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HomeMy WebLinkAboutResolution No. 5014COUNCIL RESOLUTION NO. 5014 A RESOLUTION DESIGNATING THE CITY OF EUGENE AS AN ARRA RECOVERY ZONE, AUTHORIZING PRELIMINARY ACTIONS IN CONNECTION WITH CONDUIT,. BONDS FOR BENNETT MANAGEMENT COMPANY, AND AUTHORIZING SUBALLOCATION OR TRANSFER OF RECOVERY ZONE ECONOMIC DEVELOPMENT BOND AUTHORITY FOR LAN COMMUNITY COLLEGE. r -PASSED: 8:0, REJECTED: OPPOSED: ABSENT: CONSIDERED: September 15, 2010 RESOLUTION NO. 5014 A RESOLUTION DESIGNATING THE CITY OF EUGENE AS AN ARRA RECOVERY ZONE, AUTHORIZING PRELIMINARY ACTIONS IN CONNECTION WITH CONDUIT BONDS FOR BENNETT MANAGEMENT COMPANY, AND AUTHORIZING SUBALLOCATION OR TRANSFER OF RECOVERY ZONE ECONOMIC DEVELOPMENT BOND AUTHORITY FOR LANE COMMUNITY COLLEGE, The City Council of the City of Eugene, Oregon, finds as follows: A. The American Recovery and Reinvestment Act of 2009 ("ARRA") permits the issuance of recovery zone bonds. The City of Eugene has been allocated $11,083,000 of Recovery Zone Facility Bonds ("RZFB") and $7,389,000 of Recovery Zone Economic Development Bonds ('6'61?,,.ZEDBs") volume cap. B. RZFBs are tax- exempt bonds that can be issued before January 1, 2011, to finance depreciable property that is .privately owned or used, is located in a recovery zone, and is. constructed, reconstructed, substantially renovated or acquired by purchase by a private user after the recovery zone is designated. This type 'of property ordinarily i's not eligible for financing with low cost, tax - exempt bonds. C. Bennett Management, Company ("BMC") .has proposed development of a . roughly $10 million retail and commercial :building that will be located on a vacant parcel directly south of the Centre Court Building (the "Bennett Project "). D. BMC has requested assistance from the City of Eugene to make the Bennett Project financially viable, including (i) the transfer of ownership of the property from Beam Development to BMC; (ii) utilization of the City's RZFB authority to allow BMC to achieve a lower, tax- exempt interest rate on its bank loan; (iii) a City commitment to occupy and/or guarantee up to 20,000 feet of office space in the new facility; and (iv) a potential Downtown Redevelopment Loan Program loan to assist with closing financial gaps. E. The City's ' Debt Policies, which are attached hereto, set out requirements for conduit financings like - the proposed RZFB financing for the Bennett Project. The Bennett Project financing will comply with the debt policies related to conduit financings except for the rating - or -credit enhancement requirement. Because the Bennett Project will be financed through a bank private placement loan rather than a public bond sale, this policy requirement is not needed. F. The RZFBs for the Bennett Project will be payable solely from revenues provided by BMC, related parties and users of the Bennett Project. G. RZEDBs are taxable bonds that can be issued before January 1, 2011, for public infrastructure and facilities, and that will receive a subsidy from the federal government for a portion of the interest cast. H. The Lane Community College Board of Education passed a resolution on September 8, 2010 requesting that the City suballocate its RZEDB authorization to Lane Community College for use in financing housing at its new downtown campus location. I. A "recovery zone" may consist of any area designated by the City as having significant poverty, unemployment, rate of home foreclosures, or general distress. I.R.S. Notice 2009 -50 allows the City to designate recovery zones in any reasonable manner. J. The annual unemployment rate for the Eugene - Springfield MSA has increased from 4.7% in 2007 to 5.4% in 2008. In 2009 the rate rose to 10.2 %, and as of June 2010 the rate stood at 10.6 %. This has exceeded the unemployment rates of both Oregon and the U.S as a whole for several years. Poverty rates for individuals within the Eugene - Springfield MSA rose from 17% in 2007 to 20.8% in 2008, according to the U.S. Census Bureau, which also reports that in 2008 median household income was only 86.4% of median income for Oregon as a whole, and 83.3% of U.S. median income. In 2009 and 2010 home foreclosures have continued to be high, and in the first quarter of 2010 nearly one -third of all home sales in Eugene - Springfield MSA were either short sales or foreclosures. :NO W, ' T -BE IT .RESOLVED by the City Council of the City of Eugene, a municipal corporation