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HomeMy WebLinkAbout10. Public Hearing-Health Care Facilities Revenue Bonds-Res. No. 6074 10 CITY OF SHAKOPEE Memorandum TO: Mayor and City Council FROM: Mark McNeill, City Administrator SUBJECT: Public Hearing - Health Care Facilities Revenue Bonds (St. Francis) DATE: July 2,2004 INTRODUCTION: At its meeting of July 6th, the City Council will hold a public hearing to consider authorization of the issuance of $65 million in Health Care Revenue Bonds to benefit St. Francis Regional Medical Center. BACKGROUND: In June, the City Council called for a public hearing to be held at 7:00 p.m. on Tuesday, July 6th. The purpose of the public hearing is to consider whether the City of Shako pee will act as a conduit for the issuance of $65 million in bonds, to benefit St. Francis. As Council is aware, St. Francis is undertaking an extensive expansion of their campus, so as to provide health services to the areas rapidly expanding population. $42 million of the $65 million will be to finance the construction; the balance will be to provide the refunding of two previous bond issues, which took place in 1987, and 1998. The refunding will allow for more favorable bond rates. After taking public input, if the City Council approves proceeding with the issuance of these bonds, the actual sale would take place in later August. At that time, the Council would be asked to finalize the sale. The actual closing of the bond sale would take place in late September. BUDGET IMPACT: This does not impact the City budget. It has no impact on the City's bond rating, and any costs incurred by the City in the issuance of these bonds are to be reimbursed by St. Francis. RECOMMENDATION: After taking public testimony, I recommend that the public hearing be closed. Assuming that the Council is in agreement in the concept of acting as the conduit for the sale of these bonds, it should adopt the enabling resolution. ACTION REQUIRED: If the Council concurs, it should, by motion, adopt the following resolution: RESOLUTION NO. 6074 GNING PRELIMINARY APPROVAL TO THE PROPOSED ISSUANCE OF REVENUE BONDS UNDER MINNESOTA STATUES, SECTIONS 469.152 THROUGH 469.1651 ~&~ Mark McNeill City Administrator MM:th CITY OF SHAKOPEE, MINNESOTA RESOLUTION NO. 6074 GIVING PRELIl\1INARY APPROVAL TO THE PROPOSED ISSUANCE OF REVENUE BONDS UNDER MINNESOTA STATUTES, SECTIONS 469.152 THROUGH 469.1651 WHEREAS,_ the City of Shakopee, Minnesota (the "City"), is a statutory city organized and existing under the Constitution and laws of the State of Minnesota; and WHEREAS, pursuant to the Minnesota Statutes, Sections 469.152-469.1651, as amended (the "Act"), the City is authorized 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 including 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 hospitals, nursing homes, 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 interest on such bonds; and WHEREAS, St. Francis Regional Medical Center, a Minnesota nonprofit corporation (the "Borrower"), has submitted an application to the City requesting revenue bond financing pursuant to the Act, in a principal amount not to exceed $42,000,000, for a project generally described as: (i) the construction and equipping ofa new inpatient bed tower; (ii) the expansion and improvement of its emergency department facilities; (iii) the expansion and improvement of its surgery department facilities; (iv) expansion and improvement of its Cancer Center; (v) improvement and equipping of the diagnostic and cardiopulmonary services, (vi) expansion and improvement of its lab and pharmacy areas; (vii) 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 (collectively, the "Project"); and WHEREAS, the Borrower has also requested the issuance of revenue refunding bonds pursuant to the Act in a principal amount not to exceed $23,000,000 to redeem and prepay all or any portion of the following outstanding obligations of the City previously issued for the benefit of the Borrower: (i) the Hospital Facilities Variable Rate Demand Revenue Bonds (Benedictine Health System - St. Francis Regional Medical Center), Series 1987, issued on December 1, 1987 in the original principal amount of $8,000,000 (the "Series 1987 Bonds") and (ii) the Adjustable Demand Revenue Notes, Series 1998 (St. Francis Regional Medical Center), issued on September 1, 1998 in the original principal amount of $12,036,000 (the "Series 1998 Bonds") (collectively, the "Prior Bonds"); and WHEREAS, the bonds propose<i to be issued by the City to finance the Project and to redeem and prepay the Prior Bonds (hereinafter referred to as the "Series 2004 Bonds") will 1 constitute revenue bonds secured solely by: (i) the revenues derived from a revenue agreement between the City and the Borrower; (ii) other revenues pledged by the Borrower to the payment of the principal of and interest on the Series 2004 Bonds; (iii) a mortgage and security agreement granted by the Borrower with respect to the Project; (iv) other security provided or arranged by the Borrower including, but not limited to, a guaranty from one or more related or unrelated persons, credit enhancement provided by one or more financial institutions, a note or other instrument issued pursuant to a master trust indenture, one or more reserve funds established with proceeds of the Series 2004 Bonds or other sources, and such other property, revenues, funds assets, instruments, and other security as shall be deemed appropriate by the Borrower; and WHEREAS, pursuant to Section 469.154, subdivision 4, of the Act, prior to submitting an application to the Minnesota Department of Employment and Economic Development for approval of the Project, the City Council of the City must conduct a public hearing on the proposal to undertake and finance the Project and notice of the time and place of the hearing and stating the general nature of the Project and the estimate of the principal amount of the. Series 2004 Bonds to be issued to finance the Project must be published at least once not less than fourteen (14) days, nor more than thirty (30) days prior to the date fixed for the hearing in the official newspaper and a newspaper of general circulation of the City; and WHEREAS, Section 147(f) of the Internal Revenue Code of 1986, as amended (the "Code"), and regulations promulgated thereunder, requires that prior to the issuance of the Series 2004 Bonds, this Council approve the bonds after conducting a public hearing thereon preceded by publication of a notice of public hearing (in the form required by Section 147(f) ofthe Code and applicable regulations) in a newspaper of general circulation at least fourteen (14) days prior to the