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HomeMy Public PortalAboutResolution 16-96 Authorizing Indebtedness for Portion of Cost Golf Course • RESOLUTION NO. 16-96 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF McCALL, IDAHO, AUTHORIZING THE ISSUANCE AND DELIVERY OF A PROMISSORY NOTE OF THE CITY, IN THE PRINCIPAL AMOUNT OF $650, 000, TO U.S . BANK OF IDAHO, AS EVIDENCE OF A LOAN INDEBTEDNESS OF THE CITY INCURRED FOR PAYING A PORTION OF THE COST OF GOLF COURSE IRRIGATION SYSTEM IMPROVEMENTS; PROVIDING FOR THE ISSUANCE, FORM, EXECUTION, REGISTRATION, MATURITY, AND PAYMENT OF THE NOTE; PROVIDING COVENANTS WITH RESPECT TO THE NOTE; AUTHORIZING THE EXECUTION OF ADDITIONAL DOCUMENTS WHEREAS, the City of McCall, Valley County, Idaho (the "City") , is a municipal corporation duly organized and operating under and pursuant to the laws of the State of Idaho; and WHEREAS, the City presently owns and operates, and has for many years owned and operated, a municipal golf course for public recreational purposes (the "Golf Course") ; and WHEREAS, the City Council (the "Council") of the City has determined that certain improvements to the existing Golf Course irrigation system (the "Improvements" ) are necessary for the continued operation of the Golf Course, and, in order to finance the cost of the Improvements, the City has made application to West One Bank, Idaho, now U.S . Bank of Idaho (the "Bank") for a loan of { up to $650, 000, and the Bank has approved such loan application, to be repaid by the City from Golf Course revenues over a 15-year term; and WHEREAS, the Council, by adoption of Resolution No. 9-96 on May 23, 1996, approved and authorized the execution of a loan agreement between the City and the Bank, and the Council further determined and declared, in Resolution No. 9-96, that the indebtedness to be incurred thereby is an ordinary and necessary expense of the City within the meaning of Article 8, Section 3 , Idaho Constitution, for which no approval of the electors of the City is necessary; and WHEREAS, pursuant to Resolution No. 9-96, the City caused to be filed, in the District Court of the Fourth Judicial District of the State of Idaho, in and for the County of Valley (the "District Court") , a Petition for Judicial Confirmation pursuant to Title 7, Chapter 13 , Idaho Code, seeking a judicial determination and declaration of the validity of the City' s incurring of an indebtedness and the issuing of its promissory note as evidence thereof for the purpose of financing the cost of the improvements; and WHEREAS, on June 27, 1996, the District Court, in Case No. SP- 96-98, entered its Findings of Fact, Conclusions of Law and Page 1 Judgment (the "Judicial Confirmation Order" ) ordering, adjudging, and decreeing that (1) the City is authorized to enter into the loan agreement with the Bank without the approval of the electors of the City voting at a special election called for such purpose; (2) the indebtedness of the City incurred pursuant to the loan agreement is an ordinary and necessary expense of the City within the meaning of Article 8, Section 3, of the Idaho Constitution; (3) the City is authorized to issue its evidence of indebtedness pursuant to the loan agreement and to pledge its Golf Course revenues to the payment thereof; and (4) such evidence of indebtedness, when issued pursuant to such authority, will be a valid and binding special obligation of the City in accordance with its terms; and WHEREAS, pursuant to the Judicial Confirmation Order, the City now desires to issue its promissory note in the principal amount of $650, 000 to the Bank in accordance with the loan agreement and the Judicial Confirmation Order. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF McCALL, of Valley County, Idaho, as follows : Section 1 : For the purpose of providing funds for the financing of the Golf Course irrigation system improvement project, and the payment of costs and fees incidental thereto, the Mayor is hereby authorized to execute, and the City Clerk is hereby authorized to attest, on behalf of the City, the promissory note ( (the "Note") of the City in the manner hereinafter provided. Section 2 : The Note shall be substantially in the form annexed hereto as Exhibit "A" ; shall be dated the date of its delivery; shall be issued to U.S . Bank of Idaho as Registered Owner; shall be in the principal amount of $650, 000; and shall bear interest at the rate of six and five hundredths percent (6.05%) per annum on the unpaid principal balance from its date of issuance, or the date from which the last interest payment has been made, computed on the basis of a 365-day year, until November 1, 2004 . The interest rate shall then be reestablished by the parties to a tax-exempt rate equivalent to 4 . 