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HomeMy WebLinkAbout6.A. Public Heating for the Issuance of Series 2014 Bonds - Res. No. 7449Public Hearings (, A. S1 AKOPE TO: Mayor and City Council Mark McNeill, City Administrator FROM: Julie Linnihan, Finance Director /City Clerk DATE: 05/20/2014 SUBJECT: Public Hearing for the issuance of Series 2014 Bonds -Res. No. 7449 (C, D) Action Sought Request consideration and approval of Resolution No. 7449, A Resolution Authorizing the Issuance, Sale, and Delivery of its Health Care Facilities Revenue Refunding Bonds (St. Francis Regional Medical Center), Series 2014, For the Benefit of St. Francis Regional Medical Center and Execution and Delivery of Related Documents. Background On October 6, 2004, the City issued its Health Care Facilities Revenue Bonds (St. Francis Regional Medical Center), Series 2004 (the "Prior Bonds "), in the original aggregate principal amount of $51,520,000. Proceeds of the Prior Bonds were loaned to St. Francis Regional Medical Center, a Minnesota nonprofit corporation (the "SFRMC ") in order to (i) finance a portion of the capital costs of all or a portion of the construction and equipping of a new inpatient bed tower, the expansion and improvement of its emergency department facilities, the expansion and improvement of its surgery department facilities, the expansion and improvement of its Cancer Center, the improvement and equipping of the diagnostic and cardiopulmonary services, the expansion and improvement of its lab and pharmacy areas, and the expansion and improvement of support areas, including plant services and administrative areas, and other improvements to its acute care hospital facilities located at 1455 St. Francis Avenue in the City; and (ii) redeem and prepay the Adjustable Demand Revenue Notes, Series 1998 (St. Francis Regional Medical Center), issued by the City on September 1, 1998, in the original principal amount of $12,036,000, the proceeds of which were used to make capital improvements to the acute care hospital facilities (collectively, the "Project "). Proceeds of the Prior Bonds were also used to fund a reserve fund to secure the Prior Bonds, pay interest on the Prior Bonds through the construction period of the Project, and pay a portion of the costs of issuance of the Prior Bonds. SFRMC has proposed that the City issue the Series 2014 Bonds in an estimated aggregate principal amount not to exceed $55,000,000, under the Act and pursuant to the terms of an Indenture of Trust, to be dated on or after June 1, 2014 (the "Bond Indenture "), between the City and Wells Fargo Bank, National Association, as trustee (the "Bond Trustee "). The proceeds derived from the sale of the Series 2014 Bonds are proposed to be loaned to SFRMC pursuant to the terms of a Loan Agreement, to be dated on or after June 1, 2014 (the "Loan Agreement "), between the City and SFRMC. The proceeds of the loan will be applied by SFRMC to (i) refinance the Project by redeeming and prepaying the outstanding Prior Bonds; (ii) fund any reserves for the Series 2014 Bonds, if required; and (iii) pay the costs of issuing the Series 2014 Bonds. The Series 2014 Bonds are proposed to be issued as tax- exempt obligations, the interest on which is not includable in gross income for federal income tax purposes. Under applicable provisions of the Act, the Internal Revenue Code of 1986, as amended (the "Code ") and the Treasury Regulations promulgated thereunder, as a condition to the issuance of the Series 2014 Bonds, the Council must conduct a public hearing at which the Council must permit any person to comment on the proposed financing transaction and the facilities to be refinanced with the proceeds of the Series 2014 Bonds. Following the public hearing to be held on May 20, 2014, the Council is requested to consider the enclosed Resolution, which gives final approval to the issuance of the Series 2014 Bonds for the purposes described herein. If the Series 2014 Bonds are authorized to be issued by the Council, the Series 2014 Bonds will be issued as conduit revenue bonds secured solely by the revenues derived from the Loan Agreement executed by SFRMC and from other security provided by SFRMC, including proceeds of a mortgage. The Series 2014 Bonds will not constitute a general or moral obligation 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 2014 Bonds will not be subject to any debt limitation imposed on the City and the issuance of the Series 2014 Bonds will not have any adverse impact on the credit rating of the City, even in the event that SFRMC encounters financial difficulties with respect to the facilities to be refinanced with the proceeds of the Series 2014 Bonds. Under the terms of the Loan Agreement, SFRMC will agree to pay the City's administrative fee in the amount of $50,000 and the out -of- pocket expenses of the City with respect to this transaction. Each year the City has the ability to designate up to $10,000,000 in tax - exempt bonds as "qualified tax- exempt obligations" (sometimes referred to as "bank - qualified bonds ") for purposes of Section 265(b)(3) of the Code. 