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F3. Resolution 5746 - ROI - Immanuel Lutheran Revenue BondsCity of Kalispell Charles A. Harball Office of City Attorney City Attorney 201 First Avenue East P.O. Box 1997 Kalispell, MT 59903-1997 MEMORANDUM TO: Doug Russell, City Manager ) f Z FROM: Charles Harball, City Attorney Tel 406.758.7709 Fax 406.758.7771 charball@kalispeR.com SUBJECT: Resolution No. 5746 — Resolution of Intent to Issue Revenue Bonds for Immanuel Lutheran Corporation MEETING DATE: December 7, 2015 — Regular Council Meeting BACKGROUND: The Immanuel Lutheran Corporation of Kalispell has requested the assistance from the City of Kalispell that it provide its statutory bond issuance capacity to issue a conduit bond package in the sum of up to $35,000,000 for the purposes of refinancing the existing debt for which the City issued a conduit bond and to borrow additional funds for further capital improvements to its health care campus on Buffalo Hill in Kalispell. As with the existing bond, this proposed issuance would be a conduit bond that would not be a general or moral obligation of the City and the full faith and credit and taxing power of the City will not be pledged to the payment of the debt. Bond counsel has provided a more extensive memorandum which is attached to this agenda item as amplification of the issues and further explains any restrictions this issuance may cause the City in borrowing for the calendar year 2016. RECOMMENDATION: It is recommended that the Council consider and pass the offered resolution declaring its intent and calling for a public hearing. ALTERNATIVES: Upon consideration of the proposal the Council may reject the resolution of intent. Memorandum To: Doug Russell, City Manager Charlie Hardball, City Attorney City of Kalispell, Montana From: Ben Johnson, Barnes & Thornburg LLP Date: December 2, 2015 Re: Issuance of $35,000,000 City of Kalispell, Montana Housing and Healthcare Facilities Revenue Refunding Bonds (Immanuel Lutheran Corporation Project) Series 2016A and Housing and Healthcare Facilities Revenue Bonds (Immanuel Lutheran Corporation Project) Series 2016B You have requested a memorandum describing and explaining the proposed issuance of bonds requested by the Immanuel Lutheran Corporation of Kalispell, Montana, a Montana nonprofit corporation (the `Borrower") and Compass Bank d/b/a BBVA Compass or an affiliate (the "Lender") with respect to the $35,000,000 Housing and Healthcare Facilities Revenue Refunding Bonds (Immanuel Lutheran Corporation Project) Series 2016A (the "Series 2016A Bonds") and the Housing and Healthcare Facilities Revenue Bonds (Immanuel Lutheran Corporation Project) Series 2016B (the "Series 2016B Bonds," and together with the Series 2016A Bonds, the "Series 2016 Bonds"), proposed to be issued by the City of Kalispell, Montana (the "City"). This memorandum (the "Memo") will describe the proposed issuance of the Series 2016 Bonds (the "Transaction") and the City's role in the proposed Transaction and certain legal considerations for the City with respect to the proposed Transaction. Background. The information under this section on the Memo is to provide background relating to the issuance of the Series 2016 Bond for the City Council and City staff. On December 3, 2010, the City issued its Housing and Healthcare Facilities Revenue Bonds (Immanuel Lutheran Corporation Project) Series 2010 (the "Series 2010 Bonds") and loaned the proceeds of the Series 2010 Bonds to the Borrower under the terms of a Loan Agreement, dated as of December 1, 2010, as amended (the "2010 Loan Agreement"), between the City and the Borrower. The Series 2010 Bonds are special, limited obligations of the City payable solely from loan payments to be made by the Borrower under the terms of the Loan Agreement and a Continuing Covenant Agreement, dated as of December 1, 2010 as amended (the "2010 CCA"), between the Borrower and Wells Fargo Bank, National Association, as purchaser of the Series 2010 Bonds (the "2010 Lender"). The Series 2010 Bonds are not a general or moral obligation of the City and the full faith and credit and taxing power of the City are not pledged to the payment of the Series 2010 Bonds. The Series 2010 Bonds are a conduit revenue bond and the City did not have