public hearing date; and WHEREAS, pursuant to the Act and the Code, a notice of public hearing in the form required by the Act and Section 147(f) of the Code was published in the Shako pee Valley News on Thursday, June 17, 2004; and WHEREAS, on July 6, 2004, the City held a public hearing on the Project and the issuance ofthe Series 2004 Bonds to finance the Project and to refund the Prior Bonds. NOW, THEREFORE, BE IT RESOLVED THAT: 1. The Project is hereby given preliminary approval by the City. The issuance of the Series 2004 Bonds in the original aggregate principal amount not to exceed $42,000,000 to finance the Project and in the original aggregate principal amount not to exceed $23,000,000 to refund the Prior Bonds are hereby approved subject to the approval of the Project by the Minnesota Department of Employment and Economic Development ("DEED") as required by the Act, and subject to the.mutual agreement of the City, the Borrower and the initial purchaser of the Series 2004 Bonds as to the details of the Series 2004 Bonds and provisions for their payment. In all events, it is understood, however, that the Series 2004 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 Series 2004 Bonds and the Project, and the Series 2004 Bonds, when, as, and if issued, shall recite in substance that the Series 2004 2 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 moral obligation of the City. 2. 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( d) of the Act. 3. In accordance with Section 469.154 of the Act, the City Manager of the City is hereby authorized and directed to submit the proposal for the Project to DEED. The City Manager 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 Manager is authorized to initiate and assist in the preparation of such documents as may be appropriate to the Project, if it is approved. 4. 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 Series 2004 Bonds issued in connection therewith. The Mayor, City Manager and other officers, employees and agents of the City are hereby authorized to assist Bond Counsel in the preparation of such documents. 5. In accordance with Section 469.154, Subdivision 7, ofthe Act, the officers, employees and agents of the City are hereby authorized and directed to encourage the Borrower to provide employment opportunities to economically disadvantaged or unemployed individuals. Such individuals may be identified by such mechanisms as are available to the City, such as a first source agreement in which the Borrower agrees to use a designated State employment office as a first source for employment recruitment, referral, and placement. 6. The Borrower has agreed to pay directly or through the City any and all costs incurred by the City in connection with the Project whether or not the Project is approved by DEED, whether or not the Project is carried to completion, and whether or not the Series 2004 Bonds are issued and the operative instruments are executed and delivered. The Borrower has also agreed to pay the administrative fee of the City in the event the Series 2004 Bonds are issued. 7. All commitments of the City expressed herein are subject to the condition that by July 6, 2005, the City, the Borrower and the initial purchaser of the Series 2004 Bonds will have agreed to mutually acceptable terms and conditions of the loan or revenue agreement, the Series 2004 Bonds and of the other instruments and proceedings relating to the Series 2004 Bonds and their issuance and sale. If the events set forth herein do not take place within the time set forth above, or any extension thereof, and the Series 2004 Bonds are not sold within such time, this Resolution will expire and be of no further effect. 8. The adoption of this Resolution does not constitute a guaranty or.:firm commitment that the City will issue the Series 2004 Bonds as requested by the Borrower. The City retains the right in its sole discretion to withdraw from participation and accordingly not to issue the Series 2004 Bonds, or issue the Series 2004 Bonds in an amount less than the amount referred to herein, 3 should the City at any time prior to issuance thereof determine that it is in the best interest of the City not to issue the Series 2004 Bonds, or to issue the Series 2004 Bonds in an amount less than the amount referred to in paragraph 1 hereof, or should the parties to the transaction be unable to reach agreement as to the terms and conditions of any of the documents required for the transaction. 9. (a) 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 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 of: (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. (b) The City reasonably expects to reimburse the Borrower for the expenditures made for costs of the Project from the proceeds of the Series 2004 Bonds in an estimated maximum aggregate principal amount of $42,000,000 after the date of payment of all or a portion of the costs of the Project. All reimbursed expenditures shall be capital expenditures, a cost of issuance ofthe Series 2004 Bonds or other expenditures eligible for reimbursement under Section 1.150- 2(d)(3) of the Regulations and also qualifying expenditures under the Act. Based on representations by the Borrower, no expenditures for the Project have been made by the Borrower more than sixty days before the date of adoption of this resolution other than: (i) expenditures to be paid or reimbursed from sources other than the Series 2004 Bonds; (ii) expenditures permitted to be reimbursed under prior regulations pursuant to the transitional provision contained -in Section 1.150-2G)(2)(i)(B) of the Regulations; (iii) expenditures constituting preliminary expenditures within the meaning of Section 1.150-2(f)(2) of the Regulations; or (iv) expenditures in a "de minimus" amount (as defined in Section 1.150-2(t)(1) ofthe Regulations). (c) Based on representations by the Borrower, as of the date hereof, there are no funds of the Borrower reserved, allocated on a long term-basis or otherwise set aside (or reasonably expected to be reserved, allocated on a long-term basis or otherwise set aside) to provide permanent financing for the expenditures related to the Project to be financed from proceeds of the Series 2004 Bonds, other than pursuant to the issuance of the Series 2004 Bonds. This I resolution, therefore, is determined to be consistent with the budgetary and financial circumstances of the Borrower as they exist or are reasonably foreseeable on the date hereof. 4 Approved by the City Council of the City of Shakopee, Minnesota this 6th day of July, 2004. CITY OF SHAKOPEE, MINNESOTA By Mayor Attest: By City Clerk SH155-148 (JAE) 249142vA 5