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07. Resolution 4299 - Outlaw Inn Bond Refunding RequestBACKGROUND/CONSIDERATION: At the last council meeting, you approved a Resolution of Intent to refund the Outlaw Inn's outstanding bonds. At this council meeting, we will need to approve the Resolution to Refund those bonds. Dorsey & Whitney should have the resolution available to us by the council meeting. RECOMMENDATION: Since this action is not a City obligation and we get reimbursed for the refunding costs, I recommend the approval of the refunding resolution. ACTION REQUIRED: Approval of the Refunding RESOLUTION is required to further process this action. RESOLUTION NO. 4299 RESOLUTION RELATING TO INDUSTRIAL DEVELOPMENT REVENUE REFUNDING BONDS IN THE PRINCIPAL AMOUNT OF $2,680,000 FOR OUTLAW INN; MAKING FINDINGS, AUTHORIZING THE SALE AND ISSUANCE OF THE BONDS AND ESTABLISHING THE SECURITY THEREFOR, AND AUTHORIZING THE EXECUTION OF DOCUMENTS BE IT RESOLVED by the City Council (the "Council") of the City of Kalispell, Montana (the "City"), as follows: Section 1. Recitals. 1.01. The City is authorized by Montana Code Annotated, Title 90, Chapter 5, Part 1, as amended (the "Act"), to enter into agreements upon terms the governing body considers advantageous and not in conflict with the provisions of the Act to issue its revenue bonds and sell such bonds at public or private sale in such manner and at such times as may be determined by this body to be most advantageous; and to loan the proceeds of its revenue bonds for the purpose of defraying the cost of acquiring or improving commercial, manufacturing, agricultural or industrial enterprises, recreational or tourist facilities, multifamily housing, hospitals, long-term care facilities or medical facilities, or to refund bonds or notes issued under the Act. Such revenue bonds may be secured by a pledge of the revenues to be derived by the City from a loan agreement with the borrower, by a mortgage on the project and by such other security devices as may be deemed advantageous. Under the provisions of the Act, any bonds so issued by the City shall be limited obligations of the City, and the bonds shall not constitute nor give rise to a pecuniary liability of the City or a charge against its general credit or taxing powers. 1.02. Pursuant to the Act, the City has issued its Industrial Development Revenue Refunding Mortgage Bonds (Outlaw Inn Project), Series 1986, dated as of December 15, 1986, in the original aggregate principal amount of $2,680,000, of which $2,680,000 in aggregate principal amount are now outstanding (the "Refunded Bonds"), which were issued to redeem and refund the outstanding principal balance of the $2,900,000 City of Kalispell Industrial Development Revenue Mortgage Note (Outlaw Inn Project) (the "Original Bonds") issued originally to provide funds for the acquisition, construction and equipping of a 45,000 square foot addition to the Outlaw Inn (the "Facility") and related improvements (the "Project"). The Facility comprises a motel and convention center facility known as the Outlaw Inn, including the land, building, and improvements. 1.03. Representatives of the Borrower have requested that the City, acting under and pursuant to the Act, issue and sell to D. A. Davidson & Co., in Great Falls, Montana (the "Underwriter"), its City of Kalispell, Montana, Industrial Development Revenue Refunding Bonds in the principal amount of $2,680,000 for the Outlaw Inn Project, to be dated as of November 15, 1996 (the "Bonds"), to be used to refund, with other available funds of the Borrower, in advance of their maturities the Refunded Bonds. Pursuant to the proposal, the proceeds of the Bonds would be loaned to the Borrower pursuant to a Loan Agreement between the City and the Borrower; the Borrower would agree to apply the proceeds, and other funds available to them, to redeem the Refunded Bonds on January 1, 1997, and to repay the loan of such proceeds at such times and in such amounts sufficient in the aggregate to provide for the prompt payment of the principal of, premium, if any, and interest on the Bonds; the City would pledge and assign to a Trustee, pursuant to an Indenture of Trust, certain of the City's interests in and to the Loan Agreement including all loan repayments thereunder (but excluding the rights of the City to reimbursement of expenses and to indemnification), to secure the full and prompt payment of the principal of, premium, if any, and interest on the Bonds; the payment of the principal of, premium, if any, and interest on the Bonds would be further secured by an irrevocable letter of credit (the "Letter of Credit") issued by First Interstate Bank of Commerce, a Montana banking corporation, with its principal place of business in Billings, Montana, through its Missoula, Montana office (the "Bank"); and the Borrower will, pursuant to a Letter of Credit Reimbursement Agreement (the "Reimbursement Agreement") among other things, agree to repay a draw under the Letter of Credit, which obligation will be evidenced by a promissory note (the "Note") and be secured by a mortgage on and security interest in certain real and personal property comprising the Facility pursuant to a Trust Indenture and Security Agreement executed by the Borrower in favor of the Bank. The Bonds would be special, limited obligations of the City payable principally from and secured by the payments to be made by the Borrower and other security as described hereafter and would not constitute or give rise to a pecuniary liability of the City or a charge against its general credit or taxing powers. 