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HomeMy WebLinkAbout6.A. Authorizing the Issuance, Sale, and Delivery of the Health Care and Housing Facilities Revenue Refunding Note (Benedictine Health System Obligated Group) Series 2013 in Three Series and Related Documents-Res. No. 7359 P General Business 6. A. Sr-tNkOPF F TO: Mayor and City Council Mark McNeill, City Administrator FROM: Julie Linnihan, Finance Director/City Clerk DATE: 09/17/2013 SUBJECT: Authorizing the Issuance, Sale, and Delivery of the Health Care and Housing Facilities Revenue Refunding Note (Benedictine Health System Obligated Group) Series 2013 in Three Series and Related Documents-Res. No. 7359 (D) Action Sought Consideration and approval of Resolution No.7359, Authorizing the Issuance, Sale and Delivery of the Health Care and Housing Facilities Revenue Refunding Note Series 2013 in Three Series and Related Documents. Background Attached for your review and information is the overview of the process that will be undertaken by the City of Shakopee, to assist with the issuance of Series 2013 Notes. As this memo details, the Series consists of 2013A, 2013B and 2013C which will be issued following the Public Hearing conducted on September 17th, 2013. St. Gertrude's Health Center has requested that the City issue these Notes, allowing them to use the proceeds to refinance the various senior housing projects, which are located in the City of Osseo, City of Minneapolis and City of Shakopee. The City is authorized to issue these Notes under Minnesota State Statute. The other impacted cities have authorized these requests earlier this summer. Upon approval of this resolution, these Notes will be issued as conduit debt, executed by the Benedictine Health System. As noted on page 2 of the memo from Julie Eddington, Kennedy & Graven, this issuance does not obligate the City of Shakopee for the debt, or obligate future tax levies. The credit rating of the City will not be adversely impacted, even if the group encounters financial difficulties. Recommendation Staff recommends the approval of resolution No. 7359, which will allow for the issuance of the conduit debt. Budget Impact The City will retain a fee for the services provided for under the terms of the Loan Agreement, not to exceed $50,000 Relationship to Vision Goal D: Maintain improve and create strong partnerships with other public and private sector entities. Requested Action Move to approve Resolution No. 7359, Authorizing the Issuance, Sale, and Delivery of the Helath Care and Housing Facilities Revenue Refunding Note (Benedictine Health Sytem Obligated Group), Series 2013 in Three Series and Related Documents. Attachments: BHS Resolution Letter to JAL Notice of Public Hearing I CITY OF SHAKOPEE,MINNESOTA RESOLUTION NO. 7359 AUTHORIZING THE ISSUANCE, SALE, AND DELIVERY OF THE HEALTH CARE AND HOUSING FACILITIES REVENUE REFUNDING NOTE (BENEDICTINE HEALTH SYSTEM OBLIGATED GROUP), SERIES 2013 IN THREE SERIES AND RELATED DOCUMENTS BE IT RESOLVED by the City Council of the City of Shakopee, Minnesota (the "City"), as follows: Section 1. Findings. 1.01. The City is authorized by Minnesota Statutes, Chapter 462C, as amended (the "Housing Act"),to carry out the public purposes described therein by providing for the issuance of revenue bonds to provide funds to finance or refinance multifamily housing developments (including nursing and assisted living facilities) located within the City. The City is authorized by Minnesota Statutes, Sections 469.152 through 469.1655, as amended(the "Industrial Development Act"), to issue revenue bonds to finance, in whole or in part, the cost of the acquisition, construction, reconstruction, improvement, betterment, or extension of any properties, real or personal, used or useful in connection with a revenue-producing enterprise, whether or not operated for profit, engaged in providing health care services, including, without limitation, hospitals and related medical facilities or to refund, in whole or in part, bonds previously issued by the City under the authority of the Industrial Development Act. 1.02. Minnesota Statutes, Section 471.656, as amended, authorizes a municipality to issue obligations to finance the acquisition or improvement of property located outside of the corporate boundaries of such municipality if the obligations are issued under a joint powers agreement between the municipality issuing the obligations and the municipality in which the property to be acquired or improved is located. Pursuant to Minnesota Statutes, Section 471.59, as amended,by the terms of a joint powers agreement entered into through action of their governing bodies,two or more municipalities may jointly or cooperatively exercise any power common to the contracting parties or any similar powers, including those which are the same except for the territorial limits within which they may be exercised and the joint powers agreement may provide for the exercise of such powers by one or more of the participating municipalities on behalf of the other municipalities. 