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HomeMy WebLinkAbout09-287J U LY 28, 2009 09 -287 RESOLUTION (CARRIED 5 -2 LOST LAID OVER WITHDRAWN ) PURPOSE: CONSIDERATION OF AN INITIAL RESOLUTION REGARDING INDUSTRIAL DEVELOPMENT REVENUE BOND FINANCING TO BENEFIT THE SHOPS AT MARKET FAIR PROJECT. INFORMATION WITH RESPECT TO THE JOB IMPACT OF THE PROJECT WILL BE AVAILABLE AT THE TIME OF CONSIDERATION OF THE INITIAL RESOLUTION WHEREAS, Section 66.1103 of the Wisconsin Statutes (the "Act ") authorizes the City of Oshkosh, Wisconsin (the "Issuer "), to authorize the issuance and sale of bonds by the Issuer to construct, equip, re- equip, acquire by gift, lease or purchase, install, reconstruct, rebuild, rehabilitate, improve, supplement, replace, maintain, repair, enlarge, extend or remodel industrial projects; and WHEREAS, 2323 East Capitol, LLC, a Wisconsin limited liability company, and /or a related limited liability entity to be formed (the "Borrower ") desires to complete a project consisting of the (a) acquisition of land, (b) renovation and construction of an approximately 80,000 square foot facility known as the "Shops at Market Fair" located at 1508 South Koeller Avenue in the City of Oshkosh, Wisconsin, (c) capitalized interest, (d) soft costs and (e) payment of financing fees (the "Project "), which Project will be constructed by the Borrower and leased to Best Buy Stores L.P., Michaels Stores, Inc. and other retailers, all of which would contribute to the well -being of the City of Oshkosh, Wisconsin; and WHEREAS, the cost of the Project is presently estimated to be greater than $9,300,000, and the amount proposed to be financed with one or more series of tax - exempt and /or taxable industrial development revenue bonds does not exceed $9,300,000; and WHEREAS, the Borrower has requested that the Issuer now approve an initial resolution (the "Initial Resolution ") providing for the financing of the Project in an amount not to exceed $9,300,000; and WHEREAS, the Issuer is a municipality organized and existing under and pursuant to the laws of the State of Wisconsin, and is authorized to enter into revenue agreements with eligible participants with respect to the Project whereby eligible participants agree to cause said Project to be acquired, constructed and renovated and to pay the Issuer an amount of funds sufficient to provide for the prompt payment when due of the principal and interest on said industrial development revenue bonds. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Oshkosh, Wisconsin, as follows: 1. Based upon representations of the Borrower and the advice of Bond Counsel, prior to the issuance of the Bonds (as hereinafter defined), the City Council will determine that the Project is a qualified "project" within the meaning of the Act and that the Borrower is an "eligible participant" within the meaning of the Act. The Issuer shall: (a) Finance the Project in an amount not to exceed $9,300,000; and (b) Issue industrial development revenue bonds in one or more series of tax - exempt and /or taxable bonds (the "Bond(s) "), in an amount not to exceed $9,300,000 in order to finance costs of the Project 2. The aforesaid plan of financing contemplates, and is conditioned upon, the following: (a) The Bonds shall never constitute an indebtedness of the Issuer within the meaning of any state constitutional provision or statutory limitation; (b) The Bonds shall not constitute or give rise to a pecuniary liability of the Issuer or a charge against its general credit or taxing powers, including but not limited to: 1. Liability for failure to investigate or negligence in the investigation of the financial position or prospects of an eligible participant, a user of the Project or any other person or for failure to consider, or negligence concerning, the adequacy of terms of, or collateral security for, the Bonds or any related agreement to protect interests of holders of the Bonds; and 2. Any liability in connection with the issuance or sale of the Bonds, for representations made, or for the performance of the obligation of any person who is a party to a related transaction or agreement except as specifically provided in the Act or by an express provision of the Bond or a related written agreement to which the Issuer is a party. (c) The Project shall be subject to property taxation in the same amount and to the same extent as though the Project were not financed with revenue bonds; (d) The Borrower shall find a purchaser for all of the Bonds; and (e) The Issuer's out -of- pocket costs, including but not limited to legal fees and Trustee's fees, in connection with the issuance and sale of the Bonds shall be paid by the Borrower. 