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2. Resolution 5318 - Preliminary Inducement Resolution and Call for PH - Mental Health Center Revenue BondsCharles A. Harball office of City Attorney City Attorney 20. First Avenue Fast P.O. Box 1997 Kalispell, NET 59903-997 Im���c��r To: Mayor Pamela B. Kennedy and Kalispell City Council Tel 406.75 S .7977 Fax 406.758.7979 charball@kalispell.com FROM: Charles Harball, City Attorney James H. Patrick, City Manager SUBJECT"`: Resolution No. 5318 Granting Preliminary Approval to the Proposed Issuance of Healthcare Facilities Revenue Dotes Payable by western Montana Mental health Center in an Aggregate Principal Amount Not to Exceed $1,600,000 Under Montana Code Annotated, Title 00, Chapter 5, Part 1 and Calling for a Public Hearing. MEETING DATE: Monday, October 6, 2008 -- Regular Council Meeting BACKGROUND* The City has received a request from western. Montana Mental Health Center, a Montana nonprofit corporation (the "Borrower"), for the City to issue one or more healthcare facilities revenue notes (the "Note") pursuant to the Act that will be a special, limited obligation of the City. The City will loan the proceeds derived from the Dote to the Borrower in order to (i) refinance indebtedness incurred by the Borrower in order to finance the cost of the construction and equipping of (a) a 10,231 square foot medical office building located at 418 windward way, in the City, (b) a 11,508 square foot medical office building located at 410 windward way, in the City, and (c) a 1,671 square foot medical office building located at 412 windward way, in the City (collectively, the "Project"); and (ii) to pay costs of issuance for issuing the Note. The debt service on the Dote is payable solely from revenues and resources of the Borrower. The Borrower provides mental health services to residents of the City and the area surrounding the City. Montana law authorizes the City to issue revenue bonds that are special, limited obligations of the City for the purpose of defraying the cost of acquiring or improving any land, building, other improvement, and real or personal property considered necessary in connection with an improvement that is suitable for community -based facilities for individuals who are persons with developmental disabilities as defined in Montana Code Annotated Title 53 Chapter 20 fart 102, as amended; medical facilities and any combination of these projects. Memorandum for Resolution 5 318 October 2, 2008 Page - 2 The Note shall not constitute a charge, lien or encumbrance, legal or equitable, upon any property of the City except the City's interest in the loan or revenue agreement with respect to the Note and the Project, and the Note, when, as, and if issued, shall recite in substance that the Note, including interest thereon, are payable solely from the revenues received from the Project, the property pledged to the payment thereof and other sources of security for the Note, and shall not constitute a pecuniary liability of, or a general or moral obligation of the City, within the meaning of any constitutional or statutory limitation. The full faith, credit and taxing power of the City are not pledged to the payment of the Note. The Internal Revenue Code requires that prior to the issuance of tax-exempt bonds the City Council must hold a public hearing on the proposed Project and the issuance of the Note to refinance a portion of the cost of the Project. The hearing notice will be published for a public hearing to be held by the City Council on Monday, November 3, 2008. Anyone who appears at the public hearing will be given an opportunity to express their views with respect to the Project and the issuance of the Note. The City Council will consider the views of the public expressed at the public hearing, any written comments filed with the Clerk and the information submitted by the Borrower prior to the decision by the City Council on whether to issue the Note. The adoption of this Resolution does not constitute a guaranty or firm commitment that the City will issue the Note as requested by the Borrower. The City retains the right in its sole discretion to withdraw from participation and accordingly not to issue the Note, or issue the Note in an amount less that the amount requested should the City at any time prior to issuance thereof determine that it is in the best interest of the City not to issue the Note. RECo NDA.''T'ION: That Council consider and pass Resolution. No. 5318 granting preliminary approval to the issuance of the Note subject to final approval following the preparation of bond documents, and subject to final determination by this City Council that the financing of the Project and the issuance of the Note is in the best interest of the City and to further call for a public hearing. FISCAL EFFECTS: None at this time. Respectfully submi ted, Charles Har ,City Attorney J es H. Patrick, City Manager Office of City Attorney City of Kalispell RESOLUTION NO.5318 A RESOLUTION GRANTING PRELIMINARY APPROVAL TO THE PROPOSED ISSUANCE OF HEALTHCARE FACILITIES REVENUE NOTES PAYABLE BY WESTERN MONTANA MENTAL HEALTH CENTER IN AN AGGREGATE PRINCIPAL AMOUNT NOT TO EXCEED $1,600,000 UNDER MONTANA CODE ANNOTATED, TITLE 90, CHAPTER 5, PART 1, AND CALLING FOR A PUBLIC BEARING BE IT RESOLVED by the City Council (the "City Council") of the City of Kalispell, Montana, a City and political subdivision of the State of Montana (the "City"), as follows: Section 1. Recitals. 