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HomeMy WebLinkAbout2013-002 Wastewater Treatment Facility Loan - Promissory NoteRESOLUTION NO. 2013-02 A RESOLUTION OF THE CITY OF CHUBBUCK, IDAHO, AUTHORIZING AND PROVIDING FOR THE ISSUANCE AND DELIVERY OF A PROMISSORY NOTE TO THE STATE OF IDAHO DEPARTMENT OF ENVIRONMENTAL QUALITY IN A PRINCIPAL AMOUNT NOT TO EXCEED $9,389,548 AS EVIDENCE OF LOAN INDEBTEDNESS INCURRED BY THE CITY FROM THE WASTEWATER TREATMENT FACILITY LOAN ACCOUNT OF THE STATE FOR THE PURPOSE OF PAYING THE COST OF WASTEWATER/SEWER COLLECTION AND TREATMENT SYSTEM IMPROVEMENTS; PROVIDING FOR THE ISSUANCE, FORM, EXECUTION, REGISTRATION, MATURITY, AND PAYMENT OF THE NOTE; PROVIDING COVENANTS RELATING TO THE NOTE AND THE TAX - EXEMPT STATUS OF THE NOTE; PROVIDING FOR RELATED MATTERS; AND PROVIDING AN EFFECTIVE DATE WHEREAS, the City of Chubbuck, Bannock County, Idaho (the "City "), is a municipal corporation duly organized and operating under and pursuant to the laws of the State of Idaho; and WHEREAS, the City presently owns and operates, and has for many years owned and operated, a wastewater /sewer collection and treatment system for the benefit of the residents of the City; and WHEREAS, the Mayor and Council of the City heretofore determined that the acquisition and construction of certain improvements to the existing wastewater /sewer collection and treatment system of the City were necessary for the continued efficient operation of the wastewater /sewer collection and treatment system, and in order to finance the cost of such improvements, the City made applications to the State of Idaho Department of Environmental Quality (the "State ") for loans under the State's Wastewater Treatment Facility Loan Program including a loan application in the amount of $9,389,548, which loan application was approved by the State; and WHEREAS, the Mayor and Council further determined that the indebtedness to be incurred thereby was an ordinary and necessary expense of the City within the meaning of Article 8, Section 3, Idaho Constitution, for which no approval of the electors of the City was necessary; and WHEREAS, The City caused to be filed, in the District Court of the Sixth Judicial District of the State of Idaho, in and for the County of Bannock (the "District Court") multiple Petitions for Judicial Confirmation pursuant to Title 7, Chapter 13, Idaho Code, seeking a judicial determinations and declarations of the validity of the City's incurring of indebtedness and issuing its promissory note as evidence thereof for the purpose of financing the cost of the improvements; and WHEREAS, on November 19, 2007, the District Court, in Case No. CV 2007 - 03643-OC entered its judgment of Judicial Confirmation ordering, adjudging, and Page 1 decreeing that (1) the loan agreement in the amount of $9,389,548 with the State constitutes a valid "ordinary and necessary expense" of the City within the meaning of Article 8, Section 3, of the Idaho Constitution, for which no approval of the City's electors is required; (2) the loan agreement, promissory note, or other evidence of indebtedness, when duly executed and delivered, will constitute valid and enforceable special obligations of the City, enforceable in accordance with their terms, and (3) the City may pledge its wastewater /sewer collection and treatment system revenues to the payment thereof, and WHEREAS, on December 15, 2008, the District Court, in Case No. CV 2008 - 4421-OC entered its judgment of Judicial Confirmation ordering, adjudging, and decreeing that (1) the loan agreement in the amount of $9,883,000 with the State constitutes a valid "ordinary and necessary expense" of the City within the meaning of Article 8, Section 3, of the Idaho Constitution, for which no approval of the City's electors is required; (2) the loan agreement, promissory note, or other evidence of indebtedness, when duly executed and delivered, will constitute valid and enforceable special obligations of the City, enforceable in accordance with their terms, and (3) the City may pledge its wastewater /sewer collection and treatment system revenues to the payment thereof; and WHEREAS, on October 13, 2009, the District Court, in Case No. CV 2009-3024 - OC entered its judgment of Judicial Confirmation ordering, adjudging, and decreeing that (1) the loan agreement in the amount of $11,000,000 with the State constitutes a valid "ordinary and necessary expense" of the City within the meaning of Article 8, Section 3, of the Idaho Constitution, for which no approval of the City's electors is required; (2) the loan agreement, promissory note, or other evidence of indebtedness, when