1.04. Draft forms of the following documents relating to the Bonds have been prepared and submitted to this Council, and are hereby directed to be filed with the City Clerk: (a) a Loan Agreement (the "Loan Agreement") to be dated as of November 15, 1996 to be entered into by and between the City and the Borrower, whereby the City agrees to lend the proceeds of the Bonds to the Borrower and the Borrower agrees to apply the proceeds, and other funds available to it, to redeem the Refunded Bonds on January 1, 1997; (b) an Indenture of Trust (the "Indenture") to be dated as of November 15, 1996 to be entered into between the City and First Trust Company of Montana National Association, in Billings, Montana, as Trustee (the "Trustee"), whereby the terms and conditions for the Bonds are specified, and the City pledges and assigns to the Trustee the City's interest -2- in and to the Loan Agreement, including all loan repayments thereunder (but excluding the rights of the City to reimbursement of expenses and to indemnification), to secure the full and prompt payment of the principal of, premium, if any, and interest on the Bonds; (c) a Bond Purchase Agreement (the "Bond Purchase Agreement") to be entered into by and between the Borrower, the City and the Underwriter, whereby the City agrees to sell and the Underwriter agrees to buy the Bonds on the terms and conditions therein specified; (d) an Irrevocable Letter of Credit (the "Letter of Credit"), to be dated as of November 15, 1996, by the Bank for the account of the Borrower in favor of the Trustee; (e) a Letter of Credit Reimbursement Agreement (the "Reimbursement Agreement"), to be entered into between the Borrower and the Bank; (f) a Trust Indenture and Security Agreement (the "Trust Indenture") to be executed by the Borrower, as grantor, and First Interstate Bank of Commerce, Missoula office (the "Bank"), as beneficiary, whereby the Grantor grants the Trust Indenture trustee a mortgage lien on and security interest in the properties comprising the Facility; (g) an Official Statement (the "Official Statement"), in the form of a Preliminary Official Statement (the "Preliminary Official Statement"), to be used in connection with the offer and sale of the Bonds by the Underwriter; (h) a Continuing Disclosure Agreement between the Borrower and the Trustee (the "Continuing Disclosure Agreement"). Section 2. Findings. It is hereby found, determined and declared that: (a) The Facility comprises real and personal property which are suitable for use in connection with a commercial enterprise as contemplated by the Act. (b) The refinancing of the Facility, the issuance and sale of the Bonds, the execution and delivery of the Loan Agreement, the Indenture, and the Trust Indenture, the Bond Purchase Agreement and the performance of all covenants and agreements of the City contained in the Loan Agreement, the Indenture, the Trust Indenture, and the Bond Purchase Agreement and all other acts and things required under the Constitution and laws of the State of Montana to make the Loan Agreement, the Indenture, the Trust Indenture, the Bond Purchase Agreement, and -3- the Bonds valid and binding special, limited obligations of the City in accordance with their terms, are authorized by the Act. (c) The issuance and sale of the Refunded Bonds and the financing of the Facility by the City were and are in the public interest of the City and its citizens. (d) It is desirable that the Bonds be issued by the City upon the terms set forth in this resolution and the Indenture, under the provisions of which certain of the City's interests in the Loan Agreement and its interests in all loan repayments thereunder will be assigned and pledged to the Trustee as security for the payment of principal of, interest and redemption premiums on the Bonds. (e) The loan repayments and other amounts to be paid by the Borrower under the Loan Agreement are calculated to be sufficient (1) to pay the total principal of, premium, if any, and interest on the Bonds when due, (2) to pay any taxes on the Facility, which Facility during the term of the Loan Agreement shall be subject to taxation to the same extent, in the same manner, and under the same procedures as privately owned property in similar circumstances, and (3) to pay all other costs and expenses of the City in connection with the Facility and the issuance of the Bonds; and the Loan Agreement also provides that the Borrower is required to pay or cause to be paid all expenses of maintenance of the Facility, including, but without limitation, adequate insurance thereon and insurance against all liability for injury to persons or property arising from the operation thereof, and special assessments levied upon or with respect to the Facility and payable during the term of the Loan Agreement. (f) Based on representations of the Underwriter, no reserves are deemed necessary in connection with the Facility or the Bonds. (g) Under the provisions of Montana Code Annotated, Sections 90-5-103 and 90-5-105, and as provided in the Loan Agreement, the Indenture and the Bonds, the Bonds are limited obligations of the City payable solely from loan repayments made by the Borrower (except to the extent payable from payments made under the Letter of Credit) and do not constitute a pecuniary liability of the City or a charge against its general credit or taxing powers. Section 3. Authorization and Approval of the Loan Agreement, Indenture and Bond Purchase Agreement. The City is hereby authorized to refund the Refunded Bonds and to pledge and assign the Loan Agreement and the loan repayments due thereunder, all as provided in the Loan Agreement and the Indenture. It is acknowledged that the purchase price of the Bonds and the interest rates on the Bonds have not been determined as of the date of adoption of this resolution and are not