3. Resolution 4505 - Amends Industrial Development Revenue Noteof Kalispell
Post Office Box 1997 • Kalispell. Montana 59903-1997 - Telephone (406) 758-7700 • FAX (406) 758-7758
REPORT TO:
FROM:
SUBJECT:
MEETING DATE:
Mayor Boharski and City Council Members
Amy Robertson, Finance Director
Chris Kukulski, City Manager
Industrial Development Revenue Note - Kalispell Center Limited
Partnership Project
September 7, 1999
BACKGROUND: The original note was issued on December 17, 1984 to finance the
acquisition of land and the construction of the Kalispell Center Mall.
The project is currently owned -by the Cavanaughs Hospitality
Limited Partnership successor to the Kalispell Center Limited
Partnership. The primary purpose of the refinancing is to lower the
interest rate. The outstanding amount of the note is $7,027,917.
RECOMMENDATION: Adoption of this resolution authorizing issuance of a first amended
and restated note and the execution of documents related thereto.
FISCAL EFFECTS: The City fee for the refunding is $2.50 per thousand which will
generate $17,570 for the General Fund.
ALTERNATIVES: As suggested by Council.
Amy . Robertson
Finance Director
Report compiled: September 3, 1999
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Chris A. Kukuuljski
City Manager
RESOLUTION NO.4 5 0 5
RESOLUTION RELATING TO INDUSTRIAL DEVELOPMENT
REVENUE NOTE (KALISPELL CENTER LIMITED PARTNERSHIP
PROJECT); AUTHORIZING ISSUANCE OF A FIRST AMENDED AND
RESTATED NOTE AND THE EXECUTION OF DOCUMENTS
RELATING THERETO
BE IT RESOLVED by the City Council of the City of Kalispell, Montana (the "City"),
as follows:
Section 1. Recitals.
1.1. Pursuant to Montana Code Annotated, Title 90, Chapter 5, Part 1, as amended (the
"Act"), and a resolution adopted by the City Council of the City on December 3, 1984 (the
"Original Resolution'), the City authorized the issuance of its Industrial Development Revenue
Note (Kalispell Center Limited Partnership Project), in the original principal amount of
$10,000,000, and dated_ December 17, 1984 (the "Original Note"); and executed and delivered a
Loan Agreement, dated December 17, 1984 (the "Loan Agreement'), between the City and
Kalispell Center Limited Partnership, a Washington limited partnership (the "Original
Borrower'); a Disbursing Agreement, dated December 17, 1984 (the "Disbursing Agreement"),
between the City, the Original Borrower and Washington Trust Bank, as purchaser of the
Original Note (the "Lender"); and an Assignment of Loan and Disbursing Agreement, dated
December 17, 1984 (the "Assignment"), from the City to the Lender. The Original Note was
issued to finance the acquisition of certain land in the City and the acquisition, construction and
equipping thereon of an approximately 171,000 square foot commercial shopping mall, a 134-
room motor inn, restaurant, cocktail lounge, banquet facility and related facilities (collectively,
the "Project').
1.2. The Original Borrower has conveyed its interest in the Project and its rights,
duties and obligations under the Loan Agreement, the Mortgage and the Disbursing Agreement
to Cavanaughs Hospitality Limited Partnership, a Delaware limited partnership (the "Borrower"),
which has assumed such rights, duties and obligations, all with the consent of the Lender. A
Guaranty Agreement, dated December 17, 1984, from Barbieri Hospitality, Inc. to the Lender
expired at the Completion Date (as defined in the Loan Agreement) and no longer secures the
Original Note.
1.3. The Lender and representatives of the Borrower have requested that the City
amend the Original Note to fix and, initially reduce, the interest rate thereon and to eliminate
provisions of the Original Note that require its purchase from the holder by the Borrower.
1.4. As required by the Internal Revenue Code of 1986, as amended, in order to
preserve the tax exemption of interest on the Original Note, the City Council on August 16,
1999, conducted a public hearing on the proposed amendment of the terms of the Original Note.
All parties who appeared, at the hearing were given an opportunity to express their views with
respect to the proposal to amend the terms of the Note and interested persons were given the
opportunity to submit written comments to the Finance Officer before the time of the hearing,
which if so submitted were considered by this Council.
1.5. Draft forms of the following documents relating to the amendment of the Original
Note have been prepared and submitted to this Council, and are hereby directed to be filed with
the Clerk of Council:
(a) a form of the First Amended and Restated Note (the "First Amended and
Restated Note'); and
(b) an Agreement as to Note Amendment (the "Amending Agreement"), which
amends the Loan Agreement, the Disbursing Agreement, the Assignment and the
Mortgage.
Section 2. Approval and Authorization.
2.1. Based on the public hearing, such written comments (if any) and such other facts
and circumstances as this Council deems relevant, the City hereby agrees to the amendment of
the terms of the Original Note as described herein and in the First Amended and Restated Note
and the Amending Agreement and the City hereby authorizes the issuance of the First Amended
and Restated Note to the Lender in exchange for the Original Note. The First Amended and
Restated Note shall be subject to registration, transfer and exchange as provided in the Original
Resolution.
