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5.1 Issue EDR BondsCITY OF SALINA REQUEST FOR COMMISSION ACTION DATE TIME 6/16/1986 4:00 P.M. AGENDA SECTION: Public Hearings and Items ORIGINATING DEPARTMENT: APPROVED FOR NO- 5 Scheduled for a Certain Time City Clerk AGE%DAi:.} k'lJv ITEM NO. i ~BY: D. L. Harrison BY: ~ At a special meeting of the Board of Commissioners on May 29, 1986 at 8:00 am the Board of Commissioners adopted Resolution 86-3844, relating to a project under the economic development revenue bond act; calling for a public hearing thereon. The notice of public hearing was published on May 30, 1986. At the conclusion of the public hearing, Ordinance Number 86-9137 - relating to $5,800,000 Economic Development Revenue Bond (Omaha Hotel, Inc. Project); authorizing the issuance thereof pursuant to K.S.A., Section 12-1749 et seq., and approving and authorizing the execution of documents in connectio'~-' therewith, should be introduced for first reading. Second Reading is scheduled for June 23, 1986, and the ordinance will be published on June 24th. COMMISSION ACTION MOTION BY SECOND BY TO: ORDINANCE NO. 86-9137 AN ORDINANCE RELATING TO $5,800,000 ECONOMIC DEVELOPMENT REVENUE BOND (OMAHA HOTEL, INC. PROJECT); AUTHORIZING THE ISSUANCE THEREOF PURSUANT TO K.S.A., SECTION 12-1749 ET SEQ., AND APPROVING AND AUTHORIZING THE EXECUTION OF DOCUMENTS IN CONNECTION THEREWITH BE IT ORDAINED by the governing body of the City of Salina, Kansas: Section 1. Definitions 1.01. In this Ordinance the following terms, when used with initial capital letters, have the following respective meanings unless the context hereof or use herein clearly requires otherwise: Act: the Kansas Economic Development Revenue Bond Act, K.S.A., Section 12-1749, et seq.; Assignment: the Assignment of Rents, Leases and Other Benefits to be given by the Tenant in favor of the Lender; Bond: the $5,800,000 Economic Development Revenue Bond (Omaha Hotel, Inc. Project) to be issued by the City pursuant to this Ordinance; Building: the three-story hotel facility to be constructed by the Tenant on the Land and to be located at 1600 West Crawford in the City; City: assigns; Code: the City of Salina, Kansas, its successors and the Internal Revenue Code of 1954, as amended; Escrow Agent: FirsTier Bank, N.A., Omaha, a national banking association, its successors and assigns; Escrow Agreement: the Escrow and Disbursing Agreement to be entered into between the City, the Tenant, the Escrow Agent and the Lender; Holder: the registered Holder of the Bond; Land: the real estate described in Exhibit A to the Lease Agreement; Lease Agreement: the Lease Agreement to be executed by the City and the Tenant; Lender: Unionmutual Stock Life Insurance Co. of America, a Maine corporation, its successors and assigns; Mortgage: the Leasehold Mortgage and Security Agreement to be given by the Tenant in favor of the Lender; Ordinance: this ordinance of the City Council, adopted June 23, 1986, authorizing the issuance of the Bond; Pledge Agreement: the Pledge Agreement to be given by the City in favor of the Lender; Project: the acquisition of the Land and the acquisition, construction and equipping of the Building; Project Costs: the costs of the Project and the costs of the issuance and delivery of the Bond as defined in the Lease Agreement; Tenant: Omaha Hotel, Inc., a Kansas corporation, its successors and assigns; and Title Company: Ticor Title Insurance Company. Section 2. and declared that: Findinqs. It is hereby found, determined (a) the financing of the Project, the authorization of the Bond in the principal amount of $5,800,000, the execution and delivery of the Lease Agreement, the Escrow Agreement and the Pledge Agreement and the performance of all covenants and agreements of the City contained in the Lease Agreement, the Escrow Agreement and the Pledge Agreement and of all other acts and things required under the Constitution and laws of the State of Kansas to make the Lease Agreement, the Escrow Agreement, the Pledge Agreement and the Bond valid and binding obligations in accordance with their terms, are authorized by the Act; (b) an information statement has been filed with the State Board of Tax Appeals as required by Section 12-1744a of the Act at least seven days prior to the proposed delivery date of the Bond and the Chairperson of the Board of Tax Appeals has found, or will, prior to the delivery of the Bond, find, that the information and documents submitted