maturity are called for redemption while the Bonds are registered in the name of Cede & Co., the City or the Bond Registrar designated below will notify DTC of the particular amount of such maturity to be prepaid. DTC will determine by lot the amount of each participant’s interest in such maturity to be redeemed and each participant will then select by lot the beneficial ownership interest in such maturity to be redeemed. If less than all the Bonds of a maturity are called for redemption and the Bonds are not registered in the name of Cede & Co., the Bond Registrar will determine by lot or other manner deemed fair, the amount of each maturity to be redeemed. All prepayments shall be at a price equal to the principal amount thereof plus accrued interest. If any Bond is redeemed in part, upon surrender of the Bond being redeemed, the City shall deliver or cause to be delivered to the registered owner of such Bond, a Bond is like form in the principal amount equal to that portion of the Bond so surrendered not being redeemed.
The Bonds of this series are issued as fully registered bonds without coupons, in the denomination of $5,000 or any integral multiple thereof. Subject to limitations set forth in the Resolution, this Bond is transferable by the registered owner hereof upon surrender of this Bond for transfer at the principal corporate office of the Bond Registrar, duly endorsed or accompanied by a written instrument of transfer in form satisfactory to the Bond Registrar and executed by the registered owner hereof or the owner’s attorney duly authorized in writing. Thereupon the City shall execute and the Bond Registrar shall authenticate, if required by law and the Resolution, and deliver, in exchange for this Bond, one or more new fully registered bonds in the name of the transferee, of an authorized denomination, in an aggregate principal amount equal to the unpaid principal amount of this Bond, of the same maturity, and bearing interest at the same rate.
IT IS CERTIFIED AND RECITED that all acts and conditions required by the Charter of the City and by the laws and the Constitution of the State of Minnesota to be done, and to exist precedent to and in the issuance of this Bond in order to make it a valid and binding general obligation of the City in accordance with its terms, have been done and do exist in form, time, and manner as so required; that all taxable property within the corporate limits of the City is subject to the levy of ad valorem taxes to the extent needed to pay the principal hereof and the interest hereon when due, without limitation as to rate or amount; and that the issuance of this Bond does not cause the indebtedness of the City to exceed any constitutional, statutory or charter limitation.
This Bond shall not be valid or become obligatory for any purpose or be entitled to any security or benefit under the Resolution until the Bond Registrar’s Authentication Certificate hereon shall have been executed by the Bond Registrar by one of its authorized representatives.
IN WITNESS WHEREOF, the City of Duluth, in St. Louis County, Minnesota, by its City Council, has caused this Bond to be executed in its name by the manual or facsimile signatures of the mayor and the city clerk.
Attest:
__________________________ ______________________________
City Clerk Mayor
Date of Authentication: __________________________
BOND REGISTRAR’S AUTHENTICATION CERTIFICATE
The Bond Registrar confirms that the books reflect the ownership of the Bond registered in the name of the owner named above in the principal amount and maturing on the date stated above and this Bond is one of the Bonds of the series issued pursuant to the Resolution hereinabove described.
BOND TRUST SERVICES CORPORATION
By____________________________
Authorized Representative
REGISTRATION CERTIFICATE
This Bond must be registered as to both principal and interest in the name of the owner on the books to be kept by Bond Trust Services Corporation, of Roseville, Minnesota, as Bond Registrar. No transfer of this Bond shall be valid unless made on said books by the registered owner or the owner’s attorney thereunto duly authorized and similarly noted on the registration books. The ownership of the unpaid principal balance of this Bond and the interest accruing thereon is registered on the books of Bond Trust Services Corporation as Bond Registrar, in the name of the registered owner last noted below.
Date Registered Owner Signature of Bond Registrar
__/__/2024 Cede & Co. __________________
c/o The Depository Trust Company
570 Washington Blvd.
Jersey City, NJ 07310
Federal Taxpayer I.D. No.: 13-2555119
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned sells, assigns, and transfers unto
(Name and Address of Assignee)
___________________ Social Security or Other
Identifying Number of
___________________ Assignee
the within Bond and all rights thereunder and does hereby irrevocably constitute and appoint _________________________________________ attorney to transfer the said Bond on the books kept for registration thereof with full power of substitution in the premises.
Dated: ________________________.
NOTICE: The signature of this assignment must correspond with the name of the registered owner as it appears upon the face of the within Bond in every particular, without alteration or enlargement or any change whatsoever.
