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HomeMy WebLinkAboutRes2010-129 Sponsored by: Oates CITY OF SEWARD, ALASKA itrav RESOLUTION 2010 -129 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SEWARD, ALASKA, AUTHORIZING THE ISSUANCE AND SALE OF GENERAL OBLIGATION BONDS IN THE AGGREGATE PRINCIPAL AMOUNT OF NOT TO EXCEED $3,730,000 TO PAY THE COSTS OF LIBRARY /MUSEUM CAPITAL IMPROVEMENTS IN THE CITY, FIXING CERTAIN DETAILS OF SUCH BONDS, AND PLEDGING THE FULL FAITH AND CREDIT OF THE CITY TO THE PAYMENT THEREOF WHEREAS, pursuant to Resolution 2009 -53 of the City of Seward (the "City ") passed and approved on June 22, 2009, the following question, referred to at the election held on October 6, 2009 as Proposition No. 3 ( "Proposition 3 "), was passed and approved: PROPOSITION NO. 3 General Obligation Bonds for Seward Community Library Museum Capital Improvements Shall the City of Seward incur debt and issue general obligation bonds in an amount not to exceed five million dollars ($5,000,000) to finance the construction of community library museum capital improvements in the City? Bonds may not be issued until the City has obtained additional funding through contributions and grants for the remainder of the costs of the project. The bonds shall be secured by a pledge of the full faith and credit of the City. It is expected that annual payments of principal and interest on the Bonds will not exceed the annual amount to be received by the City from a one -half percent sales tax. PROPOSITION NO. 3 YES NO A "Yes" vote authorizes the issuance of not to exceed $5 million dollars of general obligation bonds for capital costs for the library /museum project. A "No" vote does not authorize the issuance of not to exceed $5 CITY OF SEWARD, ALASKA RESOLUTION 2010 -129 million dollars of general obligation bonds for capital costs for the library /museum project. WHEREAS, in a report to the City Council by ECl/Hyer & RISE Alaska on November 29, 2010, the total cost of competing the library /museum project is estimated to be approximately $10,294,560; and WHEREAS, the City received grants and donations to fund a substantial portion of the project costs; and WHEREAS, it is necessary and in the best interest of the City and its residents that the City proceed to plan, design, do site preparation for, construct, acquire, renovate, install and equip the capital improvements within the City described in Proposition 3 (the "Project "), and issue not to exceed $3,730,000 principal amount of the general obligation bonds referred to in Proposition 3, to pay costs of the Project; and WHEREAS, under the Internal Revenue Code, the City may issue its general obligation bonds as tax - exempt bonds or, if such statutory authorization is available, as taxable "Build America Bonds," or as taxable "Recovery Zone Economic Development Bonds;" and WHEREAS, the City Council finds that it is necessary and appropriate to delegate to the Seward Finance Director authority to determine whether to issue the bonds as tax - exempt bonds, taxable "Build America Bonds," or taxable "Recovery Zone Economic Development Bonds," or as a combination thereof with each type of bonds being issued in a separate series, to determine the maturity amounts, interest rates and other details of each series of bonds, and to determine other matters that are not provided for in this resolution; and WHEREAS, the City intends to sell its bonds to the Alaska Municipal Bond Bank, which will purchase the bonds with proceeds of an issue of general obligation bonds; and WHEREAS, there has been presented to the City the form of a Loan Agreement between the Alaska Municipal Bond Bank and the City, which provides for the Alaska Municipal Bond Bank to purchase the Bonds on the terms and conditions set forth therein and in this resolution, and it is in the best interest of the City that it sell the bonds to the Alaska Municipal Bond Bank under such terms and conditions; NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF SEWARD, ALASKA that: SECTION 1. Definitions. The following terms shall have the following meanings in this resolution: 2 CITY OF SEWARD, ALASKA RESOLUTION 2010 -129 r. (a) "Bond" or "Bonds" means any of the Bonds of the City, the issuance and sale of which are authorized herein as the evidence of the indebtedness referred to in Proposition 3. (b) "Bond Bank" means the Alaska Municipal Bond Bank. (c) "Bond Register" means the registration books maintained by the Registrar, which include the names and addresses of the owners or nominees of the Registered Owners of the Bonds. (d) "Build America Bonds" means the Bonds that are described in Section 54AA(d)(1) of the Code. (e) "City" means the City of Seward, Alaska, a municipal corporation of the State of Alaska. (f) "City Council" means the City Council of the City, as the general legislative authority of the City, as the same shall be duly and regularly constituted from t time to time. (f) "Code" means the Internal Revenue code of 1986, as amended from time to