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R-11-13 RESOLUTION NO. R -11 -13 RESOLUTION TO APPROVE THE REFINANCING OF CERTAIN EXISTING LEASE ARRANGEMENTS, TO APPROVE THE DETAILS OF SUCH REFINANCING AND TO AUTHORIZE THE EXECUTION AND DELIVERY OF RELATED DOCUMENTS WHEREAS, during the period 2004 and 2007, the City of Fairfax, Virginia (the "City "), financed the acquisition, construction, renovation, improvement and equipping, as applicable, of certain properties for open space, parks, recreation and historic preservation purposes and secured such financings by granting to a financing entity a leasehold interest in the following properties located at (i) 10735 West Drive (referred to as the Jester Property), (ii) 3300 Stafford Drive (referred to as the Stafford Property), (iii) 9910 Barbara Anne Lane, 9990 Mosby Road, and 4143 Evergreen Drive (collectively, referred to as the Grefe Property), (iv) 9817 Ashby Road (referred to as the Ashby Road /Conard Property), (v) 10421 -25 North Street (referred to as the Weight Watchers Property), and (vi) 3610 Old Lee Highway (referred to as the Blenheim Property), all located within the City limits (collectively, the "Open Space Property "); WHEREAS, the City leased the Open Space Property to a financing entity, which in turn agreed to lease such property back to the City pursuant to the terms of financing lease agreements; WHEREAS, during 2006, the City financed the acquisition, construction, renovation, improvement and equipping, as applicable, of (i) improvements to the City's Middle School and High School and (ii) park improvements, including ball fields and trails, and secured such financing by granting to a financing entity a leasehold interest in the Westmore School, located at 11000 Berry Street, Fairfax, Virginia, on approximately 10.0 acres of land (the " Westmore Property "); WHEREAS, the City leased the Westmore Property to a financing entity, which in turn agreed to lease such property back to the City pursuant to the terms of a financing lease agreement; WHEREAS, the City now desires to refinance the remaining rental payments due under such existing lease financing arrangements by terminating the existing ground leases and financing lease agreements related to the Open Space Property and the Westmore Property (together, the "Property ") and entering into new ground leases and financing lease agreements related to the Property; WHEREAS, the proposed lease refinancing is expected to be structured in three transactions: (i) refinancing approximately $5,942,678 principal portion of the open space and parks projects described above by the lease of certain of the Property with a term not exceeding 4 years; (ii) refinancing approximately $5,164,800 principal portion of the open space and parks projects described above, by the lease of certain of the Property for a lease term not exceeding 16 years; and (iii) refinancing approximately $8,574,000 principal portion of the school and ball field projects described above, by the lease of certain of the Property for a lease term not exceeding 16 years; WHEREAS, the City Council (the "Council ") has received bids pursuant to advertisement in the manner prescribed by law, from bidders to arrange for the refinancing of the existing lease financings and has determined that Wells Fargo Bank, National Association (the "Bank "), submitted a proposal providing the most favorable terms to the City, a copy of which is attached hereto as Exhibit A (the "Proposal "); WHEREAS, the Bank has proposed that (a) the City lease to a corporate trustee the Property pursuant to one or more ground leases, (b) the corporate trustee lease the Property back to the City pursuant to one or more financing lease agreements, and (c) the corporate trustee issue and sell to the Bank certificates of participation in the rental payments received from the City under such financing lease agreements; and WHEREAS, there have been presented to the Council prior to this meeting (a) a form of ground lease to be used for each lease financing transaction (each a "Ground Lease" and collectively, the "Ground Leases ") and (b) a form of financing lease agreement to be used for each lease financing transaction (each a "Lease Agreement" and collectively, the "Lease Agreements "), both of which the Council proposes to authorize and approve for purposes of carrying out the lease refinancing described above; NOW, THEREFORE, BE IT RESOLVED BY CITY COUNCIL OF THE CITY OF FAIRFAX, VIRGINIA: 1. The Council authorizes and approves the refinancing of the remaining rental payments due under the existing lease financing arrangements described above in accordance with the Proposal and the terms of this Resolution. The City Manager, in consultation with Davenport & Company LLC, as the City's financial advisor, is authorized to determine the details of each Lease Agreement provided that (a) the total aggregate amount of the principal components of basic rent (the "Basic Rent ") payable under the Lease Agreements shall not exceed $21,000,000, (b) the Lease Agreements shall terminate no later than December 31, 2019, and (c) the interest components of Basic Rent payable under the Lease Agreements shall reflect an initial rate not exceeding 3.20% per year, calculated on the basis of a 360 -day year of twelve 30 -day months and subject to yield maintenance and related provisions in accordance with the terms of the Proposal. The payments of Basic Rent (constituting both principal and interest components) shall be payable semi - annually on dates as determined by the City Manager. The Lease Agreements shall be subject to prepayment on terms determined by the City Manager in accordance with the Proposal. The Property may be subject to cross - default and cross - collateralization provisions in each Lease Agreement. 