any repayment obligation with respect to the Series 2010 Bonds. The proceeds of the Series 2010 Bonds were used by the Borrower to (i) finance the redemption and prepayment of various tax-exempt bonds previously issued by the City in 1997 for the benefit of the Borrower, (ii) finance, the costs of the installation, renovation, rehabilitation, and equipping of certain capital improvements to the 100-unit senior retirement apartment facility (the "Housing Facility") and the 155-bed nursing home facility known as Immanuel Lutheran Home (the "Nursing Facility") (collectively, the "2010 Project"); (iii) fund certain reserves and capitalized interest for the Series 2010 Bond; and (iv) pay a portion of the costs of issuance of the Series 2010 Bond. The Series 2010 Bonds were issued by the City under the terms of (i) Montana Code Annotated, Title 90, Chapter 5, Part 1, as amended (the "Act"), (ii) Resolution No. 5458 of the City Council adopted on September 20, 2010 (the "2010 Resolution"); and (iii) an Indenture of Trust, dated as of December 1, 2010, as amended (the "Indenture"), between the City and Wells Fargo Bank, National Association, as trustee (the "2010 Trustee"). On September 20, 2010, prior to adoption of the 2010 Resolution, the City held a public hearing with respect to the 2010 Project, the use of the proceeds of the Series 2010 Bonds, and the 2010 Bonds after notice of such public hearing was published in accordance with the provisions of the Act and Section 147 of the Internal Revenue Code of 1986, as amended (the "Code"). The Borrower has completed the 2010 Project. The Transaction proposes the issuance of the Series 2016 Bonds by the City. The Borrower will apply the proceeds derived from the Series 2016 Bonds to the following purposes: (i) the redemption and prepayment of the Series 2010 Bonds; (ii) financing the costs of the installation, renovation, rehabilitation, and equipping of certain capital improvements to the Housing Facility and the Nursing Facility consisting of (a) renovation of the skilled nursing unit wing of the Nursing Facility, (b) the construction and equipping of 36 independent senior living units to the Housing Facility, (c) the construction and equipping of 32 short term rehab units, (d) the construction and equipping of 24 memory care units, and (e) certain predevelopment costs for future improvements for the Borrower's campus in the City (collectively, the "2016 Project"); (iii) the funding of certain reserves and capitalized interest for the Series 2016 Bonds; and (iv) the financing all or a portion of the costs of issuing the Series 2016 Bonds (including the City's administrative fee related to the original issuance of the Series 2016 Bonds). . The Series 2016 Bonds are proposed to be issued by the City under the terms of (i) Montana Code Annotated, Title 90, Chapter 5, Part 1, as amended (the "Act"), (ii) a resolution of the City Council of the City to be adopted in January 2016 after a public hearing called under the terms of the enclosed preliminary, conditional resolution for the Series 2016 Bonds (the "Preliminary Resolution"); and (iii) a Bond Indenture of Trust, dated on or after February 1, 2016 (the "2016 Indenture"), between the City and U.S. Bank National Association, as bond trustee (the "2016 Trustee"). If the City Council adopts the enclosed preliminary resolution, the City Council will hold a public hearing with respect to the 2016 Project, the refunding of the Series 2010 Bonds, and the issuance of the Series 2016 Bonds at the City Council meeting on January 19, 2016, after the publications required under the terms of the Act and the Section 147 of the Code. Like the Series 2010 Bonds, it is proposed that the proceeds of the Series 2016 Bonds would be loaned by the City to the Borrower under the terms of a Loan Agreement, dated on or after February 1, 2016 (the "2016 Loan Agreement"), between the City and the Borrower. The Series 2016 Bonds would be special, limited obligations of the City payable solely from loan payments to be made by the Borrower under the terms of the 2016 Loan Agreement and a Continuing Covenant Agreement, dated on or after February 1, 2016 (the "2016 CCA"), between the Borrower and the Lender, as purchaser of the Series 2016 Bonds. The Series 2016 Bonds