1.03. St. Gertrude's Health Center, a Minnesota nonprofit corporation ("St. Gertrude's"), Steeple Pointe Senior Living Community,a Minnesota nonprofit corporation("Steeple Pointe"),and City of Lakes Care Center, a Minnesota nonprofit corporation ("City of Lakes," and collectively with St. Gertrude's and Steeple Pointe, the "Obligated Group"), have requested that the City issue its (i) Health Care and Housing Facilities Revenue Refunding Note (Benedictine Health System Obligated Group), Series 2013A (the "Series 2013A Note"), in the aggregate principal amount not to exceed $9,695,000; (ii)Health Care and Housing Facilities Revenue Refunding Note (Benedictine Health System Obligated Group), Series 2013B (the "Series 2013B Note"), in the aggregate principal amount not to exceed $9,620,000; and (iii) Taxable Health Care and Housing Facilities Revenue Note (Benedictine Health System Obligated Group), Series 2013C(the "Series 2013 Note,"and collectively with the Series 2013A Note and the Series 2013B Note, the "Series 2013 Notes"), in the aggregate principal amount not to exceed$280,000. 429683v2 JAE SH155-294 1.04. The Obligated Group intends to apply the proceeds of the Series 2013 Notes (a) to the redemption and prepayment of(i)the Tax Exempt Loan Participation Note(St. Gertrude's/Steeple Pointe Project), Series 2003 (the"Series 2003 Osseo Note"),issued in accordance with the Housing Act and the Industrial Development Act by the City of Osseo, Minnesota (the "City of Osseo") on September 26,2003, in the original aggregate principal amount of$9,995,000; (ii) the Tax Exempt Loan Participation Note (St. Gertrude's Health Center Project), Series 2004 (the "Series 2004 Osseo Note"), issued in accordance with the Housing Act by the City of Osseo on September 28, 2004, in the original aggregate principal amount of$3,900,000; (iii) the Health Care Revenue Bonds, Series 2004A (City of Lakes Care Center Project) (the "Series 2004 Minneapolis Bonds"), issued in accordance with the Industrial Development Act by the City of Minneapolis (the"City of Minneapolis") on October 27, 2004, in the original aggregate principal amount of$4,735,000; and (iv)the Tax Exempt Loan Participation Note (St. Gertrude's Health & Rehabilitation Center Project), Series 2010 (the "Series 2010 Shakopee Note"), issued in accordance with the Industrial Development Act by the City on September 30, 2010, in the original aggregate principal amount of$5,675,000; and(b)to the payment of costs of issuance of the Series 2013 Notes. The Series 2003 Osseo Note, the Series 2004 Osseo Note, the Series 2004 Minneapolis Bonds, and the Series 2010 Shakopee Note are referred to herein collectively as the "Prior Obligations." 1.05. Proceeds of the Series 2003 Osseo Note were used to refinance a senior rental housing facility located in the City of Osseo through the redemption of the City of Osseo's Multi-Family Housing Revenue Bonds, Series 1997 (Steeple Pointe Project) (the "1997 Portion"), and a skilled nursing facility located in the City through the redemption of the City's Health Care Facilities Refunding Revenue Bonds (St. Gertrude's Health Center Project), Series 2000 (the "2000 Portion"). Proceeds of the Series 2004 Osseo Note were used to finance an assisted living facility in the City. Proceeds of the Series 2004 Minneapolis Bonds were used to finance a long-term care facility in the City of Minneapolis. Proceeds of the Series 2010 Shakopee Note were used to finance a skilled nursing facility in the City. The facilities financed and refinanced with the proceeds of the Prior Obligations are referred to herein collectively as the"Facilities." The Facilities authorized under the Housing Act are referred to herein collectively as the "Housing Facilities," and the Facilities authorized under the Industrial Development Act are referred to herein collectively as the"Nursing Facilities." 1.06. The City, the City of Osseo, and the City of Minneapolis are proposing to enter into a Cooperative Agreement, dated on or after October 1, 2013 (the "Cooperative Agreement"), pursuant to which the City of Osseo and the City of Minneapolis will consent to the issuance by the City of the Series 2013 Notes and the refinancing of the Facilities by the City, and the City will agree to issue the Series 2013 Notes to refinance the Facilities. 1.07. In accordance with the Housing Act, the City has prepared a Housing Program (the "Housing Program"),which authorizes the issuance of the Series 2013 Notes by the City to refinance the Housing Facilities and was submitted to the Metropolitan Council for its review and comment. 