of the State of Oregon, as follows: Section .1. Designation of Recovery zone. Based on the economic statistics reported in Finding J, the Council hereby finds that the geographic area of the City of Eugene is experiencing significant poverty, unemployment, rate of home foreclosures, or general distress for purposes of Section 1400U -1(b) of the Internal Revenue Code of 1986, as amended. The geographic area of the City • of Eugene is hereby designated as a recovery zone for purposes of Section 1400U- I (b) of that code. Section -2. Preliminary Bond Activities Authorized. The City is hereby authorized to work - with Bennett Management Company, its financing team and the City's bond counsel to develop documents and otherwise prepare for the sale of conduit RZFBs for the Bennett Project. However, the City ' shall not enter in to any legally binding commitment to sell RZFBs for the Bennett Project until that sale has been approved by the Council.. Section 3. Conformance with Debt Policies. The conduit RZFBs issued for the. Bennett Project will comply with the conduit financing portion of the City's debt policies (included at Exhibit 1), with one exception. The financing will be a bank private placement and will not comply With the requirement for an investment grade rating or alternative credit enhancement. That portion of the debt policies is waived for the Bennett Project RZFBs. Section 4. Recovery zone Economic Development Bond . Authority for Lane Community College. The City Manager or the person designated by the City Manager to act on behalf of the City under this resolution may suballocate or transfer to, or otherwise arrange for the use by,' Lane Community College of all or any portion of the City's RZEDB authority. Section 5. Delegation The City Council hereby authorizes the City Manager and the person designated by the City Manager to act on behalf of the City under this resolution to . make reimbursement declarations for the ' Bennett Project and to take any other actions that are desirable -to carry out this resolution and prepare for the sale of conduit RZFBs for the Bennett Project. Section 6. Effective Date. This resolution shall take effect immediately upon adoption. The foregoing Resolution adopted by the City Council on the 15'' day of September, 20 10'. Deputy City Recorder Exhibit 1 Excerpt from City Debt Policies CONDUIT FINANCINGS 1. Conduit financings are financings that the City provides for the benefit of non - governmental entities to allow those non - governmental entities to obtain low cost, tax - exempt financing. Conduit financings are not secured by any revenues or assets of the City except revenues and assets provided by the non- governmental entities that benefit from the conduit financings. 2. The United States Internal Revenue Code substantially limits the ability of the City to provide conduit financing; conduit financings are only available for small manufacturing facilities, facilities used by qualified 501(c)(3) organizations, certain kinds of low income housing projects, and other projects that can be financed with "qualified bonds" as defined in the Internal Revenue Code. 3. Recognizing that the City is able to issue debt for broad purposes, it may be appropriate to enter into a conduit financing on behalf of another party when the City Council determines that the proposed project will provide a general benefit to City residents and/or the City economy. 4.: Conduit financing will be considered only when a project is consistent with the city's overall service and policy obj ectives. 5. The City should not incur any moral or financial obligation under a conduit borrowing. 6. The City will only consider conduit financings that will.insulate the City from any credit risk. 7. Any financing issued through the City must qualify for an investment grade rating by one of the . nationally recognized statistical rating agencies or provide alternative credit enhancement from a third party satisfactory to the City or a corporate guaranty if the corporation carries an investment grade rating. 8. All expenses related to conduit financing will be borne by the third -party applicant for whom the debt is being issued. g. The City will establish review procedures of the requesting party for projects, including adherence to public contracting requirements, development of a financial feasibility study of the' project, and submission of annual financial statements to ensure the ability to repay the debt.