HomeMy Public PortalAbout2012-27 Resolution Authorizing Internal Loan in Connection with Payment of Debt ServiceMember Weir introduced the following resolution and moved its adoption:
CITY OF MEDINA
RESOLUTION NO.2012-27
RESOLUTION AUTHORIZING INTERNAL LOAN IN
CONNECTION WITH THE PAYMENT OF DEBT SERVICE ON
GENERAL OBLIGATION BONDS FROM TAX INCREMENT
DERIVED FROM TAX INCREMENT FINANCING DISTRICT NO. 1-9
BE IT RESOLVED BY THE CITY COUNCIL (THE "CITY") OF THE CITY OF
MEDINA, MINNESOTA (THE "CITY") AS FOLLOWS:
Section 1. Background.
1.01. Pursuant to Minnesota Statutes, Sections 469.174 through 469.1799, as amended (the
"TIF Act"), the City has duly established Development District No. 1 (the "Project Area") and Tax
Increment Financing District No. 1-9 (the "TIF District") within the Project Area.
1.02. On October 13, 2005, the City issued its General Obligation Tax increment Bonds,
Series 2005C (the "Series 2005C Bonds"), in the original aggregate principal amount of $1,040,000. The
Series 2005C Bonds were issued to (i) pay for improvements to Sioux Drive, Mill Drive, and Hamel Road
in the City (the "Series 2005C Improvement Bonds"), and assessments were pledged to pay the debt
service on the Series 2005C Improvements Bonds; and (ii) pay for an underground electrical project (the
"Series 2005C TIF Bonds"), and tax increments from the TIF District were pledged to pay the debt
service on the Series 2005C TIF Bonds. The Series 2005C TIF Bonds are no longer outstanding, but the
Series 2005C Improvement Bonds are currently outstanding in the aggregate principal amount of
$725,000.
1.03. On June 17, 2008, the City issued its General Obligation Bonds, Series 2008A (the
"Series 2008A Bonds"), in the original aggregate principal amount of $2,280,000. The Series 2008A
Bonds were issued to (i) pay for an underground electrical project (the "Series 2008A TIF Bonds"), and
tax increments from the TIF District were pledged to pay the debt service on the Series 2008A TIF
Bonds; and (ii) pay for improvements to Hamel Road in the City (the "Series 2008A Improvement
Bonds"), and special assessments and ad valorem taxes were pledged to pay the debt service on the
Series 2008A Improvement Bonds. The Series 2008A TIF Bonds are currently outstanding in the
aggregate principal amount of $585,000 and the Series 2008A Improvement Bonds are currently
outstanding in the aggregate principal amount of $1,335,000.
1.04. The budget within the TIF Plan allows for a maximum of $6,000,000 of tax increment
generated by the TIF District to be used for public improvements. The public improvements financed
with the proceeds of the Series 2005C Improvement Bonds are wholly located within the TIF District.
Approximately 78.1 % of the public improvements financed with the proceeds of the Series 2008A
Improvement Bonds are located within the TIF District. Therefore, after the payment of (i) the pay-as-
you-go note issued to Ryan Companies US, Inc. in the amount of $765,400; (ii) the pay-as-you-go note
issued to Target Corporation in the amount of $1,234,000; and (iii) the Series 2008A TIF Bonds, tax
increment generated by the TIF District may be used to pay debt service on the Series 2005C
Resolution No. 2012-27
April 17, 2012
Improvement Bonds and the debt service on 78.1% of the total principal amount of the Series 2008A
Improvement Bonds.
1.05. The City has determined that there may be insufficient tax increment in the next several
years to pay the full amount of the debt service on the Series 2005C Bonds and the Series 2008A Bonds
and desires to use other City funds to pay the debt service on the Series 2005C Bonds and the Series
2008A Bonds.
1.06. Under Section 469.178, Subdivision 7 of the TIF Act, the City is authorized to advance or
loan money from any fund from which such advances may be legally made (each such advance being
referred to an "Interfund Loan") in order to finance expenditures that are eligible to be paid with tax
increments under the TIF Act.
1.07. The City may enter into one or more Interfund Loans repayable from tax increments derived
from the TIF District, in order to make required payments on the Series 2005C Bonds and the Series 2008A
Bonds.
Section 2. Interfund Loans Authorized.