Signature Guaranteed:
______________________________
(Bank, Trust Company, member of
National Securities Exchange)
Unless this Bond is presented by an authorized representative of The Depository Trust Company, a New York corporation (“DTC”), to the City or its agent for registration of transfer, exchange, or payment, and any bond issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL, inasmuch as the registered owner hereof, Cede & Co., has an interest herein.
Section 4. Covenants, Revenues, Accounts and Tax Levies.
4.01 (a) The City Council covenants and agrees with the holders of the Bonds 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 Municipal Steam Utility located in the downtown area of Duluth at the times and in the amounts required to pay the normal, reasonable and current expenses of operating and maintaining the Municipal Steam Utility, and also to produce net revenues at least adequate at all times to pay the principal and interest due on the Bonds and on all other bonds heretofore or hereafter issued and made payable from said net revenues, and will operate the Municipal Steam Utility and segregate and account for the revenues thereof as provided in this section.
The City will place all such charges, when collected, and all money received from the sale of any facilities or equipment of the Municipal Steam Utility in a separate Steam Utility Operating Account within the Public Utility Steam District No. 1 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 Municipal Steam Utility, and to maintain such reasonable reserves for such expenses as the finance director 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 which are herein pledged and appropriated first to pay the principal of and interest on all Municipal Steam Utility bonds when due.
(b) The City has created a separate construction account within the Public Utility Steam District No. 1 Fund to which there shall be credited the proceeds of the Bonds, together with any additional funds which may be available and are appropriated for 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 improvements to the Municipal Steam Utility capitalized interest and costs of the issuance of the Bonds.
(c) Until the Bonds issued hereunder are fully paid or duly called for redemption, or otherwise discharged, the City will also maintain a separate debt service account (the “Debt Service Fund”) in the Public Utility Steam District No. 1 Fund to be used solely for the payment of the principal and interest, as such principal and interest become due and payable, on the Bonds and on any other bonds which have been or may be issued and made payable from said net revenues of the Municipal Steam Utility. The finance director shall credit to the Debt Service Fund the rounding amount and the amount of accrued interest, if any, on the Bonds. The finance director shall transfer from the Steam 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 Bonds, and all charges due to the Bond Registrar. 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.
(d) Surplus revenues from time to time received in the Steam Utility Operating Account, in excess of payments due from and reserves required to be maintained in the Steam Utility Operating Account and in the Debt Service Fund, may be used for necessary capital expenditures for the improvement of the Municipal Steam Utility, for the prepayment and redemption of bonds constituting a lien on the Municipal Steam Utility, and for any other proper municipal purpose consistent with policies established by resolutions of the City Council.
4.02 If the balance in the Debt Service Fund is ever insufficient to pay all principal and interest then due on the Bonds, the finance director 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 the Debt Service Fund when the balance therein is sufficient. It is estimated that the net revenues 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 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.
Section 5. Tax Covenants.
5.01 (a) The City Council covenants and agrees with the holders of the Bonds that the City will (i) take all action on its part necessary to cause the interest on the Bonds to be excluded from gross income for federal income taxes including, without limitation, restricting, to the extent necessary, the yield on investments made with the proceeds of the Bonds 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 Bonds to be subject to federal income taxes, including, without limitation, refraining from spending the proceeds of the Bonds and investment earnings thereon on certain specified purposes.
(b) As set out in Section 1.05 of this Resolution, the Bonds are being issued pursuant to Section 142(a)(9) and (g) of the Code as exempt facility bonds to finance local district heating and cooling facilities. The City covenants and agrees to comply with Sections 142, 146 and 147 as they apply to the Bonds and use of the Project, including but not limited to (i) receipt of State of Minnesota Annual Volume Cap in the amount of $4,100,000; (ii) holding a public hearing on the Project and issuance of the Bonds; (iii) receipt of public approval by the City Council and Mayor of the City; (iv) assuring that the average maturity of the Bonds do not exceed 120% of the economic life of the Project; (v) assuring that the costs of issuance to be financed with proceeds of the Bonds does not exceed 2.0% of the proceeds of the Bonds; (vi) assuring that the Utility has at least 10 users of the commercial heating and cooling; and (vii) assuring the City’s continued use of the Utility is for local district heating and cooling purposes throughout the term of the Bonds.
5.02 (a) No portion of the proceeds of the Bonds shall 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 for a reasonable temporary period until such proceeds are needed for the purpose for which the Bonds were issued. To this effect, any proceeds of the Bonds 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 Bonds) in excess of amounts which under the applicable federal arbitrage regulations may be invested without regard as to yield shall 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 of minor portion made available under the federal arbitrage regulations.
