HomeMy WebLinkAbout5. Private Activity Revenue Bond Policy Adoption 0111"1111 5.
SHAKOPEE
TO: Economic Development Authority
FROM: Samantha DiMaggio, Economic Development Coordinator
DATE: 06/18/2013
SUBJECT: Private Activity Revenue Bond Policy Adoption
Action Sought
The EDA is asked to make a recommendation on the adoption of a Private Activity Revenue Bond Policy.
Introduction
City Staff has developed a Private Activity Revenue Bond Policy and would like your recommendation on it before
it's brought to the City Council.
Background
The City has been approached by a variety of end users to issue Private Activity Revenue Bonds on their behalf.
Some of these users include multi - family housing developments, senior housing developments and health care
facilities.
The advantage to the businesses is that they are able to use the City's tax- exempt status to get more favorable bond
interest rates when the bonds are sold. Conversely, the City is able to assist these businesses , while at the same
time not incurring any risk or potential impact on the city's bond credit rating.
Previously, the City has issued conduit bonds to benefit local entities such as St. Gertrude's and St. Francis, and the
Emerald Crest care facility. There are also times when a city may be asked to issue bonds on behalf of
organizations in other cities. That may be due to other potential- issuer cities being at a statutory maximum for
issuance of bonds, or that the benefiting business may have multiple city locations, which may or may not include
Shakopee.
Previously, the City has billed for actual expenses incurred due to financial or legal reviews. However, there are
also ongoing costs involved with reporting requirements. Therefore, to ensure continuity, and to make certain that
future reporting costs are covered, a policy for the issuance of conduit bonds is recommended.
The City Attorney's office, Kennedy & Graven, and the City's Financial Adviser, Springsted, have sent samples of
current policies from a variety of cities for the staff to use when developing a policy. The EDAC reviewed a
staff - recommended policy on June 12, 2013, and subsequently made a recommendation that the City Council
approve the policy. Their only addendum was that it include a provision that the benefiting business shall have a tie
to Shakopee.
Budget Impact:
The recommended policy provides that there be non - refundable application fees of $1000, and that bond
administration fees of up to a maximum of $50,000 (depending on the amount of the bonds to be issued) be
included. Adoption of these reimbursement guidelines will guaranty both short term, and long -term cost recoveries
for the City.
Relationship to Visioning:
This supports Goal D, "Maintain, improve, and create strong partnerships with other public and private sector
entities."
Recommendation:
I recommend the EDA recommend an adoption of the Policy to the City Council.
Action Required
If the EDA concurs, it should, by motion, recommend to the City Council the attached adoption of the Private
Activity Revenue Bond Policy.
Attachments: Bond Policy
CITY OF SHAKOPEE, MINNESOTA
PRIVATE ACTIVITY REVENUE BOND POLICY
I. INTRODUCTION
The City of Shakopee, Minnesota (the "City ") has the authority to issue revenue bonds
pursuant to Minnesota Statutes, Sections 469.152 to 469.1651 (the "Industrial Development Act ")
and Minnesota Statutes, Chapter 462C (the "Housing Act "). The City Council of the City will
consider the issuance of private activity bonds (both taxable and tax - exempt) to finance the
following types of projects:
(1) Manufacturing / industrial facilities;
(2) Multifamily housing;
(3) Health care facilities;
(4) Other projects on behalf of 501(c)(3) organizations; and
(5) Other projects authorized by state statutes and federal law.
In extraordinary circumstances, the City Council of the City may consider and approve
the issuance of private activity bonds by the Economic Development Authority for the City of
Shakopee (the "EDA ").
II. GENERAL REQUIREMENTS
The following are the general guidelines and requirements the City will use to evaluate
requests for private activity bond financing. The City has complete discretion regarding whether
to issue private activity bonds and reserves the right to approve only proposals which, in the
opinion of the City, meet the needs of the City and have a strong likelihood of success. All
proposals for the issuance of private activity bonds must meet the following general
requirements:
A. Be consistent with the City's Comprehensive Plan.
B. Fulfill all of the applicable federal and state requirements for the issuance of
bonds.
C. Comply with all applicable federal, state, regional, and City laws, including
zoning and land use regulations and ordinances applicable to the project.
D. The applicant agrees to use the legal services of a bond attorney designated by the
City of Shakopee.
E. The applicant for bond financing and the applicant's chosen bond underwriter,
placement agent or lender shall hold the City and its respective officers,
consultants, and agents harmless from any alleged or actual violations of any
securities laws, state or federal, in connection with the issuance of bonds for the
project. In addition, the City shall not be held responsible for any debt repayment
of the bond issue or other costs relating to the project to be financed, should it fail
financially for any reason.
