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
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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:
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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;
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(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.
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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.
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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.
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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
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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
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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
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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)
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CITY OF CHUBBUCK
Bannock County, Idaho
Y
Mayor