Res 2016- 22 Policy for Private Rev Bond FinancingResolution 2016-22
A Resolution Adopting
Policies and Procedures for Private Activity
Revenue Bond Financing
for the City of Mendota Heights, Minnesota
WHEREAS, the City of Mendota Heights is has the ability to issue up to $10 million in tax
exempt bonds annually that are classified as "bank qualified"; and
WHEREAS, the City of Mendota Heights traditionally for itself does not issue bonds which
exceed the $10 million limit; and
WHEREAS, as a result, the City of Mendota Heights has the capacity to issue Private Activity
Revenue Bonds for a variety of projects for other housing and non-profit entities; and
WHEREAS, in order to have consistency in the issuance of this conduit debt, and to make
certain that all of the costs for the issuance and future reporting are covered, the City of Mendota
Heights has prepared a policy which defines the necessary qualifications, methodology, fees,
application form, and an Indemnification Letter of Agreement for issuers of Commercial,
Educational, Industrial, Health Care, or Housing Bonds, who desire to use the bank qualified
bonds to be issued by the City of Mendota Heights; and
WHEREAS, said policies have been reviewed and approved by the City Attorney for the City of
Mendota Heights.
NOW, THEREFORE, BE IT RESOLVED BY THE MAYOR AND CITY COUNCIL OF
THE CITY OF MENDOTA HEIGHTS, MINNESOTA that the Procedure for Application to
City of Mendota Heights, Minnesota for Private Activity Revenue Bond Financing, effective as
of March 16, 2016, is hereby adopted.
Sandra Krebsbich, Mayor,
City of Mendota Heights, Minnesota
ATTTE:
Lorri Smith, City Clerk
SJB-193102v1
SA285-04
PROCEDURE
FOR
APPLICATION TO
CITY OF MENDOTA HEIGHTS, MINNESOTA
FOR
PRIVATE ACTIVITY REVENUE BOND FINANCING
Effective as of March 16, 2016
TABLE OF CONTENTS
Page
-i-
PROCEDURE FOR APPLICATION
TO THE CITY OF MENDOTA HEIGHTS FOR
PRIVATE ACTIVITY REVENUE BOND FINANCING
Table of Contents
Page
PART I GENERAL ............................................................................................................. 1
PART II GUIDELINES ........................................................................................................ 2
PART III MISCELLANEOUS MATTERS .......................................................................... 4
PART IV APPLICATION FOR TAX-EXEMPT FINANCING ........................................... 5
PART V APPLICATION FOR TAX-EXEMPT FINANCING ........................................... 8
PART VI ADDENDUM TO APPLICATIONS .................................................................. 11
PART VII INDEMNIFICATION LETTER OF AGREEMENT .......................................... 13
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PART I
GENERAL
Under the Minnesota Municipal Industrial Development Act, Minnesota Statutes, Sections
469.152 to 469.1655, as amended (the “Industrial Development Act”), the City of Mendota
Heights, Minnesota (the “City”) has authority to issue industrial, commercial, and health care
revenue bonds or notes to attract or promote economically sound industry and commerce to the
City.
Under Minnesota Statutes, Chapter 462C, as amended (the “Housing Act”), the City is authorized
to issue housing revenue bonds to finance multi-family residential housing projects for low and
moderate income persons and elderly persons. Projects must be consistent with a Housing
Program as these terms are defined in the Housing Act.
The Council is aware that such financing for certain private activities may be of benefit to the City
and will consider requests for tax-exempt financing subject to these Guidelines. The Council
considers tax-exempt financing to be a privilege, not a right.
It is the judgment of the Council that tax-exempt financing is to be used on a selective basis to
encourage certain development that offers a benefit to the City as a whole, including significant
employment and housing opportunities. It is the applicant's responsibility to demonstrate the
benefit to the City, both in writing and at the required public hearing. The applicant should
understand that although approval may have been granted by the City for the issuance of financing
for a similar project or a similar debt structure, that is not a basis upon which approval will be
granted. Each application will be judged on the merits of the project as it relates to the public
purposes of the Housing Act or the Industrial Development Act and the benefit to the City at the
time the request for financing is being considered.