1.08. Section 147(f) of the Internal Revenue Code of 1986, as amended (the "Code"), and regulations promulgated thereunder, require that prior to the issuance of the Series 2013 Notes, the City Council approve the Series 2013 Notes after conducting a public hearing thereon preceded by publication of a notice of public hearing (in the form required by Section 147(f) of the Code and applicable regulations) in a newspaper of general circulation at least fifteen(15) days prior to the public hearing date. 1.09. On the date hereof, the City Council conducted a duly noticed public hearing at which a reasonable opportunity was provided for interested individuals to express their views, both orally and in writing, on the following issues: (i) approval of the issuance of the Series 2013 Notes pursuant to the 429683v2 JAE SH155-294 2 requirements of Section 147(f)of the Code and the regulations promulgated thereunder;and(ii) approval of the Housing Program pursuant to the requirements of the Housing Act. 1.10. The Series 2013 Notes are to be issued under the terms of this resolution and a Servicing Agreement, dated on or after October 1, 2013 (the "Servicing Agreement"), between the City and Piper Jaffray Lending LLC, a Delaware limited liability company, as servicer (the "Servicer"). It is further proposed that the Series 2013 Notes will be sold to Piper Jaffray Lending LLC, a Delaware limited liability company, as lead lender(the"Lead Lender"),who will sell undivided interests in and to each of the three series of the Series 2013 Notes to one or more institutional lenders (the"Lenders")pursuant to one or more participation agreements which shall be evidenced by one or more certificates of participation. The proceeds derived from the sale of the Series 2013 Notes are to be loaned by the City to the Obligated Group pursuant to the terms of a Loan Agreement, dated on or after October 1, 2013 (the "Loan Agreement"), between the City, Benedictine Health System, a Minnesota nonprofit corporation and the designated agent of the Obligated Group (the "Obligated Group Agent"), and the Lead Lender. Proceeds of the Series 2013 Notes will be applied by the Obligated Group, together with other funds of the Obligated Group, to redeem, refund and/or prepay the Prior Obligations, as applicable, refinance the Facilities and pay the costs of issuance of the Series 2013 Notes. 1.11. In consideration of the loan by the City of the proceeds of the Series 2013 Notes to the Obligated Group and to secure the payment of its obligations under the Loan Agreement and the principal of, premium, if any, and interest on the Series 2013 Notes when due, (i) St. Gertrude's will execute and deliver an Amended and Restated Combination Mortgage, Security Agreement, Assignment of Leases and Rents and Fixture Financing Statement, dated on or after October 1, 2013 (the "St. Gertrude's Mortgage"), between St. Gertrude's, as mortgagor, and the Servicer, as mortgagee, which will grant the Servicer a secured interest in the property and Facilities owned by St. Gertrude's; (ii) Steeple Pointe will execute and deliver an Amended and Restated Combination Mortgage, Security Agreement, Assignment of Leases and Rents and Fixture Financing Statement, dated on or after October 1, 2013 (the "Steeple Pointe Mortgage"), between Steeple Pointe, as mortgagor, and the Servicer, as mortgagee, which will grant the Servicer a secured interest in the property and Facilities owned by Steeple Pointe; and(iii) City of Lakes will execute and deliver an Amended and Restated Mortgage Agreement, dated on or after October 1,2013 (the"City of Lakes Mortgage,"and collectively with the St. Gertrude's Mortgage and the Steeple Pointe Mortgage, the "Mortgages"), between City of Lakes, as mortgagor, and the Servicer, as mortgagee,which will grant the Servicer a secured interest in the property and Facilities owned by City of Lakes. The St. Gertrude's Mortgage,the Steeple Pointe Mortgage, and the City of Lakes Mortgage will amend and restate the mortgages previously executed and delivered by members of the Obligated Group with respect to the Prior Obligations and will be assigned by the prior mortgagees to the Servicer. 1.12. In consideration of the loan by the City of the proceeds of the Series 2013 Notes to the Obligated Group and to secure the payment of the principal of, premium, if any, and interest on the Series 2013 Notes when due, the Obligated Group will enter into a Master Trust Indenture, dated on or after October 1, 2013 (the "Master Indenture"), with U.S. Bank National Association, as master trustee (the "Master Trustee"), and will issue and deliver to the City its (i)Series 2013A Note, dated on or after October 1, 2013 (the "Series 2013A Obligated Group Note"), pursuant to the Master Indenture and a supplemental indenture thereto; (ii) Series 2013B Note, dated on or after October 1, 2013 (the "Series 2013B Obligated Group Note"), pursuant to the Master Indenture and a supplemental indenture thereto; and(iii) Series 2013C Note,dated on or after October 1,2013 (the"Series 2013C Obligated Group Note," and collectively with the Series 2013A Obligated Group Note and the Series 2013B Obligated Group Note, the "Series 2013 Obligated Group Notes"), pursuant to the Master Indenture and a supplemental indenture thereto. The Series 2013A Obligated Group Note,the Series 2013B Obligated Group Note,and the Series 2013C Obligated Group Note will be in the same aggregate principal amount and bear interest at the same rates as the Series 2013A Note, the Series 2013B Note, and the Series 2013C Note, 429683v2 JAE SH155-294 3 respectively,will have redemption provisions corresponding to those of the Series 2013A Note,the Series 2013B Note, and the Series 2013C Note, respectively, and will be payable in installments equal to the maturities and mandatory redemptions of the Series 2013A Note, the Series 2013B Note, and the Series 2013C Note,respectively. 