will not be a general or moral obligation of the City and the full faith and credit and taxing power of the City will not be pledged to the payment of the Series 2016 Bonds. The Series 2016 Bonds will be a conduit revenue bond and the City will not have any repayment obligation with respect to the Series 2016 Bonds. Immanuel Lutheran Corporation Bond Memo Page 2 In order to provide for the issuance of the Series 2016 Bonds, the City, the Lender, and Trustee will need to enter into the 2016 Indenture, the 2016 Loan Agreement, the 2016 CCA, and any other documents and certificates as requested by Bond Counsel and the Lender. The Borrower and the Lender are requesting that the City Council of the City adopt the Preliminary Resolution on December 7, 2015 preliminarily approving the Transaction and authorizing the publication of the notice of the public hearing and setting the date for such hearing. As bond counsel to the City ("Bond Counsel"), we have prepared the Preliminary Resolution on behalf of the City and will be acting as Bond Counsel with respect to the proposed Transaction. I also acted as bond counsel to the City with respect to the issuance of the Series 2010 Bonds. As Bond Counsel to the City, we will be reviewing the proposed Transaction and working with the Borrower, Borrower's counsel, the Lender, and Lender's counsel to make sure that the Transaction is done in a manner that maintains the tax-exempt status of the Series 2016 Bonds. We will also be drafting the appropriate certifications of the Lender and the Borrower and also working with the Lender and the Borrower so that the proper documentation is in place. Legal Discussion. The Series 2016 Bonds are proposed to be issued as tax-exempt bonds under both federal and Montana law. The City must approve the proposed Transaction and execute and deliver the Series 2016 Bonds and related documents to the Lender in order to provide funds to the Borrower to finance the 2016 Project and refinance the Series 2010 Bonds on a tax-exempt basis. Although City is not obligated to repay the Series 2016 Bonds, the City is required to be the technical maker of the Series 2016 Bonds since only states or local units of government may issue tax-exempt bonds. The Borrower cannot borrow funds on a tax-exempt basis without a bond or not being issued through a local unit of government such as the City. If the City does not adopt the Preliminary Resolution and subsequent final resolution, then the City will not have approved the Transaction and the Series 2010 Bonds will not be refunded and the Borrower will not complete the financing of the 2016 Project on a tax-exempt basis. The aggregate principal amount of the proposed Series 2016 Bonds is greater than $10,000,000. Under the current Code, the principal amount of any issuance of tax-exempt debt by the City for the benefit of a 501(c)(3) organization (nonprofit) such as the Borrower counts against the City's ability to designate the City's own tax-exempt bonds in calendar year 2016 for new money projects (such as a new road project) as "qualified tax-exempt obligations" under Section 265 of the Code. These tax-exempt bonds are commonly referred to as "bank qualified" bonds. The principal amount of the Series 2016 Bonds counts against the City's calendar year bank qualification limit. Therefore, in the year the Transaction is finalized, the City will not have the ability to designate the City's own new money tax- exempt bonds as bank qualified because the principal amount of the Series 2016 Bonds is more than $10,000,000. The City will still be able to issue certain current refunding bond issued to refinance outstanding City issues as "bank qualified" if the City meets certain technical requirements under the provisions of the Code. Conclusion. The City has favorably used its ability to designate its own tax-exempt bonds as bank qualified in the past and local Kalispell banks have loaned funds to the City utilizing this designation. Examples of prior City bank qualified tax-exempt borrowings include the City's (i) limited tax bond for a new fire truck, and (ii) general obligation refunding bonds in 2013. Immanuel Lutheran Corporation Bond Memo Page 3 The City will not obligated be to pay any City funds with respect to the Series 2016 Bonds