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R-14-18 RESOLUTION NO. R-14-18 RESOLUTION TO APPROVE THE DETAILS OF A LEASE FINANCING FOR THE COSTS ASSOCIATED WITH THE ACQUISITION AND IMPROVEMENT OF CERTAIN REAL ESTATE FOR PARKS, RECREATION AND PUBLIC SAFETY PURPOSES AND TO AUTHORIZE THE EXECUTION AND DELIVERY OF RELATED DOCUMENTS WHEREAS, the City of Fairfax, Virginia (the "City"), desires to finance the acquisition, construction, equipping, renovation, rehabilitation, development and/or improvement of certain parcels of real property for parks, recreation and public safety purposes, including without limitation the Old Town Square project, the East Street parking project, the North Street pedestrian barrier project and the firing range project at the City's Property Yard (collectively, the "Project"); WHEREAS, the Council (the "Council") of the City has received bids from several banks, pursuant to advertisement in the manner prescribed by law, and has initiated the process to select one of those banks (such selected bank hereinafter referred to as the "Lessor") to act as financing lessee under one or more prime leases and to act as financing lessor under one or more financing lease agreements, attached hereto as Exhibit A (the "Proposal"); WHEREAS, the Lessor desires to acquire a leasehold interest in the Property to serve as collateral for the provision of funds to finance the Project; WHEREAS, the Council, having determined it to be in the best interest of the City to finance the Project through a financing lease, intends to authorize the leasing of certain real property and the improvements (both existing and future) thereon owned by and located in the City, including (i) the parking lot and related property of approximately 15,630 total square feet located at 10421 North Street (previously the Weight Watchers building), (ii) Old Town Hall and related parking of approximately 28,280 total square feet located at 3999 University Drive, (iii) the parcel of real property of approximately 9,321 square feet located at 10415 North Street (previously the Woods property), (iv) a parking lot and related easement of approximately 3,833 square feet located at 10364 Main Street, (v) the Keenan parking lot of approximately 3,508 total square feet located at 10413 North Street, (vi) the Woods parking lot of approximately 3,667 total square feet located at 3928 Old Lee Highway and (vii) the building of approximately 3,492 square feet containing the indoor firing range used by the City Police Department located at the City's Property Yard at 3410 Pickett Road(collectively, the "Property"); and WHEREAS, there have been circulated to members of the Council (a) a draft Deed and Agreement of Prime Lease (the "Prime Lease") pursuant to which the City will convey to the Lessor a leasehold interest in the Property and (b) a draft Deed and Agreement of Financing Lease between the Lessor and the City (the "Lease Agreement") pursuant to which the Lessor will sub-lease the Property back to the City, both of which instruments the City proposes to execute or approve to carry out the purposes of the Project and copies of which shall be filed with the records of the Council; NOW, THEREFORE, BE IT RESOLVED BY COUNCIL OF THE CITY OF FAIRFAX,VIRGINIA: 1. The Council approves the lease by the City of the Property from the Lessor pursuant to the terms of the Proposal and this Resolution. The City Manager is authorized to determine the final terms of the loan from the Lessor reflected in the Prime Lease and the Lease Agreement as the City Manager shall deem to be in the best interests of the City; provided, however that (a) the aggregate sum of the principal components constituting basic rent (the "Basic Rent") payable under the Lease Agreement shall not exceed $7,500,000, (b) the Prime Lease shall terminate no later than May 2, 2044, (c) the Lease Agreement shall terminate no later than December 31, 2030, (d) the initial interest component of Basic Rent payable under the Lease Agreement shall not exceed 3.00% per year, calculated on the basis of a 360-day year of twelve 30-day months and subject to adjustment as reflected in the Proposal, and (e) the principal components under the Lease Agreement may be subject to optional prepayment at a premium not to exceed 2% of the principal components to be prepaid or a "make whole" prepayment price based on financial market conditions at the time of prepayment. The City Manager shall also be authorized to determine whether the financing of the Project is effectuated by one or more Prime Leases and one or more Financing Leases and to determine for each the particular payment dates and amounts of Basic Rent, all as he shall deem to be in the best interests of the City. 2. The Mayor and the City Manager, either of whom may act, are authorized and directed to execute the Prime Lease and the Lease Agreement, 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 Prime 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 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 Prime Lease and the Lease Agreement and the completion of the financing, including without 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 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 Lessor 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. The City covenants that it shall neither take nor omit to take any action the taking or omission of which shall cause the principal components of rental payments under the Lease Agreement to be "arbitrage bonds" within the meaning of Section 148 of the Internal Revenue Code of 1986, as amended (the "Code"), and regulations thereunder, or otherwise cause interest on such principal components to be includable in the gross income for federal income tax purposes of the registered owners thereof under existing law. 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 of America any part of the earnings derived from the investment of the gross proceeds of the Lease Agreement. The City shall pay from its legally available general funds any amount required to be rebated to the United States of America pursuant to the Code. 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 covenants that during the term of the Lease Agreement it will not use or permit the use of any portion of the Project other than for the purpose of performing one or more governmental or proprietary functions of the City consistent with the scope of the City's authority and will not use or permit the use of any portion of the Project in a trade or business of any person or entity other than the City. 9. The City Manager is authorized to designate the principal components of the Basic Rent due under the Lease Agreement as "qualified tax-exempt obligations" for the purpose of Section 265(b)(3) of the Code if the City Manager determines that such designation will be in the best interests of the City. 10. The City intends that the adoption of this Resolution confirms the "official intent" within the meaning of Treasury Regulations Section 1.150-2 promulgated under the Code. 11. 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. 12. 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. 13. This Resolution shall take effect immediately. Introduced: April 8, 2014 Adopted: April 22, 2014 ftvi& Mayor ATTEST: City Clerk The vote on the motion to approve was recorded as follows: VOTE: Councilman DeMarco Aye Councilman Drummond Aye Councilman Greenfield Aye Councilman Meyer Aye Councilmember Schmidt Absent Councilman Stombres Absent