F. The City is to be reimbursed and held harmless for and from any out -of- pocket
expenses related to the bonds including, but not limited to, legal fees, financial
analyst fees, bond counsel fees, the City staffs expenses in connection with the
application, and any deposits or application fees required under state law in order to
secure allocation of bonding authority. The applicant must execute a letter to the
City undertaking to pay all such expenses. A form of the required letter is set forth
in Exhibit C.
G. If the City determines that issuance of the bonds requested by the applicant is
reasonably expected to cause governmental bonds issued by the City in that
calendar year to be ineligible for designation as "qualified tax exempt obligations"
under Section 265(b)(3) of the Internal Revenue Code of 1986, as amended (also
known as "bank qualified "), the applicant will be required to reimburse the City,
at the time of issuance of the City' s bonds, for any interest rate differential
between bank qualified and non -bank qualified bonds.
H. Applications for financing must be made on the forms attached to this Private
Activity Revenue Bond Policy.
I. The applicant must deposit all required fees on a timely basis.
J. The Council may, in its sole discretion, impose conditions exceeding those required
under the City building code in respect to exterior building materials, landscaping,
signage lighting, and such other aspects as the Council may consider appropriate on
a case -by -case basis.
K. The Council may, in its sole discretion, withdraw its preliminary approval of a
project any time if in its judgment the purposes of the Industrial Development Act or
the Housing Act will not be served by going forward with the project and its
financing.
III. TYPES OF PROJECTS
1. Manufacturing / Industrial Facilities
Bonds for manufacturing facilities are issued under the Industrial Development Act and
either Section 144(a) or Section 141 of the Internal Revenue Code, as amended (the "Code "). In
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addition, the bonds are generally subject to the volume cap allocation requirements of Minnesota
Statutes, Chapter 474A, as amended. The purpose of issuing bonds for such facilities is to
encourage the development of appropriate industrial projects that will benefit the community by
providing jobs and economic development, eliminating blight, and increasing property values.
Manufacturing bonds are available only for "core" manufacturing projects, and only for relatively
small manufacturers (cannot expect to have more than the maximum IRS allowable capital
expenditures in the City in the six -year period surrounding issuance of the bonds).
2. Multifamily Housing
Housing bonds to fmance privately -owned multi - family housing facilities within the City
are authorized under the Housing Act and either (a) in the case of facilities owned by 501(e)(3)
entities, Section 145 of the Code or (b) in the case of facilities owned by non- 501(c)(3) entities,
Section 142(d) of the Code. The purpose of issuing multifamily housing bonds is to benefit the
community by encouraging the availability of multifamily housing opportunities for residents of the
City. The City within its sole discretion will determine whether or not to approve Housing bonds
and if so, which multifamily project or projects it will finance. All housing projects financed with
tax- exempt bonds must comply with the restrictions set for in the Housing Act and Section 142(d)
of the Code and the Treasury Regulations promulgated thereunder.
3. Health Care Facilities
Health care facility revenue bonds are issued to finance hospitals, nursing homes or
assisted living facilities within the City owned and operated by 501(c)(3) entities. Such bonds
are issued in accordance with the Industrial Development Act or the Housing Act and Section 145
of the Code. The purpose of issuing health care bonds is to benefit the community by encouraging
the availability of affordable health care services for residents of the City.
4. Facilities for other 501(0(3) Organizations
Bonds may be issued to finance facilities within the City providing services that benefit
the City and its residents (including, without limitation, educational services) owned and
operated by 501(c)(3) entities. Such bonds are issued in accordance with the Industrial
Development Act or the Industrial Development Act and Section 145 of the Code. The purpose of
issuing such bonds is to benefit the community by encouraging the availability of beneficial
services for residents of the City.
IV. DESIGN AND MAINTENANCE STANDARDS
A. The project to be financed shall use building and design materials that are in
compliance with applicable state and local building and licensing codes and
designated maintenance standards.
B. The design and maintenance must be compatible with other neighboring land
uses, building architecture, and landscaping.
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V. FEES
A. A non - refundable application fee of $1,000 is due at the time the application is
made. This fee shall be due in the case of an application for either a new money
bond issue or a refunding bond issue. This application fee is in addition to the
other fees set forth below and is not a credit against said additional fees.
B. A bond administration fee of the greater of $10,000 or 0.50% of the principal
amount of the bonds is due at the time of closing on the bonds, subject to a
maximum fee of $50,000. This fee shall be due in the case of all new money
issues.
