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HomeMy WebLinkAbout10.F.2. Setting Public Hearing for the issuance of Solid Waste Revenue Bonds to Recovery Technology Solutions, LLC.-Res. No. 7338 �� General Business 10. F. 2. �it{�KC3I'} 1 TO: Mayor and City Council Mark McNeill, City Administrator FROM: Samantha DiMaggio, Economic Development Coordinator DATE: 08/07/2013 SUBJECT: Setting Public Hearing for the issuance of Solid Waste Revenue Bonds to Recovery Technology Solutions, LLC. - Res. No. 7338 (B) Action Sought To call for a Public Hearing to issuing Private Activity Revenue Bonds to Recovery Technology Solutions, LLC. , in a principal amount not to exceed $17,500.000. Background Recovery Technology Solutions, LLC ("RTS") has asked the City of Shakopee (the "City") to issue tax-exempt exempt facility revenue bonds in the amount of up to $17,500,000 to finance the construction of an asphalt shingle facility (the "Project"). The tax code allows tax-exempt bonds to be issued for this type of solid waste facility if the facility is owned by a public entity. To meet this requirement, RTS proposes to purchase the property upon which the proj ect will be built and provide the City with a ground lease interest in the property. In return, the City will lease the property back to RTS. RTS would construct the project, and pay all debt service on the bonds, and all costs related to the bonds. It would be solely responsible for the debt service and related costs. The ground lease interest in the property provided to the City is for financing purposes only; the City would not be responsible for the property or the facility to be built on the property. Further, the City would not be responsible for any potential hazardous materials created,�or environmental contamination caused by the asphalt shingle processing to be performed within the facility. Recommendation The City Council is being asked to make a recommendation on moving forward with a Public Hearing to discuss the issuance of Private Activity Revenue Bonds to RTS. If Council wishes to move forward, they should pass resolution No. 7338 which would call for a Public Hearing on Tuesday, September 3, 2013. Budget Impact None Relationship to Vision B. Positively manage the challenges and opportunities presented by growth development and change Requested Action Adopt Resolution No. 7338, A Resolution calling for a public hearing regarding a proposed project and the issuance of revenue bonds to finance the costs thereof under Minnesota Statutes, Sections 469.152 through 469.1655, as amended; granting preliminary approval thereto; establishing compliance with reimbursement regulations under the internal revenue code of 1986, as amended; and taking certain other actions with respect thereto. Attachments: Resolution No. 7338 RTS Memo CITY OF SHAKOPEE,MINNESOTA RESOLUTION NO.7338 RESOLUTION CALLING A PUBLIC HEARING REGARDING A PROPOSED PROJECT AND THE ISSUANCE OF REVENUE BONDS TO FINANCE THE COSTS THEREOF UNDER MINNESOTA STATUTES, SECTIONS 469152 THROUGH 469.1655, AS AMENDED; GRANTING PRELIMINARY APPROVAL THERETO; ESTABLISHING COMPLIANCE WITH REIMBURSEMENT REGULATIONS UNDER THE INTERNAL REVENUE CODE OF 1986, AS AMENDED; AND TAKING CERTAIN OTHER ACTIONS WITH RESPECT THERETO BE IT RESOLVED by the City Council of the City of Shakopee, Minnesota (the "City"), as follows: Section 1. Recitals. 1.01. Statutor_y Authorization. Minnesota Statutes, Sections 469.152 through 469.1655, as amended(the"Act"), authorizes a city to issue revenue obligations to finance, in whole or in part,the cost of the acquisition, construction, reconstruction, improvement, betterment, or extension of a "project," defined in the Act, in part,as any properties,real or personal,used ar useful in the abatement or control of noise, air, or water pollution, or in the disposal of solid wastes, in connection with a revenue producing enterprise, or any combination of two or more such enterprises engaged ar to be engaged in any business or industry(as defined in the Act). 1.02. Bonds. Recovery Technology Solutions Shakopee, LLC, a Delaware limited liability company (the `Borrower"), has proposed that the City issue its Solid Waste Revenue Bonds (RTS Minnesota Project), Series 2013 (the `Bonds"), in one or more series, in a principal amount not to exceed $17,500,000. 