since the Series 2016 Bonds will be conduit revenue bonds that are special, limited obligations of the City payable solely from the revenues of the Borrower. The proposed Transaction and adoption of the 2016 Resolution does not change this fact and the City will not be liable with respect to the Series 2016 Bonds. As Bond Counsel to the City, we would advise the City Council to adopt the Preliminary Resolution and call for the public hearing on January 19, 2016. The adoption of the Prleiminary Resolution is conditional in nature and does not obligated the City to issue until after the public hearing and adoption of a final bond resolution. The proposed Transaction does not provide for any liability of the City with respect to the Series 2016 Bonds. Please do not hesitate to contact me at bjohnson@btlaw.com or (612) 367-8794 if you or any members of the City Council have any questions regarding the proposed Transaction, this Memo, or the Series 2016 Bonds. Immanuel Lutheran Corporation Bond Memo Page 4 CERTIFICATE AS TO RESOLUTION AND ADOPTING VOTE I, the undersigned, being the duly qualified and acting recording officer of the City of Kalispell, Montana (the "City"), hereby certify that the attached resolution is a true copy of a Resolution entitled: "RESOLUTION RELATING TO ISSUANCE OF REVENUE REFUNDING BONDS AND REVENUE BONDS, THE PROCEEDS OF WHICH WILL BE LOANED TO THE IMMANUEL LUTHERAN CORPORATION OF KALISPELL, MONTANA FOR THE REFINANCING OF CERTAIN REVENUE BONDS PREVIOUSLY ISSUED BY THE CITY OF KALISPELL AND THE FINANCING OF CERTAIN CAPITAL IMPROVEMENTS TO BE MADE TO THE CAMPUS OF IMMANUEL LUTHERAN HOME LOCATED IN THE CITY OF KALISPELL; CALLING FOR A PUBLIC HEARING WITH RESPECT TO THE ISSUANCE OF SUCH REVENUE BONDS; GRANTING PRELIMINARY APPROVAL TO THE ISSUANCE OF SUCH REVENUE BONDS; ESTABLISHING COMPLIANCE WITH CERTAIN REIMBURSEMENT REGULATIONS UNDER THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, AND TAKING CERTAIN OTHER ACTIONS WITH RESPECT THERETO" (the "Resolution"), on file in the original records of the City in my legal custody; that the Resolution was duly adopted by the City Council of the City at a meeting on December 7, 2015, and that the meeting was duly held by the City Council and was attended throughout by a quorum, pursuant to call and notice of such meeting given as required by law; and that the Resolution has not as of the date hereof been amended or repealed. I further certify that, upon vote being taken on the Resolution at said meeting, the following City Council members voted in favor thereof: voted against the same: abstained from voting thereon: or were absent: WITNESS my hand officially this day of December, 2015. Aimee Brunckhorst, City Clerk RESOLUTION NO.5746 RESOLUTION RELATING TO ISSUANCE OF REVENUE REFUNDING BONDS AND REVENUE BONDS, THE PROCEEDS OF WHICH WILL BE LOANED TO THE IMMANUEL LUTHERAN CORPORATION OF KALISPELL, MONTANA FOR THE REFINANCING OF CERTAIN REVENUE BONDS PREVIOUSLY ISSUED BY THE CITY OF KALISPELL AND THE FINANCING OF CERTAIN CAPITAL IMPROVEMENTS TO BE MADE TO THE CAMPUS OF IMMANUEL LUTHERAN HOME LOCATED IN THE CITY OF KALISPELL; CALLING FOR A PUBLIC HEARING WITH RESPECT TO THE ISSUANCE OF SUCH REVENUE BONDS; GRANTING PRELIMINARY APPROVAL TO THE ISSUANCE OF SUCH REVENUE BONDS; ESTABLISHING COMPLIANCE WITH CERTAIN REIMBURSEMENT REGULATIONS UNDER THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, AND TAKING CERTAIN OTHER ACTIONS WITH RESPECT THERETO BE IT RESOLVED by the City Council (the "City Council") of the City of Kalispell, 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 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: (i) commercial, manufacturing, agricultural, or industrial enterprises; (ii) recreation or tourist facilities; (iii) local, state, and federal governmental facilities; (iv) multifamily housing; (v) hospitals; (vi) long-term care facilities; (vii) 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; (viii) medical facilities; (ix) higher education facilities; (x) electric energy generation facilities; (xi) family service provider facilities; (xii) 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 (xiii) any combination of these projects.. As a condition to the issuance of such revenue bonds, the City must hold a public hearing in