C. For bonds to be issued to refund a bond issue not issued by the City and for which
the bond administration fee in paragraph B was previously paid to the City, no
additional bond administration fee will be required.
D. For bonds to be issued to refund a bond issue previously issued by the City or its
EDA, a bond administration fee of the greater of $10,000 or 0.25% of the
principal amount of the refunding bonds is due at the time of closing on the
bonds, subject to a maximum fee of $50,000.
E. All fees and expenses in relation to the issuance of the bonds (in addition to the
foregoing application fee and bond administrative fee), including the fees of the
City's bond counsel, shall be the responsibility of the applicant, regardless of
whether the bonds are actually issued.
F. For applications requiring an allocation of bonding authority from Minnesota
Management and Budget ( "MMB ") pursuant to the provisions of Chapter 474A,
an application, in the form prescribed by MMB, must be submitted to MMB along
with the appropriate application deposit and nonrefundable application fee due to
MMB.
VI. HOST APPROVAL
The City will consider requests for the issuance of bonds by other political subdivisions to
finance of projects in the City. In these cases, the non - refundable application fee must be paid. No
administrative fee is charged, except actual costs incurred by the City, including costs associated
with a review by the City's bond counsel (if necessary), must be reimbursed. The City reserves the
right to reject such requests for any reason, including without limitation a determination by the City
that such issuance by another political subdivision would impair the City's ability to issue
governmental bonds as "bank qualified bonds" in that calendar year.
VII. REFUNDING BONDS
Previous issuance of bonds by the City does not commit the City to the issuance of
refunding bonds at a future date. Applications for the refunding of previously issued bonds will
be evaluated in terms of general benefit to the City based on such factors as financial benefit to
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the applicant, the project's past operating history, including property maintenance and
employment, and the applicant's future plans for operations in the City. To the extent
appropriate, the provisions of this Private Activity Revenue Bond Policy shall apply to refunding
bonds.
It is recognized that projects previously financed may not have met the foregoing
requirements applicable to new financing requests. Applications that include the refunding of
previously issued bonds will be evaluated based on such factors as substantial debt service
savings, removal of bonding covenants significantly impairing the financial feasibility of the
project, significant rehabilitation or physical improvements of the property, or enhancements to
the affordability of existing rents.
VIII. POST - ISSUANCE COMPLIANCE
The City will require that each applicant demonstrate to the City that it will comply with
substantially the same procedures for post- issuance compliance that apply to City governmental
bonds under the City's Post Issuance Debt Compliance Policy, approved December 1, 2009, as
amended from time to time. The City may require that applicants retain a trustee and/or an
independent arbitrage consultant for the term of the bonds.
IX. APPLICATION PROCESS
The process for obtaining bond financing is as follows:
A. An application for the issuance of bonds must be submitted in the form specified
by City staff along with the required application fee. Please submit applications
to:
Finance Director
City of Shakopee
129 Holmes St. South
Shakopee, MN 55379
B. City staff will complete an initial review to evaluate the proposal and determine
whether it qualifies for consideration for financing.
C. Staff will consult with the City's bond counsel as necessary to verify the project's
qualifications for financing.
D. For bonds requiring a bond allocation from the Department prior to issuance, the
proposal will be presented to the City Council for a preliminary resolution. The
resolution will identify the preliminary intent of the City to issue bonds, a
description of the proposed project, and the amount of bonds to be issued. Upon
adoption of the preliminary resolution, the applicant, working with the City's
bond counsel, shall prepare the application to be submitted by the City for a bond
allocation to MMB.
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E. All of the bonds for new money projects described in this Private Activity
Revenue Bond Policy require a public hearing held by the City at some time after
the public hearing. Housing bonds under Chapter 462C require, prior to
publication of notice of the public hearing, submission of a Housing Program to
the Metropolitan Council. The Housing Program must be approved by the
Metropolitan Council. Following such public hearing, the City will adopt a final
bond resolution approving the documentation to be executed by the City and
authorizing the execution of said documents and the issuance of the bonds.
F. Prior to the issuance of bonds (other than housing bonds issued under the Housing
Act), and following the public hearing, the City must file an application for
approval of the bond issue with the Minnesota Department of Employment and
Economic Development ( "DEED "). The application is considered routine if the
proper documentation is filed including the completed application form, the City's
bond resolution, a preliminary bond counsel opinion, evidence of the public
hearing, and a letter of preliminary intent from the applicant's chosen bond
underwriter, placement agent or lender to underwrite the bond issue. DEED
approval is required before issuance of the bonds.
G. Until the bonds are issued, the City reserves the right to:
(1) Reject applicant's choice of underwriter, trustee, paying agent, placement
agent, or legal counsel.
