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R-08-22 RESOL UTION NO. R-OB-22 RESOI"UTION TO APPROVE TIIE DETAILS OF LEASE FINANCIN~ FOR CAPITAL IlVIPROVElVIENTS TO TI-I E VVATER AND SEVVER SYSTElVIS OF THE CITY OF FAIRFAX. VIR~INIA. AND TO AUTHORIZE TIIE EXECUTION AND DELIVERY OF RELATED DOCUlVIENTS ""HEREAS, the City of Fairfax" Virginia (the "City'''')" desires to finance capital improvements to its """"uter and SCV\Tcr systems (the "'Project""); "VV'"HE:REAS, the City Council (the ""Cotinei!"") has received bids pursuant to advertisement in the manner prescribed by lavv" rrom bidders to act as financing lessee under onc or more ground leases and to act as financing lessor under one or more financing lease agreements", and SunTrust Ban..k (the "Bank'''') has submitted a proposal providing the most favorable terms to the City", attached hereto as Exh.ibit A (the "Proposal""); VVI-IEREAS, the Bank desires to acquire a leasehold interest in certain land located in the City (such land and all improvements no~ or hereafter existing thereon". the ....Property".")" to serve as collateral for the provision of funds for the Project; 'V\THEREAS, the City desires to lease the Property to the Bank, arld the City v.rill therl sublease the Property from the Bank pursuant to a Deed and Agreement of Finarlcing Lease bet~een the Bank and the City (the ....Lease AgreemenC'), the proceeds of ""hich v.rill fund the costs of the Proj ect; and 'V\THEREAS, there have been presented at this meeting (a) a draft Deed and Agreement of Ground Lease (the ""Ground Lease''') pursuant to vvhich the City ""ill convey to the Ba.n.k a leasehold interest in the Property arld (b) a draft Lease Agreement pursuant to V\Thich the Bank V\Till lease the Property back to the City, both of vvhich the Council proposes to execute or approve to carry out the purposes of the Project and copies of Vv'hich shall be filed V\Tith the records of the Council; NOVV, TIIEREFORE. BE IT RESOLVED BY TIIE COUNCIL OF TIIE CITY OF FAIRFAX. VIR~INIA: 1. The Council approves the lease by the City of the Property from the Bank pursuarlt to the terms of the Proposal and the Lease Agreement. The Lease Agreement shall initially provide that the total of principal components of basic rent (the ....Basic Rent''') payable under the Lease Agreement shall not exceed $4,900,,000. The term of the Lease Agreement shall terminate no later than December 31,2028. The interest component of Basic Rent payable under the Lease Agreement shall have an interest rate of 4.300/0 per year, calculated on the basis of a 360-day year of tvvelve 30-day months. The payrn..ents of Basic Rent shall be payable semi-annually on the dates and in the years and amounts determined by the City J\...1.:arlager. The principal components oT Basic Rent coming due on or after January 15, 2019". may be prepaid, at the option of the City, in V\Thole or in part at any time upon payrn..ent of 1000/0 of the principal components to be prepaid plus interest accrued to the date of prepay:rnent. 2_ The J\...1.:ayor and the City J\...1.:anager, either ofV'V"hom may act". are al..__lthorized and directed to execute the Ground Lease and the Lease Agreement, the forms ofV\Thich submitted to this meeting are hereby approved~ V\Tith such completions~ omissions". insertions and changes not inconsistent V\1"ith this Resolution as may be approved by the City Attomey and the officer executing the Ground Lease and the Lease Agreement, such execution to constitute conclusive evidence of their approval of any such completions, omissions, insertions and changes_ 3. Such officers of the City as requested by the City J\..1:anager are authorized and directed to execute and deliver all certificates and instruments and to take all actions necessary or desirable in connection V\Tith the execution arld delivery of the Ground Lease and the Lease Agreement and the completion of the financing, including V'V"ithout limitation". the granting of a leasehold deed of trust on any or all of the Property as further security for the financing. 4. The undertakings by the City to make payments due under the Lease Agreement shall be limited obligations payable solely from funds to be appropriated by the Council for such purpose and shall not constitute a debt of the City within the meaning of any constitutional or statutory limitation or a pledge of the faith and credit of the City beyond any fiscal year for which the Council has lawfully appropriated from time to time. Nothing herein or in the Lease Agreement shall constitute a debt of the City within the meaning of any constitutional or statutory limitation or a pledge of the faith and credit or taxing power of the City. 5. The Council believes that funds sufficient to make payment of all amounts payable under the Lease Agreement can be obtained. While recognizing that it is not empowered to make any binding commitment to make such payments beyond the current fiscal year, the Council hereby states its intent to make annual appropriations for future fiscal years in amounts sufficient to make all such payments and hereby recommends that future Councils do likewise during the term of the Lease Agreement. The Council directs the City's Director of Finance, or such other officer who may be charged with the responsibility for preparing the City's annual budget, to include in the budget request for each fiscal year during the term of the Lease Agreement an amount sufficient to pay all amounts expected to come due under the Lease Agreement during such fiscal year. As soon as practicable after the adoption of the City's annual budget, the City Manager is authorized and directed to deliver to the Bank evidence indicating whether the annual budget contains an appropriation sufficient to pay all amounts expected to come due under the Lease Agreement for such fiscal year. If at any time during a particular fiscal year of the City, through the fiscal year in which the last payment of Basic Rent will be due, the amount appropriated in the City's annual budget for such fiscal year is insufficient to pay when due the amounts then payable under the Lease Agreement, the Council directs the City's Director of Finance, or such other officer who may be charged with the responsibility for preparing the City's annual budget, to submit to the Council at the next scheduled meeting, or as promptly as practicable but in any event within 45 days, a request for a supplemental appropriation sufficient to cover the deficit. 