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R-19-31RESOLUTION NO. R-19-31 RESOLUTION APPROVING A LEASE FINANCING WITH THE VIRGINIA RESOURCES AUTHORITY, APPROVING THE FORM OF CERTAIN DOCUMENTS PREPARED IN CONNECTION THEREWITH AND AUTHORIZING THE DISTRIBUTION, EXECUTION AND DELIVERY OF THE SAME WHEREAS, on July 28, 2005, the City of Fairfax Economic Development Authority issued its $39,630,000 Public Facility Lease Revenue Bonds (City of Fairfax Public Improvement Projects), Series 2005 (the "Series 2005 Bonds"), and loaned the proceeds thereof to the City of Fairfax, Virginia (the "City"), to finance the acquisition, construction and equipping of certain public improvements, including downtown redevelopment improvements and the City's capital contribution for the costs of a new library to be shared with Fairfax County, Virginia; and WHEREAS, the City entered into a lease financing arrangement with the Virginia Resources Authority ("VRA") to refund the then -outstanding Series 2005 Bonds, which was effected through (a) the lease of City Hall (the "Property") to VRA pursuant to a Prime Lease dated as of June 1, 2012 (the "2012 Prime Lease"), between the City and VRA, and (b) the lease back of the Property to the City pursuant to a Local Lease Acquisition Agreement and Financing Lease dated as of April 30, 2012 (the "20I2 Financing Lease"), between VRA and the City; and WHEREAS, the City administration has informed the Council of the City (the "City Council") that the City may be able to achieve debt service savings by refinancing all or a portion of the outstanding rental payments (the "2012 Rental Payments") payable pursuant to the 2012 Financing Lease; and WHEREAS, the City Council desires to achieve debt service savings by refinancing all or a portion of the outstanding 2012 Rental Payments (such refinanced portions, the "Refinanced 2012 Rental Payments"), subject to the terms and conditions herein, including a condition that such refinancing achieve an aggregate net present value debt service savings of not less than 3.0% of the principal components of the 2012 Rental Payments being refinanced (the "Targeted Savings"); and WHEREAS, the City Council also desires to finance the costs of various capital improvements, including but not limited to (a) the design, acquisition, construction and equipping of a fire station, (b) the acquisition and equipping of a fire truck and (c) other governmental and public safety projects (collectively, the "2019 Project"); and WHEREAS, (a) the City has applied to VRA to refinance the Refinanced 2012 Rental Payments and to finance the 2019 Project, and (b) VRA has indicated its willingness to (i) undertake the same using the proceeds of one or more series of its Infrastructure and State Moral Obligation Revenue Bonds (Virginia Pooled Financing Program) (collectively, the "VRA Bonds") and (ii) effect such refinancing and financing through the amendment and restatement of the 2012 Prime Lease and the 2012 Financing Lease; and WHEREAS, the provisions and details of such lease refinancing and financing shall be reflected in (a) an Amended and Restated Prime Lease to be dated as of a date specified by VRA, between VRA and the City (the "Amended Prime Lease"), and (b) an Amended and Restated Local Lease Acquisition Agreement and Financing Lease to be dated as of a date specified by VRA, between VRA and the City (the "Amended Financing Lease"), the forms of which have been circulated in advance of this meeting of the City Council; and WHEREAS, VRA has advised the City that VRA's objective is to pay the City a purchase price for the Amended Financing Lease that in VRA's judgment reflects its market value (the "Purchase Price Objective") taking into consideration such factors as the purchase price received by VRA for the VRA Bonds, the underwriters' discount and other issuance costs of the VRA Bonds, and other market conditions relating to the sale of the VRA Bonds; and WHEREAS, VRA has acknowledged that the aggregate total of the principal components of the rental payments related to the refinancing of the Refinanced 2012 Rental Payments and the financing of the 2019 Project (collectively, the "2019 Rental Payments") and the "true" interest cost of the interest components of such 2019 Rental Payments may not exceed the respective amounts specified in this Resolution; NOW THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF FAIRFAX, VIRGINIA: 1. Essentiality of Property. The City Council reconfirms that the Property is essential to the efficient operation of the City and anticipates that the Property will continue to be essential to the operation of the City during the respective terms of the Amended Prime Lease and the Amended Financing Lease. 2. Authorization of Amended Prime Lease and Amended Financing Lease. The forms of the Amended Prime Lease and the Amended Financing Lease circulated in advance of this meeting are hereby approved. The Mayor and the City Manager, either of whom may act, are authorized to execute the Amended Prime Lease and the Amended Financing Lease in substantially such forms, with such completions, omissions, insertions and changes not inconsistent with this Resolution as may be approved by the officer executing such instruments, whose approval shall be evidenced conclusively by the execution and delivery thereof. All capitalized terms used but not defined herein shall have the same meanings as set forth in the Amended Financing Lease. 