1.03. Pro�ect. The proceeds of the Bonds will be applied to (i) the acquisition, construction, and equipping of an asphalt shingle recovery facility, with a production capacity to recycle approximately 70,000 tons per year of asphalt shingles and recover approximately 20,000 tons per year of asphalt oil, to be located at 6528 County Road 101 East in the City (the "Project"); (ii)the payment of interest on the Bonds during the construction of the Project; (iii) the funding of one or more reserve funds; and (iv) the payment of a portion of the costs of issuance related to the Bonds and other costs related to the Project. The Project will be owned by the City and leased to and operated by the Borrower. 1.04. Public Hearin�Required. Section 147(fl of the Internal Revenue Code of 1986, as amended (the "Code"), and regulations promulgated thereunder, requires that prior to the issuance of the Bonds, the City Council of the City (the "City Council") approve the Bonds after conducting a public hearing thereon. Section 469.154, subdivision 4, of the Act requires that prior to submitting an application to the Minnesota Department of Employment and Economic Development ("DEED") for approval of the Project, the City Council must conduct a public hearing on the proposal to undertake the Project authorized to be financed under the terms of the Act. 1.05. Allocation. The City Council must authorize the submission of an application to the office of Minnesota Management & Budget for an allocation of bonding authority with respect to the Bonds to finance the Project. Under Section 146 of the Code, the Bonds must receive an allocation of the 423368v3 JAE SH155-303 bonding authority of the State of Minnesota. An application for such an allocation must be made pursuant to the requirements of Minnesota Statutes,Chapter 474A, as amended(the"Allocation Act"). Section 2. City Council Ap�rovals. 2.01. Preliminar��roval. The Project is hereby given preliminary approval by the City. The issuance of the Bonds in the aggregate principal amount not to exceed $17,500,000 to finance the Project is hereby approved subject to the City Council holding a public hearing on the Project and the issuance of Bonds and the approval of the Project by DEED as required by the Act. The issuance of the Bonds is also subject to the mutual agreement of the City, the Borrower, and the initial purchaser of the Bonds as to the details of the Bonds and provisions for its payment. In all events, it is understood, however, that the Bonds shall not constitute a charge, lien, or encumbrance, legal or equitable, upon any property of the City except the City's interest in the loan or revenue agreement with respect to the Bonds and the Project, and the Bonds, when, as, and if issued, shall recite in substance that the Bonds, including interest thereon, are payable solely from the revenues received from the Project and property pledged to the payment thereof, and shall not constitute a general or maral obligation of the City. 2.02. Approval of the Project. It is hereby found and determined that the Project furthers the purposes set forth in the Act, and the Project constitutes a "project" within the meaning of Section 469.153, subdivision 2(a), of the Act. 2.03. Submission of Pro�ct to DEED. In accordance with Section 469.154 of the Act,the City Administrator of the City is hereby authorized and directed to submit the proposal for the Project to DEED. The City Administrator and other officers, employees and agents of the City are hereby authorized to provide DEED with any preliminary information needed for this purpose, and the City Administrator is authorized to initiate and assist in the preparation of such documents as may be appropriate to the Project, if it is approved. 2.04. Apnroval of Bond Counsel. The law firm of Kennedy & Graven, Chartered, is authorized to act as Bond Counsel and to assist in the preparation and review of necessary documents relating to the Project and the Bonds issued in connection therewith. The Mayor, City Administrator, Finance Director/City Clerk, and other officers, employees, and agents of the City are hereby authorized to assist Bond Counsel in the preparation of such documents. Section 3. Public Hearin�. 3.01. Establishment of Public Hearin�. The City Council shall meet at or after 7:00 p.m. on Tuesday, September 3, 2013, to conduct a public hearing on the issuance of the Bonds and the approval of the Project as requested by the Borrower. 