accordance with the requirements of Section 147(f) of the Internal Revenue Code of 1986, as amended (the "Code"), and the requirements of the Act. 1.02. Immanuel Lutheran Corporation of Kalispell, Montana, a Montana nonprofit corporation (the "Borrower"), currently owns and operates (i) a 155-bed nursing home facility known as Immanuel Lutheran Home, located at 185 Crestline Avenue in the City (the "Nursing Facility"), and (ii) a 112-unit senior retirement apartment facility (currently comprised of approximately 70 senior independent living units and 42 senior assisted living units) known as Buffalo Hills Terrace (the "Housing Facility") located adjacent to the Nursing Facility at 40 Claremont Street in the City. 1.03 In 1992, the City previously issued its Housing Facilities Refunding Revenue Bonds (Buffalo Hills Terrace Project), Series 1992 (the "Series 1992 Bonds") under the provisions of the Act, and loaned the proceeds thereof to the Borrower for the purpose of financing the acquisition and construction of the Housing Facility. 1.04. In 1992, the Borrower borrowed from Norwest Bank Montana, N.A., pursuant to two mortgage notes (the "Norwest Bank Loans) for the purpose of financing Capital Improvements to the Nursing Facility and the Housing Facility. 1.05 In 1997, the City issued its Housing Facilities Refunding Revenue Bonds (Immanuel Lutheran Corporation Project), Series 1997A, and Health Care Facilities Revenue Bonds (Immanuel Lutheran Corporation Project), Series 1997B (collectively, the "Series 1997 Bonds") under the provisions of the Act, and loaned the proceeds of the Series 1997 Bonds to the Borrower for the purpose of (i) refunding the Series 1992 Bonds; (ii) refinancing the Norwest Bank Loans; (iii) financing the construction of certain improvements to the Nursing Facility and installing equipment therein; and (iv) funding certain reserves for the Series 1997 Bonds and the payment of costs of issuance of the Series 1997 Bonds. 1.06 In 2010, the City issued its Housing and Healthcare Facilities Revenue Bond (Immanuel Lutheran Corporation Project), Series 2010 (the "Series 2010 Bonds") under the provisions of the Act, and loaned the proceeds of the Series 2010 Bonds to the Borrower for the purpose of (i) financing the redemption and prepayment of various tax-exempt bonds previously issued by the City in 1997 for the benefit of the Borrower, (ii) financing, the costs of the installation, renovation, rehabilitation, and equipping of certain capital improvements to the Housing Facility and the Nursing Facility; (iii) funding certain reserves and capitalized interest for the Series 2010 Bonds; and (iv) paying a portion of the costs of issuance of the Series 2010 Bonds. 1.07 The Borrower has requested that the City issue its revenue refunding bonds and revenue bonds in the approximate aggregate principal amount not to exceed $37,000,000, in one or more series of tax-exempt and/or taxable bonds at one time or from time to time (the "Bonds"), the proceeds of which will be loaned by the City to the Borrower. The Borrower will apply the proceeds derived from the Bonds to the following purposes: (i) the redemption and prepayment of the Series 2010 Bonds; (ii) financing the costs of the installation, renovation, rehabilitation, and equipping of certain capital improvements to the Housing Facility and the Nursing Facility consisting of (a) renovation of the skilled nursing unit wing of the Nursing Facility, (b) the construction and equipping of 32 short term rehab units, (c) the construction and equipping of 24 memory care residences, and (d) certain predevelopment costs for future development of the Borrower's campus in the City, including but not Iimited to the construction and equipping of 36 independent senior living apartments (collectively, the "2016 Project"); (iii) the funding of certain reserves and capitalized interest for the Bonds; (iv) the financing all or a portion of the costs of issuing the Bonds (including the City's administrative fee related to the original issuance of the Bonds); and (v) fund an interest rate swap termination payment. 