1.13. The loan repayments required to be made by the Obligated Group under the terms of the Loan Agreement will be assigned to the Servicer under the terms of the Loan Agreement and the Servicing Agreement, and the Series 2013 Obligated Group Notes will be assigned by the City to the Servicer under the terms of the Servicing Agreement. 1.14. The Series 2013A Note, Series 20313B Note, and Series 2013C Note will be secured by the Mortgages and the Loan Agreement on a parity basis. Section 2. Housing Program. The Housing Program, in the form substantially on file with the City,is hereby approved. Section 3. The Series 2013 Notes. 3.01. For the purposes set forth above, there are hereby authorized the issuance, sale and delivery of the Series 2013A Note in an aggregate principal amount not to exceed $9,695,000, the Series 2013B Note in an aggregate principal amount not to exceed$9,620,000,and the Series 2013C Note in an aggregate principal amount not to exceed$280,000. Each series of the Series 2013 Notes shall bear interest at the interest rate or rates designated by the terms of the Servicing Agreement and the applicable Series 2013 Note, and shall be designated, shall be numbered, shall be dated, shall mature, shall be subject to redemption prior to maturity,shall be in such form,and shall have such other terms,details,and provisions as are prescribed in the Servicing Agreement, in the form now on file with the City, with the amendments referenced herein. The City hereby authorizes the Series 2013A Note and the Series 2013B Note to be issued as "tax-exempt bonds" the interest on which is not includable in gross income for federal and State of Minnesota income tax purposes. The City hereby authorizes the Series 2013C Note to be issued as a"taxable bond"the interest on which is includable in gross income for federal and State of Minnesota income tax purposes. 3.02. All of the provisions of the Series 2013 Notes,when executed as authorized herein, shall be deemed to be a part of this resolution as fully and to the same extent as if incorporated verbatim herein and shall be in full force and effect from the date of execution and delivery thereof. The Series 2013 Notes shall be substantially in the form set forth in the Servicing Agreement, which form is hereby approved, with such necessary and appropriate variations, omissions, and insertions (including but not limited to changes to the name of the Series 2013 Notes, the aggregate principal amount of the Series 2013 Notes, the stated maturities of the Series 2013 Notes and the maturity dates of the Series 2013 Notes,the interest rates on the Series 2013 Notes,and the terms of optional and mandatory redemption of the Series 2013 Notes) as the Mayor and the City Administrator of the City (the "Mayor" and the "City Administrator,"respectively), in their discretion, shall determine. The Mayor and the City Administrator are authorized and directed to prepare and execute the Series 2013 Notes as prescribed in the Servicing Agreement and the Series 2013 Notes shall be delivered to the Servicer on behalf of the Lead Lender and the Lenders. The execution of the Series 2013 Notes with the manual or facsimile signatures of the Mayor and the City Administrator and the delivery of the Series 2013 Notes by the City shall be conclusive evidence of such determination. The City Council of the City hereby authorizes and directs the Mayor and the City Administrator to execute and deliver the Series 2013 Notes. 3.03. The Series 2013 Notes (i) shall be special limited obligations of the City; (ii) shall be payable solely from the revenues pledged therefor; (iii) shall not constitute a debt of the City within the 429683v2 JAE SH155-294 4 meaning of any constitutional or statutory limitation; (iv) shall not constitute or give rise to a pecuniary liability of the City or a charge against its general credit or taxing powers; and(v) shall not constitute a charge, lien, or encumbrance, legal or equitable, upon any property of the City other than the City's interest in the Loan Agreement and the Series 2013 Obligated Group Notes. The proceeds of the Series 2013 Notes shall be disbursed pursuant to the terms of the Servicing Agreement and the Loan Agreement, and the principal of, interest on, and premium, if any, on the Series 2013 Notes shall be payable solely from the proceeds of the Series 2013 Notes, the revenues derived from the Obligated Group pursuant to the terms of the Loan Agreement and the Series 2013 Obligated Group Notes, and the security provided by the Obligated Group in accordance with the terms of the Loan Agreement, the Servicing Agreement,the Mortgages,and any and all other security of any kind or nature provided by the Obligated Group to the Servicer. Section 4. The Note Documents. The Cooperative Agreement, the Servicing Agreement and the Loan Agreement (the "Note Documents" are hereby approved. The Mayor and the City Administrator