are complete and timely filed; (c) it is desirable that the Bond in the amount of $5,800,000 be issued by the City upon the terms set forth herein and that the City pledge and grant to the Lender a -2- security interest in certain revenues and payments to be received by the City under the Lease Agreement as security for the payment of the principal of, premium, if any, and interest on the Bond; (d) the payments contained in the Lease Agreement are fixed, and are required to be revised from time to time as necessary, so as to produce income and revenue sufficient to provide for prompt payment of principal of, premium, if any, and interest on the Bond when due; and the Lease Agreement also provides that the Tenant is required to pay all expenses of the operation and maintenance of the Project, including, but without limitation, adequate insurance thereon and insurance against all liability for injury to persons or property arising from the operation thereof, and all taxes and special assessments levied upon or with respect to the Land and payable during the term of the Lease Agreement; (e) the execution and delivery of the Lease Agreement, the Escrow Agreement, the Pledge Agreement and the Bond will not conflict with, or constitute on the part of the City a breach of or a default under, any existing agreement, indenture, mortgage, lease or other instrument to which the City is subject or is a party or by which it is bound; (f) no litigation is pending or, to the best knowledge of the members of this Commission, threatened against the City questioning the organization or boundaries of the City or the right of any officer of the City to hold his or her office, or in any manner questioning the right and power of the City to execute and deliver the Bond, or otherwise questioning the validity of the Bond or the execution, delivery or validity of the Lease Agreement, the Escrow Agreement or the Pledge Agreement or questioning the appropriation of revenues to payment of the Bond or the right of the City to acquire and construct the Project and lease it to the Borrower; (g) all acts and things required under the Constitution and the laws of the State of Kansas to make the Lease Agreement, the Escrow Agreement, the Pledge Agreement and the Bond the valid and binding obligations of the City in accordance with their terms will have been done upon adoption of this Ordinance and execution of the Lease Agreement, the Escrow Agreement and the Pledge Agreement; (h) the City is duly organized and validly existing under the Constitution and laws of the State of Kansas and -3- is authorized to issue the Bond in accordance with the Act; and (i) pursuant to Executive Orders 84-77, 84-78 and 86-85, the State Department of Economic Development has allocated to the City $6,000,000 of authority to issue private activity bonds under Section 103(n) of the Code and H.R. 3838. Section 3. Authorization and Sale 3.01. Authorization. The City is authorized by the Act to issue revenue bonds and to use the proceeds thereof to acquire and construct facilities such as the Project and to lease such facilities to entities such as the Tenant. 3.02. Preliminary City Approval. The C0mmi$$i~n gave preliminary approval to the sale of its revenue bonds pursuant to the Act, the use of the proceeds for the acquisition and improvement of the Project and the lease of the Project to the Tenant and authorized the preparation of such documents as may be appropriate to the Project by adoption of Resolution No. 85-3765, on March 4, 1985. 3.03. Documentation. There have been prepared and presented, to this C~m~$$i~on~ copies of the following documents, all of which are now, or shall be, placed on file in the office of the City Clerk: (a) the Lease Agreement; (b) the Pledge Agreement; (c) the Escrow Agreement; (d) the Mortgage; and (e) the Assignment; Section 4. Approval of Documents. The forms of the Lease Agreement, Escrow Agreement and Pledge Agreement referred to in Section 3.03 are approved subject to such modifications as are deemed appropriate and approved by the attorney for the City and by the Mayor, which approval shall be conclusively evidenced by execution of the Lease Agreement, the Escrow Agreement, the Pledge Agreement and the Bond by the Mayor and the City Clerk. The Mayor and City Clerk are directed to execute the Lease Agreement and the Escrow Agreement upon execution thereof by the Tenant and to execute the Pledge Agreement. Copies of all of the documents shall be delivered, -4- filed and recorded as provided therein. The Mayor and the City Clerk are also authorized and directed to execute such other instruments as may be required to give effect to the transactions herein contemplated. Section 5. The Bond. 5.01. Form. The Bond shall be issued substantially in the form set forth in Exhibit A hereto, with such appropriate variations, omissions and insertions as are permitted or required by this Ordinance, and in accordance with the further provisions of this Section 5. 