time, together with all regulations applicable thereto. (g) "Cost" or "Costs" means the cost of planning, designing, acquiring property for, site preparation, constructing, acquiring, renovating, installing and equipping the Project, including interest on the Bonds during the period of planning, designing, acquiring property for, site preparation, constructing, acquiring, renovating, installing, and equipping the Project, the cost whether incurred by the City or by another of field surveys and advance planning undertaken in connection with the Project properly allocable to the Project, the cost of acquisition of any land or interest therein required as the site or sites of the Project or for use in connection therewith, the cost of any indemnity and surety bonds and premiums on insurance incurred in connection with the Project prior to or during construction thereof, all related direct administrative and inspection expenses whether incurred by the City or by another in connection with the Project prior to or during construction thereof and allocable portions of direct costs of the City, legal fees, costs of issuance of the Bonds by the City, including financing charges and fees and expenses of bond counsel, financial advisors and consultants in connection therewith, the cost of any bond insurance premium, any required reserve fund L. CITY OF SEWARD, ALASKA RESOLUTION 2010 -129 obligations, the cost of audits, the cost of all machinery, apparatus and equipment, cost of engineering, architectural services, designs, plans, specifications and surveys, estimates of cost, the reimbursement of all moneys advanced from whatever source for the payment of any item or items of cost of the Project, and all other expenses necessary or incidental to determining the feasibility or practicability of the Project, and such other expenses not specified herein as may be necessary or incident to the acquisition and development of the Project, the financing thereof and the putting of the same in use and operation. (h) "Loan Agreement" means the Loan Agreement between the City and the Bond Bank, dated as of the date of the Bonds. (i) "Project" means library /museum capital improvements in the City authorized by Proposition 3. (j) "Recovery Zone Economic Development Bonds" means Bonds that are described in Section 1400U- 2(b)(1) of the Code. (k) "Registered Owner" means the person named as the registered owner of a Bond in the Bond Register. (1) "Registrar" means the Finance Director of the City, or any successor that the City may appoint through resolution. SECTION 2. Authorization of Bonds and Purpose of Issuance. For the purpose of providing the funds required to pay the Costs of the Project, to provide for original issue discount or premium, if any, and to pay all costs incidental thereto and to the issuance of the Bonds, the City hereby authorizes and determines to issue and sell the Bonds in the aggregate principal amount of not to exceed $3,730,000. The Bonds shall be designated "City of Seward, Alaska General Obligation Library /Museum Bonds 20XX." The City has ascertained and hereby determines that each and every matter and thing as to which provision is made in this resolution is necessary in order to carry out and effectuate the purpose of the City in accordance with the Constitution and the statutes of the State of Alaska and to incur the indebtedness and issue the Bonds as referred to in Proposition 3. SECTION 3. Obligation of Bonds. The Bonds shall be direct and general obligations of the City and the full faith and credit of the City are hereby pledged to the payment of the principal of and interest on the Bonds. The City hereby irrevocably pledges and covenants that it will levy and collect taxes upon all taxable property within the City without limitation as to rate or 4 CITY OF SEWARD, ALASKA RESOLUTION 2010 -129 amount, in amounts sufficient, together with other funds legally available therefor, to pay the principal of and interest on the Bonds as the same become due and payable. SECTION 4. Date, Maturities, Interest Rates, and Other Details of Bonds. The Bonds shall be dated as of the date of delivery, shall be in the denomination of $5,000 or any integral multiple thereof, or such other date and denominations as may be determined by the Finance Director, and shall be numbered separately in such manner and with any additional designation as the Registrar deems necessary for purposes of identification. The Finance Director is authorized to determine whether to issue the Bonds in one or more series or subseries in one or more of the following categories: Tax- Exempt Bonds, Build America Bonds, Recovery Zone Economic Development Bonds, or such other form as may be authorized by the Code, or as any combination thereof. The Bonds shall bear interest from the date thereof, payable on February 1, 2012, and semiannually thereafter on August 1 and February 1 of each year or such other dates as may be determined by the Finance Director. Interest shall be computed on the basis of a 