3. Terms of Lease Financing. The following plan of refinancing and financing is approved. VRA will use a portion of the proceeds of the VRA Bonds to refinance the Refinanced 2012 Rental Payments and finance the 2019 Project. Pursuant to the terms of the Amended Prime Lease, the City will extend the original term of the lease to VRA to a date no later than December 31, 2044. Pursuant to the terms of the Amended Financing Lease, VRA will extend the original term of the lease back to the City to a date no later than December 31, 2039. The schedule of rental payments coming due under the 2012 Financing Lease will be amended by the terms of the Amended Financing Lease to reflect the refinancing of the Refinanced 2012 Rental Payments and the addition of the 2019 Rental Payments. The final pricing terms contained in the Amended Financing Lease, to the extent such terms relate to the 2019 Rental Payments, shall be determined by VRA subject to VRA's Purchase Price Objective and market conditions described in the Recitals hereof, provided, however, that (a) subject to the provisions of the immediately following sentence, the aggregate total of the principal components of the 2019 Rental Payments shall not exceed $30,865,000, which may be purchased with proceeds of and allocated to either federally tax-exempt VRA Bonds ("Tax -Exempt VRA Bonds") or federally taxable VRA Bonds ("Taxable VRA Bonds"), or both, all as the City Manager may determine to be in the best interests of the City; (b) the interest components of the 2019 Rental Payments (whether allocable to Tax -Exempt VRA Bonds or Taxable VRA Bonds) shall have a "true" interest cost not to exceed 5.00% (exclusive of "supplemental interest" as provided in the Amended Financing Lease); (c) the refunding of the Refinanced 2012 Rental Payments shall achieve at least the Targeted Savings; and (d) the principal components of the 2019 Rental Payments shall be subject to prepayment upon the terms set forth in the Amended Financing Lease. In the event that the Assistant City Manager!Director of Finance determines, pursuant to Section 13 below, that none of the 2012 Rental Payments shall be refinanced, the City may proceed with the lease financing of the 2019 Project; provided, however, that, in such event, the aggregate total of the principal components of the 2019 Rental Payments shall not exceed $6,000,000. Subject to the preceding terms, the City Council further authorizes the City Manager to accept the final terms presented by VRA and accordingly to determine the aggregate total of principal and interest components of the 2019 Rental Payments, including the dates and amounts, and the optional and extraordinary prepayment provisions, if any, of the 2019 Rental Payments, all in accordance with the provisions hereof. As set forth in the Amended Financing Lease, the City agrees to pay such "supplemental interest" and other charges as provided therein, including such amounts as may be necessary to maintain or replenish the VRA Reserve. 4. Payment and Prepayment Provisions. The 2019 Rental Payments shall be payable in lawful money of the United States of America and otherwise comply with the terms set forth in the Amended Financing Lease. The City may, at its option, prepay the principal components of the 2019 Rental Payments upon the terms set forth in the Amended Financing Lease. 5. Subject to Appropriation. The undertaking by the City under the Amended Financing Lease to make payments thereunder (including the 2019 Rental Payments) shall be payable solely from funds to be appropriated by the City Council from time to time 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 City Council has lawfully appropriated sufficient funds for such purpose from time to time. Nothing in this Resolution or in the Amended Financing Lease shall be deemed to 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. 6. Annual Budget. The City Council believes that funds sufficient to make payment of all amounts payable under the Amended Financing Lease 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 City 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 City Councils do likewise during the term of the Amended Financing Lease. The City Council directs the Assistant City Manager/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 Amended Financing Lease an amount sufficient to pay all amounts coming due under the Amended Financing Lease during such fiscal year. If at any time during the term of the Amended Financing Lease, the amount appropriated in the City's annual budget for the respective fiscal year is insufficient to pay when due the amounts payable under the Amended Financing Lease, the City Council directs the Assistant City Manager/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 City 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 deficiency. 