0% plus the then-current 5-Year Treasury Constant Maturity, as more fully set forth in Exhibit "B" which is annexed hereto and by reference made a part of this Resolution. All proceeds of the Notes shall be drawn by the City by November 1, 1996 . Accrued interest on all advance draws shall be paid in full by the City on November 1, 1996 . Semiannual payments of principal and interest in the amount of $25, 000 (to be applied first to interest and then to principal) shall be made by the City on each May 1 and November 1, commencing on May 1, 1997, and continuing through November 1, 2004 . Semiannual payments due on May 1, 2005, through November 1, 2011, shall be adjusted to amortize the remaining principal balance in approximately equal semiannual payments on November 1, 2011 . The entire principal 1 Page 2 balance of the Notes and all interest accrued from the last payment date shall be due on November 1, 2011 . Section 3 : The Note shall be registered in the name of the Bank as the Registered Owner, both as to principal and as to interest, with the City Treasurer, and any transfer must likewise be registered. Section 4 : The City reserves the right to prepay the outstanding principal balance of the Note, in full, together with interest accrued thereon, on any scheduled payment date on or after November 1, 2004, without penalty. Section 5 : The Note shall be payable in lawful money of the United States of America to the Registered Owner thereof at the address of such Registered Owner as shown in the registration books of the City. Section 6 : The Note shall be executed in the name of the City by the manual signature of the Mayor and attested by the manual signature of the City Clerk, and the seal of the City shall be impressed thereon. Section 7 : The Note shall be payable from the net revenues (gross revenues less costs of operation and maintenance) of the Golf Course of the City (the "Net Revenues") . The Net Revenues are hereby pledged for the payment of the Note on a parity with the lien of the City' s Recreational Revenue Bonds, Series 1989, issued pursuant to Ordinance No. 554, adopted on July 14, 1989 . Section 8 : The City covenants with the Registered Owner of the Note as follows : A. In accordance with Section 149 (a) of the Internal Revenue Code of 1986, as amended (the "Code") , the Note shall be issued and remain in fully registered form in order that interest thereon be excluded from gross income of the owner or owners for federal income tax purposes . The City covenants and agrees that it will take no action to permit the Note to be issued in or converted to bearer form. B. The Note is hereby designated a "qualified tax-exempt obligation" within the meaning and for the purposes of Section 265 (b) (3) of the Code, and the City does not reasonably anticipate that it will designate more than $10, 000, 000, including the Note, as qualified tax-exempt obligations during the calendar year 1996 . C. None of the proceeds of the Note will be used directly or indirectly (i) to make or finance loans to persons or (ii) in any trade or business carried on by any person (other than use as a member of the general public) . For purposes of the preceding sentence, the term "person" does not include a government unit 1 Page 3 other than the United States or any agency or instrumentality ( thereof, and the term "trade or business" means any activity carried on by a person other than a natural person. The City further covenants and agrees to take no action which would cause the Note to be a "private activity bond, " nor will it omit to take any action necessary to prevent the Note from becoming a "private activity bond, " within the meaning of Section 141 of the Code. D. The City reasonably anticipates that all proceeds of the Note will be fully expended for the local governmental purposes of the Note within six months of the date of issuance of the Note, and