duly executed and delivered, will constitute valid and enforceable special obligations of the City, enforceable in accordance with their terms, and (3) the City may pledge its wastewater /sewer collection and treatment system revenues to the payment thereof; and WHEREAS, pursuant to the Judicial Confirmation Orders as set forth above, the City and the State entered into loan agreements, the City has constructed and installed a portion of the improvements, and the City now desires to issue a promissory note in a principal amount not to exceed $9,389,548 to the State in accordance with the loan agreements and Judicial Confirmation Orders; and WHEREAS, such Note shall be on parity with the City's Series 2011A Note and the Series 2011B Note as such terms are defined in this resolution; and NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF CHUBBUCK, Bannock County, Idaho, as follows: Page 2 Section 1: DEFINITIONS As used in this Resolution, the following terms shall have the following meanings. Qfty means the City of Chubbuck, Bannock County, Idaho. City Clerk or Clerk means the Clerk of the City, or other officer of the City who is the custodian of the records, seal, and proceedings of the City. Cost of Project means all or any part designated by the Council of the cost acquisition, construction, and installation of the wastewater /sewer collection and treatment improvement Project. Council means the City Council of the City. Loan Agreements means the Loan Offer, Acceptance, and Contracts for wastewater /sewer collection and treatment design and construction costs between the State and the City. Mayor means the Mayor of the City, including his/her successor in functions, if any, and includes the President of the Council when acting in the place of the Mayor. Net Revenues means the Revenue of the System after the deduction of Operation and Maintenance Expenses. Note mean the Sewer Revenue Promissory Note, Series 2013, in an amount not to exceed $9,389,548, authorized by this Resolution, and on parity with the Series 2011A Note and the Series 2011 B Note. Note Payment Fund means the fund referenced by Section 9 of this Resolution for the payment of the principal on the Note. Note Registrar means the registrar and paying agent appointed and designated in Section 5 of this Resolution. Operation and Maintenance Expenses or any phrase of similar import means all reasonable and necessary current expenses of the City, paid or accrued, of operating, maintaining, and repairing the System or of levying, collecting, and otherwise administering the Net Revenues for the payment of the Note; and the term includes (except as limited by contract or otherwise limited by law) without limiting the generality of the foregoing: (1) Engineering, auditing, reporting, legal, and other overhead expenses of the various City departments directly relating and reasonably allocable to the administration of the System; Page 3 (2) Fidelity bonds and property and liability insurance premiums pertaining to the System, or a reasonably allocable share of a premium of any blanket bond or policy pertaining thereto; (3) Payments to pension, retirement, health, and hospitalization funds and other insurance; (4) Any taxes, assessments, excise taxes, or other charges which may be lawfully imposed on the City, the System, revenues therefrom, or any privilege in connection with their operation; (5) The reasonable charges of the bond registrar, fiscal or paying agent, commercial bank, trust bank, or other depository bank pertaining to the Note issued by the City or pertaining to the Project, if any; (6) Contractual services, professional services, salaries, other administrative expenses, and the cost of materials, supplies, repairs, and labor, pertaining to the issuance of the Note and to the ordinary operation of the System; and (7) All other administrative, general, and commercial expenses. Project means the wastewater /sewer collection and treatment system improvement project described in Section 2 of this Resolution. Registered Owner means the purchaser of the Note and any subsequent transferee of the Note. Reserve Fund means the Reserve Fund referenced in Section 9 of this Resolution. Resolution means this Resolution No. 2013 -02, adopted on March 26, 2013. Revenue of the System means all gross income and revenue received or receivable by the City from the ownership or operation of the System, determined in accordance with generally accepted accounting principles, including all fees (excluding connection fees), rates, charges and all amounts paid under any contracts received by or owed to the City in connection with the operation of