7. Arbitrage Covenants. To the extent that the Amended Financing Lease is funded from Tax -Exempt VRA Bonds, the City covenants that it shall not take or omit to take any action the taking or omission of which will cause the Tax -Exempt VRA Bonds to be "arbitrage bonds," within the meaning of Section 148 of the Internal Revenue Code of 1986, as amended, including regulations applicable to the Tax -Exempt VRA Bonds (the "Code"), or otherwise cause interest on the Tax -Exempt VRA Bonds to be includable in gross income for federal income tax purposes or to become a specific item of tax preference for purposes of the federal alternative minimum tax. Without limiting the generality of the foregoing, the City shall comply with the provisions of any nonarbitrage certificate and tax compliance agreement 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 gross proceeds derived from the Tax -Exempt VRA Bonds and allocable to the Amended Financing Lease, unless the City and VRA receive an opinion of nationally recognized bond counsel (in form and substance reasonably satisfactory to VRA) that such compliance is not required to prevent interest on the Tax -Exempt VRA Bonds from being included in gross income for federal income tax purposes or from becoming a specific item of tax preference for purposes of the federal alternative minimum tax. The City shall pay any such required rebate from legally available funds. 8. Tax Compliance Agreement. Such officers of the City as may be requested by VRA are authorized and directed to execute and deliver a nonarbitrage certificate and tax compliance agreement (the "Tax Compliance Agreement") in a form not inconsistent with this Resolution as may be approved by the officers of the City executing such document, whose approval shall be evidenced conclusively by the execution and delivery thereof. 9. Private Activity Covenants. The City covenants that it shall not permit the proceeds derived from the Tax -Exempt VRA Bonds and allocable to the Amended Financing Lease or the facilities financed or refinanced therewith to be used in any manner that would result in (a) 5% or more of such proceeds or facilities 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, (b) 5% or more of such proceeds or facilities 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 and VRA receive an opinion (in form and substance reasonably satisfactory to VRA) of nationally recognized bond counsel that any such covenants need not be complied with to prevent the interest on the Tax -Exempt VRA Bonds from being included in gross income for federal income tax purposes or from becoming a specific item of tax preference for purposes of the federal alternative minimum tax, the City need not comply with such covenants to the extent provided in such opinion. 10. Official Statement. The City Council authorizes and consents to the inclusion of information with respect to the City contained in VRA's Preliminary Official Statement and VRA's Official Statement in final form, both prepared in connection with the sale of the VRA Bonds. 11. SNAP Investment Authorization. The City has heretofore received and reviewed the Information Statement describing the State Non -Arbitrage Program of the Commonwealth of Virginia ("SNAP") and the Contract Creating the State Non -Arbitrage Program Pool (the "Contract"), and the City Council hereby determines to authorize the City Treasurer to use SNAP in connection with the investment of any proceeds of the Amended Financing Lease not applied to the prepayment of the Refinanced 2012 Rental Payments. The City Council acknowledges the Treasury Board of the Commonwealth of Virginia is not, and shall not be, in any way liable to the City in connection with SNAP, except as otherwise provided in the Contract. 12. Refinancing of the Refinanced 2012 Rental Payments. The Assistant City Manager/Director of Finance is authorized and directed to determine which portions of the 2012 Rental Payments, if any, shall constitute the Refinanced 2012 Rental Payments and to take all proper steps to effect the refinancing of such Refinanced 2012 Rental Payments. The Mayor and the City Manager, either of whom may act, are authorized to execute and deliver any notices, documents and certificates, as may be necessary to provide for such refinancing. 13. Other Actions. All other actions of officers of the City in conformity with the purposes and intent of this Resolution and in furtherance of the refinancing of the Refinanced 2012 Rental Payments and the financing of the 2019 Project are ratified, approved and confirmed. The officers of the City are authorized and directed to execute and deliver all certificates and other instruments and to take all actions considered necessary or desirable in connection with the execution and delivery of the Amended Prime Lease and the Amended Financing Lease, the refinancing of the Refinanced 2012 Rental Payments and the financing of the 2019 Project. 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. 14. Effective Date. This Resolution shall take effect immediately. Introduced: September 10, 2019 Adopted: September 24, 2019 Mayor ATTEST: City Clerk The vote on the motion to approve was recorded as follows: VOTE: Councilmember DeMarco Aye Councilmember Lim Aye Councilmember Miller Aye Councilmember Passey Aye Councilmember Stehle Aye Councilmember Yi Aye