HomeMy WebLinkAbout05. 12-543
NOVEMBER 13, 2012 12-543 RESOLUTION
(CARRIED___7-0____ LOST _______ LAID OVER _______ WITHDRAWN _______)
PURPOSE: INITIAL RESOLUTION REGARDING REVENUE BOND
FINANCING TO BENEFIT UNIVERSITY OF WISCONSIN
OSHKOSH FOUNDATION, INC (ALUMNI WELCOME AND
CONFERENCE CENTER PROJECT)
INITIATED BY: UNIVERSITY OF WISCONSIN OSHKOSH FOUNDATION, INC
AND/OR UW OSHKOSH FOUNDATION ALUMNI WELCOME AND
CONFERENCE CENTER, LLC
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 revenue
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, the University of Wisconsin Oshkosh Foundation, Inc., a Wisconsin
nonstock corporation, and/or UW Oshkosh Foundation Alumni Welcome and
Conference Center, LLC, a Wisconsin limited liability company, and/or a related limited
liability entity (collectively, the Borrower”) desires to complete a project consisting of the
(i) construction of an approximately 39,000 square-foot Alumni Welcome and
Conference Center to be located at 625 Pearl Avenue in the City of Oshkosh, Wisconsin
(the “Facility”), (ii) acquisition of furniture, fixtures and equipment at the Facility and (iii)
payment of professional and financing fees (the “Project”), which Project will be
constructed by the Borrower and owned by the University of Wisconsin System and
used by the UW-Oshkosh and the Borrower, 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
$13,300,000, and the amount proposed to be financed with one or more series of tax-
exempt and/or taxable revenue bonds to be issued as qualified 501(c)(3) bonds under
Section 145 of the Internal Revenue Code or as Midwestern disaster area revenue bonds
does not exceed $13,300,000; 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 $13,300,000; and
WHEREAS, completion of the Project will increase the number of people coming to
the City for business and recreation; 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 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, it is the finding and
determination of the City Council 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:
(a) shall finance the Project in an amount not to exceed $13,300,000;
(b) shall issue revenue bonds in one or more series of tax-exempt
and/or taxable bonds (the "Bond(s)"), in an amount not to exceed $13,300,000 in
order to finance costs of the Project; and
(c) hereby finds that the completion of the Project will increase the
number of people coming to the City for business and recreation.
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
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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
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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 Wisconsin Economic Development
Corporation 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 $13,300,000. This statement of official intent is made
pursuant to Internal Revenue Code §1.150-2.
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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 November 13,
2012 adopted an Initial Resolution pursuant to Section 66.1103 of the Wisconsin Statutes, as
amended, expressing the intention to issue not to exceed $13,300,000 of revenue bonds of the
Issuer (the "Bonds") on behalf of University of Wisconsin Oshkosh Foundation, Inc., a Wisconsin
nonstock corporation, and/or UW Oshkosh Foundation Alumni Welcome and Conference
Center, LLC, a Wisconsin limited liability company, and/or a related limited liability entity
(collectively, the Borrower"). The Bonds are being issued for financing a project consisting of the
(i) construction of an approximately 39,000 square-foot Alumni Welcome and Conference
Center to be located at 625 Pearl Avenue in the City of Oshkosh, Wisconsin (the "Facility"), (ii)
acquisition of furniture, fixtures and equipment at the Facility and (iii) payment of professional
and financing fees (the "Project"), which Project will be constructed by the Borrower and owned
by the University of Wisconsin System and used by the UW-Oshkosh and the Borrower, 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 5.
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 R. Ubrig, City Clerk
City of Oshkosh, Wisconsin
CITY HALL
215 Church Avenue
P.O.Box 1130
Oshkosh,Wisconsin
5 903-1130 City of Oshkosh
411111)—
OfHKOJH
TO: Honorable Mayor and Members of the Common Council
FROM: Lynn A. Lorenson, City Attorney
DATE: November 8, 2012
RE: Initial Resolution Regarding Revenue Bond Financing to benefit the
University of Wisconsin Oshkosh Foundation, Inc. (Alumni Welcome and
Conference Center Project)
BACKGROUND
The University of Wisconsin Oshkosh Foundation, Inc. and/or the UW Oshkosh
Foundation Alumni Welcome and Conference Center, LLC have requested the Council
consider the adoption of an Initial Resolution with respect to revenue bond financing to
assist with the completion of an alumni welcome and conference center to be located at
625 Pearl Avenue in the City of Oshkosh. Attached to this memorandum is a discussion
of the project and proposed financing that has been provided by the Foundation's
counsel.
ANALYSIS
Federal and state laws allow municipalities to issue municipal bonds as a conduit issuer
for certain purposes in compliance with all of the law's requirements. The issuance of
these bonds provides a benefit to the underlying organization by providing the
organization funding at a significantly reduced interest rate compared to other types of
financing.
The statutes require that the authorization for issuance for revenue bonds by the
municipality be done in two stages, by consideration of an initial and final resolution
related to the project. The initial resolution is the first step in this process and does not
commit the City to issue the bonds at this time. It is a statement of the intent to issue
bonds pending the satisfactory negotiation of final terms. In this case, the University of
Wisconsin Oshkosh Foundation, Inc. and/or the UW Oshkosh Foundation Alumni
Welcome and Conference Center, LLC have requested the Council pass an initial
resolution indicating an intent to issue up to $13,300,000 in revenue bonds for the
purpose of constructing an Alumni Welcome and Conference Center, acquiring the
IS
necessary furniture, fixtures and equipment for the facility, and to pay professional and
financing fees related to the project.