3.02. Notice of Public Hearin�. The City Administrator is authorized and directed to publish notice of the hearing in substantially the form attached hereto as EXHIBIT A in the Shakopee Valley News, the official newspaper and a newspaper of general circulation in the City, once, at least fourteen(14)days prior to the date of the public hearing. Section 4. Submission of an A�lication for an Allocation of Bonding Authoritv. Under Section 146 of the Code, the Bonds must receive an allocation of the bonding authority of the State of Minnesota. An application for such an allocation must be made pursuant to the requirements of the Allocation Act. The City Council hereby authorizes the submission of an application for allocation of bonding authority pursuant to Section 146 of the Code and the Allocation Act in accordance with the requirements of the Allocation Act. The Mayor of the City, the City Administrator, the Finance � Director/City Clerk of the City, and Kennedy&Graven, Chartered, acting as bond counsel with respect to the Project and the Bonds, shall take all actions, in cooperation with the Borrower, as are necessary to submit an application for an allocation of bonding authority to the office of Minnesota Management & Budget. Section 5. Reimbursement of Costs under the Code. 5.01. Treasury Regulations. The United States Department of the Treasury has promulgated final regulations governing the use of the proceeds of tax-exempt bonds, all or a portion of which are to be used to reimburse the City or a borrower from the City for project expenditures paid prior to the date of issuance of such bonds. Those regulations (Treasury Regulations, Section 1.150-2) (the "Regulations") require that the City adopt a statement of official intent to reimburse an original expenditure not later than sixty(60) days after payment of the original expenditure. The Regulations also generally require that the bonds be issued and the reimbursement allocation made from the proceeds of the bonds occur within eighteen months after the later o£ (i)the date the expenditure is paid; or(ii)the date the project is placed in service or abandoned, but in no event more than three years after the date the expenditure is paid. The Regulations generally permit reimbursement of capital expenditures and costs of issuance of the bonds. 5.02. Reimbursement for Ex�enditures. To the extent any portion of the proceeds of the Bonds will be applied to expenditures with respect to the Project, the Ciry reasonably expects to reimburse itself or the Borrower for the expenditures made for costs of the Project from the proceeds of the Bonds after the date of payment of all or a portion of such expenditures. All reimbursed expenditures shall be capital expenditures, costs of issuance of the Bonds, or other expenditures eligible for reimbursement under Section 1.150-2(d)(3) of the Regulations and also qualifying expenditures under the Act. Section 6. Costs. The Borrower will pay the administrative fees of the City and pay, or, upon demand, reimburse the City for payment of, any and all costs incurred by the City in connection with the Project and the issuance of the Bonds,whether or not the Bonds are issued. Section 7. Commitment Conditional. The adoption of this resolution does not constitute a guarantee or a firm commitment that the City will issue the Bonds as requested by the Borrower. If, as a result of information made available to ar obtained by the City during its review of the Project, it appears that the Project or the issuance of Bonds to finance the costs thereof is not in the public interest or is inconsistent with the purposes of the Act, the City reserves the right to decline to give final approval to the issuance of the Bonds. The City also retains the right, in its sole discretion, to withdraw from participation and accordingly not issue the Bonds should the City Council, at any time prior to the issuance thereof, determine that it is in the best interests of the City not to issue the Bonds or should the parties to the transaction be unable to reach agreement as to the terms and conditions of any of the documents for the transaction. Section 8. Effective Date. This Resolution shall be in full force and effect from and after its passage. Approved by the City Council of the City of Shakopee,Minnesota this 7th day of August,2013. Mayor ATTEST: Finance Director/City Clerk 3 423368v3 JAE SH155-303 EXHIBIT A NOTICE OF PUBLIC HEARING CITY OF SHAKOPEE, MINNESOTA NOTICE OF PUBLIC HEARING WITH RESPECT TO A PROJECT DESCRIBED IN MINNESOTA STATUTES, SECTIONS 469.152 THROUGH 469.1655, AS AMENDED NOTICE IS HEREBY GIVEN that the City Council of the City of