R-06-52
RESOLUTION NO. :R-06-52
RESOLUTION TO APP:ROVE TIIE DETAILS OF LEASE
FINANCING FO:R IlVIP:ROVElVIENTS TO TIIE lVIIDDLE
SCIIOOL. THE HIGII SCHOOL AND PA:R:KS AND TO
AUTIIO:RIZE TIIE EXECUTION AND DELIVE:RY OF
RELATED DOCUlVIENTS
'V\7HER..EAS~ the City of Fairfax" Virginia (the ';'City"")" desires to floance the
acquisition, construction, renovation, improvement and equIpping" as applicable" or (a)
improvements to the City"s 1'v1:iddle School and High School and (b) park improvements"
including ball fields and trails (collectively" the ....ProjectH);
'V\7HEREAS, the City Council (the "'"CoullciP") has received bids pursuant to
advertisement in the manner prescribed by la~, from bidders to act as financing lessee under
one or more ground leases and to act as financing lessor under one or more financing lease
agreements" and Branch Banking and Trust Company (the '''Bank'''') has submitted a proposal
providing the most favorable terms to the City" attached hereto as Exhibit A (the "Proposal"");
and
"V\THE:REAS, the Ban.k desires to acquire a leasehold interest in certain land located in
the City (such land and all improvemen.ts novv or hereafter existing thereon" the '''Property'''')"
to serve as collateral for the provision of funds for the Project; aI1d
"VVI-IE.REAS, the City desires to lease the Property to the Bank" and the City '-ViII then
sublease the Property rrom the Bank pursuant to a Deed and Agreement of Financing Lease
bet"VVeen the Bank aI1d the City dated as or even date herevvith (the ""Lease Agrcen"'1ent"")" the
proceeds of vvhich vvill rund the costs of the Proj ect;
",,"HER.EAS, there have been presented at this meeting (a) a draft Deed and
Agreement of Ground Lease (the '''GroUI1d Lease"") pursuaI1t to vvhich the City vvill convey to
the Bank a leasehold interest in the Property and (b) a draft Lease Agreement pursuant to
vvhich the BaI1K vvill lease the Property back to the City,. both or vvhich the Council proposes
to execute or approve to carry out the purposes of the Project and copies of V\rhich shall be
filed V'V"ith the records of the Council;
NO""'. TIIEREFORE. BE IT RESOLVED BY CITY COUNCIL OF THE CITY
OF FAI:RFAX. VT:RGINIA:
1. The Council approves the lease by the City of the Property from the Bank
pursuant to the terms or the Proposal and the Lease Agreement. The Lease Agreen"1ent shall
initially provide that the aggregate total of principal components of basic rent (the .....Basic
Rent"") payable under the Lease Agreement shall not exceed $10,,000,.000. The terrn or the
Lease Agreement shall commence on December 22" 2006" an..d shall terminate on August 1"
2026. The interest component of Basic Rent payable under the Lease Agreement shall have
an initial interest rate or 4.070/0 per year" calculated on the basis or a 360-day year of tV\rclvc
3D-day months". and shall be subject to adjustment in accordance V\Tith the terms or the Lease
Agreement. The payments of Basic Rent (constituting both principal and interest
components) shall be payable semi-annually on each February 1 and August 1". commencing
August 1". 2007,. in the years and amounts forth on Exhibit B to the Lease Agreement.
2. The ~ayor and the City .l\I1anager". either of vv-hom may act:" are authorized and
directed to execute the Ground Lease and the Lease .Agreement". the rorms orvvhich submitted
to this meeting are hereby approved". vvith such completions" omissions" insertions and
chan..ges not inconsistent vvith this Resolution as may be approved by the City Attomey aI1d
the officer execu.ting the Ground Lease and the Lease Agreement:" such execution to constitute
conclu.sive evidence of their approval or any such completior1s" omissions" insertions and
changes.
3_ Such officers or the City as requested by the City 1\...1":ar1ager are authorized and
directed to execute and deliver all certificates and instruments and to take all actions
necessary or desirable in connection vvith the execu.tion and delivery or the Ground Lease and
the Lease Agreement and the completion of the fi:t1ancing" including vvithout limitation". the
granting of a leasehold deed of trust on any or all of the Property as further security for the
financing.
4. The obligations of the City 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.
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
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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 2006, 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 2006 (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 2006, 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 2006 (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 2006 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. The City represents and covenants as follows:
(a) Barring circumstances unforeseen as of the date of entering into the
Lease Agreement, the City will not issue tax-exempt obligations itself or approve the issuance
of tax-exempt obligations of any of its "subordinate entities," within the meaning of Section
148(f)(4)(C) of the Code, and all entities that issue tax-exempt obligations on behalf of the
City and its subordinate entities, if the issuance of such tax-exempt obligations would, when
aggregated with all other tax-exempt obligations theretofore issued in calendar year 2006 by
the City and such other entities, result in the City and such other entities having issued a total
of more than $5,000,000 (which amount is increased by the lesser of $10,000,000 or so much
of the aggregate face amount of tax-exempt obligations attributable to financing the
construction of public school facilities) of tax-exempt obligations in calendar year 2006 (not
including private activity bonds), including the Lease Agreement;
(b) The City has no reason to believe that the City and such other entities
will issue tax-exempt obligations in calendar year 2006 in an aggregate amount that will
exceed such $5,000,000 (which amount is increased by the lesser of $10,000,000 or so much
of the aggregate face amount of tax-exempt obligations attributable to financing the
construction of public school facilities) limit; and
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(c) At least 95% of the proceeds of the Lease Agreement shall be used for
"local governmental activities" of the City within the meaning of Section 148(f)(4)(C) of the
Code;
provided, however, that if the City receives an opinion of nationally recognized bond counsel
that compliance with any restriction set forth in (a) or (c) above will not prevent the City from
having to rebate to the United States any part of the earnings derived from the investment of
the gross proceeds of the Lease Agreement, the City need not comply with such restriction.
10. 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.
11. 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.
12. This Resolution shall take effect immediately.
ADOPTED THIS 12 DAY OF DECEMBER, 2006.
~'-
ATTEST:
Cit C erk, City of Fairfax, Virginia
The vote on the motion to approve was recorded as follows:
VOTE:
Councilwoman Cross
Councilman Greenfield
Councilwoman Lyon
Councilman Rasmussen
Councilman Silverthorne
Councilmember Winter
Aye
Absent
Aye
Aye
Aye
Aye
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Exhibit A
[Attach BB&T Proposal]
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