5.02. Bond Terms. The Bond shall be designated the Economic Development Revenue Bond (Omaha Hotel, Inc. Project), and shall: (a) be dated as of the date of delivery thereof to the Lender; (b) be in the total principal amount of $5,800,000; (c) bear interest initially at the rate of 10-3/8% per annum, subject to adjustment at the times and in the manner set forth in the form of the Bond contained in Exhibit A hereto; (d) be payable in monthly installments of principal and interest initially in the amount of $52,513.61, subject to adjustment at the times and in the manner set forth in the form of the Bond contained in Exhibit A hereto; (e) mature finally on July 1, 2001; and (f) be subject to redemption and prepayment upon the terms and subject to the conditions provided in the form of the Bond provided in Exhibit A hereto. 5.03. Execution. The Bond shall be executed on behalf of the City by the signatures of the Mayor and the City Clerk, and shall be sealed with the corporate seal of the City. In case any officer whose signature shall appear on the Bond shall cease to be such officer before the delivery thereof, such signature shall nevertheless be valid and sufficient for all purposes. 5.04. Mutilated, Lost and Destroyed Bond. In case the Bond shall become mutilated or be destroyed or lost, the City shall cause a new Bond to be executed and delivered of like outstanding principal amount and tenor in exchange and -5- substitution for and upon cancellation of the mutilated Bond, or in lieu of and in substitution for such Bond destroyed or lost, pursuant to procedures and requirements as the City shall deem proper and sufficient fully to protect itself, including the posting by the Holder of an indemnity bond in form, substance and amount satisfactory to the attorney for the City and the Holder's paying the expenses and charges of the City in connection with such substitution and replacement, and, in case the Bond is destroyed or lost, its filing with the City evidence satisfactory to it of compliance with any applicable provisions of law. 5.05. Registration of Transfer. The City will cause to be kept at the office of the City Clerk a Bond Register in which, subject to such reasonable regulations as it may prescribe, the City shall provide for the registration or transfer of ownership of the Bond. The Bond shall be transferable upon the books of the City by the Holder thereof in person or by its attorney duly authorized in writing, upon surrender of the Bond together with a written instrument of transfer satisfactory to _the City Clerk, duly executed by the Holder thereof or its duly authorized attorney, and upon payment by the Holder of any expenses of the City incurred by it in connection with such transfer. Upon such transfer the City Clerk shall note the date of registration and the name and address of the new Holder on the books of the City and in the registration blank appearing on the Bond. Alternatively, the City shall, at the request and expense of the Holder, issue a new bond or bonds, in aggregate outstanding principal amount equal to that of the Bond surrendered, and of like tenor except as to number, principal amount and the amount of the monthly installments payable thereunder, and registered in the name of the Holder or such transferee as may be designated by the Holder. The City may deem and treat the person in whose name the Bond is last registered upon the books of the City with such registration noted on the Bond, as the absolute owner thereof, whether or not overdue, for the purpose of receiving payment of or on account of the principal balance, prepayment price or interest and for all other purposes, and all such payments so made to the Holder or upon its order shall be valid and effectual to satisfy and discharge the liability upon the Bond to the extent of the sum or sums so paid, and the City shall not be affected by any notice to the contrary. 