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PART II
GUIDELINES
1. The Council will consider tax exempt financing for commercial, industrial and health care
projects under the Industrial Development Act and housing projects under the Housing
Act. An applicant for tax-exempt financing pursuant to the Industrial Development Act
must submit to the City the application contained in Part IV of these Guidelines. An
applicant for tax-exempt financing pursuant to the Housing Act must submit to the City the
application contained in Part V of these Guidelines.
2. Projects must be compatible with the overall development plans and objectives of the City
and comply with the zoning and land use regulations of the City.
3. An application will not be considered by the Council until City Staff has reviewed City
Codes with respect to zoning, building plans, platting, streets, and utility services. The
application must be accompanied by the addendum contained in Part VI of these
Guidelines and must provide information as to the project's need for municipal services
including, but not limited to, street improvements, water and sewer services, and police
and fire protection.
4. The project must be a positive benefit to the City. The project must be of a nature that the
City wishes to attract, or an existing business which the City wishes to retain or have
expand within the City, considering employment opportunities, incentive for further
development, impact on City services, and support for the industrial, commercial or health
care operations currently located in the City. A housing project must provide significant
housing opportunities for low and moderate income persons or the elderly.
5. The applicant must select a qualified financial adviser or underwriter to assist the applicant
in preparing all necessary application documents and materials. The financial adviser will
submit a letter that establishes the financial feasibility of the project. Applications may, in
the alternative, include a signed letter from a financial institution indicating that the project
is economically feasible and viable and stating that bonds can be successfully sold for the
project or that an individual or institution intends to purchase all of the bonds.
The City will appoint bond counsel for the bond issue, which will normally be the City's
regularly retained bond counsel.
6. Pursuant to the Industrial Development Act and the Housing Act, consideration of an
application for tax-exempt financing and issuance of related bonds must be done at a
public hearing held by the Council. The applicant or a representative of the applicant must
attend the public hearing. Modifications to the project after the public hearing and
preliminary approval must be consistent with the scope of the project as proposed at the
time of preliminary approval.
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The applicant must receive approval from the appropriate state agencies, secure financing
and commence construction, if applicable, within one year of the date of the public hearing
on the project or the housing program.
7. The City is to be reimbursed and held harmless for and from any out-of-pocket expenses
related to the tax-exempt financing including, but not limited to, legal fees, financial
analyst fees, bond counsel fees, the City staff's expenses in connection with the
application, and any deposits or application fees required under state law in order to secure
allocation of bonding authority. The applicant must execute a letter to the City undertaking
to pay all such expenses. A form of the required letter is set forth as Part VII of these
Guidelines. In addition to the out of pocket fees listed above, a non-refundable application
fee in the amount of $2,500 must be included with the submission of the application.
8. Prior to closing and delivery of the bonds for the project, the applicant must pay an
administrative fee in an amount equal to the greater of $10,000 or .5% of the principal
amount of the bonds actually issued. The administrative fees required by this paragraph
will be adjusted at or paid prior to delivery of the bonds if necessary to ensure compliance
with the Internal Revenue Code and U.S. Treasury Regulations.
9. Applications for financing must be made on the forms attached to these Guidelines. In
addition, the applicant must furnish a description of the project, a site plan, elevation of
proposed buildings, landscape, lighting, and site preparation, if applicable, together with a
brief description of applicant and the proposed financing in such form as required at the
time of application.
10. The Council may, in its sole discretion, impose conditions exceeding those required under
the City building code in respect to exterior building materials, landscaping, signage
lighting, and such other aspects as the Council may consider appropriate on a case-by-case
basis.
11. The Council may, in its sole discretion, withdraw its preliminary approval of a project any
time if in its judgment the purposes of the Industrial Development Act or the Housing Act
will not be served by going forward with the project and its financing.
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PART III
MISCELLANEOUS MATTERS
1. Refundings. In the case of refundings of bonds for which the administrative fee listed in
paragraph 8 of Part II have been paid in full, no new administrative fees are required; but
the non-refundable application fee must be paid together with all City expenses in excess
of that fee. If the administrative fees for the refunded bonds are not paid in full upon
closing on the refunding bonds, such fees must continue to be paid for the refunding bonds.