the System and all proceeds of insurance relating to the System and investment income allocable to the System and all other income and revenue howsoever derived by the City from the ownership or operation of the System or arising from the System. Revenue Fund means the "City of Chubbuck Sewer Revenue Fund" referenced by Section 8 of this Resolution. Page 4 Series 2011A Note means the City of Chubbuck Parity Lien Sewer Revenue Bond, Series 2011A, issued in the initial aggregate principal amount of $1,400,000, pursuant to Resolution No. 2011 -07, adopted on April 26, 2011. Series 20118 Note means the City of Chubbuck Parity Lien Sewer Revenue Bond, Series 201113, issued in the initial aggregate principal amount of $219,976, pursuant to Resolution No. 2011 -07, adopted on April 26, 2011. State, for purposes of this Resolution, means the State of Idaho Department of Environmental Quality. System for purposes of this Resolution, means the wastewater /sewer collection and treatment system of the City, as the same now exists, including its assets, real and personal, tangible and intangible, and as it may later be added to, extended, and improved, and shall include buildings, structures, utilities, or other income producing sewer facilities from the operation of or in connection with which the revenues of the payment of the Note to be issued hereunder will be derived, and the lands pertaining thereto. Section 2: THE PROJECT The wastewater /sewer collection and treatment improvement project consists of the acquisition, construction, and installation of improvements and betterments to the City's wastewater /sewer collection and treatment system, consisting generally of the installation of additional 42" sewer pipe; the installation of additional 8 " -27" sewer pipe; the installation of additional force main sewer lines; the construction and rehabilitation of lift stations, and all the associated costs of the project including all associated costs, including, but not limited to, engineering and design services, legal services, and costs incurred in issuing the Note. Section 3: THE NOTE The 2013 Note shall be substantially in the form annexed hereto as Exhibit "A "; shall be issued to the State of Idaho Department of Environmental Quality (the "State "), as Registered Owner in accordance with the Loan Agreement; shall be in a principal amount not to exceed $9,389,548; shall be dated as of its date of delivery, shall mature twenty (20) years from its date, and shall, with written permission of the Registered Owner be subject to prepayment, in whole or in part, without penalty, on any date; and shall not bear interest. Principal on the Note shall be payable in semi - annual installments. Section 4: EXECUTION OF NOTE The Note shall be executed in the name of the City by the manual signature of the Mayor or President of the Council and attested by the manual signature of the City Clerk, and the seal of the City shall be impressed thereon. Page 5 Section 5: REGISTRATION OF NOTE The Note shall be registered in the name of the State as the Registered Owner, with the City Treasurer, who is hereby designated as registrar and paying agent with respect to the Note, and any transfer must likewise be registered. Section 6: PAYMENT The Note shall be payable in lawful money of the United States of America to the Registered Owner thereof at the address of such Registered Owner as shown in the registration books of the City. Section 7: PLEDGE OF NET REVENUES The Note shall be payable from the Net Revenues of the wastewater /sewer collection and treatment System of the City. The Net Revenues are hereby pledged for the payment of the Note. Section 8: THE REVENUE FUND There has heretofore been created pursuant to Resolution No. 2011 -07, adopted on April 26, 2011, a special fund, designated the "City of Chubbuck Sewer Revenue Fund" (the "Revenue Fund "), which shall be maintained by the Treasurer and into which the Revenue of the System shall be deposited immediately upon its receipt. A. Use of Revenues. The Revenue of the System shall be used for the payment of the following obligations in the following order of priority: (1) First Charge and Lien: The costs of Operation and Maintenance Expenses. (2) Second Charge and Lien: The principal of the Note, the principal and interest of the Series 2011A Note, and the Series 2011B Note, by payment into the Note Payment Fund, as provided in Section 9 of this Resolution. (3) Third Charge and Lien: To maintain the Reserve Funds referenced in Section 10 of this Resolution; and (4) To administer surplus funds. B. Interest Earnings. Interest earnings on deposits in the Sewer Revenue Fund shall