360 -day year composed of twelve 30 -day months. The Finance Director is authorized to fix and determine the maturity dates and the rate of interest on each principal installment of the Bonds, provided that (i) no rate of interest on a principal installment shall exceed the rate of interest on the corresponding maturity of the bonds of the Bond Bank issued to provide funds to purchase the Bonds; (ii) the true interest cost of the Bonds (blended in the case of multiple series or subseries) shall not exceed 6% unless approved by resolution of the City Council; and (iii) all of the Bonds shall mature on or before December 31, 2037. SECTION 5. Place and Medium of Payment. Both principal of and interest on the Bonds shall be payable in lawful money of the United States of America which, on the respective dates of payment thereof, shall be legal tender for the payment of public and private debts. For so long as all outstanding Bonds are registered in the name of the Bond Bank, payments of principal and interest thereon shall be made as provided in the Loan Agreement. In the event that the Bonds are no longer owned by the Bond Bank, payments of principal and interest on the Bonds will be made by check or draft mailed by first class mail to the Registered Owners of the Bonds at the addresses for such Registered Owners appearing on the Bond Register on the 15th day of the month preceding the payment date, provided that the final installment of principal and interest on the Bonds will be payable at the principal office of the Registrar upon surrender of the Bond. SECTION 6. Optional Redemption or Prepayment. The Finance Director is hereby authorized to establish redemption and prepayment provisions, if any, for the Bonds as set forth in the Loan Agreement. SECTION 7. Form of Bond. Each Bond shall be in substantially the following form, subject to the provisions of the Loan Agreement: 5 CITY OF SEWARD, ALASKA RESOLUTION 2010 -129 ..s UNITED STATES OF AMERICA STATE OF ALASKA CITY OF SEWARD, ALASKA (A Municipal Corporation of the State of Alaska) NO. $ GENERAL OBLIGATION LIBRARY /MUSEUM BONDS 20XX REGISTERED OWNER: PRINCIPAL AMOUNT: The City of Seward, Alaska (the "City "), a home rule municipal corporation of the State of Alaska, hereby acknowledges itself to owe and for value received promises to pay to the Registered Owner identified above, or its registered assigns, the Principal Amount indicated above in the following installments on 1 of each of the following years, and to pay interest on such installments from the date hereof, payable on 1, 20XX and vei semiannually thereafter on the first days of and of each year, at the rates per annum as follows: Principal Interest Year Amount Rate For so long as this Bond is owned by the Alaska Municipal Bond Bank (the "Bank "), payment of principal and interest shall be made as provided in the Loan Agreement between the Bank and the City (the "Loan Agreement "). In the event that this Bond is no longer owned by the Bank, payment of principal of and interest on this Bond will be made by check or draft mailed by first class mail to the registered owner at the address appearing on the bond register of the City on the 15th day of the month preceding the payment date, provided that the final installment of principal and interest on this Bond will be payable at the office of the City Finance Director (the "Registrar ") upon surrender of this Bond. Interest shall be computed on the basis of a 360 -day year composed of twelve 30 -day months. Both principal of and interest on this bond are payable in lawful money of the United States of America which, on the respective dates of payment thereof, shall be legal tender for the payment of public and private debts. This Bond is one of the General Obligation Library /Museum Bonds, 20XX of the City of 6 CITY OF SEWARD, ALASKA RESOLUTION 2010 -129 Seward, Alaska of like tenor and effect except as to interest rate, serial number and maturity, aggregating $ in principal amount, and constituting bonds authorized for the purpose of paying the cost of the library /museum capital improvements in the City, and is issued under Resolution 2010- of the City entitled: A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SEWARD, ALASKA AUTHORIZING THE ISSUANCE AND SALE OF GENERAL OBLIGATION BONDS IN THE AGGREGATE PRINCIPAL AMOUNT OF NOT TO EXCEED $3,730,000 TO PAY THE COSTS OF LIBRARY /MUSEUM CAPITAL IMPROVEMENTS IN THE CITY, FIXING CERTAIN DETAILS OF SUCH BONDS, AND PLEDGING THE FULL FAITH AND CREDIT OF THE CITY TO THE PAYMENT THEREOF (herein called the "Resolution "). The Bonds will be subject to redemption at the option of the City as described in the Loan Agreement. This Bond is transferable as provided in the Resolution, (i) only upon the bond register of the City, and (ii) upon surrender of this Bond together with a written instrument of transfer duly executed by the registered owner or the duly authorized attorney of the registered owner, and thereupon a new fully registered Bond or Bonds in the same