(b) In addition, the proceeds of the Bonds and money in the Debt Service Fund shall not be invested in obligations or deposits issued by, guaranteed by 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 Internal Revenue Code of 1986, as amended (the “Code”).
5.03 Eighteen-Month Spending Exemption to Rebate. (a) Pursuant to Section 1.148-7(d) of the U.S. Treasury Regulations, relating to exception from rebate for certain proceeds of the Bonds spent within a specified time frame, the Issuer reasonably expects that the gross proceeds and investment earnings thereon will be allocated to project costs allocable to the Bonds in accordance with the following schedule measured from the date of closing and delivery of the Bonds:
A. at least 15% within 6 months (the first spending period);
B. at least 60% within 12 months (the second spending period); and
C. 100% within 18 months (the third spending period);
provided that the Bonds will not fail to satisfy the spending requirement herein specified as a result of reasonable retainage not exceeding 5% of the proceeds of the Bonds if such amount is allocated to the portion of the project costs allocable to the Bonds within 30 months of the date of closing and delivery of the Bonds. In the event proceeds of the Bonds are not so spent, the Issuer will compute and cause the payment to the United States of all amounts required under the rebate requirement of Section 148(f) of the Code and the Regulations issued thereunder.
(b) Unless the proceeds are spent pursuant to an arbitrage rebate spending exception, the City covenants to compute and cause the payment to the United States of all amounts required under the rebate requirement of Code Section 148(f), the regulations issued thereunder with regard to the Bonds. To this end, the City agrees to:
(1) maintain records identifying all “gross proceeds” as defined in Code Section 148(f)(6)(B) attributable to the Bonds, the yield at which such gross proceeds are invested, any arbitrage profit derived therefrom (earnings in excess of the yield on the Bonds) and any earnings derived from the investment of such arbitrage profit;
(2) make, or cause to be made within 30 days after the close of each fifth bond year, the annual determination of the amount, if any, of excess arbitrage required to be paid to the United States by the City (the “Rebate Amount”);
(3) pay, or cause to be paid, to the United States at least once every five bond years the Rebate Amount, if any, including the last installment which must be made no later than 60 days after the day on which the Bonds are paid in full; and
(4) retain all records of the annual determination of the foregoing amounts until six years after the Bonds have been fully paid.
(c) The City shall use its best efforts to comply with any federal procedural requirements which may apply in order to effectuate the designation made by this section.
Section 6. Continuing Disclosure. The City acknowledges that the Bonds are subject to the continuing disclosure requirements of Rule 15c2-12 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934 (17 C.F.R. § 240.15c2-12) (the “Rule”). The Rule governs the obligations of certain underwriters to require that issuers of municipal bonds enter into agreements for the benefit of the bondholders to provide continuing disclosure with respect to the Bonds. To provide for the public availability of certain information relating to the Bonds and the security therefor and to permit underwriters of the Bonds to comply with the Rule, which will enhance the marketability of the Bonds, the mayor and the city clerk are hereby authorized and directed to execute a continuing disclosure certificate substantially in the form of Exhibit B attached hereto.
Section 7. Certificate of Proceedings.
7.01 The city 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 Bonds have been duly entered on the county auditor’s register.
7.02 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 Bonds and other affidavits and certificates as may reasonably be requested to show the facts relating to the legality and marketability of the Bonds 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.
7.03 The officers of the City are hereby authorized and directed to certify that they have examined the official statement prepared and circulated in connection with the sale of the Bonds and that to the best of their knowledge and belief the official statement is a complete and accurate representation of the facts and representations made therein as of the date of the official statement.
Statement of Purpose
STATEMENT OF PURPOSE: This resolution authorizes the sale of General Obligation Steam Utility Revenue Bonds, Series 2024A, in the maximum amount of $4,100,000 to provide funds for project costs plus additional amounts for underwriter discount, capitalized interest and costs of issuance. The resolution allows the finance director to select the date to offer the bonds for sale, authorizes the City’s municipal advisor to solicit bids and authorizes the city administrator and the finance director, or either of them, to award the sale so long as the true interest cost of the bonds does not exceed 5.00%. The bonds are payable from the net revenues to be derived from the operation of the steam utility. The proceeds will be used for improvements to the steam utility, including control upgrades, meters and distribution line improvements.