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. Pursuant to Section 265(b)(3)(C)(ii) of the Code, there are certain obligations that do not need to be taken into account when the City determines whether it has reached its $10,000,000 limit for bank- qualified bonds, including bonds issued to refund outstanding bonds to the extent the refunding bonds are issued in an amount that does not exceed the principal amount of the bonds to be refunded. Because the proposed Series 2014 Bonds will be in an amount of more than $10,000,000, the City will be unable to issue any bonds for new projects and designate such bonds as "bank - qualified bonds." However, in case the City issues general obligation bonds in calendar year 2014 that cannot be designated as bank - qualified due to the issuance of the Series 2014 Bonds, the Loan Agreement includes a provision requiring SFRMC to compensate the City for any economic loss it incurs if it must issue general obligation bonds in 2014 that are not bank - qualified. Recommendation Staff recommends approval of Resolution No. 7449. Budget Impact No budget impact. Relationship to Vision C. Maintain the City's strong financial health. D. Maintain improve and create strong partnerships with other public and private sector entities. Requested Action Request consideration and approval of Resolution No. 7449, A Resolution Authorizing the Issuance, Sale, and Delivery of its Health Care Facilities Revenue Refunding Bonds (St. Francis Regional Medical Center), Series 2014, For the Benefit of St. Francis Regional Medical Center and Execution and Delivery of Related Documents Attachments: Res. # 7449 CITY OF SHAKOPEE, MINNESOTA RESOLUTION NO. #7449 RESOLUTION AUTHORIZING THE ISSUANCE, SALE, AND DELIVERY OF ITS HEALTH CARE FACILITIES REVENUE REFUNDING BONDS (ST. FRANCIS REGIONAL MEDICAL CENTER), SERIES 2014, FOR THE BENEFIT OF ST. FRANCIS REGIONAL MEDICAL CENTER AND EXECUTION AND DELIVERY OF RELATED DOCUMENTS WHEREAS, the City of Shakopee, Minnesota (the "City ") is a statutory city and political subdivision duly organized and existing under the Constitution and laws of the State of Minnesota; and WHEREAS, the City is authorized by Minnesota Statutes, Sections 469.152 through 469.1655, as amended (the "Act "), to issue revenue bonds for the following purposes: (i) 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 as 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; and (ii) to refund, in whole or in part, bonds previously issued by the City under the authority of the Act; and WHEREAS, St. Francis Regional Medical Center, a Minnesota nonprofit corporation (the "Corporation "), has proposed that the City issue its Health Care Facilities Revenue Refunding Bonds (St. Francis Regional Medical Center), Series 2014 (the "Series 2014 Bonds "), in the aggregate principal amount not to exceed $55,000,000, and loan the proceeds thereof to the Corporation to (i) redeem and prepay the City's outstanding Health Care Facilities Revenue Bonds (St. Francis Regional Medical Center), Series 2004 (the "Prior Bonds "), issued on October 6, 2004, in the original aggregate principal amount of $51,520,000; (ii) fund any reserves for the Series 2014 Bonds, if required; and (iii) pay costs of issuance of the Series 2014 Bonds; and WHEREAS, proceeds of the Prior Bonds were loaned to the Corporation and applied by the Corporation to (i) finance a portion of the capital costs of all or a portion of the construction and equipping of a new inpatient bed tower, the expansion and improvement of its emergency department facilities, the expansion and improvement of its surgery department facilities, the expansion and improvement of its Cancer Center, the improvement and equipping of the diagnostic and cardiopulmonary services, the expansion and improvement of its lab and pharmacy areas, and the expansion and improvement of support areas, including plant services and administrative areas, and other improvements to the