1.01. Montana Code Annotated, Title 90 Chapter 5 Part 1, as amended (the "Act"), authorizes the City to issue revenue bonds that are special, limited obligations of the City for the purpose of defraying the cost of acquiring or improving any land, building, other improvement, and real or personal property considered necessary in connection with an improvement that is suitable for: commercial, manufacturing, agricultural, or industrial enterprises; recreation or tourist facilities; local, state, and federal governmental facilities; multifamily housing; hospitals; long-term care facilities; community - based facilities for individuals who are persons with developmental disabilities as defined in Montana Code Annotated Title 53 Chapter 20 Part 102, as amended; medical facilities; higher education facilities; electric energy generation facilities; family service provider facilities; the production of energy using an alternative renewable energy source as defined in Montana Code Annotated, Title 90 Chapter 4 Part 102, as amended; and any combination of these projects. 1.02. The City has received a request from western Montana Mental Health Center, a Montana nonprofit corporation (the "Borrower"), for the City to issue one or more healthcare facilities revenue notes (the "Note") pursuant to the Act that will be a special, limited obligation of the City. The City will loan the proceeds derived from the Note to the Borrower in order to (i) refinance indebtedness incurred by the Borrower in order to finance the cost of the construction and equipping of (a) a 10,231 square foot medical office building located at 418 windward way, in the City, (b) a 11,508 square foot medical office building located at 410 windward way, in the City, and (c) a 1,671 square foot medical office building located at 412 windward way, in the City (collectively, the "Project"); and (ii) to pay costs of issuance for issuing the Note. The debt service on the Note is payable solely from revenues and resources of the Borrower. The Borrower provides mental health services to residents of the City and the area surrounding the City. 1.03. Section 147(f) of the Internal Revenue Code of 1986, as amended (the "Code"), including the regulations promulgated thereunder, and the Act require that prior to the issuance of tax-exempt bonds, the City Council must hold a public hearing on the proposed Project and the issuance of the Note to refinance a portion of the cost of the Project. 1.04. Kennedy & Graven, Chartered, P.C., as bond counsel to the City, with cooperation from City staff and staff of the Borrower, has prepared a Notice of Public Bearing (the "Bearing Notice") with respect to the Project and the issuance of the Note. The Hearing Notice will be published in the Daily Inter Lake once a week for three consecutive weeks in preparation for a public hearing to be held by the City Council on Monday, November 3, 2008, at or after 7:00 p.m. at City Hall, 201 1st Avenue East, Kalispell, Montana 59901. All persons who appear at the public hearing will be given an opportunity to express their views with respect to the Project and the issuance of the Note. The City Council will consider the views of the public expressed at the public hearing, any written comments filed with the Clerk and the information submitted by the Borrower prior to the decision by the City Council on whether FR600-2 (BWJ) A-1 340061 v.1 to issue the Note. The Nearing Notice will be published by the City Clerk in substantially the form attached hereto as Exhibit A and is approved by Kennedy & Graven, Chartered, P.C., as bond counsel to the City. Section 2. Preliminary Approval Granted. 2.01. The issuance of the Note, in an amount not to exceed $1,600,000, to refinance the cost of the Project is hereby preliminarily approved subject to the mutual agreement of the City, the Borrower and First Interstate Bank, a Montana commercial banking corporation, or its assignee (the "Lender"), as to the details of the Note and provisions for payment of the Note. In all events, it is understood, however, that the Note shall not constitute a charge, lien or encumbrance, legal or equitable, upon any property of the City except the City's interest in the loan or revenue agreement with respect to the Note and the Project, and the Note, when, as, and if issued, shall recite in substance that the Note, including interest thereon, are payable solely from the revenues received from the Project, the property pledged to the payment thereof and other sources of security for the Note, and shall not constitute a pecuniary liability of, or a general or moral obligation of the City, within the meaning of any constitutional or statutory limitation. The full faith, credit and taxing power of the City are not pledged to the payment of the Note. The Note may be sold at a public or private sale in a manner as may be agreed upon by the Borrower and the Lender. The Note may be payable at a time or times not exceeding 20 years from the date of the Note, at a price above or below par and at a place or places, bear interest at a rate or rates, be evidenced in a manner, be redeemable prior to maturity, with or without premium. The City is authorized to enter into agreements upon the terms that this City Council considers advantageous and not in conflict with the provisions of the Act. Pursuant to the Act, the Note shall be a special limited obligation of the City and may be secured by a pledge of the revenues derived from a loan agreement with the Borrower, by a mortgage on the Project and by such other security devices as may be deemed advantageous by this City Council. 