3. The aforesaid plan of financing shall not be legally binding upon the Issuer nor be finally implemented unless and until: (a) The details and mechanics of the same are authorized and approved by a further resolution of the City Council which shall be solely within the discretion of the City Council; (b) The City Clerk shall cause notice of adoption of this Initial Resolution, in the form attached hereto as Exhibit A , to be published once in a newspaper of general circulation in the City of Oshkosh, and the electors of the City of Oshkosh shall have been given the opportunity to petition for a referendum on the matter of the aforesaid Bond issue, all as required by law; (c) Either no such petition shall be timely filed or such petition shall have been filed and said referendum shall have approved the Bond issue; (d) The City Clerk shall have received an employment impact estimate issued under Section 560.034 of the Wisconsin Statutes; (e) All documents required to consummate the financing have been duly authorized and delivered; and (f) The Issuer and the Borrower have resolved all land use and special use issues with respect to the affected property and the Project. 4. Pursuant to the Act, all requirements that the Project be subject to the contracting requirements contained in Section 66.1103 (11) are waived, the Borrower having represented that it is able to negotiate satisfactory arrangements for completing the Project and that the Issuer's interests are not prejudiced thereby. 5. The City Clerk is directed, following adoption of this Initial Resolution (i) to publish notice of such adoption not less than one time in the official newspaper of the City of Oshkosh, Wisconsin, such notice to be in substantially the form attached hereto as Exhibit A and (ii) to file a copy of this Initial Resolution, together with a statement indicating the date the Notice to Electors was published, with the Secretary of Business Development of the State of Wisconsin within twenty (20) days following the date of publication of such notice. 6. This Initial Resolution is an "initial resolution" within the meaning of the Act and official action toward issuance of the Bonds for purposes of Sections 103 and 144 of the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder. Furthermore, it is the reasonable expectation of the Issuer that proceeds of the Bonds may be used to reimburse expenditures made on the Project prior to the issuance of the Bonds. The maximum principal amount of debt expected to be issued for the Project on the date hereof is $9,300,000. This statement of official intent is made pursuant to Internal Revenue Code §1.150 -2. Adopted: July 28, 2009. Mark A. Rohloff, City Manager Attest: Pamela Ubrig, City Clerk EXHIBIT A NOTICE TO ELECTORS OF THE CITY OF OSHKOSH, WISCONSIN TAKE NOTICE that the City Council of the City of Oshkosh, Wisconsin (the "Issuer"), at a regular meeting held at City Hall, 215 Church Avenue, Oshkosh, Wisconsin, on July 28, 2009, adopted an Initial Resolution pursuant to Section 66.1103 of the Wisconsin Statutes, as amended, expressing the intention to issue not to exceed $9,300,000 of revenue bonds of the Issuer (the "Bonds ") on behalf of 2323 East Capitol, LLC, a Wisconsin limited liability company, and /or a related limited liability entity to be formed (the "Borrower "). The Bonds are being issued for financing a project consisting of the (a) acquisition of land, (b) renovation and construction of an approximately 80,000 square foot facility known as the "Shops at Market Fair" located at 1508 South Koeller Avenue in the City of Oshkosh, Wisconsin, (c) capitalized interest, (d) soft costs and (e) payment of financing fees (the "Project "), which Project will be constructed by the Borrower and leased to Best Buy Stores L.P., Michaels Stores, Inc. and other retailers, all of which would contribute to the well -being of the City of Oshkosh, Wisconsin. The Borrower has represented that the net number of full -time equivalent jobs which the Project is expected to create on the Project site is 100. Pursuant to the terms of Section 66.1103 (11) of the Wisconsin Statutes, all requirements that the Project be subject to the contracting requirements contained in Section 66.1103 (11) are waived, the Borrower having represented that it is able to negotiate satisfactory arrangements for completing the Project and that the Issuer's interests are not prejudiced thereby. THE BONDS SHALL NEVER CONSTITUTE AN INDEBTEDNESS OF THE ISSUER, NOR SHALL THE BONDS GIVE RISE TO ANY PECUNIARY LIABILITY OF THE ISSUER, NOR SHALL THE BONDS BE A CHARGE AGAINST THE GENERAL CREDIT OR TAXING POWERS OF THE ISSUER. RATHER, THE BONDS SHALL BE PAYABLE SOLELY FROM THE REVENUES AND OTHER AMOUNTS TO BE DERIVED PURSUANT TO THE REVENUE AGREEMENT RELATING TO SAID PROJECT TO BE ENTERED INTO BETWEEN THE ISSUER AND THE BORROWER. The Initial Resolution may be