2. The Mayor and the City Manager, either of whom may act, are authorized and directed to execute the Ground Leases and the Lease Agreements, the forms of which submitted to this meeting are hereby approved, with such completions, omissions, insertions and changes not inconsistent with this Resolution as may be approved by the City Attorney and the officer executing the Ground Leases and the Lease Agreements, 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 Manager are authorized and directed to execute and deliver all certificates and instruments and to take all actions necessary or desirable in connection with the execution and delivery of the Ground Leases and the Lease Agreements and the completion of each lease financing, including without limitation, the granting of leasehold deeds of trust on any or all of the Property as further security for the financing and the acknowledgement by the City of the terms of the trust indentures providing for the issuance and sale of certificates of participation in connection with each Lease Agreement. 4. Any payments due from the City under the Lease Agreements 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 Agreements 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 pay all amounts due under each Lease Agreements 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 each 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 each Lease Agreement an amount sufficient to pay all amounts expected to come due under such 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 corporate trustee and the Bank evidence indicating whether the annual budget contains an appropriation sufficient to pay all amounts expected to come due under the respective 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 respective 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 respective Lease Agreements or the related certificates of participation 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 respective Lease Agreements or the related certificates of participation 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 funds received under the respective Lease Agreements, 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 particular Lease Agreement or the related certificates of participation 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 respective Lease Agreements to be used in any manner that would result in (a) 10% or more of such proceeds or the facilities refinanced 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 such facilities, (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 under the respective Lease Agreements or the related certificates of participation 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 received under the respective Lease Agreements, 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. To the extent the City intends to satisfy the requirements set forth in Section 265(b)(3) of the Code for calendar year 2011, the City Manager is hereby authorized to designate the principal components of Basic Rent under any one or more of the Lease Agreements or the related certificates of participation as "qualified tax - exempt obligations" for purposes of such Code Section. The City Manager and such other officers of the City as may be requested by the City's bond counsel are authorized and directed to make such certifications and execute and deliver such documentation as may be necessary to set forth or establish the designation of such principal components of Basic Rent or the related certificates of participation as "qualified tax- exempt obligations" and to evidence the City's intent to comply with the requirements of Section 265(b)(3) of the Code. Such documentation shall be in such forms as may be requested by the City's bond counsel. 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 lease refinancing and the issuance and sale of the related certificates of participation are hereby approved, ratified and confirmed. The officers of the City are further authorized and directed to execute and deliver all such certificates and instruments and to take all such further action as may be considered necessary or desirable in connection with this lease financing and the issuance and sale of the related certificates of participation. 11. This Resolution shall take effect immediately. ADOPTED this 12`" day of April, 2011. ayo ATTEST: t ' City Clerk The vote on the motion to approve was recorded as follows: VOTE: Councilwoman Cross Aye Councilman Drummond Aye Councilman Greenfield Aye Councilman Meyer Aye Councilwoman Schmidt Aye Councilman Stombres Aye