Shakopee, Minnesota (the "City") will hold a public hearing on Tuesday, September 3, 2013, at or after 7:00 p.m., at City Hall, located at 129 Holmes Street South in the City, to consider a proposal far the issuance of revenue obligations of the City under Minnesota Statutes, Sections 469.152 through 469.1655, as amended (the "Act"), on behalf of Recovery Technology Solutions Shakopee, LLC, a Delaware limited liability company (the "Borrower"). The proceeds of the revenue obligations proposed to be issued by the City (the "Bonds") will be applied to the following purposes: (i) the acquisition, construction, and equipping of an asphalt shingle recovery facility, with a production capacity to recycle approximately 70,000 tons per year of asphalt shingles and recover approximately 20,000 tons per year of asphalt oil,to be located at 6528 County Road 101 East in the City (the "Project"); (ii)the payment of interest on the Bonds during the construction of the Project; (iii) the funding of one or more reserve funds; and (iv) the payment of a portion of the costs of issuance related to the Bonds and other costs related to the Project. The Project will be owned by the City and leased to and operated by the Borrower. Following the public hearing, the City Council will consider adoption of a resolution approving the Project and giving approval to the issuance of the Bonds. The aggregate face amount of the Bonds proposed to be issued to finance the Project is presently estimated not to exceed $17,500,000 and may be issued in one or more series of tax-exempt obligations. The Bonds to be issued by the City will constitute a limited obligation of the City payable solely from the revenues expressly pledged to the payment thereof, and will not be a general or moral obligation of the City and will not be secured by the taxing power of the City or any assets or property of the City except any interests of the City in the Project that may be granted to the City in conjunction with this financing. All interested persons may appear and be heard at the time and place set forth above. A draft copy of the proposed application to the Department of Employment and Economic Development for approval of the Project, together with all attachments and e�ibits, shall be available for public inspection following the publication of this notice, at City Hall during normal business hours. Dated: [Date of Publication] CITY OF SHAKOPEE, MINNESOTA A-1 423368v3 JAE SH155-303 Of�ices in 470 17.5.Ilank Plaza - � 200 Sauth Sixth Street f' , Minneapolis Minneapotis,MN 55402 , Saint Paul (G12)337-)300 telephone � (612)337-9310 fax St. ClouCl �`n��.kennedy-graven.com c H A R T E R E D Affirmative Action,Equal Oppor�unity Employer MEMORANDUM TO: Mark McNeil, City Administrator Julie Linnihan, Finance Director Samantha DiMaggio, Community Development Director � FROM: Julie Eddington , DATE; August 1, 2013 RE: City's Ability to Limit Liability with Respect to Land Taken per a Ground Lease Interest Solely for Financing Purposes ' Background Recovery Technology Solutions, LLC ("RTS") has asked the City of Shakopee (the "City") to issue tax-exempt exempt facility revenue bonds in the amount of up to $17,500,000 to finance the construction of an asphalt shingle facility (the "Project"). The tax code allows tax-exempt bonds to be issued for this type of solid waste facility if the facility is owned by a public entity. To meet this requirement, RTS proposes to purchase the property upon which the Project will be built and provide the City with a ground lease interest in the property. In turn, the City would lease the property back to RTS and RTS would construct the Project and pay all debt service on the Bonds and all costs related to the Bonds, The ground lease interest in the property provided to the City is for financing ' purposes only and the City would not be responsible for the property or the facility to be � built on the property. Further, the City would not be responsible for any potential hazardous materials created or environmental contamination caused by the asphalt shingle processing to be performed within the facility. We have been asked to set forth the City's ability to limit its liability with respect to the property taken per the ground lease and the facility to be built on the property, Issue Can the City limit its liability with respect to property it obtains pursuant to a ground lease entered into solely for financing purposes? 