inspected in the office of the City Clerk at 215 Church Avenue, Oshkosh, Wisconsin, during business hours. TAKE FURTHER NOTICE THAT THE ELECTORS OF THE CITY OF OSHKOSH MAY PETITION FOR A REFERENDUM ON THE QUESTION OF THE BOND ISSUE. Unless within thirty (30) days from the date of the publication of this Notice a petition signed by not less than five percent (5 %) of the registered electors of the City of Oshkosh is filed with the City Clerk requesting a referendum on the question of the issuance of the Bonds, the Issuer will issue the Bonds without submitting the proposition for the electors' approval. If such petition is filed as aforesaid, then the Bonds shall not be issued until approved by a majority of the electors of the City of Oshkosh voting thereon at a general or special election. Pamela Ubrig, City Clerk City of Oshkosh, Wisconsin MEMORANDUM 0 Of HKOfH Date: July 24 , 2009 ON THE WATER To: Honorable Mayor and Members of the Common Council From: Lynn A. Lorenson, City Attorney G�_ Subject: Resol. 09 -287 — Approval Initial IDRB — Shops at Market Fair Attached to this memorandum is a letter from Lisa R. Lang explaining the request for IDRB's for "The Shops at Market Fair Project" and also a copy of the Summary Conduit Tax - Exempt Bond Financing document regarding this project Lisa R Lange (608) 258 -7129 llange @whdlaw.com July 17, 2009 TO THE ATTACHED DISTRIBUTION LIST RE: $9,300,000 City of Oshkosh, Wisconsin Industrial Development Revenue Bonds, Series 2009 (The Shops at Market Fair Project) Greetings: At the request of 2323 East Capitol, LLC, a Wisconsin limited liability company, and /or a related limited liability entity to be formed (the "Borrower "), we have prepared drafts of documents necessary for the consideration and adoption of an Initial Resolution Regarding Industrial Development Revenue Bond Financing to Benefit The Shops at Market Fair Project (the "Initial. Resolution ") by the City Council of the City of Oshkosh, Wisconsin (the "City ") on July 28, 2009. The project consists of financing the (a) acquisition of land, (b) renovation and construction of an approximately 80,000 square foot facility known as the "Shops at Market Fair" located at 1508 South Koeller Avenue in the City of Oshkosh, Wisconsin, (c) capitalized interest, (d) soft costs and. (e) payment of financing fees (the "Pro)ect "), which Project will be constructed by the Borrower and leased to Best Buy Stores L.P., Michaels Stores, Inc. and other retailers, all of which would. contribute to the well-being of the City of Oshkosh, Wisconsin. Federal and state law requires that the authorization for such an industrial development revenue: bond be done in two stages (first, the consideration of an Initial Resolution by the City Council, and second the consideration of a final resolution (the "Final Resolution ") by the City Council). The Initial Resolution is not a commitment to issue bonds, but merely evidences the City's "official intent" to issue bonds pending satisfactory negotiation of the terms. The Final Resolution to be considered by the City Council at a future meeting will be drafted and presented to the City only after negotiations for the bond issue have been completed. Enclosed are the following documents necessary to allow the City Council to consider the Initial Resolution at its July 28, 2009 meeting: WHD/6582467.1 July 17, 2009 Page 2 (1) Initial Resolution, with the form of Notice to Electors of the City of Oshkosh, Wisconsin, attached as Exhibit A; (2) Good faith fee estimate letter required under Section 66.1103 of the Wisconsin Statutes; (3) Notice of Public Hearing (the so -called "TEFRA" notice); and (4) Notice of Intent to Obtain a Municipal Industrial Revenue Bond, which contains information regarding job estimates. We have also enclosed a "Checklist for the City of Oshkosh" and a summary entitled "Summary Conduit Tax- Exempt Bond Financing" for informational purposes. The following, in chronological order, are the steps necessary to issue the bonds: 1. For agenda purposes, the City Clerk should describe the Initial Resolution as follows for the July 28, 2009 meeting: "Consideration of an Initial Resolution Regar&ng Industrial Development Revenue Bond Financing to Benefit The Shops at Market Fair Pr ject. Information with respect to the job impact of the project will be available at the time of consideration of the Initial Resolution. " Please fax a copy of the agenda to Kate L. Albrecht at 414 - 223 -5000. 