aggregate principal amount and maturity shall be issued to the transferee in exchange therefor as provided in the Resolution and upon the payment of charges, if any, as therein prescribed. The City may treat and consider the person in whose name this Bond is registered as the absolute owner hereof for the purpose of receiving payment of, or on account of, the principal or redemption price, if any, hereof and interest due hereon and for all other purposes whatsoever. This Bond is a general obligation of the City of Seward, Alaska, and the full faith and credit of the City are pledged for the payment of the principal of and interest on the Bond as the same shall become due. IT IS HEREBY CERTIFIED AND RECITED that all conditions, acts or things required by the constitution or statutes of the State of Alaska to exist, to have happened or to have been performed precedent to or in the issuance of this Bond, exist, have happened and have been performed, and that the series of Bonds of which this is one, together with all other indebtedness of the City, is within every debt and other limit prescribed by said constitution or statutes. it 7 CITY OF SEWARD, ALASKA RESOLUTION 2010 -129 IN WITNESS WHEREOF, THE CITY OF SEWARD, ALASKA, has caused this Bond to be signed in its name and on its behalf by its Mayor and its corporate seal to be hereunto impressed or otherwise reproduced and attested by its Clerk, all as of the day of , 20XX. Willard E. Dunham Mayor ATTEST: Johanna Kinney, City Clerk SECTION 9. Execution. The Bonds shall be executed in the name of the City by the Mayor, and its corporate seal shall be impressed or otherwise reproduced thereon and attested by the City Clerk. The execution of a Bond on behalf of the City by persons that at the time of the "" execution are duly authorized to hold the proper offices shall be valid and sufficient for all purposes, although any such person shall have ceased to hold office at the time of delivery of the Bond or shall not have held office on the date of the Bond. SECTION 10. Registration. (a) The Bonds shall be issued only in registered form as to both principal and interest. The City designates the City Finance Director as Registrar for the Bonds. The Registrar shall keep, or cause to be kept, the Bond Register at the principal office of the City. (b) The City, in its discretion, may deem and treat the Registered Owner of each Bond as the absolute owner thereof for all purposes. and neither the City nor the Registrar shall be affected by any notice to the contrary. Payment of any such Bond shall be made only as described in Section 5, but such registration may be transferred as herein provided. All such payments made as described in Section 5 shall be valid and shall satisfy and discharge the liability of the City upon such Bond to the extent of the amount or amounts so paid. (c) Bonds shall be transferred only upon the Bond Register kept by the Registrar. Upon surrender for transfer or exchange of any Bond at the office of the Registrar, with a written instrument of transfer or authorization for exchange in form and with guaranty of signature 8 CITY OF SEWARD, ALASKA RESOLUTION 2010 -129 satisfactory to the Registrar, duly executed by the registered owner of its duly authorized attorney, the City shall execute and the Registrar shall deliver an equal aggregate principal amount of Bonds of the same maturity of any authorized denominations, subject to such reasonable regulations as the Registrar may prescribe and upon payment sufficient to reimburse it for any tax, fee or other governmental charge required to be paid in connection with such transfer or exchange. All Bonds surrendered for transfer or exchange shall be canceled by the Registrar. The Registrar shall not be required to transfer or exchange any Bond after the Bond has been called for redemption. (d) The City covenants that, until all Bonds have been surrendered and canceled, it will maintain a system for recording the ownership of each Bond that complies with the provisions of Section 149 of the Code. SECTION 11. Mutilated, Destroyed, Stolen or Lost Bonds. Upon surrender to the Registrar of a mutilated Bond, the City shall execute and deliver a new Bond of like maturity and principal amount. Upon filing with the Registrar of evidence satisfactory to the City that a Bond has been destroyed, stolen or lost and of the ownership thereof, and upon furnishing the City with identification satisfactory to it, the City shall execute and deliver a new Bond of like maturity and principal amount. The person requesting the authentication and delivery of a new Bond pursuant to this section shall comply with such other reasonable regulations as the City may prescribe and pay such expenses as the City may incur in connection therewith. Any Bonds issued pursuant to this section in substitution for Bonds alleged to be destroyed, stolen or lost shall constitute original additional contractual obligations on the part of the City, whether or not the Bonds alleged to be destroyed, stolen or