reflected in the Indenture, the Loan Agreement, the Trust Indenture or the Bond Purchase Agreement. The Bonds will be issued in the principal amount of $2,680,000 and will be payable on the estimated maturity schedule shown on Exhibit A hereto. The Mayor or, in the event of his absence or disability, the Finance Director is hereby authorized to approve: (1) the purchase price of the Bonds; provided that the purchase price is not less than 98% of the principal amount of the Bonds; (2) the provisions for redemption of the Bonds; and (3) the interest rates on the Bonds; provided that no interest rate shall exceed 6% per annum. The approval of such officer of the terms of the Bonds shall be conclusively presumed by the execution of the Bond Purchase Agreement by authorized officers of the City. The forms of the Loan Agreement, the Indenture, the Reimbursement Agreement, the Trust Indenture, the Letter of Credit, the Bond Purchase Agreement, the Continuing Disclosure Agreement and the Bonds referred to in Section 1.04 are approved, subject to such modifications as are deemed appropriate and approved by the City Attorney and the Mayor, which approval shall be conclusively evidenced by execution of the Loan Agreement, the Indenture, and the Bond Purchase Agreement by the Mayor and the City Clerk -Treasurer. The Bond Purchase Agreement as so approved is directed to be executed forthwith in the name and on behalf of the City by the Mayor, City Manager and the City Clerk -Treasurer following the execution thereof by the Borrower and the Underwriter. The Loan Agreement as so approved is directed to be executed in the name and on behalf of the City by the Mayor, the City Manager and City Clerk -Treasurer and delivered to the Trustee upon execution thereof by the Borrower. The Indenture as so approved is directed to be executed in the name and on behalf of the City by the Mayor, City Manager and the City Clerk -Treasurer. Copies of all the documents shall be delivered, filed or recorded as provided therein. The Mayor, the City Manager and the City Clerk - Treasurer are also authorized and directed to execute such other instruments as may be required to give effect to the transactions herein contemplated. Section 4. Official Statement. The City hereby consents to the use of the Preliminary Official Statement by the Underwriter in connection with the offer and sale of the Bonds to potential investors, and consents to the preparation and use of a final Official Statement, in substantially the form of the Preliminary Official Statement; provided, however, that the City has not reviewed the Preliminary Official Statement and takes no responsibility for, and makes no representations or warranties as to the accuracy or completeness of the information contained therein, or in the final Official Statement. The Finance Director is hereby authorized and directed to determine that the Preliminary Official Statement is deemed "final" as of its date for purposes of SEC Rule 15c2-12. -5- Section 5. The Bonds. 5.01. In anticipation of the receipt of the loan repayments from the Borrower, the City shall proceed forthwith to issue its Industrial Development Revenue Refunding Bonds (Outlaw Inn Project), Series 1996, dated, as originally issued, as of November 15, 1996, in the aggregate principal amount of $2,680,000, in the form and upon the terms set forth in the Indenture and this resolution. 5.02. The Mayor, the City Manager and the City Clerk -Treasurer are authorized and directed to prepare and execute the Bonds as prescribed herein and in the Indenture and to deliver them to the Trustee, together with a certified copy of this resolution, the other documents required in the Indenture, and such other certificates, documents and instruments as may be appropriate to effect the transactions herein contemplated. Section 6. Modifications Absence of Officers. The approval hereby given to the various documents referred to above includes an approval of such modifications thereto, deletions therefrom and additions thereto as may be necessary and appropriate and approved by the Mayor and the City Attorney. The execution of any instrument by the appropriate officer or officers of the City herein authorized shall be conclusive evidence of the approval of such documents in accordance with the terms hereof. In the absence or disability of the Mayor or City Manager, 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 Clerk - Treasurer by such officer of the City who, in the opinion of the City Attorney, may execute such documents. Section 7. Authentication of Proceedings. The Mayor, the City Manager and the City Clerk and other officers of the City are authorized and directed to furnish to the Trustee, the Underwriter and bond counsel certified copies of all proceedings and records of the City relating to the Bonds, and such other affidavits and certificates as may be required to show the facts relating to the legality and marketability of the Bonds 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 8. Fee. The Borrower shall pay to the City for the costs and expenses it has incurred and will incur in connection with the issuance of the Bonds a fee of $6,712.50, payable on the date of issuance of the Bonds. M Section 9. Effective Date. This resolution shall become effective immediately upon its passage and approval. PASSED AND APPROVED by the City Council of the City of Kalispell, Montana, this _th day of November, 1996. Attest: City Clerk -Treasurer (SEAL) -7- Mayor EXHIBIT A ESTIMATED Maturity Schedule January 1 Principal January 1 Principal Year Amount Year Amount 1998 $185,000 2003 $275,000 1999 220,000 2004 290,000 2000 230,000 2005 305,000 2001 245,000 2006 325,000 2002 255,000 2007 350,000 A-1