6. (a) The City covenants that it will not take or omit to take any action the taking or omission of which will cause the Basic Rent payments due under the Lease Agreement to be "arbitrage bonds" within the meaning of Section 148 of the Internal Revenue Code of 1986, as amended, and regulations issued pursuant thereto (the "Code"), or otherwise cause the interest components of the Basic Rent due under the Lease Agreement to be includable in the gross income of the holder thereof under existing statutes. Without limiting the generality of the foregoing, the City shall comply with any provision of law that may require the City at any time to rebate to the United States any part of the earnings derived from the investment of the tax-exempt portion of the funds received under the Lease Agreement, unless the City receives an opinion of nationally recognized bond counsel that such compliance is not required to prevent the interest components of Basic Rent due under the Lease Agreement from being includable in the gross income for federal income tax purposes of the holder thereof under existing law. (b) The City covenants that it shall not permit the proceeds derived from the Lease Agreement to be used in any manner that would result in (a) 10% or more of such proceeds or the facilities financed with such proceeds being used in a trade or business carried on by any person other than a governmental unit, as provided in Section 141 (b) of the Code, provided that no more than 5% of such proceeds may be used in a trade or business unrelated to the City's use of the Project, (b) 5% or more of such proceeds being used with respect to any "output facility" (other than a facility for the furnishing of water), within the meaning of Section 141(b)(4) of the Code, or (c) 5% or more of such proceeds being used directly or indirectly to make or finance loans to any persons other than a governmental unit, as provided in Section 141(c) of the Code; provided, however, that if the City receives an opinion of nationally recognized bond counsel that any such covenants need not be complied with to prevent the interest components of the Basic Rent from being includable in the gross income for Federal income tax purposes of the holder thereof under existing law, the City need not comply with such covenants. 2 7. Such officers of the City as may be requested are authorized and directed to execute an appropriate certificate setting forth the expected use and investment of the funds received under the Lease Agreement, and any elections such officers deem desirable regarding rebate of earnings to the United States, for purposes of complying with Section 148 of the Code. Such certificate and elections shall be in such form as may be requested by bond counsel for the City. 8. The City designates the principal components under the Lease Agreement as "qualified tax-exempt obligations" for the purpose of Section 265(b)(3) of the Code. The City represents and covenants as follows: (a) The City will in no event designate more than $10,000,000 of obligations as qualified tax-exempt obligations in calendar year 2008, including the principal components under the Lease Agreement, for the purpose of such Section 265(b )(3); (b) The City, all its "subordinate entities," within the meaning of such Section 265(b )(3), and all entities which issue tax-exempt obligations on behalf of the City and its subordinate entities have not issued, in the aggregate, more than $10,000,000 of tax- exempt obligations in calendar year 2008 (not including "private activity bonds," within the meaning of Section 141 of the Code, other than "qualified 501(c)(3) bonds," within the meaning of Section 145 of the Code), including the principal components under the Lease Agreement; (c) Barring circumstances unforeseen as of the date of delivery of the Lease Agreement, the City will not issue tax-exempt obligations itself or approve the issuance of tax-exempt obligations of any of such other entities if the issuance of such tax-exempt obligations would, when aggregated with all other tax-exempt obligations theretofore issued by the City and such other entities in calendar year 2008, result in the City and such other entities having issued a total of more than $10,000,000 of tax-exempt obligations in calendar year 2008 (not including private activity bonds other than qualified 501(c)(3) bonds), including the principal components under the Lease Agreement; and (d) The City has no reason to believe that the City and such other entities will issue tax-exempt obligations in calendar year 2008 in an aggregate amount that will exceed such $10,000,000 limit; provided, however, that if the City receives an opinion of nationally recognized bond counsel that compliance with any covenant set forth in (a) or (c) above is not required for the principal components under the Lease Agreement to be qualified tax-exempt obligations, the City need not comply with such covenant. 9. Any authorization herein to execute a document shall include authorization to deliver it to the other parties thereto and to record such document where appropriate. 10. All other acts of the officers of the City that are in conformity with the purposes and intent of this Resolution and in furtherance of this financing and the undertaking of the Project are approved and ratified. 11. This Resolution shall take effect immediately. Adopted this10 day of June, 2008. G~~ ATTEST: 1L~ 1 Y er, lty 0 aIr ax, lrgmla 3 The vote on the motion to approve was recorded as follows: Votes Councilmember Cross Councilman Greenfield Councilmember Lyon Councilman Rasmussen Councilman Silverthorne Councilmember Winter Aye Aye Aye Aye Absent Aye 4 3783 . 00026 EMF_US 25789648v2 Exhibit A [See SunTrust Bank Proposal Attached]