In the case of refundings of bonds where no administrative fee has ever been paid, the
administrative fees listed in paragraph 8 of Part II must be paid. The application form is to
be appropriately modified.
2. Subsequent Proceedings. Where changes to the underlying documents or credit facilities
of outstanding bond issues are to be made and require Council action (including changes
that are a “deemed reissuance” under Internal Revenue Service regulations), no
administrative fee is to be charged but a non-refundable fee of $1,500 must be deposited
with the City to cover administrative costs, and all City expenses in excess of the fee must
be paid. No formal application form is required.
3. Issue by Another Political Subdivision. The City will consider requests for tax-exempt
financing of projects in the City by other political subdivisions (i.e. “host approval”). In
these cases the non-refundable application fee must be paid and all procedures through the
approval of the preliminary resolution followed. No administrative fee is charged.
4. City Contact. Initial contacts about tax-exempt financing are made by contacting:
Finance Director
City of Mendota Heights
1101 Victoria Curve
Mendota Heights, MN 55118
5. Request for additional information or requirements. The City of Mendota Heights has the
right to request additional information that may be deemed necessary to consider requests
for tax-exempt financing of any project in the City of Mendota Heights.
6. Upon issuance of the Bonds. The City of Mendota Heights shall be copied in on all annual
certifications of documents that are sent to the U.S. Treasury Department, the Internal
Revenue Service, the State of Minnesota, the Minnesota Housing Finance Agency and/or
other governmental body for compliance purposes, as provided in the documents relating
to the bonds. Any and all signatures required on the documents supporting the tax-exempt
financing will be supplied at the convenience of the City.
7. Loss of Bank-Qualified Designation. Federal tax regulations limit municipalities to $10
million of “bank-qualified” tax-exempt bonds to be issued in a calendar year. Bank-
qualified bonds are generally more attractive to bank purchasers because they may deduct
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certain carrying expenses when making such investments; this attractiveness typically
results in lower interest rates for bank-qualified tax-exempt bonds. It is possible that
conduit revenue debt issued by the City and designated as “bank qualified” may cause the
$10 million limit to be exceeded by the City in a given year, thereby making the City’s
general obligation bonds (which would have otherwise been designated as bank qualified
in such given year) non-bank qualified and subject to higher interest rates. Therefore, the
applicant must covenant as part of the project financing documents to reimburse the City
for any higher interest costs related to the City’s general obligation bonds having to be
designated as non-bank qualified bonds due to the conduit debt issuance. The City’s legal
and financial consultants will determine the present value of the actual additional interest
costs due from loss of bank qualification, and such determination shall be conclusive and
final.
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PART IV
APPLICATION FOR TAX-EXEMPT FINANCING
(Commercial, Industrial or Health Care)
1. APPLICANT
a. Business Name:
b. Business Address:
c. Business Form (corporation, partnership, sole proprietorship, etc.):
d. Authorized Representative:
e. Principal contact person and telephone number:
2. PURPOSE OF REQUESTED FINANCING:
a. New Facility (describe):
b. Expansion (describe):
c. Refunding (describe):
3. GIVE BRIEF DESCRIPTION OF NATURE OF BUSINESS, PRINCIPAL PRODUCTS,
ETC.:
4. ESTIMATED PROJECT COSTS: (Not required for refunding)
Land $______________
Building ______________
Equipment ______________
Architectural, Engineering ______________
Costs of Issuance ______________
Capitalized Interest,
including discount ______________
Other ______________
Total Financing Requested $______________
5. AMOUNT OF FINANCING REQUESTED: $_____________ (___% of project costs)
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6. TYPE OF FINANCING PROPOSED:
Bonds ______ Tax Exempt Mortgage Note _______
Expected Term of Financing ______ Years
Security:
Mortgage ________
Letter of Credit ________
Guaranty (third party) _______
Guaranty (personal) _______
Unsecured _______
Other (specify) _______
7. BUSINESS PROFILE: (Not required for refunding)
a. Is the business currently located in the City of Mendota Heights?
b. Number of employees in City:
1) Before this project:
2) After this project:
c. Approximate annual sales:
d. Length of time in business:
Length of time in business in City:
e. Do you have facilities in other locations? If so, where?
f. Is any portion of the project to be financed religious in nature? If so, provide detail.
g. If you are considering leasing a portion of the financed project, please provide detailed
information as to the tenant(s), the length of the lease, the rental amount, and other
particulars.