Corporation's acute care hospital facilities located at 1455 St. Francis Avenue in the City; (ii) redeem and prepay the Adjustable Demand Revenue Notes, Series 1998 (St. Francis Regional Medical Center), issued by the City on September 23, 1998, in the original principal amount of $12,036,000, the proceeds of which were used to make capital improvements to the acute care hospital facilities (collectively, the "Project "); (iii) fund a reserve fund to secure the Prior Bonds; (iv) pay interest on the Prior Bonds during the construction of the Project; and (iv) pay a portion of the costs of issuance of the Prior Bonds; and WHEREAS, a notice of public hearing (the "Public Notice ") was published in the Shakopee Valley News, the official newspaper of and a newspaper of general circulation in the City, with respect to the public hearing held pursuant to Section 147(f) of the Internal Revenue Code of 1986, as amended (the 4424820 JAE SH155 -337 "Code "), on a date at least fourteen (14) days prior to the regularly scheduled meeting of the City Council of the City, and on the date hereof the City Council conducted a public hearing at which a reasonable opportunity was provided for interested individuals to express their views, both orally and in writing; and WHEREAS, the Series 2014 Bonds are to be issued under the Act and a Bond Indenture of Trust, to be dated on or after June 1, 2014 (the "Bond Indenture "), between the City and Wells Fargo Bank, National Association, as trustee (the "Bond Trustee "), and the proceeds derived from the sale of the Series 2014 Bonds are to be loaned to the Corporation under a Loan Agreement, to be dated on or after June 1, 2014 (the "Loan Agreement "), between the City and the Corporation; and WHEREAS, in consideration of the loan by the City of the proceeds of the Series 2014 Bonds to the Corporation and to secure the payment of the principal of, premium, if any, and interest on the Series 2014 Bonds when due, the Corporation, as the representative of the Obligated Group (the "Obligated Group Representative ") currently consisting of the Corporation (the "Obligated Group ") under the Master Trust Indenture, dated as of October 1, 2004 (the "Master Indenture "), between the Obligated Group Representative and Wells Fargo Bank, National Association, as trustee (the "Master Trustee "), will issue a supplemental note (the "Series 2014 Obligation ") to the City under Supplemental Trust Indenture Number Three, dated on or after June 1, 2014 (the "Third Supplemental Indenture "), between the Obligated Group Representative and the Master Trustee, which supplements the Master Indenture; and WHEREAS, the Series 2014 Obligation will be in the same aggregate principal amount and bear interest at the same rate or rates as the Series 2014 Bonds, will have redemption provisions corresponding to those of the Series 2014 Bonds, and will be payable in installments equal to the maturities and mandatory redemption of the Series 2014 Bonds; and WHEREAS, the loan repayments required to be made by the Corporation under the terms of the Loan Agreement will be assigned to the Bond Trustee under the terms of the Bond Indenture, and the Series 2014 Obligation will be assigned by the City to the Bond Trustee under the terms of the Bond Indenture and the Third Supplemental Indenture; and WHEREAS, the Series 2014 Bonds and the interest and any premium on the Series 2014 Bonds: (i) shall be payable solely from the revenues pledged therefor; (ii) shall not constitute a debt of the City within the meaning of any constitutional or statutory limitation; (iii) shall not constitute nor give rise to a pecuniary liability of the City or a charge against its general credit or taxing powers; and (iv) 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, the Series 2014 Obligation, and the Project; and NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF SHAKOPEE, MINNESOTA, AS FOLLOWS: 1. The City acknowledges, finds, determines, and declares that: (i) the issuance of the Series 2014 Bonds is authorized by the Act; and (ii) the application of the proceeds of the Series 2014 Bonds to redeem and prepay all or any portion of the Prior Bonds, fund any reserves (if required), and pay all or a portion of the costs of issuance of the Series 2014 Bonds is consistent with and furthers the purposes of the Act. 2. For the purposes set forth above, there is hereby authorized the issuance, sale and delivery of the Series 2014 Bonds in one or more series in the aggregate principal amount not to exceed $55,000,000. The