that, pursuant to Section 148 (f) (B) (i) of the Code, the City will not be required to pay rebates to the United States under Section 148 (f) of the Code. If, however, the proceeds of the Note are not so expended, the City will comply with the applicable arbitrage rebate requirements of Section 148 (f) of the Code. E. The Mayor, Clerk, and Treasurer, and other appropriate officials of the City, or any one or more of such officials, as may be appropriate, are each hereby authorized and directed to execute, on behalf of the City, such certificate or certificates as shall be necessary to establish that the Note is not an "arbitrage bond" within the meaning of Section 148 of the Code and the Treasury Regulations promulgated thereunder, and to establish that interest on the Note is not and will not become includable in the gross income of the owners of the Note under the Code and applicable regulations . The City covenants and agrees that no use will be made of the proceeds of the Note, or any funds of the City which may, pursuant to Section 148 of the Code and applicable regulations, be deemed to be proceeds of the Note, which would cause the Note to be an "arbitrage bond. " F. The City will comply with the information reporting requirements of Section 149 (e) of the Code. G. None of the proceeds of the Note will be used to reimburse the City for capital expenditures made prior to the date of delivery of the Note unless the City, not later than 60 days after the payment of such expenditure, shall have adopted an official intent resolution as provided by Section 1 . 150-2 of the Treasury Regulations . H. The City has complied, or will, prior to the issuance of the Note, have complied, with the requirements of Section 17 (A) of Ordinance No. 554, adopted on July 14, 1989, with respect to the issuance of additional obligations issued on a parity of lien with the City' s Recreational Revenue Bonds, Series 1989 . Section 9 : The Mayor, City Clerk, and City Treasurer, or any one or more such officials, as shall be appropriate, are hereby authorized to execute such further certifications and other Page 4 documents as may be necessary or appropriate to carry out the 1 intent of this Resolution. Section 10 : This Resolution shall take effect and be in force from and after its passage an approval . DATED this 22nd day of August, 1996 . CITY OF McCALL Valley County, Idaho ifBy j 7 i AT . G1'` KoR / City Clerk ( S E A L ) f Page 5 [Form of Promissory Note] U UNITED STATES OF AMERICA STATE OF IDAHO COUNTY OF VALLEY CITY OF McCALL PROMISSORY NOTE, SERIES 1996 THE CITY OF McCALL, Valley County, Idaho (the "City") for value received, acknowledges itself to owe and promises to pay in lawful money of the United States of America, from the City of McCall Golf Course Revenue Fund (the "Revenue Fund") created by Ordinance No. 554, adopted on July 14, 1989, to U.S . BANK OF IDAHO the original Registered Owner hereof or its assignee, the principal sum of SIX HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS ($650, 000 . 00) , and shall make payments on the then outstanding principal balance, together with accrued interest, in thirty (30) semi-annual payments, commencing on May 1, 1997, and all subsequent payments coming due on the first day of November and May each year thereafter. The City' s final payment will be due on or before November 1, 2011, and will be for all principal and all accrued interest not yet paid. The semi-annual payments due May 1, 1997, through November 1, 2004, are hereby fixed in the amount of $25, 000 each. The subsequent semi-annual payments due May 1, 2005, through November 1, 2011, will be determined in March 2005, so as to amortize the unpaid balance in equal installments . The proceeds of the Note will be drawn in the form of multiple advances as funds are needed for financing the costs of improvements to the City' s golf course irrigation system. All proceeds shall be fully expended for the governmental purposes for which the Note is issued on or before November 1, 1996 . Accrued interest on the advances shall be payable on November 1, 1996 . Unless otherwise agreed on or required by applicable law, payments will be applied first to accrued unpaid interest, then to principal and any remaining amount to any unpaid collection costs and late charges . Interest shall be computed at a rate of 6 . 