2.02 Based upon information provided by the Borrower, this City Council hereby makes the following findings: (a) The Project is suitable as a mental health facility eligible for financing under the Act and the City is authorized to issue revenue bonds (the debt service on which will be paid by the Borrower) to defray the costs of making a loan to the Borrower. The proceeds of the loan will be used to refinance the Project and paying the costs and expenses related to the issuance and sale of the Note. The City will enter into a loan agreement with the Borrower requiring loan repayments from the Borrower in an amount sufficient to repay the loan when due and requiring the Borrower to pay all costs of maintaining and insuring the Project. (b) The loan repayments made by the Borrower under the loan agreement shall be established at a level and payable in installments, and at times sufficient, to pay all principal of, premium, if any, and interest on the Note when due. (c) The City's purpose in authorizing the issuance of the Note is to promote the public welfare of the City and its residents by retaining and expanding a mental health facility servicing the residents of the City, improving employment opportunities in the City, and furthering the purposes of the Act. FR600-2 (BWJ) A-2 340061 v.1 (d) The undertaking of the Project and the issuance of the Note to refinance all or a portion of the costs of the Project are in the public interest. 2.03. The law firm of Kennedy & Graven, Chartered, P.C., is authorized to act as Bond Counsel and to assist in the preparation and review of necessary documents relating to the Project and Note issued in connection therewith. The Mayor, the Council Members and other officers, employees and agents of the City are hereby authorized to assist Bond Counsel in the preparation of such documents. 2.04. The Borrower has agreed to pay directly or through the City any and all costs and expense incurred by the City in connection with the Project. The Borrower has also agreed to pay the one time administrative fee of the City upon issuance of the Note. 2.05. All commitments of the City expressed herein are subject to the condition that by December 31, 2008, the City, the Borrower and the Lender will have agreed to mutually acceptable terms and conditions of the loan agreement, the Note and of the other instruments and proceedings relating to the Note and its issuance and sale. If the events set forth herein do not take place within the time set forth above, or any extension thereof, and the Note is not sold within such time, this Resolution will expire and be of no further effect. 2.06. The adoption of this Resolution does not constitute a guaranty or firm commitment that the City will issue the Note as requested by the Borrower. The City retains the right in its sole discretion to withdraw from participation and accordingly not to issue the Note, or issue the Note in an amount less that the amount referred to in paragraph 2.01 hereof, should the City at any time prior to issuance thereof determine that it is in the best interest of the City not to issue the Note, or to issue the Note in an amount less than the amount referred to in paragraph 2.01 hereof, or should the parties to the transaction be unable to reach agreement as to the terms and conditions of any of the documents required for the transaction. 2.07. This Resolution shall be in full force and effect from and after its passage. PASSED AND APPROVED BY THE CITY COUNCIL AND SIGNED BY THE MAYOR OF THE CITY OF KALISPELL THIS CTH DAY OF OCTOBER.. 2008. Pamela B . Kennedy Mayor ATTEST: Theresa white City Clerk FR600-2 (BWJ) A-3 340061 v.1 EXHIBIT A CITY OF KALISPELL, MONTANA NOTICE OF PUBLIC HEARING ON ISSUANCE OF REVENUE BONDS UNDER MONTANA CODE ANNOTATED TITLE 90, CHAPTER 5, PART 1, AS AMENDED, TO FINANCE A PROJECT NOTICE IS HEREBY GIVEN that the City Council (the "City Council") of the City of Kalispell, Montana (the "Issuer") will hold a public hearing on Monday, November 3, 2008, at or after 7:00 p.m. at City Hall, 201 Ist Avenue East, Kalispell, Montana 59901, to consider the issuance of one or more revenue notes (the "Note") under Montana Code Annotated, Title 90 Chapter 5 Part 1, as amended (the "Act"). If issued, proceeds of the Note will be loaned to Western Montana Mental Health Center, a Montana nonprofit corporation (the "Borrower"), to refinance indebtedness incurred by the Borrower in order to finance the cost of the construction and equipping of (i) (a) a 10,231 square foot medical office building located at 418 Windward Way, in the City, (b) a 11,508 square foot medical office building located at 410 Windward Way, in the City, and (c) a 1,671 square foot medical office building located at 412 Windward Way, in the City (collectively, the "Project") (the "Project"); and (ii) to pay costs of issuance for issuing the Note. Proceeds derived from the issuance and sale of the Note will be loaned from the Issuer to the Borrower pursuant to a loan agreement to pay the costs of the Project and certain costs of issuing the Note. After the public hearing, the City Council will consider adoption of a resolution granting approval to the issuance of the Note. The aggregate face amount of the Note proposed to be issued to refinance the Project is presently estimated not to exceed $1,600,000. The Note Will be issued by the Issuer and will be special, limited obligations of the Issuer, payable solely from the revenues pledged to the payment thereof, and will not be a pecuniary liability of or a general obligation of the Issuer. The full faith, credit and taxing power of the Issuer are not pledged to the payment of the Note. The Issuer, the State of Montana, or any political subdivisions thereof are not obligated in any manner for repayment of the Note. Anyone desiring to be heard during the public hearing will be afforded an opportunity to do so. Persons desiring additional information may contact the City Clerk, Ms. Theresa White at 201 1 st Avenue East, Kalispell, Montana or by calling (406) 758--7756. All persons interested may appear and be heard at the time and place set forth above, or may file Written comments with the City Clerk prior to the date of the hearing set forth above. Dated: October 6, 2008 BY ORDER OF THE CITY COUNCIL OF THE CITY OF KALISPELL, MONTANA Theresa White City Clerk Publication Dates: October 13, 2008 October 20, 2008 October 27, 2008 FR600-2 (BWJ) A-4 34006 1 v,