lost be at any time enforceable by anyone. SECTION 12. Disposition of the Sale Proceeds of the Bonds. The sale proceeds of the Bonds representing accrued interest on the Bonds, if any, shall be applied to pay a portion of the interest due on the Bonds on February 1, 2012 or such other date determined by the Finance Director to be the first interest payment date. The remainder of the sale proceeds of the Bonds shall be applied to pay Costs. The sale proceeds of the Bonds shall be deposited in the appropriate funds or accounts of the City for such purposes. SECTION 13. Tax Covenants. The City covenants not to take or omit to take any action that if taken or omitted would cause (i) the interest on any Tax Exempt Bond to be includable in gross income for federal income tax purposes; (ii) any Build America Bond not to qualify as a Build America Bond; or (iii) any Recovery Zone Economic Development Bond not to qualify as a Recovery Zone Economic Development Bond. Without limiting the generality of the foregoing, the City covenants that it will make no use of the proceeds of the Bonds that would cause the Bonds to be "arbitrage bonds" subject to federal income taxation by reason of Section 148 of the Code, and that it will not take or permit any action that would cause the Bonds to be "private 9 CITY OF SEWARD, ALASKA RESOLUTION 2010 -129 activity bonds" as defined in Section 141 of the Code. SECTION 14. Sale of the Bonds; Loan Agreement. The sale of not to exceed $3,730,000 aggregate principal amount of the Bonds, as provided in the Loan Agreement and this resolution, is hereby authorized and approved. The Mayor or the Finance Director are each hereby authorized to execute and deliver the Loan Agreement, and such other documents as may be necessary to effectuate issuance of the Bonds on behalf of the City. SECTION 15. Authority of Officers. The Mayor, the Finance Director, and the City Clerk are, and each of them hereby is, authorized and directed to do and perform all things and determine all matters not determined by this resolution, or to be determined by a subsequent ordinance or resolution, to the end that the City may carry out its obligations under the Bonds and this resolution. SECTION 16. Amendatory and Supplemental Resolutions. (a) The City Council from time to time and at any time may adopt a resolution or resolutions supplemental hereof, which resolution or resolutions thereafter shall become a part of this resolution, for any one or more of the following purposes: (i) To add to the covenants and agreements of the City in this resolution, other covenants and agreements thereafter to be observed, or to surrender any right or power herein reserved to or conferred upon the City. (ii) To make such provisions for the purpose of curing any ambiguities or of curing, correcting or supplementing any defective provision contained in this resolution or in regard to matters or questions arising under this resolution as the City Council may deem necessary or desirable and not inconsistent with this resolution and which shall not adversely affect the interest of the Registered Owner of the Bonds. Any such supplemental resolution may be adopted without the consent of the Registered Owners of any of the Bonds at any time outstanding, notwithstanding any of the provisions of subsection (b) of this section. (b) With the consent of a bond insurer, if any, or the Registered Owners of not less than 60 percent in aggregate principal amount of the Bonds at the time outstanding, the City Council may adopt a resolution or resolutions supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this resolution or of any supplemental resolution; provided, however that no such supplemental resolution shall: (i) extend the fixed maturity of any of the Bonds, or reduce the rate of interest thereon, or reduce 10 CITY OF SEWARD, ALASKA RESOLUTION 2010 -129 the amount or change the date of any sinking fund installment, or extend the time of payments of interest from their due date, or reduce the amount of the principal thereof, or reduce any premium payable on the redemption thereof, without the consent of the owners of each Bond so affected; or (ii) reduce the aforesaid percentage of owners of Bonds required to approve any such supplemental resolution without the consent of the owners of all the Bonds then outstanding. It shall not be necessary for the consent of the Registered Owners of the Bonds under this subsection to approve the particulars of any proposed supplemental resolution, but it shall be sufficient if such consent approves the substance thereof. (c) Upon the adoption of any supplemental resolution under this section, this resolution shall be deemed to be modified and amended in accordance therewith, and the respective rights, duties and obligations under this resolution of the City and all Registered Owners of outstanding Bonds shall thereafter be subject in all respects to such modification and amendment, and all the terms and conditions of the supplemental resolution shall be deemed