425746v2 JAE SH I55-303 Legal Analysis A ground lease, like other leases, constitutes a contract setting forth the intent of the � parties. Within a conh•act, the parties can include contract provisions apportioning �, liability. In commercial leases, such as the proposed ground lease between RTS and the � City,the parties can include language allocating liability among the parties. No statute or ', case law makes such an action illegal, For instance to protect itself, the City could include language in the lease limiting its liability arising from any of RTS' actions during the construction and operation of the asphalt shingle recovery facility. As such, RTS would be liable for its own wrongdoing and the actions of its employees, assignees, and subcontractors. Including such language would require RTS to assume all liability resulting from its own conduct including, but not limited to, any environmental contamination, damage to property, and damage to persons located on the premises. Provisions in commercial leases protecting a party from liability have been found valid unless the provision contravenes an established public policy. Weirick v. Hamm Realtv Co,, 228 N.W. 175 (Minn. 1929); Scoreboard Sportswear Inc. v. WelshCo LLC, 2009 WL 2852886 (Minn. Ct. App. Sept. 8,2009). Conclusion The City has the authority to enter into the proposed ground lease for financing purposes � and limit its liability with respect to any and all liabilities related to the construction and � use of the Project and not specifically caused by willful and malicious acts or omissions � by the City, including but not limited to any liabilities related to potential hazardous � materials created or environmental contamination caused by the construction of the � Project or the asphalt shingle processing to be performed within the Project. Attached as Exhibit A is sample indemnity language to be included in the proposed ground lease. Please contact me at your convenience with any questions regarding the foregoing, KENNEDY & GRAVEN, CHARTERED � � Julie Eddington { i 425746v2 JAE SH155-303 � i EXHIBIT A Proposed Indemnity Language � Indemnity, The Corporation covenants and agrees, at its expense, to pay and to � indemnify and save the Issuer and the Trustee and their respective members, officials, �I directors, officers, employees, advisors, and agents harmless from and against all loss, liability, damage or expense arising out of any and all claims, demands, expenses, penalties, fines, taxes of any character or nature whatsoever regardless of by whom imposed, and losses of every conceivable kind, character and nature, whatsoever, arising from the issuance of the Bonds and the execution of this Lease Agreement and the other Bond Documents, including, but not limited to claims for loss or damage to any property or injury to or death of any person, asserted by or on behalf of any person, firm, corporation or governmental authority arising out of or in any way connected with the Project, or the conditions, occupancy, use, possession, conduct or management of, or any work done in or about the Project, The Corporation also covenants and agrees at its expense to pay, and to indemnify and save the Issuer and the Trustee and their respective members, officials, directors, officers, employees, advisors, and agents harmless of, from and against, all costs, reasonable counsel fees, expenses and liabilities incurred by them or by the Corporation in any action or proceeding brought by reason of any such claim, demand, expense, penalty, fine or tax, In the event that any action or proceeding is brought against the Issuer or the Trustee or their respective council members, officials, directors, officers, employees, advisors, or agents by reason of any such claim or demand, the Corporation, upon notice from the Issuer or the Trustee, covenants to resist and defend such action or proceeding on demand of the Issuer or the Trustee or their � respective council members, officials, directors, officers, employees, advisors, or agents. Notwithstanding the foregoing, neither the Issuer nor the Trustee nor their respective council members, officials, directors, officers, employees, advisors, and agents shall be , indemnified against liability for damage arising out of bodily injury to persons or damage to property caused by their own willful and malicious acts or omissions or willful and malicious acts or omissions of their own council members, directors, officers, advisors, agents or employees. ; 425746v2 JAE SH 155-303 ' I �