(2) Require corrections or amendments to any legal document.
(3) Reject the proposal and the issuance of the bonds if the City determines, in
its sole discretion, that the financing is not in furtherance of the City's
goals or is otherwise unacceptable, even if preliminary approval for the
proposal or any part of the proposal being separately considered has
previously been given.
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APPROVED AND ADOPTED this 18 of June, 2013 by the City Council of the City of
Shakopee, Minnesota.
CITY OF SHAKOPEE, MINNESOTA
By:
Brad Tabke, Mayor
ATTEST:
Julie Linnihan, City Clerk
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Exhibit A
APPLICATION FOR ISSUANCE OF
SHAKOPEE PRIVATE ACTIVITY BONDS
(Industrial, Health Care or Other Non - Housing Non - Profit Projects)
1. APPLICANT
a. Business Name: Date of Application:
b. Business Address:
c. Primary Business Contact Name:
Telephone number: Email:
d. Authorized Business Representative:
e. Structure:
❑ Corporation ❑ Partnership ❑ Sole Proprietorship ❑ LLC n Other:
2. PURPOSE OF REQUESTED FINANCING:
❑ New Facility ❑ Expansion ❑ Refunding
3. ESTIMATED PROJECT COSTS: (Not required for refunding)
Land
Building
Equipment
Architectural, Engineering
Costs of Issuance
Capitalized Interest (including discount)
Other
Total Financing Requested
5. AMOUNT OF FINANCING REQUESTED: $ ( % of project costs)
6. TYPE OF FINANCING PROPOSED:
a. 111 Publicly Sold Bonds ❑ Privately Placed Bonds (Bonds sold to a Bank)
b. Expected Term of Financing Years
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c. Security:
❑ Mortgage El Letter of Credit ❑ Guarant (third party)
❑ Guaranty (personal) ❑ Unsecured ❑ Other (specify)
7. BUSINESS PROFILE: (Not required for refunding)
a. Job Information
1. Current number of Full Time Equivalent Employees:
*Full Time Equivalent (FTE) is based on total annual hours of 2080
2. Number of New Permanent Jobs to be Created:
3. Number of Construction Jobs to be Created:
4. Number of Jobs to be Relocated:
b. Length of Time in Business:
c. Do you have facilities in other locations? ❑ Yes ❑ No
If yes, where:
8. NAMES OF:
a. Underwriter, Place Agent or Lender Name:
Contact Person Name:
Telephone: Email:
b. Corporate Counsel Name:
Telephone: Email:
c. Counsel to Underwriter, Place Agent or Lender Name:
Telephone: Email:
9. WHAT IS YOUR TARGET DATE FOR:
a. Construction start:
b. Construction completion:
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10. ATTACHMENTS:
Attach the following information with the application. Application is not considered complete until all
documents have been received.
a) Description of the project;
b) Give a brief description of the nature of the business, principal products, etc.;
c) Plot plan, elevation of proposed buildings, landscape, lighting, and site preparation;
d) Preliminary sources and uses for financing project;
e) Initial application fee; and
f) Indemnification Letter of Agreement.
I certify that the information provided above contains no misrepresentations, omissions or concealments of
material facts and that the information given is true and complete to the best of my knowledge. I have been
furnished a copy of the Procedure for Application to the City of Shakopee for Private Activity Revenue
Bond Financing and I am aware of its content and agree to be bound by its terms and the terms of the
indemnification letter.
Signature / Title Date
NOTICE TO COMPANY: Data Practices Act
The information that you supply in your application to the City of Shakopee /Shakopee EDA ( "City ") will
be used to assess your eligibility for financial assistance. The City will not be able to process your
application without this information. The Minnesota Government Data Practices Act (Minnesota
Statutes, Chapter 13) governs whether the information that you are providing to the City is public or
private. If financial assistance is provided for the project, the information submitted in connection with
your application will become public, except for those items protected under Minnesota Statutes, Section
13.59, Subdivision 3(b) or Section 13.591, Subdivision 2.
I have read the above statement and I agree to supply the information to the City with full knowledge of
the matters contained in this notice. I certify that the information submitted in connection with the
application is true and accurate.