remain in and be used for the purposes of the Sewer Revenue Fund. Page 6 C. Surplus Funds. Funds remaining in the Revenue Fund after having been applied for the purposes provided in this section shall constitute surplus funds and may be used for any lawful purposes of the City. Section 9: NOTE PAYMENT FUND There has heretofore been created pursuant to Resolution No. 2011 -07, adopted on April 26, 2011, a special fund designated the "City of Chubbuck Sewer System Note Payment Fund" (the "Note Payment Fund "), which shall be maintained by the Treasurer and into which shall be deposited, from the Net Revenues of the System, not less than two (2) days before each payment date, the amounts required by this Resolution to make the semiannual payments of principal on the Note, in addition to the payments required for the Series 2011A Note and the Series 2011B Note. If for any reason the City does not have, on any payment date, Net Revenues in the Note Payment Fund sufficient to make the scheduled payment of principal due on the Note, the amount of such deficiency shall be deposited into the Note Payment Fund from the Reserve Fund. Section 10: RESERVE FUND There has heretofore been created pursuant to Resolution No. 2011 -07, adopted on April 26, 2011, a special fund and account, to be held by the Treasurer, as additional security for the Note, which is designated the Sewer System Note Reserve Fund (the "Reserve Fund "). The City covenants and agrees to accumulate in the Reserve Fund, in addition to the amounts required for the Series 2011A Note and the Series 2011 B Note, within a five -year period from the Revenue Fund, an amount equal to one year's payment of principal, fees and interest, to be deposited in equal annual deposits from the Revenue Fund, such that the total amount required is deposited within five years from the date of the issuance of the Note, and to maintain the Reserve Fund until the Note is paid in full. Any transfer from the Reserve Fund to the Note Payment Fund shall be replenished from the Revenue Fund as soon as practicable after such transfer is made. Section 11: GENERAL COVENANTS For the protection and security of the Note, it is covenanted and agreed to and with the Registered Owner of the Note from time to time, that the City will perform the following covenants: A. Complete Project. It will complete the construction of the Project with all practical dispatch and in a sound and economical manner. B. Operate System. It will operate the System in an efficient and economical manner and prescribe, revise, and collect such charges in connection therewith so that the services, facilities, and properties of the System may be furnished at the lowest possible cost consistent with sound economy and prudent management. C. Good Repair. It will operate, maintain, preserve, and keep the System and Page 7 every part hereof in good repair, working order, and condition. D. Corporate Status. It will maintain its status as a municipal corporation of the State of Idaho and will take no steps to disincorporate or otherwise change its corporate status. E. Preserve Security. It will preserve and protect the security of the Note and the rights of the Registered Owner thereof. F. Collect Revenues. It will collect and hold in trust the revenues and other funds pledged to the payment of the Note and apply such revenue or other funds only as provided in this Resolution. G. Service Note. It will pay and cause to be paid punctually the principal of the Note on the date or dates and at the place or places and in the manner mentioned in the Note, and in accordance with this Resolution. H. Pay Claims. It will pay and discharge any and all lawful claims for labor, materials, and supplies which, if unpaid, might by law become a lien or charge upon the Revenue of the System, or any part of said Revenue of the System, or any funds in the hands of the Treasurer, prior or superior to the lien of the Note or which might impair the security of the Note, to the end that the priority and security of the Note shall be fully preserved and protected. I. Encumbrances. It will not mortgage or otherwise encumber, sell, lease, or dispose of the System or any part thereof, nor enter into any lease or agreement which would impair or impede the operation of the System or any part thereof necessary to secure adequate revenues for the payment of the principal on the Note, nor which would otherwise impair or impede the rights of the Registered Owner of the Note with respect to such revenues of the operation of the System without provisions for the retirement of the Note then outstanding from the proceeds thereof. J. Insurance. It will