Series 2014 Bonds shall bear interest at fixed rates 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 Bond Indenture, in 442482v3 JAE SH155 -337 2 the form now on file with the City, with the amendments referenced herein. The City hereby authorizes the Series 2014 Bonds 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. All of the provisions of the Series 2014 Bonds, 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 2014 Bonds shall be substantially in the form set forth in the Bond Indenture, which form is hereby approved, with such necessary and appropriate variations, omissions and insertions (including changes to the name of the Series 2014 Bonds, the aggregate principal amount of the Series 2014 Bonds, the stated maturities of the Series 2014 Bonds and the maturity dates of the Series 2014 Bonds, the interest rates on the Series 2014 Bonds, and the terms of optional and mandatory redemption of the Series 2014 Bonds) as the Mayor of the City and the City Administrator of the City (respectively, the "Mayor" and "City Administrator "), in their discretion, shall determine. The execution of the Series 2014 Bonds with the manual or facsimile signatures of the Mayor and the City Administrator and the delivery of the Series 2014 Bonds by the City shall be conclusive evidence of such determination. 3. The Series 2014 Bonds: (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 meaning of any constitutional or statutory limitation; (iv) shall not constitute nor 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 2014 Obligation. The proceeds of the Series 2014 Bonds shall be disbursed under the terms of the Indenture and the Loan Agreement, and the principal, premium, and interest on the Series 2014 Bonds shall be payable solely from the proceeds of the Series 2014 Bonds, the revenues derived from the Corporation pursuant to the terms of the Loan Agreement, the revenues derived from the Obligated Group under the terms of the Series 2014 Obligation, and other funds pledged under the Bond Indenture or the Loan Agreement. 4. The City Council of the City hereby authorizes and directs the Mayor and the City Administrator to execute and deliver the Bond Indenture, and hereby authorizes and directs the execution of the Series 2014 Bonds in accordance with the terms of the Bond Indenture, and hereby provides that the Bond Indenture shall provide the terms and conditions, covenants, rights, obligations, duties and agreements of the owners of the Series 2014 Bonds, the City, and the Bond Trustee as set forth therein. All of the provisions of the Bond Indenture, 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 Bond Indenture shall be substantially in the form on file with the City, which is hereby approved, with such necessary and appropriate variations, omissions and insertions as do not materially change the substance thereof, or as the Mayor and the City Administrator, in their discretion, shall determine, and the execution and delivery thereof by the Mayor and the City Administrator shall be conclusive evidence of such determination. 5. The Mayor and the City Administrator are hereby authorized and directed to execute and deliver the Loan Agreement, a Bond Purchase Contract, to be dated on or after June 1, 2014 (the "Purchase Contract "), between the City, the Corporation, and J.P. Morgan Securities LLC, as the original purchaser of the Series 2014 Bonds (the "Underwriter "), and the Letter of Representation, to be dated on or after June 1, 2014 (the "Letter of Representation "), between the City, the Corporation, and the Underwriter. All of the provisions of the Loan Agreement, the Purchase Contract, and the Letter of Representation, 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 4424820 JAE SH155 -337 effect from the date of execution and delivery thereof. The Loan Agreement, the Purchase Contract, and the Letter of Representation shall be substantially in the forms on file with the City which are hereby approved, with such omissions and insertions as do not materially change the substance thereof, or as the Mayor and the City Administrator, in their discretion, shall determine, and the execution thereof by the Mayor and the City Administrator shall be conclusive evidence of such determination. 6. The Bond Trustee is hereby appointed as the initial Paying Agent and Bond Registrar with respect to the Series 2014 Bonds. 