Signature / Title Date
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Exhibit B
APPLICATION FOR PRIVATE ACTIVITY BONDS
SHAKOPEE (Multi - Family Housing)
1. APPLICANT
a. Business Name: Date of Application:
b. Business Address:
c. Primary Business Contact Name:
Telephone number: Email:
2. PROJECT INFORMATION
a. Project Name:
b. Business Location:
3. RENTAL INFORMATION
Monthly Rent Units
Efficiency
One Bedroom
Two Bedroom
Three Bedroom
Parking (included in rent)
Parking (not included in rent)
Laundry
Utilities included in monthly rent:
4. OPERATING EXPENSES: % of Gross (Annual)
5. TOTAL PROJECT COST: $ 6. DEVELOPER EQUITY: $
7. DEBT SERVICE: $ 8. *HARD COSTS: $
9. LAND VALUE: $ 10. SOFT COSTS: $
*Hard Costs are all project costs the IRS has determined to be eligible items for depreciation.
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11. ANTICIPATED INTEREST RATES:
12. ANTICIPATED TERM OF DEBT:
13. If the project were conventionally fmanced, what interest rate would you expect to pay?
14. EQUIPMENT: $ of project cost is for equipment (e.g., washers/dryers)
15.
ANTICIPATED INCREASES: ANTICIPATED VACANCY RATE:
Revenue: % per year First Year:
Expenses: % per year After First Year:
16. CONSTRUCTION SCHEDULE
Anticipated construction commencement date:
Anticipated construction completion date:
17. ATTACHMENTS:
Attach the following information with the application. Application is not considered complete until all
documents have been received.
a) Description of the project;
b) Plot plan, elevation of proposed buildings, landscape, lighting, and site preparation;
c) Preliminary sources and uses for financing project;
d) Initial application fee; and
e) Indemnification Letter of Agreement.
I certify that the information provided above contains no misrepresentations, omissions or concealments of
material facts and that the information given is true and complete to the best of my knowledge. I have been
fumished a copy of the Procedure for Application to the City of Shakopee for Private Activity Revenue
Bond Financing and I am aware of its content and agree to be bound by its terms and the terms of the
indemnification letter.
Signature / Title Date
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NOTICE TO COMPANY: Data Practices Act
The information that you supply in your application to the City of Shakopee /Shakopee EDA ( "City ") will
be used to assess your eligibility for financial assistance. The City will not be able to process your
application without this information. The Minnesota Government Data Practices Act (Minnesota
Statutes, Chapter 13) governs whether the information that you are providing to the City is public or
private. If financial assistance is provided for the project, the information submitted in connection with
your application will become public, except for those items protected under Minnesota Statutes, Section
13.59, Subdivision 3(b) or Section 13.591, Subdivision 2.
I have read the above statement and I agree to supply the information to the City with full knowledge of
the matters contained in this notice. I certify that the information submitted in connection with the
application is true and accurate.
Signature / Title Date
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EXHIBIT C
INDEMNIFICATION LETTER OF AGREEMENT
The Mayor of the City of Shakopee
and Members of the City Council
City of Shakopee
129 Holmes St. South
Shakopee, MN 55379
RE: Application of for Private Activity Bond Financing by the City of Shakopee
Dear Mayor and Members of the City Council:
This letter of agreement is given by , a under the laws of
Minnesota ( "Applicant ") as required by the City of Shakopee, Minnesota in connection with its
consideration of an application for private activity bond financing for the project described in the
application.
Applicant agrees as follows:
1. Applicant agrees to pay or reimburse the City for any and all costs and expenses which the City may
incur in connection with its consideration of the project and the granting of bond financing therefor,
whether or not the project is preliminarily approved by the City, whether or not the project is
approved by the State of Minnesota, if necessary, whether or not revenue bond financing is finally
approved by the City, and whether or not the bonds are issued and sold.
2. Applicant agrees to indemnify and hold the City, its officers, employees and agents harmless against
any and all losses, claims, damages, expenses or liabilities, including attorneys fees incurred in their
defense, to which the City, its officers, employees and agents may become subject in connection with
the City's consideration, issuance or sale of the bonds for Applicant's project and the carrying out of
the transactions contemplated by this agreement and any resolutions adopted, or agreements executed
by the City in connection with the issuance of its bonds for this project.
3. Applicant hereby releases the City, its officers, agents and employees from any claims, causes of
action, losses, damages, or liabilities which it may have against the City, its officers, agents, and
employees or which it may incur in connection with: the City's consideration of the application for
industrial development revenue bond financing for Applicant's project; the failure of the City, in its
discretion, to issue bonds for Applicant's project; the issuance and sale of the bonds; the construction
of the project; or any other matter or thing of any type or nature whatsoever which may arise in
connection with the foregoing.
4. Applicant is aware of the City's application and administrative fee structure for bonds and agrees and
covenants that all such fees will be paid in the amount and at the times required.
Dated: [APPLICANT NAME]
By
Its
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