8. NAMES OF:
a. Underwriter or Lender (name and contact person):
b. Corporate Counsel:
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c. Underwriter's or Lender’s Counsel:
9. ANTICIPATED PERFORMANCE DATES: (Not required for refunding)
a. Construction start:
b. Construction completion:
10. ATTACHMENTS:
a. Project description:
b. Initial application fee
c. Indemnification Letter of Agreement
I certify that the information provided above contains no misrepresentations, omissions or
concealments of material facts and that the information given is true and complete to the best of
my knowledge. I have been furnished a copy of the Procedure for Application to the City of
Mendota Heights for Private Activity Revenue Bond Financing and am aware of its content and
agree to be bound by its terms and the terms of the indemnification letter.
______________________________ ______________________________
Signature Date
______________________________
Title
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PART V
APPLICATION FOR TAX-EXEMPT FINANCING
(Multi-Family Housing)
1. APPLICANT
a. Business Name:
b. Business Address:
c. Business Form (corporation, partnership, sole proprietorship, etc.):
d. Authorized Representative:
e. Principal contact person and telephone number:
2. NAMES OF:
a. Underwriter or Lender (name and contact person):
b. Corporate Counsel:
c. Underwriter's or Lender’s Counsel:
d. Property Management:
3. PURPOSE OF REQUESTED FINANCING:
a. New Facility (describe):
b. Redevelopment (describe):
c. Refunding (describe):
4. PROJECT NAME:
5. PROJECT LOCATION:
6. PROJECT INFORMATION
UNIT CURRENT RENTS RENTSAFTER AMI%*
Efficiency ______ $_______________ _____________ _______
One Bedroom ______ $______________ _____________ _______
Two Bedroom ______ $______________ _____________ _______
Three Bedroom ______ $______________ _____________ _______
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Parking (included in rent/
not included in rent) ______ $______________ _____________
Laundry ______ $______________ _____________
Utilities included in monthly rent: _____________________________________________
________________________________________________________________________
*Please provide detailed information regarding how many units are currently
income/rent restricted and what the new number will be once the development is
completed.
OPERATING EXPENSES (Not required for 501(c)(3) financings)
____________% of Gross (Annual)
TOTAL PROJECT COST: $_________ DEVELOPER EQUITY: $_________
DEBT SERVICE: $_________ *HARD COSTS: $_________
LAND VALUE: $_________ SOFT COSTS: $_________
*(Hard Costs are all project costs the IRS has determined to be eligible items for
depreciation.)
ANTICIPATED INTEREST RATES: AMORTIZATION SCHEDULE:
________________% _____-Year Amortization Schedule
If the project were conventionally financed, what interest rate would you expect to pay?
_______%
SALES ASSUMPTION: DEPRECIATION METHOD:
(Not required for 501(c)(3) financings) (Not required for 501(c)(3) financings)
How many years do you plan to Years: _____________
hold the property before you
sell? ________________________ Type: ________________________
a. At what percent do you
feel the value of the project Amount of Total Basis: $______
will appreciate? _____________
EQUIPMENT:
$________________ of project cost is for equipment (e.g., washers/dryers)
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ANTICIPATED INCREASES: ANTICIPATED VACANCY RATE:
(Not required for 501(c)(3) financings) (Not required for 501(c)(3) financings)
Revenue: _____% per year First Year: _________%
Expenses: ______% per year After First Year: _________%
CONSTRUCTION SCHEDULE: (Not required for refunding)
Anticipated construction commencement date: _____________________
Anticipated construction completion date: _______________________
7. RELOCATION PLAN (Not required for 501(c)(3) financings)
A relocation plan will be required if any of the residents are dislocated due to the
renovations or financing that is being utilized.