1.08. Under Section 147(f) of the Code and the Act, prior to the issuance of the Bonds, the City Council must hold a public hearing that has been duly noticed. Section 2. Preliminary Findings. Based on representations made by the Borrower to the City to date, the City Council hereby makes the following preliminary findings, determinations, and declarations: (a) The 2016 Project consists of the components described in Section 1.07(ii) above. (b) The City will enter into a loan agreement (or other revenue agreement) with the Borrower requiring loan repayments from the Borrower in amounts sufficient to repay the loan evidenced by the Bonds when due and requiring the Borrower to pay all costs of maintaining and insuring the Nursing Facility and the Housing Facility as improved by the 2016 Project, including any payments in lieu of taxes thereon. In all events, it is understood, however, that the Bonds 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 Bonds and the Borrower's facilities, and the Bonds, when, as, and IN if issued, shall recite in substance that the Bonds, including interest thereon, are payable solely from the revenues received from the 2016 Project, the property pledged to the payment thereof and other sources of security for the Bonds, 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 Bonds. (c) The Bonds are intended to be sold to Compass Bank d/b/a BBVA Compass or an affiliate thereof (the "Lender") in a negotiated sale as authorized by the Act. The repayment of the Bonds to the Lender will be secured by an assignment of the loan or revenue agreement (subject to certain retained rights for the City) and a mortgage or trust indenture. (d) In preliminarily authorizing the issuance of the Bonds, the refinancing of the Series 2010 Bonds and the financing of the installation, renovation, rehabilitation, construction and equipping of the 2016 Project and the related costs, the City's purpose is and the effect thereof will be to promote the public welfare of the City and its residents by retaining and improving affordable senior housing, assisted living and nursing home facilities in the City and otherwise furthering the purposes and policies of the Act. Section 3. Public Hearing. 3.01. Barnes & Thornburg LLP, as bond counsel to the City, with cooperation from City staff and staff of the Borrower, has prepared a Notice of Public Hearing (the "Hearing Notice") with respect to the refinancing of the Series 2010 Bonds, the 2016 Project and the issuance of the Bonds by the City. 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 Tuesday, January 19, 2016, at or after 7:00 p.m. in the City Council Chambers located in Kalispell City Hall at 201 1" Avenue East, Kalispell, Montana. All persons who appear at the public hearing will be given an opportunity to express their views with respect to the refinancing of the 2010 Bonds, the 2016 Project and the issuance of the Bonds. The City Council will consider the views of the public expressed at the public hearing, any written comments filed with the City Clerk and the information submitted by the Borrower prior to the decision by the City Council on whether to issue the Bonds. The Hearing Notice will be published by Barnes & Thornburg LLP, as bond counsel to the City, in substantially the form attached hereto as Exhibit A. 3.02. The City Manager or his designee is hereby authorized to establish an alternate date for the public hearing, if necessary, in conformity with the requirements of Section 147(f) of the Code and the requirements of the Act. 3.03. It shall be the Borrower's responsibility to pay the costs of publication of the Hearing Notice. Section 4. PreliminaryApproval. This City Council hereby grants preliminary approval to the issuance of the Bonds in the approximate aggregate principal amount not to exceed $37,000,000 to finance all or a portion of the costs of the redemption and prepayment of the Series 2010 Bonds and the installation, renovation, rehabilitation, construction and equipping of the 2016 Project and the related costs discussed in Section 1.07 of this Resolution, subject to final approval following the preparation of bond documents, and subject to final determination by this City Council that the financing of the 2016 Project and the issuance of the Bonds are in the best interest of the City. Section 5. Reimbursement of Costs under the Code. 5.01. The United States Department of the Treasury has promulgated final regulations