2.2. The forms of the First Amended and Restated Note and the Amending Agreement
referred to in Section 1.5 are hereby approved, subject to such modifications thereto, deletions
therefrom and additions thereto as may be necessary and appropriate and approved by the City -
Manager and the City Attorney, which approval shall be conclusively evidenced by execution of
the First Amended and Restated Note and the Amending Agreement by appropriate officers of
the City. The First Amended and Restated Note and the Amending Agreement are directed to be
executed in the name and on behalf of the City by the Mayor, the City Manager and the Finance
Director. Copies of all of the documents shall be delivered, filed and recorded as provided
therein. In the absence or disability of the Mayor, any of the documents authorized by this
resolution to be executed, may be executed by the acting Mayor and in the absence or disability
of the City Manager or the City Clerk by such officer of the City who, in the opinion of the City
Attorney, may execute such documents.
The Mayor, the City Manager and the Finance Director are also authorized and directed
to execute such other instruments as may be required to give effect to the transactions herein
contemplated.
-2-
Section 3. Authentication of Proceedings. The Mayor, the City Manager, the Finance
Director and other officers of the City are authorized and directed to furnish to the Lender and
bond counsel certified copies of all proceedings and records of the City relating to the First
Amended and Restate Note, and such other affidavits and certificates as may be required to show
the facts relating to the legality and marketability of the First Amended and Restated Note as
such facts appear from the books and records in the officers' custody and control or as otherwise
known to them; and all such certified copies, certificates and affidavits, including any heretofore
furnished, shall constitute representations of the City as to the truth of all statements of fact
contained therein.
Section 4. Tax Matters Relating to First Amended and Restated Note. The Mayor, the
City Manager and the Finance Director, being the officers of the City charged with the
responsibility for issuing the First Amended and Restated Note pursuant to this resolution, are
authorized and directed to execute and deliver to the Lender a certificate, based on
representations to be made by the Borrower, in accordance with the provisions of Section 148 of
the Code, and Section 1.148-2(b) of the Regulations, stating that on the basis of facts, estimates
and circumstances in existence on the date of issue and delivery of the First Amended and
Restated Note, it is reasonably expected that the proceeds of the First Amended and Restated
Note will be used in a manner that would not cause the Note to be an "arbitrage bond" within the
meaning of Section 148 of the Code and the Regulations. The City shall file with the Secretary
of the Treasury no later than November 15, 1999, a statement concerning the First Amended and
Restated Note containing the information required by Section 149(e) of the Code.
Passed and duly adopted by the City Council of the City of Kalispell this 7`' day of
September, 1999.
Attest:
Clerk of Council
-3-
Mayor
CAVANAUG HS
HOSPITALITY
CORPORATIONS
August 16,3999
Chris Kukulski
City Manager
City of Kalispell
P.O. Box 1997
Kalispell, MT 59903
Dear Mr. Kukulsld
This letter is in response to our recent phone conversations and the letter we received from the
Interim City Manager, Mr. Al Thelen. Please be advised that we are working diligently on the
Kalispell Curter Expansion.
We are very much aware of the obligations we have from the Development Agreement dated
July, 21, 1997 between the City of Kalispell, Equity Supply Company and Cavanaughs
Hospitality Corporation (successor to Barbieri Investment Company). In reference to Section S
of the Development Agreement Cavanaughs Rospitality Corporation's purchase of the Equity
Supply property closed on March 2, 1998.
As you know real estate development is impacted by many internal and external fords. The
refinancing of the Industrial Development Revenue Note to the current fair market interest rate is
certainty a positive event in our efforts for the project. We have a staff of seasoned professionals
actively working on the expansion project. In addition we are pleased to be in discussion with
other national -retailers who are motivated to- become apart of the existing Kalispell Center Mail.
We look forward to sharing our progress with you as the project moves forward.
Sincerely,
Thomas M. Barbieri
Executive Vice President
Cavanaughs Hospitality Corporation
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CAUANAUGHS.
AT KALISPELL CENTER
August 27, 1999
The Honorable Mayor Boharski
City of Kalispell
312 First Avenue East
Kalispell MT 59901
Dear Mayor:
I would like to take this opportunity to update you on Cavanaughs Hospitality Corporation's
involvement in our community. Our company culture is strongly committed to family and active
involvement in the communities we serve. We do provide encouragement to our associates to
grow within our organization by communicating openly and providing opportunities for
advancement.
Let me share an example of a real success story we are proud of. We have an associate who is a
Kalispell native, part of a third generation family of Montanans, who 3-1/2 years ago joined our
company as an hourly paid deposit clerk at a wage 18% above minimum wage. She is now our
Director of Hotel Operations, earning a salary triple her starting wage, enjoying stock options and a
full benefit package. There are many other stories similar to this in our organization we take great
pride in seeing realize their dreams.
Our recent acquisition of the Outlaw Hotel has been exciting. We are investing considerable funds
in the renovation of the physical plant, trying to improve the facility.
We have successfully completed and implemented two separate bargaining unit agreements in
good faith within nine months of our ownership.
You should know that we are committed as a company to conducting business honestly and with
the highest level of ethical conduct. We DO treat our associates fairly, with respect, and great
appreciation.
20 North Main Street • Kalispell, Montana 59901 • (406) 752-6660 • FAX (406) 752-6628
4 www.cavanaughs.com
CVH
IY I Washington • Idaho • Montana • Oregon + Utah
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