procure and keep in force insurance upon all buildings and structures of the System and the machinery and equipment therein, which are usually insured by entities operating like property, in good and responsible insurance companies. The amount of the insurance shall be such as may be required to adequately protect it and the Registered Owner of the Note from loss due to any casualty, and in the event of any such loss, the proceeds shall be used to repair or restore the System or for the payment of the Note issued under this Resolution. K. Fidelijy Bonds. It will procure suitable fidelity bonds covering all of its officers and other employees charged with the operation of the System and the collection and disbursement of revenues therefrom. L. Engineers. It will employ consulting engineers of acknowledged reputation, skill, and experience in the improvement and operation of the System for any Page 8 unusual or extraordinary items of maintenance, repair, or betterments as shall be required from time to time, all reports, estimates, and recommendations of such consulting engineers to be filed with the Clerk and furnished to the Registered Owner of the Note issued hereunder, upon request. M. Accounts. It will keep proper and separate accounts and records in which complete and separate entries shall be made of all transactions relating to the System, and it will furnish complete operating and income statements upon request. N. Delinquencies. It will not furnish sewer service to any customer whatsoever free of charge, and it shall not later than sixty (60) days after an account becomes delinquent, take such legal action as may be reasonable to enforce collection of any collectible delinquent account. Section 12: SPECIAL COVENANTS The City further covenants with the Registered Owner of the Note as follows: A. In accordance with Section 149(a) of the Internal Revenue Code of 1986, as amended (the "Code "), the Note shall be issued and remain in fully registered form. The City covenants and agrees that it will take no action to permit the Note to be issued in or converted to bearer form. B. None of the proceeds of the Note will be used directly or indirectly (i) to make or finance loans to persons or (ii) in any trade or business carried on by any person (other than use as a member of the general public). For purposes of the preceding sentence the term "person" does not include a government unit other than the United States or any agency or instrumentality thereof, and the term "trade or business" means any activity carried on by a person other than a natural person. The City further covenants and agrees to take no action which would cause the Note to be a "private activity bond," nor will it omit to take any action necessary to prevent the Note from becoming a "private activity bond," within the meaning of Section 141 of the Code. C. The Mayor, Clerk, and Treasurer, and other appropriate officials of the City, or any one or more of such officials, as may be appropriate, are each hereby authorized and directed to execute, on behalf of the City, such certificate or certificates as shall be necessary to establish that the Note is not an "arbitrage bond" within the meaning of Section 148 of the Code and the Treasury Regulations promulgated thereunder, and to establish that interest on the Note, if any, is not and will not become includable in the gross income of the owners of the Note under the Code and applicable regulations. The City covenants and agrees that no use will be made of the proceeds of the Note, or any funds of the City which may, pursuant to Section 148 of the Code and applicable regulations, be deemed to be proceeds of the Note, which would cause the Note to be an "arbitrage bond" within the meaning of Section 148 of the Code. The City further covenants to comply throughout the term of the Note with the requirements of Section Page 9 148 of the Code and the regulations promulgated thereunder in order to prevent the Note from becoming an "arbitrage bond. D. The City will comply with the information reporting requirements of Section 149(e) of the Code. Section 13: FURTHER AUTHORITY The Mayor, President of the Council, City Clerk, and City Treasurer, or any one or more such officials, as shall be appropriate, are hereby authorized to execute such further certifications and other documents as may be necessary or appropriate to carry out the intent of this Resolution. Section 14: EFFECTIVE DATE This Resolution shall take effect and be in force from and after its passage and approval. DATED this 26th day of March, 2013. ATTEST: City Clerk (SEAL) Page 10 CITY OF CHUBBUCK Bannock County, Idaho Y Mayor