governing the use of the proceeds of tax-exempt bonds, all or a portion of which are to be used to reimburse the City or a borrower from the City for project expenditures paid prior to the date of issuance of such bonds. Those regulations (Treasury Regulations, Section 1.150-2) (the "Regulations") require that the City adopt a statement of official intent to reimburse an original expenditure not later than sixty (60) days after payment of the original expenditure. The Regulations also generally require that the Bonds be issued and the reimbursement allocation made from the proceeds of the bonds occur within eighteen (18) months after the later of: (i) the date the expenditure is paid; or (ii) the date the 2016 Project is placed in service or abandoned, but in no event more than three (3) years after the date the expenditure is paid. The Regulations generally permit reimbursement of capital expenditures and costs of issuance of the Bonds. 5.02. To the extent any portion of the proceeds of the Bonds will be applied to expenditures with respect to the 2016 Project, the City reasonably expects to reimburse the Borrower for the expenditures made for costs of the 2016 Project from the proceeds of the Bonds after the date of payment of all or a portion of such expenditures. All reimbursed expenditures shall be capital expenditures, a cost of issuance of the Bonds, or other expenditures eligible for reimbursement under Section 1.150-2(d)(3) of the Regulations and also qualifying expenditures under the Act. Based on representations by the Borrower as of the date hereof, other than (i) expenditures to be paid or reimbursed from sources other than the Bonds, (ii) expenditures permitted to be reimbursed under prior regulations pursuant to the transitional provision contained in Section 1.150-20)(2)(i)(B) of the Regulations, (iii) expenditures constituting preliminary expenditures within the meaning of Section 1.150- 2(f)(2) of the Regulations, or (iv) expenditures in a "de minimus" amount (as defined in Section 1.150- 2(f)(1) of the Regulations), no expenditures with respect to the 2016 Project have been made by the Borrower more than sixty (60) days before the date of adoption of this resolution. 5.03. Based on representations by the Borrower, as of the date hereof, there are no funds of the Borrower reserved, allocated on a long term -basis or otherwise set aside (or reasonably expected to be reserved, allocated on a long-term basis or otherwise set aside) to provide permanent financing for the expenditures related to the 2016 Project to be financed from proceeds of the Bonds, other than pursuant to the issuance of the Bonds. This resolution, therefore, is determined to be consistent with the budgetary and financial circumstances of the Borrower as they exist or are reasonably foreseeable on the date hereof. Section 6. Costs. The Borrower will pay the administrative fees of the City with respect to the original issuance of the Bonds and pay, or, upon demand, reimburse the City for payment of, any and all costs incurred by the City in connection with the 2016 Project and the issuance of the Bonds, whether or not the Bonds are issued. Section 7. Commitment Conditional. The adoption of this resolution does not constitute a guarantee or a firm commitment that the City will issue the Bonds as requested by the Borrower. If, based on comments received at a public hearing to be held pursuant to this resolution, or other information made available to or obtained by the City during its review of the 2016 Project, it appears that the 2016 Project or the issuance of Bonds to finance or refinance the costs thereof is not in the public interest or is inconsistent with the purposes of the Act or the Code, the City reserves the right not to grant final approval to the issuance of the Bonds. The City also retains the right, in its sole discretion, to withdraw from participation and accordingly not issue the Bonds should the City Council, at any time prior to the issuance thereof, determine that it is in the best interests of the City not to issue the Bonds or 4 should the parties to the transaction be unable to reach agreement as to the terms and conditions of any of the documents for the transaction. Section 8. Effective Date. This Resolution shall be in