8. LEASES: If you are considering leasing a portion of the financed project, please provide
detailed information as to the tenant(s), the length of the lease, the rental amount, and other
particulars.
9. ADDITIONAL INFORMATION:
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
I certify that the information provided above contains no misrepresentations, omissions or
concealments of material facts and that the information given is true and complete to the best of
my knowledge. I have been furnished a copy of the Procedure for Application to the City of
Mendota Heights for Private Activity Revenue Bond Financing and am aware of its content and
agree to be bound by its terms and the terms of the indemnification letter.
______________________________ ______________________________
Signature Date
______________________________
Title
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PART VI
ADDENDUM TO APPLICATIONS
The following items must be attached to each application:
APPENDIX A
A brief description of the organizational structure of Applicant, including parent subsidiary and
affiliate organizations (if applicant is other than an individual).
APPENDIX B
Statement of Applicant's business history (for applications under Part V, including any other
multi-family rental projects of the Applicant).
APPENDIX C
The name, address, and telephone number of:
1. The Applicant's legal counsel
2. The Applicant's accountant
3. The architect of the proposed Project (Not required for refunding)
4. The engineer of the proposed Project (Not required for refunding)
5. The general contractor of the proposed Project (Not required for refunding)
APPENDIX D
6. Present ownership of the proposed Project site and Applicant's interest therein.
7. Present zoning of the Project site and a description of what city land use approvals are
needed for this project.
8. The projected number of new employees to be added to the Applicant's permanent work
force because of the Project (for Commercial, Industrial or Health Care only).
9. Other financing attempted or available to the Project including any interim financing.
10. Statement regarding whether or not this project has all required city approvals. If the
project does not have all of the required approvals, list the approvals still needed and a
tentative time schedule.
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APPENDIX E
Indemnification Letter of Agreement.
APPENDIX F (Not required for 501(c)(3) financings)
Proforma Analysis of the Project
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PART VII
INDEMNIFICATION LETTER OF AGREEMENT
Mayor and City Council
City of Mendota Heights
1101 Victoria Curve
Mendota Heights, MN 55118
RE: Application of _________________ for Tax Exempt Revenue Bond Financing by the City
of Mendota Heights
Dear Mayor and Members of the City Council:
This letter of agreement is given by _____________________, a _________________ under the
laws of Minnesota ("Applicant") as required by the City of Mendota Heights, Minnesota in
connection with its consideration of an application for tax exempt revenue bond financing for the
project described in the application.
Applicant agrees as follows:
1. Applicant agrees to pay or reimburse the City for any and all costs and expenses which the
City may incur in connection with its consideration of the project and the granting of tax
exempt revenue bond financing therefor, whether or not the project is preliminarily
approved by the City, whether or not the project is approved by the State of Minnesota,
whether or not revenue bond financing is finally approved by the City, whether or not the
bonds are issued and sold, and whether or not the project is carried to completion.
2. Applicant agrees to indemnify and hold the City, its officers, employees and agents
harmless against any and all losses, claims, damages, expenses or liabilities, including
attorneys fees incurred in their defense, to which the City, its officers, employees and
agents may become subject in connection with the City's consideration, issuance or sale of
the bonds for Applicant's project and the carrying out of the transactions contemplated by
this agreement and any resolutions adopted, or agreements executed by the City in
connection with the issuance of its bonds for this project.
3. Applicant hereby releases the City, its officers, agents and employees from any claims,
causes of action, losses, damages, or liabilities which it may have against the City, its
officers, agents, and employees or which it may incur in connection with: the City's
consideration of the application for industrial development revenue bond financing for
Applicant's project; the failure of the City, in its discretion, to issue tax-exempt revenue
bonds for Applicant's project; the issuance and sale of the bonds; the construction of the
project; or any other matter or thing of any type or nature whatsoever which may arise in
connection with the foregoing.
4. Applicant is aware of the City's application and administrative fee structure for tax-exempt
financing and agrees and covenants that all such fees will be paid in the amount and at the
times required.
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Dated: ____________ (Applicant)
By ___________________________
Its __________________________