are hereby authorized and directed to execute and deliver the Cooperative Agreement. All of the provisions of the Note Documents, when executed and delivered as authorized herein, shall be deemed to be a part of this resolution as fully and to the same extent as if incorporated verbatim herein and shall be in full force and effect from the date of execution and delivery thereof. The Note Documents shall be substantially in the form on file with the City, with such omissions and insertions as do not materially change the substance thereof, or as the Mayor and City Administrator,in their discretion,shall determine, and the execution of the Cooperative Agreement by the Mayor and the City Administrator shall be conclusive evidence of such determination. Section 5. Other Documents. The Mayor and the City Administrator are hereby authorized to execute and deliver, on behalf of the City, such other documents as are necessary or appropriate in connection with the issuance, sale, and delivery of the Series 2013 Notes, including one or more certificates of the City, an endorsement of the City to the tax certificate of the Obligated Group, an Information Return for Tax-Exempt Private Activity Bond Issues, Form 8038, and all other documents and certificates as shall be necessary and appropriate in connection with the issuance,sale,and delivery of the Series 2013 Notes. The City hereby approves the execution and delivery by the Servicer of the Servicing Agreement and all other instruments, certificates, and documents prepared in conjunction with the issuance of the Series 2013 Notes that require execution by the Servicer. The City hereby authorizes Kennedy & Graven, Chartered, as bond counsel, to prepare, execute, and deliver its approving legal opinion with respect to the Series 2013 Notes. Section 6. Disbursements of Series 2013 Note Proceeds. The proceeds of the Series 2013 Notes shall be disbursed in accordance with the terms of the Loan Agreement and the Servicing Agreement for redeeming, refunding, and/or prepaying the Prior Obligations, as applicable, and paying the costs of issuance of the Series 2013 Notes in accordance with the terms therein. Section 7. Servicer Authorized to Act. The Servicer is hereby authorized to accept the Mortgages in order to secure payment of the Series 2013 Notes and is hereby authorized to take all actions necessary or appropriate under the terms of the Mortgages to ensure timely payment of the principal of,premium,if any,and interest on the Series 2013 Notes. Section 8. Disclosure Documents. The City has not participated in the preparation of any official statement or other disclosure document relating to the offer and sale of the Series 2013 Notes and the City assumes no responsibility for the sufficiency, accuracy, or completeness of any information set forth in any such disclosure document. 429683v2 JAE SH155-294 5 Section 9. The City and Its Officers,Employees,and Agents. 9.01. Except as otherwise provided in this resolution, all rights, powers, and privileges conferred and duties and liabilities imposed upon the City or the City Council by the provisions of this resolution or of the aforementioned documents shall be exercised or performed by the City or by such members of the City Council, or such officers, board, body, or agency thereof as may be required or authorized by law to exercise such powers and to perform such duties. 9.02. No covenant, stipulation, obligation, or agreement herein contained or contained in the aforementioned documents shall be deemed to be a covenant, stipulation,obligation,or agreement of any member of the City Council of the City, or any officer, agent, or employee of the City in that person's individual capacity, and neither the City Council of the City nor any officer or employee executing the Series 2013 Notes shall be liable personally on the Series 2013 Notes or be subject to any personal liability or accountability by reason of the issuance thereof. 9.03. No provision, covenant, or agreement contained in the aforementioned documents, the Series 2013 Notes, or in any other document relating to the Series 2013 Notes, and no obligation therein or herein imposed upon the City or the breach thereof, shall constitute or give rise to any pecuniary liability of the City or any charge upon its general credit or taxing powers. In making the agreements, provisions,covenants,and representations set forth in such documents,the City has not obligated itself to pay or remit any funds or revenues,other than funds and revenues derived from the Loan Agreement,and the Series 2013 Obligated Group Notes,which are to be applied to the payment of the Series 2013 Notes, as provided therein and in the Servicing Agreement. 