2. The Initial Resolution should be considered by the City Council at its meeting on July 28, 2009. The meeting must meet the requirements of an open meeting under Sections 19.81 et sec . of. the Wisconsin Statutes. Pursuant to Section 19.85 of the Wisconsin Statutes, the City Council may not: commence a meeting, subsequently convene in closed session, and reconvene in open session, unless public notice of such subsequent open session was given at the same time, and in the same manner, as the notice of the meeting convened prior to the closed session. If the City Council proposes to go into closed session at the meeting, please contact me to discuss this issue. A representative of the Borrower should attend the July 28, 2009 meeting to answer questions regarding the Project: and provide job estimate information to the City Council. Under federal regulations for cost recovery, reimbursement of the Borrower's expenditures with bond proceeds can only occur if the Issuer adopts the Initial Resolution. This Initial Resolution may apply to expenditures made by the Borrower within sixty (60) days prior to the adoption of the Initial Resolution and, in general, the reimbursement must be made no later than three (3) years after the original expenditure. WHD/6582467.1 July 17, 2009 Page 3 3. On July 29, 2009, the City Clerk should call Kate L. Albrecht at out office (414 -978- 5516) to confirm that the Initial Resolution was adopted. Kate will publish the Notice to Electors, which is attached to the Initial Resolution as Exhibit A, in the City's local newspaper. After the notice is published, the electors of the City have thirty (30) days during which to circulate a petition for a referendum. In my personal experience, only one such referendum has ever been placed on the ballot, out of hundreds of industrial development revenue bond issues. 4. The City Clerk should mail a copy of the Initial Resolution (the Certificate by City Clerk which is attached to the Initial Resolution should be completed and signed) to Kate L. Albrecht. Kate will send a copy of the Initial Resolution, along with the date that the Notice to Electors was published, to Steven Sabatke at the Wisconsin Department of Commerce. 5. The federal tax law known as the Tax Equity and Fiscal Responsibility Act of 1986 ( "TEFRA "), requires that this Project, which is being funded with tax- exempt bond proceeds, be the subject of a noticed public hearing called a TEFRA public hearing. These hearings provide interested individuals or parties the opportunity to testify on any matters related to such potential bond issues, including the nature and location of the Project. Therefore, at a future date, a notice regarding the scheduled TEFRA public hearing must be published (our office will publish the Notice of Public Hearing on behalf of the City). The Notice of Public Hearing must be published no later than fourteen (14) days before the TEFRA public hearing. Our usual practice is to have the TEFRA public heating immediately preceding the meeting at which the Final Resolution is considered by the City Council. We will notify the City in the future to schedule the TEFRA public hearing /Final Resolution date. 6. At a future date, the City Council will hold the TEFRA public hearing and consider the Final Resolution. A representative of the Borrower should attend the TEFRA public hearing. The City Council meeting must meet the requirements of an open meeting under Sections 19.81 et seq. of the Wisconsin Statutes 7. After the preliminary steps outlined above have been completed, the Borrower and the. Purchaser will need to negotiate the bond documents (to be prepared by Whyte Hirschboeck Dudek. S.C.) in preparation for the sale of the bonds. The pricing will occur just prior to the City Council. meeting during which the City Council will be asked to adopt the Final Resolution. The foregoing is a brief sketch of the procedural steps that must be followed when issuing; industrial development revenue bonds. The key point to remember is that the City will be considering., from a policy standpoint, whether to encourage the location of the Project in the City. By issuing the; bonds, the City will give the Borrower an interest rate benefit because the bonds will be tax - exempt in. the hands of the Purchaser. It must be emphasized that the City will not be liable in any way on the bonds; the bonds are special, limited obligations of the City. WHD/6582467.1 July 17, 2009 Page 4 We are simultaneousy dehvering to the City Clerk the good faith fee estimate letter required under Section 66.1103 of the Wisconsin Statutes. A copy of this letter should be signed by Pamela Ubrig and returned to us to evidence her receipt of the letter. An authorised officer of the Borrower should sign the enclosed Notice of Intent to Obtain a Municipal Industrial Revenue Bond (the `Notice of Intent') and return it to me. We will send the signed Notice of Intent to the City Clerk at the City and to Steven Sabatke at the Wisconsin Department of Commerce. Whoever attends the meeting on behalf of the Borrower should bring the signed Notice of Intent to the City Council