7. The Mayor, the City Administrator, and the Finance Director of the City 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 2014 Bonds, including one or more certificates of the City, an endorsement to the Tax Certificate of the Corporation, an Information Return for Tax- Exempt Private Activity Bond Issues, IRS Form 8038 (Rev. April 2011), and all other documents and certificates as shall be necessary and appropriate in connection with the issuance, sale, and delivery of the Series 2014 Bonds. The City hereby approves the execution and delivery by the Bond Trustee of the Bond Indenture and all other instruments, certificates, and documents prepared in conjunction with the issuance of the Series 2014 Bonds that require execution by the Bond Trustee. The City hereby authorizes Kennedy & Graven, Chartered, as bond counsel of the City, to prepare, execute, and deliver its approving legal opinion with respect to the Series 2014 Bonds. 8. The City has not participated in the preparation of the Preliminary Official Statement or the Official Statement relating to the offer and sale of the Series 2014 Bonds (collectively, the "Official Statement ") and has made no independent investigation with respect to the information contained therein, including the appendices thereto (except for the provisions specifically related to the City and litigation to which the City is a party), and the City assumes no responsibility for the sufficiency, accuracy, or completeness of such information. Subject to the foregoing, the City hereby consents to the distribution and the use by the Underwriter in connection with the sale of the Series 2014 Bonds of the Official Statement. The Official Statement is the sole material consented to by the City for use in connection with the offer and sale of the Series 2014 Bonds. The City hereby approves the Continuing Disclosure Agreement, to be dated on or after June 1, 2014 (the "Continuing Disclosure Agreement "), to be executed and delivered by the Corporation, on behalf of itself and the Obligated Group, and the Bond Trustee, as dissemination agent, in the form now on file with the City. 9. 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. 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 2014 Bonds shall be liable personally on the Series 2014 Bonds or be subject to any personal liability or accountability by reason of the issuance thereof. No provision, covenant or agreement contained in the aforementioned documents, the Series 2014 Bonds or in any other document relating to the Series 2014 Bonds, 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, 442482v3 JAE SH155 -337 d 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 2014 Obligation which are to be applied to the payment of the Series 2014 Bonds, as provided therein and in the Bond Indenture. 10. 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 2014 Bonds 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 holder from time to time of the Series 2014 Bonds issued under the provisions of this resolution. 11. In case any one or more of the provisions of this resolution, other than the provisions contained in the first sentence of Section 3 hereof, or of the aforementioned documents, or of the Series 2014 Bonds 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 2014 Bonds, but this resolution, the aforementioned documents, and the Series 2014 Bonds shall be construed and endorsed as if such illegal or invalid provisions had not been contained therein. 12. The Series 2014 Bonds, when executed and delivered, shall contain a recital that they are issued pursuant to the Act, and such recital shall be conclusive evidence of the validity of the Series 2014 Bonds 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 2014 Bonds, 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. 13. The officers of the City, bond counsel, other attorneys, 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 Series 2014 Bonds for the full, punctual and complete performance of all the terms, covenants and agreements contained in the Series 2014 Bonds, 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. 14. The City understands that the Corporation will pay the City's administrative fee upon issuance of the Series 2014 Bonds. In addition, the Corporation will pay all costs paid or incurred by the City in connection with the transactions authorized by this resolution, whether or not the Series 2014 Bonds are issued. 15. This resolution shall be in full force and effect from and after its passage. 4424820 JAE SH155 -337 Approved by the City Council of the City of Shakopee, Minnesota, this 20th day of May, 2014. Mayor ATTEST: City Clerk 442482v3 JAE SH155 -337