full force and effect from and after its passage. PASSED by the City Council of the City of Kalispell, Montana, this 7th day of December, 2015. Attest: City Clerk 66139-3 (BWJ) 2437457v.3 Mayor 67 EXHIBIT A FORM OF NOTICE OF PUBLIC HEARING CITY OF KALISPELL NOTICE OF PUBLIC HEARING NOTICE OF PUBLIC HEARING WITH RESPECT TO THE ISSUANCE OF REVENUE REFUNDING BONDS FOR REFINANCING REVENUE BONDS PREVIOUSLY ISSUED FOR IMMANUEL LUTHERAN CORPORATION OF KALISPELL, MONTANA AND ISSUANCE OF REVENUE BONDS FOR THE FINANCING OF IMPROVEMENTS TO THE FACILITIES LOCATED ON THE CAMPUS OF IMMANUEL LUTHERAN CORPORATION OF KALISPELL, MONTANA NOTICE IS HEREBY GIVEN that the City Council of the City of Kalispell, Montana (the "City") will meet on January 19, 2016, at 7:00 p.m. in the Council Chambers at City Hall, 201 First Avenue East, Kalispell, Montana, for the purpose of holding a public hearing to consider the preliminary approval of the issuance of one or more series of tax-exempt and/or taxable revenue refunding bonds and/or revenue bonds (the "Bonds") in accordance with the requirements of the Montana Code Title 90 Chapter 5 Part 1, as amended, and the Internal Revenue Code of 1986, as amended (the "Act"). The proceeds of the Bonds, if issued will be loaned by the City to Immanuel Lutheran Corporation of Kalispell, Montana, a Montana nonprofit corporation (the "Borrower"). The Borrower owns and operates a 155-bed nursing home facility commonly known as Immanuel Lutheran Home, located at 185 Crestline Avenue in the City (the "Nursing Facility"), and a 112-unit senior retirement apartment facility commonly known as Buffalo Hills Terrace (the "Housing Facility) located adjacent to the Nursing Facility at 40 Claremont Street in the City. The Borrower will apply the proceeds derived from the Bonds to the following purposes: (i) the redemption and prepayment of the Series 2010 Bonds; (ii) financing the costs of the installation, renovation, rehabilitation, and equipping of certain capital improvements to the Housing Facility and the Nursing Facility consisting of (a) renovation of the skilled nursing unit wing of the Nursing Facility, (b) the construction and equipping of 32 short term rehab units, (c) the construction and equipping of 24 memory care units, and (d) certain predevelopment costs for future development of the Borrower's campus in the City, including but not limited to the construction and equipping of 36 independent senior living apartments (collectively, the "2016 Project"); (iii) the funding of certain reserves and capitalized interest for the Bonds; (iv) the financing all or a portion of the costs of issuing the Bonds (including the City's administrative fee related to the original issuance of the Bonds); and (v) fund an interest rate swap termination payment. At the public hearing, the City Council of the City will consider granting approval to the issuance of the Bonds by the City for and on behalf of the Borrower for the purposes set forth above. The aggregate face amount of the Bonds proposed to be issued by the City is presently estimated not to exceed $37,000,000. The Bonds will be special, limited obligations of the City payable solely from the revenues of the Borrower pledged to the payment thereof under the terms of a loan agreement (or other revenue agreement) between the City and the Borrower. The Bonds will not be a general or moral obligation of or be secured by the taxing power or any property or assets of the City. The full faith, credit and taxing power of the City are not pledged to the payment of the Bonds. The City, the State of Montana, or any political subdivisions thereof are not obligated in any manner for repayment of the Bonds. Anyone desiring to be heard during the public hearing will be afforded an opportunity to do so. After the public hearing, the City Council of the City will consider adoption of a resolution granting final approval to the issuance of the Bonds. The aggregate face amount of the Bonds proposed to be issued by the City is presently estimated not to exceed $37,000,000. A-1 Persons desiring additional information may contact the City Clerk at 201 First 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. Publish Date: December _, 2015 January 2016 January 2016 Aimee Brunckhorst City Clerk A-2