meeting on July 28, 2009. We are looking forward to working with everyone on this Project. Please call me with any questions or comments. Very truly yours, LRL /k1a Lisa R. Lange WHD/6582467.1 Summary Conduit Tax- Exempt Bond Financing Industrial Revenue Bonds (IRBs) The City of Oshkosh, Wisconsin is being asked to consider an Initial Resolution to benefit a local company, 2323 East Capitol, LLC, a Wisconsin limited liability company (the "Company "), through the conduit issuance of industrial revenue bonds ( "IRBs "), similar to the UW Oshkosh conduit IRB that the City issued last year. In an IRB transaction, a state or local governmental entity issues Bonds and loans the proceeds from the sale of the bonds to a private entity for an authorized project. In Wisconsin, cities, villages and towns, as well as duly constituted redevelopment authorities and community development authorities may issue IRBs. Federal Law.- MDA Bonds. Previously under Federal law, IRBs could only be issued for small manufacturers, 501(c)(3) organizations or for certain exempt facilities. In October of 2008, Congress passed the Heartland Disaster Tax Relief Act following the severe storms, tornadoes and flooding experienced throughout the Midwest. This act allows tax - exempt bonds (Midwestern Disaster Area Bonds or MDA Bonds) to be issued for a business for a wider range of purposes including projects like the one proposed by the Company. MDA Bonds (which are IRBs) must finance a project located in one of the 30 southern affected counties of Wisconsin which were declared federal disaster areas, including Winnebago County. City as Conduit Issuer These IRBs are municipal bonds; however, they are not general obligations of the City. If the City agrees to issue Bonds to benefit the proposed project: 1. The Cif will not be liable for payment of the principal and interest on the Bonds; 2. The City will not have ongoing responsibilities of monitoring or reporting with regard to the Bonds or the Project. 3. The Bonds do not count against the City's borrowing capacity The City will not levy a tax for payment of the Bonds. The City acts strictly as a conduit, which enables the Company to borrow at a lower rate of interest. Because the Bonds are issued by a governmental entity, the holder of the Bond may exclude: the interest on the Bonds from gross income for federal tax purposes. Inducement /Reimbursement Companies considering IRB financing must obtain an Initial Resolution, also sometimes referred to as an "inducement resolution" or "qualified reimbursement resolution" from the WHD16579692.1 municipality in which the Project being financed is located in order to preserve the option to use IRBs. The Initial Resolution is preliminary approval only and is non - binding as to the City or the Company but is required by Federal tax law and State law. If the Initial Resolution is adopted by the City, this will assure that when and if Bonds are issued, all eligible project costs incurred no more than 60 days prior to the date of the Initial Resolution (including reimbursement of equity contributions or refunding of conventional financing), may be included in the ultimate IRB financing. Failure to have a qualified resolution may result in disqualifying certain costs. The Company will benefit from the tax - exempt financing by owning and /or using the Bond financed- facilities and will enjoy a lower interest rate as a result of using a bond structure. A lending institution will secure payment of the Bonds pursuant to a direct pay Letter of Credit and the Bonds will be sold to the public market, or a lending institution will directly purchase the Bonds. The Trustee for the Bonds will look solely to the Company for repayment. Bondholders will not look to the City for payment. The City will assign all of its rights, liability and responsibilities under the Bonds to a third parry fiduciary Trustee for administration for the benefit of the Bondholders. The Company will be fully responsible for repaying the loan and must make the arrangements with the Trustee for the payment on. the Bonds. If the Company is not able to meet its payment obligations, the Bank will realize . on its collateral and enforce its rights against the Company. The City is not liable for payment. The foregoing is just a brief discussion of tax - exempt financing. The key point to remember is that the City will be considering from a policy standpoint whether to encourage the location of the Company in the City. By issuing the Bonds, the City will give the Company an interest rate benefit, because the tax- exempt Bonds will be tax - exempt in the hands of the Bondholders. It must be emphasized that the City will not be liable in any way on the Bonds; the Bonds are special, limited obligations of the City. 2 WHD/6579692.1