FISCAL IMPACT
The bonds are municipal bonds but are not general obligations of the City and do not
count against the City's borrowing capacity. There is no anticipated fiscal impact to the
City from the proposed borrowing. The Initial Resolution would provide the property
owner with the opportunity to secure lower interest rate, tax-exempt bonds in support of
the proposed project. The City of Oshkosh would not be liable for payment of principal
or interest on the bonds and would not have any ongoing responsibilities for monitoring
or reporting with regard to the bonds or the proposed projects.
Res►ectfully Submi ed, Approved:
0/1 ,
en A Lorenson Mark A. Rohloff
City A orney City Manager
Discussion—Utilization
Tax-Exempt Bonds ("IRBs")
To Benefit University of Wisconsin Oshkosh Foundation, Inc.Project
The University of Wisconsin Oshkosh Foundation, Inc., a Wisconsin nonstock corporation, and/or UW
Oshkosh Foundation Alumni Welcome and Conference Center, LLC, a Wisconsin limited liability company, and/or a
related limited liability entity(the "Foundation") desires to complete a project consisting of (i) the construction of an
approximately 39,000 square-foot Alumni Welcome and Conference Center to be located at 625 Pearl Avenue in the
City of Oshkosh,Wisconsin (the "Facility"), (ii) acquisition of furniture, fixtures and equipment at the Facility and (iii)
payment of professional and financing fees (the "Project"), which Project will be constructed by the Foundation and
owned by the University of Wisconsin System and used by the UW-Oshkosh and the Borrower.
Section 66.1103 Wis.Stats. provides that cities,villages and towns in the State have requisite authority to act as
a conduit issuer for tax-exempt bonds for eligible projects. The proposed Project is an eligible project under Section
66.1103 and the City of Oshkosh has statutory authority to serve as a conduit issuer. Likewise, Section 145 of the
Internal Revenue Code provides that under Federal law, a 501(c)(3) borrower may borrow on a tax-exempt basis to
finance expenditures in furtherance of its exempt purpose. Tax-Exempt financing will result in significant interest rate
savings over other types of financing.
Conduit Nature of Bonds
Bonds are issued by the City are municipal bonds;however,they are not general obligations of the City. If the
City agrees to issue bonds to benefit the Foundation:
1. the City will not be liable for payment of the principal and interest;
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;
4. the City will be reimbursed for out-of-pocket costs,including applicable legal
fees.
The City acts strictly as a conduit,which enables the Foundation to borrow at a lower rate of interest.
The City of Oshkosh has done several conduit bonds to benefit small manufacturers. The operation
of the proposed financing to benefit the Foundation would be identical in structure—the only difference is that
this borrower is a 501(c)(3) organization rather than a manufacturer.
Security for the Bonds
Like the manufacturers who have benefited from the City serving as a conduit issuer,the Foundation will enjoy
a lower interest rate as a result of using a bond structure. The Bonds will either be purchased directly by a Bank or will
be sold to the public market,backed by a direct pay letter of credit issued by the Bank The Bank,as Bondholder(if the
Bonds are structured as a bank purchase),will look solely to the Foundation for repayment and would not look to the
City for payment. If the transaction is structured as a publicly sold issue,the Bondholders will look solely to the Letter
of Credit for payment of principal and interest and the Bank will look solely to the Foundation for repayment and would
not look to the City for payment. The City would assign all of its rights,liability and responsibilities under the Bonds to
the Trustee for the benefit of the Bondholders.
Qualifications
Qualified 501(c)(3)Bonds are tax-exempt qualified private activity bonds issued by a state or local government,
the proceeds of which are then used by the exempt organization in furtherance of its exempt purpose. Typical exempt
borrowers that utilize tax-exempt bond financing include universities,hospitals,continuing care retirement communities,
certain 501(c)(3)recreational and cultural facilities and private schools.
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How Revenue Bond Financing Works
With a revenue bond financing, pursuant to a credit agreement or a reimbursement agreement between the
Bank and the Foundation,the Foundation will agree to make loan repayments in amounts sufficient to pay debt service
on the Bonds. The Bonds are by law strictly a pass through or non-recourse form of financing as far as the City is
concerned.
In addition to the loan agreement between the City and the Foundation, which sets forth the Foundation's
responsibilities, there is an indenture agreement between the issuer a corporate trustee for the benefit of the
Bondholders. The terms of the Bonds are set pursuant to such an indenture. A bank (the "Trustee") holds the
proceeds from the sale of the Bonds in a construction fund. Upon requisition by the Foundation and approval by the
Bank,the Trustee disburses the proceeds for the cost of construction and acquisition.
There is considerable flexibility in the terms that can be worked out between the parties. The repayment
schedule for the Bonds can be tailored to the needs of the 501(c)(3) borrower. The term of the Bond usually ranges
from 10 to 30 years.
Summary
The foregoing is just a brief discussion of conduit tax-exempt financing. The key point to remember is that the
issuance of conduit Bonds by the City may give the Foundation a significant interest rate benefit at no cost to the City or
the taxpayers.
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