5.06. Delivery and Use of Proceeds. Prior to delivery of the Bond, the documents referred to below shall be completed and executed in form and substance as approved by the attorney for the City. The City shall execute and deliver the Bond to the Lender together with the following: -6- (a) a duly certified copy of this Ordinance; (b) original, executed counterparts of the Lease Agreement, the Escrow Agreement and the Pledge Agreement; and (c) such closing certificates, opinions and related documents as are required by the Lender or by Dorsey & Whitney, as bond counsel, and which are approved by the attorney for the City. Upon delivery of the Bond and the above items to the Lender, the Lender shall pay the purchase price of the Bond (which purchase price shall be in an amount equal to the principal amount of the Bond) to the Escrow Agent, on behalf of the City, and the Tenant shall pay to the City an amount equal to the expenses incurred by the City in connection with the issuance of the Bond, as shown by a statement to be delivered to the Tenant by the City. The Escrow Agent shall deliver to the City and the Lender a receipt for such purchase price, shall hold the proceeds of the Bond in accordance with the Escrow Agreement and shall disburse such proceeds to the Tenant in reimbursement of expenditures made by the Escrow Agent for Project Costs. The Escrow Agent shall provide the City with a full accounting of all funds disbursed for Project Costs. Section 6. Waiver of Tax Exemption. The Bond is issued under the condition that the Lease Agreement will provide that the Tenant will waive any ad valorem property tax exemption which would otherwise be available to the Project under the provisions of K.S.A., Section 79-201(a) Second. Section 7. Conveyance of Project. Upon receipt by the City of the purchase price of the Project, computed in accordance with Section 2.12 of the Lease Agreement, title to the Project shall be transferred and conveyed to the Tenant as provided in the Lease Agreement, and the Mayor and City Clerk are hereby authorized and directed to execute such deeds, bills of sale and other instruments as may be necessary to effect such conveyance and transfer in accordance with the provisions of Section 2.12 of the Lease Agreement. Section 8. Limitations of the City's Obligations. Notwithstanding anything contained in the Bond, the Lease Agreement, the Escrow Agreement, the Pledge Agreement or any other documents referred to in Section 3.03, the Bond shall not constitute a debt of the City within the meaning of any constitutional or statutory limitation, and shall not be payable from nor charged upon any funds other than the revenues pledged to the payment thereof, and no Holder of the Bond shall ever have the right to compel any exercise of the taxing power -7- of the City to pay the Bond or the premium, if any, or interest thereon, or to enforce payment thereof against any property of the City other than those rights and interests of the City under the Lease Agreement which have been pledged to the payment thereof, and the Bond shall not constitute a charge, lien or encumbrance, legal or equitable, upon any property of the City other than those rights and interests of the City under the Lease Agreement which have been pledged to the payment thereof. The principal of and interest on the Bond shall be payable solely and only from the revenues pledged to the payment thereof and the Bond shall not in any respect be a general obligation of the City nor shall it be payable in any manner by taxation. The agreement of the City to perform the covenants and other provisions contained in this resolution or the Bond, the Lease Agreement, the Escrow Agreement or the Pledge Agreement and the other documents listed in Section 3.03 shall be subject at all times to the availability of the revenues furnished by the Tenant sufficient to pay all costs of such performance or the enforcement thereof, and the City shall not be subject to any personal or pecuniary liability thereon other than as stated above. Section 9. Election. Pursuant to Treasury Regulations, Section 1.103-10(b)(2)(vi), the City hereby elects that the provisions of Section 103(b)(6)(D) of the Code apply to the Bond. Section 10. Effective Date. This Ordinance shall take effect and be in force from and after its passage and publication in the official newspaper of the City. PASSED AND APPROVED by the governing body of the City of Salina, Kansas this 23rd day of June, 1986. Mayor Attest: City Clerk 8