9.04. Except as herein otherwise expressly provided, nothing in this resolution or in the aforementioned documents expressed or implied is intended or shall be construed to confer upon any person or firm or corporation,other than the City or any holder of the Series 2013 Notes issued under the provisions of this resolution, any right, remedy, or claim, legal or equitable,under and by reason of this resolution or any provisions hereof, this resolution, the aforementioned documents and all of their provisions being intended to be and being for the sole and exclusive benefit of the City and any holders from time to time of the Series 2013 Notes issued under the provisions of this resolution. Section 10. Severability. In case any one or more of the provisions of this resolution, other than the provisions contained in Section 3.03 hereof, or of the aforementioned documents, or of the Series 2013 Notes issued hereunder shall for any reason be held to be illegal or invalid, such illegality or invalidity shall not affect any other provision of this resolution,or of the aforementioned documents,or of the Series 2013 Notes,but this resolution,the aforementioned documents,and the Series 2013 Notes shall be construed and endorsed as if such illegal or invalid provisions had not been contained therein. Section 11. Validity of the Series 2013 Notes. The Series 2013 Notes, when executed and delivered, shall contain a recital that they are issued pursuant to the Housing Act and the Industrial Development Act, and such recital shall be conclusive evidence of the validity of the Series 2013 Notes and the regularity of the issuance thereof, and that all acts, conditions, and things required by the laws of the State of Minnesota relating to the adoption of this resolution,to the issuance of the Series 2013 Notes, and to the execution of the aforementioned documents to happen,exist,and be performed precedent to the execution of the aforementioned documents have happened, exist, and have been performed as so required by law. Section 12. Authorization for Other Acts. The officers of the City, bond counsel, other attorneys, engineers, and other agents or employees of the City are hereby authorized to do all acts and things required of them by or in connection with this resolution, the aforementioned documents, and the 429683v2 JAE SH155-294 6 Series 2013 Notes for the full, punctual, and complete performance of all the terms, covenants, and agreements contained in the Series 2013 Notes, the aforementioned documents and this resolution. In the event that for any reason the Mayor is unable to carry out the execution of any of the documents or other acts provided herein, any persons delegated the duties of the Mayor shall be authorized to act in the capacity of the Mayor and undertake such execution or acts on behalf of the City with full force and effect, which execution or acts shall be valid and binding on the City. If for any reason the City Administrator is unable to execute and deliver the documents referred to in this resolution, such documents may be executed by any person delegated the duties of the City Administrator,with the same force and effect as if such documents were executed and delivered by the City Administrator. Section 13. Payment of Costs. The Obligated Group has agreed to pay directly or through the City any and all costs paid or incurred by the City in connection with the transactions authorized by this resolution,whether or not the Series 2013 Notes are issued. Section 14. Bank Qualification Designation for Series 2013A Note and Series 2013B Note. 14.01. The City acknowledges that the City of Osseo designated the Series 2003 Osseo Note and the Series 2004 Osseo Note as "qualified tax-exempt obligations" pursuant to Section 265(b)(3) of the Code. The City also acknowledges that pursuant to Section 265(b)(3) of the Code, as amended by Section 1502 of the American Recovery and Reinvestment Tax Act of 2009, St. Gertrude's designated the Series 2010 Note as a"qualified tax-exempt obligation"for purposes of Section 265(b)(3)of the Code. 14.02. The Obligated Group intends to use the proceeds of the Series 2013A Note to redeem, refund and/or prepay, as applicable, the 1997 Portion of the Series 2003 Osseo Note, the Series 2004 Osseo Note,and the Series 2004 Minneapolis Bonds. The Obligated Group intends to use the proceeds of the Series 2013B Note to redeem and prepay the 2000 Portion of the Series 2003 Osseo Note and the Series 2010 Shakopee Note. 14.03. The City will designate the Series 2013A Note as a"qualified tax-exempt obligation"for purposes of Section 265(b)(3)of the Code. 14.04. The City further acknowledges that, based on the opinion from its bond counsel, the Series 2013B Note will be deemed a"qualified tax-exempt obligation"for purposes of Section 265(b)(3) of the Code based on the"qualified tax-exempt obligation"status of the Prior Obligations to be refunded with the proceeds of the Series 2013B Note. Section 15. Effective Date. This resolution shall be in full force and effect from and after its passage. 