0596 per annum based on an actual 365-day year until November 1, 2004 . The interest rate for all subsequent semi-annual payments due May 1, 2005, through and including November 1, 2011, will be reset to a tax-exempt rate equivalent to 4 . 0pplus the then-current 5-Year Treasury Constant Maturity, as more fully set Page 1 - EXHIBIT "A" forth in Exhibit °1B" which is annexed hereto and incorporated by reference herein. The City reserves the right to prepay the remaining principal amount of this Note, in full, on any scheduled payment date on or after November 1, 2004, without penalty or premium. Both principal of and interest on this Note are payable in lawful money of the United States of America at U.S. Bank of Idaho, McCall Branch, 905 North Second Street, McCall, Idaho. This Note is registered, both as to principal and interest, with the Treasurer of the City of McCall, Valley County, Idaho, and any transfer hereof must likewise be registered. This Note is a negotiable instrument, authorized and approved by the McCall City Council in a Resolution duly adopted and approved on the 22nd day of August, 1996 . This Note is a special obligation of the City, payable from the City' s Golf Course revenues, duly budgeted and appropriated therefor for each fiscal year of the City on a parity with the City of McCall Recreational Revenue Bonds, Series 1989, issued pursuant to Ordinance No. 554, adopted on July 14, 1989 . The City has covenanted to budget and appropriate annually sufficient funds from its Golf Course revenues to pay the principal and interest on the Note falling due during each fiscal year of the City so long as this Note remains outstanding. IT IS HEREBY CERTIFIED, RECITED, AND DECLARED that all matters, acts, conditions, and things required by law of the State of Idaho and the Resolution of the City referred to above exist, have happened, and have been performed, and that the issuance of this Note does not violate any constitutional, statutory, or other limitations . IN WITNESS WHEREOF, the City of McCall, Valley County, State of Idaho, has caused this Note to be executed on its behalf and under its official seal by the manual signature of the Mayor and attested by the manual signature of the City Treasurer, and the Seal of the City affixed hereto, all as of the day of , 1996 . CITY OF McCALL Valley County, Idaho By Mayor ATTEST: City Treasurer ( ( S E A L ) Page 2 - EXHIBIT "A" * * * * * * * * * * * * * REGISTRATION CERTIFICATE (No writing to be placed herein except by the Note Registrar) This Note shall be payable only to the order of the registered owner or its legal representative. Date of Name and Address of Signature of Registration Registered Owner Note Registrar U.S . Bank of Idaho McCall Branch 905 North Second Street McCall, Idaho 83638 Page 3 - EXHIBIT "A" ASSIGNMENT FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto: Name of Transferee: Address : Tax Identification No. the within Bond and hereby irrevocably constitutes and appoints of to transfer said Bond on the books kept for registration thereof with full power of substitution in the premises . Dated: Registered Owner NOTE: The signature on this Assignment must correspond with the name of the registered owner as it appears upon the face of the within Bond in every particular, without alteration or enlargement or any change whatever. SIGNATURE GUARANTEED: Bank, Trust Company or Member Firm of the New York Stock Exchange Authorized Officer Page 4 - EXHIBIT "A" EXHIBIT "B" Determination of Interest Rate after November 1, 2004 The interest rate will be determined in accordance with the following formula: ((1 - MCTR) x (TCM + S)) + (ACF x MCTR x D) = R TCM = Treasury Constant Maturity (5 yr), as published in the Federal Reserve Bank of New York H.15 publication. MCTR = Marginal corporate tax rate, including federal, state and local tax rates. S = Spread required, as stipulated in the loan proposal 4.00%. D = Disallowance percentage, currently 20% for bank qualified obligations and 100% for non -bank qualified obligations. ACF = "Average Cost of Funds," the 90-day Treasury yield to be used in place of the IRS definition for this term. R = The tax exempt interest rate to be used. EXAMPLE TCM = 6.30% MCTR = 40% S = 4.00% D = 20% ACF = 5.15% ((1 - .4)x (6.30 + 4.00)) + (5.15 x .4 x .2) = 6.59%