2.01. The Mayor and City Administrator -Clerk of the City are authorized to enter into one or more
Interfund Loans, the proceeds of which are applied to pay debt service when due on the Series 2005C Bonds
and the Series 2008A Bonds, and the principal and interest payments on which Interfund Loans will be paid
from tax increments derived from the TIF District. ,
2.02. Upon each advance of funds constituting an Interfund Loan, the City Administrator -Clerk is
authorized and directed to prepare an Interfund Loan form, stating the source of funds for the advance, the
original principal amount, the interest rate, and a final maturity date, provided that such terms must be
consistent with the terms of this Resolution. The Mayor and City Administrator -Clerk are authorized and
directed to sign each such Interfund Loan form on behalf of the City. The terms of any Interfund Loan may
be modified from time to time by the Mayor and City Administrator -Clerk so long as such modifications are
consistent with the terms of this Resolution. The aggregate principal amount of all Interfund Loans
authorized under this Resolution is $2,000,000.
2.03. Each Interfund Loan shall bear interest at the City's then current internal rate of return on the
principal amount advanced, accruing from the date of each initial expenditure; provided, however that the
interest rate shall not exceed the greater of the interest rates specified under Minnesota Statutes, Section
270C.40 or Minnesota Statutes, Section 549.09 as of the date the advance is authorized. The interest rate
in effect for calendar year 2012 is 4.0%.
2.04. Principal and interest ("Payments") on each Interfund Loan shall be paid semiannually on
February 1 and August 1 (each a "Payment Date"), commencing with the first Payment Date on which the
City collects Available Tax Increment, as that term is defined herein. Payments shall continue until the
earlier of (a) the date the principal and accrued interest of the Interfund Loan is paid in full, or (b) the date of
last receipt of tax increment from the TIF District. Payments on any Interfund Loan will be made in the
amount and only to the extent of Available Tax Increment as hereinafter defined. Payments shall be applied
first to accrued interest, and then to unpaid principal. Interest accruing from the date of each expenditure to
the first Payment Date will be compounded semiannually on February 1 and August 1 of each yearaand added
to principal, unless otherwise specified by the Interfund Loan form.
2.05. Payments on any Interfund Loan are payable solely from "Available Tax Increment," which
shall mean, on each Payment Date, all of the tax increment generated in the preceding six (6) months with
Resolution No. 2012-27 2
April 17, 2012
respect to the property within the TIF District and remitted to the City by Hennepin County, all in accordance
with the TIF Act. Payments on any Interfund Loan are subordinate to any outstanding or future bonds, notes
or contracts (including the pay-as-you-go note issued to Ryan Companies US, Inc., the pay-as-you-go note
issued to Target Corporation, and the Series 2008A TIF Bonds) secured in whole or in part with Available
Tax Increment, and are on parity with any other outstanding or future Interfund Loans secured in whole or in
part with Available Tax Increment, unless a different priority of payment is established from time to time by
the Mayor and City Administrator -Clerk or under the terms of any contract, note, bond Resolution or
indenture.
2.06. The principal sum and all accrued interest payable under any Interfund Loan are prepayable
in whole or in part at any time by the City without premium or penalty. No partial prepayment shall affect
the amount or timing of any other regular payment otherwise required to be made under any Interfund Loan.
2.07. Each Interfund Loan is evidence of an internal borrowing by the City in accordance with
Section 469.178, subdivision 7 of the TIF Act, and is a limited obligation payable solely from Available Tax
Increment pledged to the payment hereof under this Resolution. Interfund Loans shall not be deemed to
constitute general obligations of the State of Minnesota or any political subdivision thereof, including,
without limitation, Hennepin County. Neither the State of Minnesota, nor any political subdivision thereof
shall be obligated to pay the principal of or interest on any Interfund Loan or other costs incident hereto
except out of Available Tax Increment. The City shall have no obligation to pay any principal amount of any
Interfund Loan or accrued interest thereon, which may remain unpaid after the final Payment Date.
2.08. The City may at any time determine to forgive the outstanding principal amount and accrued
interest on any Interfund Loan to the extent permissible under law.
2.09. The City may from time to time amend the terms of this Resolution, including amendments
to the terms of and any outstanding Interfund Loans entered into under this Resolution. However, the Mayor
and City Administrator -Clerk may initiate, prepay, terminate, or modify the terms of any Interfund Loan
authorized under this Resolution without further action by the City Council, so long as such actions are
consistent with the terms for Interfund Loans described in this Resolution.
Section 3. Effective Date. This Resolution is effective upon the date of its approval.
Dated: April 17, 2012.
T.M. Crosby, Jr., Ma or,
ATTEST:
Scott T. Johnson, City Administrator -Clerk
Resolution No. 2012-27 3
April 17, 2012
The motion for the adoption of the foregoing resolution was duly seconded by member Pederson
and upon vote being taken thereon, the following voted in favor thereof:
Crosby, Martinson, Pederson, Weir
And the following voted against same: (Absent: Siitari)
None
Whereupon said resolution was declared duly passed and adopted.
Resolution No. 2012-27 4
April 17, 2012