429683v2 JAE SH155-294 7 Approved by the City Council of the City of Shakopee, Minnesota, the 17`h day of September, 2013. CITY OF SHAKOPEE,MINNESOTA Mayor Attest: Finance Director/City Clerk 429683v2 JAE SH155-294 8 Offices in 470 U.S.Bank Plaza III + L 200 South Sixth Street Minneapolis Minneapolis,MN 55402 Saint Paul (612)337-9300 telephone (612)337-9310 fax St.Cloud www.kennedy-graven.com C H A R T S R E C3 Affirmative Action,Equal Opportunity Employer JuLiE A.EDDINGTON Attorney at Law Direct Dial(612)337-9213 Email:jeddington@kennedy-graven.com September 12,2013 Julie Linnihan Finance Director City of Shakopee 129 South Holmes Street Shakopee,MN 55379 Re: Resolution providing final approval for the issuance of the Health Care and Housing Facilities Revenue Notes proposed to be issued by the City of Shakopee,Minnesota Dear Julie, As you know, St. Gertrude's Health Center, a Minnesota nonprofit corporation ("St. Gertrude's'), Steeple Pointe Senior Living Community, a Minnesota nonprofit corporation("Steeple Pointe'), and City of Lakes Care Center, a Minnesota nonprofit corporation ("City of Lakes," and collectively with St. Gertrude's and Steeple Pointe, the "Obligated Group"), have requested that the City issue its (i) Health Care and Housing Facilities Revenue Refunding Note (Benedictine Health System Obligated Group), Series 2013A (the "Series 2013A Note"), in the aggregate principal amount not to exceed $9,695,000; (ii)Health Care and Housing Facilities Revenue Refunding Note (Benedictine Health System Obligated Group), Series 2013B (the "Series 2013B Note"), in the aggregate principal amount not to exceed $9,620,000; and (iii) Taxable Health Care and Housing Facilities Revenue Note (Benedictine Health System Obligated Group), Series 2013C (the "Series 2013 Note," and collectively with the Series 2013A Note and the Series 2013B Note,the"Series 2013 Notes"),in the aggregate principal amount not to exceed$280,000. The City Council is being asked to adopt the attached resolution approving the issuance of the Series 2013 Notes following a public hearing to be conducted on Tuesday,September 17,2013. If the City agrees to issue the Series 2013 Notes, the Obligated Group will use the proceeds of the Series 2013 Notes to refinance various senior housing facilities, skilled nursing facilities, and long-term care facilities owned and operated by members of the Obligated Group and located in the City,the City of Osseo, and the City of Minneapolis(collectively,the"Facilities")through the redemption and prepayment of certain outstanding revenue obligations issued for the benefit of the Obligated Group. Proceeds of the Series 2013 Notes will also be used to pay the costs of issuance of the Series 2013 Notes. Please refer to the resolution for a detailed explanation of the refinancing. The Series 2013 Notes are proposed to be issued pursuant to Minnesota Statutes,Chapter 462C, as amended, and Minnesota Statutes, Sections 469.152 through 469.1655, as amended(collectively,the"Act"). Because the Facilities are located in the City,the City of Osseo,and the City of Minneapolis,the City is authorized by Minnesota Statutes, Sections 471.59 and 471.656, as amended, to enter into a Cooperative Agreement with the City of Osseo and the City of Minneapolis to issue the Series 2013 Notes to refinance the Facilities that 431458vl JAE SH155-294 are located outside the City,specifically in the City of Osseo and the City of Minneapolis. The City Council of the City of Osseo approved this undertaking on June 24, 2013, and the City Council of the City of Minneapolis approved the same on August 2,2013. The Series 2013 Notes are proposed to be privately placed with Piper Jaffray Lending LLC (the "Lead Lender'),and the Lead Lender has agreed to purchase the Series 2013 Notes and to sell undivided interests in and to the Series 2013 Notes to one or more institutional lenders(the"Participants")pursuant to one or more participation agreements between the Lead Lender and each of the Participants,which will be evidenced by one or more certificates of participation. If the Series 2013 Notes are authorized to be issued by the City Council, they will be issued as conduit revenue bonds secured solely by the revenues derived from a loan agreement(the"Loan Agreement")to be executed by the City,Benedictine Health System,a Minnesota nonprofit corporation and the designated agent of the Obligated Group (the "Obligated Group Agent"), and the Lead Lender, and from other security provided by the Obligated Group. The Series 2013 Notes will not constitute general or moral obligations of the City and will not be secured by or payable from any property or assets of the City(other than the interests of the City in the Loan Agreement)and will not be secured by any taxing power of the City. The Series 2013 Notes will not be subject to any debt limitation imposed on the City and the issuance of the Series 2013 Notes will not have any adverse impact on the credit rating of the City, even in the event that the Obligated Group encounters financial difficulties with respect to the Facilities to be refinanced with the proceeds of the Series 2013 Notes. The Series 2013A Note and the Series 2013B Note are proposed to be issued as tax-exempt obligations,the interest on which is not includable in gross income for federal income tax purposes. The Series 2013C Note is proposed to be issued as a taxable obligation. Tax-exempt obligations are usually not eligible for purchase by banks and other financial institutions, but Section 265(b)(3) of the Internal Revenue Code of 1986, as amended (the "Code"), permits each issuer of tax-exempt obligations to designate up to $10,000,000 of tax-exempt bonds as "qualified tax-exempt obligations" (sometimes referred to as "bank-qualified bonds") that are eligible for purchase by banks and other financial institutions. In order to issue bank-qualified bonds, the issuer must not expect to issue more than$10,000,000 of bonds(other than private activity bonds that are not qualified 501(c)(3)bonds)in a calendar year. The Obligated Group has requested that the City designate the Series 2013A Note as a qualified tax-exempt obligation for purposes of Section 265(b)(3) of the Code. Because the revenue obligations to be refunded with the proceeds of the Series 2013B Note were previously designated as bank qualified,the Obligated Group has requested that the City"deem"the Series 2013B Note as a qualified tax-exempt obligation for purposes of Section 265(b)(3) of the Code based on the previous "bank-qualification"of the revenue obligations to be refunded. Under the terms of the Loan Agreement, the Obligated Group will pay to City's Administrative Fee of $50,000,which is equal to the greater of$10,000 or 0.50%of the principal amount of the Series 2013 Notes (less any principal of the Series 2013 Notes that refinances bonds previously issued by the Issuer), subject to a maximum fee of$50,000. 1 will be attending the City Council meeting on September 17,2013,and can answer any questions that may arise during the meeting. Please contact me with any questions you may have prior to the City Council meeting. Sincerely, Julie A.Eddington 431458v1 JAE SH155-294 2 i I I i i NOTICE OF PUBLIC HEARING CITY OF SHAKOPEE,MINNESOTA NOTICE OF PUBLIC HEARING ON THE APPROVAL OF A HOUSING PROGRAM FOR A MULTIFAMILY HOUSING DEVELOPMENT AND THE ISSUANCE OF HEALTH CARE AND HOUSING FACILITY REVENUE NOTES UNDER MINNESOTA STATUTES, CHAPTER 462C, AS AMENDED, AND MINNESOTA j 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 17,2013,at or after 7:00 p.m.,at City Hall, 129 Holmes Street South, in the City, to consider a proposal for the issuance of revenue obligations of the City under Minnesota Statutes, Chapter 462C, as amended(the"Housing Act"), and Minnesota Statutes, Sections 469.152 through 469.1655, as amended (the "Industrial Development Act"), on behalf of St. Gertmde's Health Center, a Minnesota nonprofit corporation, City of Lakes Care Center, a Minnesota I nonprofit corporation, and Steeple Pointe Senior Living Community, a Minnesota nonprofit corporation (collectively, the"Obligated Group"). The proceeds of the revenue obligations proposed to be issued by the City for the benefit of the Obligated Group (the "Notes") will be applied to (i) the refinancing of certain senior housing facilities, assisted living facilities, and long-term care facilities through the redemption and prepayment of the various outstanding tax-exempt bonds; and (ii) the payment of the costs of issuance of the Notes. The facilities to be refinanced with the proceeds of the Notes (the "Facilities")are owned and operated by individual members of the Obligated Group. The Facilities proposed to be refinanced with the proceeds of the Notes proposed to be issued by the City include (i) a 58-unit multifamily townhome and other multifamily housing facilities designated as senior rental housing located at 625 Central Avenue in the City of Osseo, Minnesota known as Benedictine Senior Living at Steeple Pointe; (ii) a 75-bed skilled nursing facility located at 1850 Sarazin Street in the City of Shakopee known as St. Gertrude's Health & Rehabilitation; (iii) a 40-unit assisted living facility, connected entryway, and related meeting and office facilities connected to St. Gertrude's Health and Rehabilitation Center located at 1850 Sarazin Street in the City; (iv)a 120-bed skilled nursing facility located at 618 East 171h Street in Minneapolis,Minnesota known as Benedictine Health Center of Minneapolis; and (v)an approximately 40,500 square foot three-level building expansion with 30 new licensed skilled nursing facility beds, expanded therapy space, a large educational area, a staff lounge, laundry,housekeeping, central supply areas and storage space,and private patient rooms at St. Gertrude's Health and Rehabilitation Center located at 1850 Sarazin Street in the City. Following the public hearing,the City Council will consider adoption of a resolution approving a housing program prepared in accordance with the requirements of the Housing Act and approving the issuance of the Notes, It is proposed that the Notes be issued in three series in a maximum principal amount of$20,000,000. The Notes to be issued by the City will constitute limited obligations of the City payable solely from the revenues expressly pledged to the payment thereof, and will not be general or moral obligations 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 Facilities that may be granted to the City in conjunction with this refinancing. 429684v1 JAE SH155-294 i I All interested persons may appear and be heard at the time and place set forth above. Dated: August 29,2013 CITY OF SHAKOPEE,MINNESOTA 429684v1 JAE SH155-294