to be part of the terms and conditions of this resolution for any and all purposes. (d) Bonds executed and delivered after the execution of any supplemental resolution adopted under this section may bear a notation as to any matter provided for in such supplemental resolution, and if such supplemental resolution shall so provide, new Bonds modified so as to conform, in the opinion of the City, to any modification of this resolution contained in any such supplemental resolution may be prepared by the City and delivered without cost to the Registered Owner of the Bonds then outstanding, upon surrender for cancellation of such Bonds in equal aggregate principal amounts. SECTION 17. Defeasance. In the event money and /or non- callable Government Obligations maturing at such ties and bearing interest to be earned thereon in amounts sufficient to redeem and retire any or all of the Bonds in accordance with their terms are set aside in a special trust account to effect such redemption or retirement and such moneys and the principal of and interest on such Government Obligations are irrevocably set aside and pledged for such purpose, then no further payments need be made to pay or secure the payment of the principal and interest on such Bonds and such Bonds shall be deemed not to be outstanding. SECTION 18. Designation of Tax - Exempt Bonds as Qualified Tax Exempt Obligations. Depending on the final structure of the Bonds and the principal amount of any Tax - Exempt Bonds the series of Tax - Exempt Bonds, if any, plus the portion of the proceeds of the Bond Bank Reserve Fund Obligations that are or may be used with respect to the series of Tax - Exempt Bonds, may be designated by the Finance Director as "qualified tax exempt obligations" in 11 CITY OF SEWARD, ALASKA RESOLUTION 2010 -129 accordance with Section 265(b)(3) of the Code, and the City hereby covenants that during the calendar year 2011 it shall not issue or designate as "qualified tax - exempt obligations" under Section 265(b)(3) of the Code an aggregate principal amount of tax - exempt obligations (other than tax exempt obligations described in Section 265(b)(3(C)(ii) of the Code) exceeding $30,000,000. SECTION 19. Miscellaneous. (a) All payments made by the City of, or on account of, the principal of or interest on the Bonds shall be made on the several Bonds ratably and in proportion to the amount due thereon, respectively, for principal or interest as the case may be. (b) No recourse shall be had for the payment of the principal of or the interest on the Bonds or for any claim based thereon or on this resolution against any member of the City Council or officer of the City or any person executing the Bonds. The Bonds are not and shall not be in any way a debt or liability of the State of Alaska or of any political subdivision thereof, except the City, and do not and shall not create or constitute an indebtedness or obligation, either legal, moral or otherwise, of said State or of any political subdivision thereof, except the City. SECTION 20. Continuing Disclosure. The City acknowledges that, under Rule 15c2 -12 of the Securities and Exchange Commission (the "Rule ") the City may now or in the future be an "obligated person" with respect to the Bond Bank bonds. In accordance with the Rule, and as the Bond Bank may require, the City shall undertake to provide certain annual financial information and operating data as shall be set forth in the Loan Agreement. Notwithstanding any other provision of this Resolution, failure of the City to comply with the continuing disclosure obligations shall not be considered a default of the City's obligations under this Resolution or the Bonds; however the owner of any Bond may bring an action for specific performance, to cause the City to comply with its continuing disclosure obligations under the Rule. SECTION 21. Severability. If any one or more of the provisions of this resolution shall be declared by any court of competent jurisdiction to be contrary to law, then such provision shall be null and void and shall be deemed separable from the remaining provisions of this resolution and shall in no way affect the validity of the other provisions of this resolution or of the Bonds. 12 CITY OF SEWARD, ALASKA RESOLUTION 2010 -129 ism SECTION 22. Effective date. This resolution shall take 30 days following adoption and posting. PASSED AND APPROVED by the City Council of the City of Seward Alaska, Alaska, this 24` day of January, 2011. THE CITY OF SEWARD, ALASKA r Willard E. Dunham, Mayor AYES: Valdatta, Keil, Shafer, Casagranda, Dunham NOES: Bardarson ABSENT: Smith ABSTAIN: None ATTEST J h Kinney, CMC ity Clerk , o or 9 i ° n oh'3 a ✓� ` • Q t S w O. 13 Council Agenda Statement of sew Meeting Date: December 13, 2010 From: City Manager Phillip Oates q P Agenda Item: Providing for the issuance of not to exceed $3,730,000 in general obligation bonds of the City to finance a portion of the construction of a combined library /museum capital improvement project BACKGROUND & JUSTIFICATION: In 2003, Seward Mayor Edgar Blatchford proposed developing a community centered project in the Centennial year of Seward's founding to be completed in 2012, the 100' anniversary of the incorporation of Seward. A new combined library museum was selected to be the embodiment of the community's pride by preserving history and providing access to present and future knowledge for the residents of Seward, the outlying areas and all seasonal workers and visitors. The Seward Community Library Museum Building Committee (SCLMBC), the City of Seward, the Seward Community Library Association (SCLA) and the Resurrection Bay Historical Society (RBHS) are working together to complete this project. In a report to City Council on November 29, 2010, RISE Alaska and ECl/Hyer estimated the remaining capital construction costs for the library museum project to be $10,294,560. In 2009, Seward voters approved issuing not to exceed $5 million in general obligation bonds, with the caveat that the bonds would not be issued until the City obtained additional funding through contributions and grants for the remainder of the costs of the project. Private foundation and individual donations and government funding has been committed to cover the majority of the costs. City Administration and project managers have estimated that $3.73 Million of general obligation bonds will be needed to complete the project as currently projected. INTENT: Authorize the issuance of not to exceed $3.73 million general obligation bonds to finance a portion of the capital costs for the library /museum project. CONSISTENCY CHECKLIST: Where applicable, this resolution is consistent with the Seward City Code, Charter, Comprehensive Plans, Land Use Plans, Strategic Plan and City Council Rules of Procedures. FISCAL NOTE: The annual debt service for a 25 -year $3.73 Million General Obligation Bond at an interest rate of 4.5% is approximately $249,000 per year. The presumed rate of interest on these bonds is an estimate based on today's market conditions, but is subject to change based on a number of factors including whether the federal government extends the Build America Bond program (which could potentially reduce the effective interest rate), whether municipal bonds continue to find favor in the financial markets, and the overall timing of the proposed bond issue. Any increase in interest rate on the bonds beyond 4.5% will raise the interest costs on the bonds. By way of example, an increase of 50 basis points (to 5.0 %) would raise the annual interest costs an average of $14,000 per year. This resolution does not take into consider the additional operating costs of the new library /museum, estimated to be approximately $260,000, for which there is not yet an identified source of revenue to pay. The issuance of general obligation bonds reduces the City's future a=� CITY OF SEWARD RESOLUTION 2010 - financial flexibility to obtain capital financing for critical infrastructure needs. There have been critical capital needs identified in the enterprise funds — especially in the electric utility — and there are no reserves available to meet those needs in the short or long term. Combined with the lack of political will to increase enterprise fund rates to a level necessary to cover those infrastructure needs, it is not unlikely that the General Fund could be called on to meet emergency needs in the City's enterprise funds. This is particularly true in the electric enterprise fund, where cash reserves are expected to be depleted in 2012, with an insufficient rate structure to replenish those reserves. In 2009, the City did not meet the bond coverage requirements for the harbor enterprise fund and the electric enterprise fund, but was able to meet the debt service payments required on all City bonds. This is a warning sign which requires tangible budget modifications in order to meet future coverage requirements. Finally, the City is undertaking the transition from a hospital -based clinic to a community health center (CHC), which is intended to provide long -term cost savings to the overall City- funded healthcare system. In the short -term, the City reserves will be utilized to cover start -up costs for the new center (estimated at $500,000), and in the long -term, the CHC should improve the financial condition of the healthcare system. However, recent State reimbursement rate estimates for the long -term care facility have come in lower than anticipated, which has the potential to adversely impact the ability of Seward Mountain Haven to fully cover debt and operating costs of the long -term care facility. It is too soon to know the magnitude of these potential changes on the finances of the overall City healthcare system. Approved by Finance Department ‘ ATTORNEY REVIEW YES RECOMMENDATION: Council approve Resolution 2010- 1 , authorizing the issuance of not to exceed $3,730,000 in general obligation bonds of the City to finance a portion of the construction of a combined library /museum capital improvement project. a$