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HomeMy WebLinkAboutO-1392ORDINANCE NO. 1392 AN ORDINANCE TO AUTHORIZE THE ISSUANCE OF THE CITY'S GENERAL OBLIGATION WARRANT IN THE PRINCIPAL AMOUNT OF $2,000,000 (IN EVIDENCE OF A REVOLVING ONE-YEAR LINE OF CREDIT WITH COMPASS BANK FOR CURRENT OPERATING EXPENSES AND UNANTICIPATED, OR EMERGENCY, CAPITAL IMPROVEMENTS RELATED TO THE CITY'S UTILITIES SYSTEMS) BE IT ORDAINED by the City Council (herein called the "Council") of the CITY OF FAIRHOPE (herein called the "City") in the State of Alabama, as follows: Section 1. Findings. The Council has found and ascertained and does hereby declare as follows: (a) it is necessary, desirable and in the public interest for the City to arrange to borrow, in connection with the City's utilities systems, not in excess of the sum of $2,000,000 outstanding at any time under a revolving line of credit to be used for the payment, from time to time during the next twelve (12) calendar months, of current operating expenses of the City and of the cost of such capital improvements as may be required on an emergency or short-term basis, said borrowing to be evidenced by a warrant to be secured by the full faith and credit of the City; and (b) Compass Bank, Fairhope, Alabama (herein sometimes called the "Bank"), has agreed to purchase the said warrant from the City in evidence of said line of credit. Section 2. Authorization and Representation. Pursuant to the provisions of Section 11-47-1 of the Code of Alabama of 1975, as amended, and for the purpose of providing (as and when needed) funds for the purposes described in Section 1 hereof, the City is hereby authorized to borrow from the Bank not exceeding $2,000,000 and, in evidence of the money so borrowed, is authorized to issue and deliver to the Bank its General Obligation Warrant (herein called the "Warrant") in the principal amount of $2,000,000. The Warrant shall be dated the date on which the initial advance thereunder is made, shall be issued as a single fully registered warrant, shall be payable to the Bank and shall be due and payable on July 1, 2010. The principal of the Warrant shall bear interest from the date of each advance, payable on the first day of each calendar month (unless such day is not a day on which the Bank is open for business and, in such case, on the next successive day on which the Bank is open for business) and at maturity, at the per annum rate equal to 65% of the one -month LIBOR plus 163 basis points, calculated on the basis of a 365-day year, applied to the actual number of days on which principal is outstanding, by multiplying the product of the principal amount and the applicable rate by the actual number of days elapsed, and dividing by 365; provided, however, that the rate of interest shall, in no instance, be less than 2.28% in any calendar month during the term of the Warrant. The interest rate is subject to change from time to time based on changes in an independent index (the "Index") which is the London Interbank Offered Rate ("LIBOR") for one - month contracts as published in the money rates column of The Wall Street Journal on the last business day of each calendar month, with an effective date of the first calendar day of the following month (such effective date for the initial advance or draw made on the Warrant to be the LIBOR in effect on the second business day next preceding the date of the initial draw). This rate is not necessarily the lowest rate charged by the Bank on its loans. If the Index becomes unavailable during the term of this loan, the Bank may designate a substitute index after notice to the City. The Bank will advise the City of the current index rate upon the City's request. The interest rate change will not occur more often than each calendar month. Further, under no circumstances shall the interest rate on the Warrant be more than the maximum rate allowed by applicable law. The Warrant shall be prepayable at any time and from time to time in whole or in part without premium or penalty and without prior notice. The City represents that it will budget and collect, to the extent permitted by law, in each fiscal year during which the Warrant is outstanding, revenues sufficient to pay the principal of and interest on the Warrant as the same shall accrue and became due. Draws (or advances) under the Warrant may be made on any business day and from time to time provided, however, no draw (or advance) may be in an amount less than $25,000. Section 3. Subject to Prepayment. The City reserves the privilege of prepaying the principal of the Warrant in full or in part on any date, without penalty or premium and without notice, provided that at the time of such prepayment the City pays the interest which shall have accrued, to the date of such prepayment, on the principal to be so prepaid with respect to the Warrant, and provided, further, that any principal prepayments shall be in amounts not less than $25,000. Section 4. Execution of the Warrant; Registration. The Warrant shall be executed and the corporate seal of the City shall be affixed thereto by the Mayor, and the City Treasurer shall attest the same with her manual signature. The Warrant shall be registered in the records maintained by the City Treasurer as a claim against the City. Said officers are hereby authorized and directed so to execute and attest the Warrant, affix said seal thereto and make such registration. A registration certificate by the City, in substantially the form set forth in Section 6 hereof, duly executed by the manual signature of the City Treasurer, shall be endorsed on the Warrant and shall be essential to its validity. The Warrant shall be registered as to both principal and interest in the name of the Bank and shall be transferable only to an "accredited investor" (as hereinafter referred to) and only with the approval and consent of the City. Section 5. General Obligation. The indebtedness evidenced and ordered paid by the Warrant is and shall be a general obligation of the City for payment of the principal of and the interest on which the full faith and credit of the City are hereby irrevocably pledged. Section 6. Form of Warrant. The Warrant shall be in substantially the following form, with such changes therein as shall be necessary to comply with the provisions of this Ordinance: 2 (Form of Warrant) ANY TRANSFER OF THIS WARRANT MAY ONLY BE TO AN "ACCREDITED INVESTOR" AS DEFINED IN THE SECURITIES AND EXCHANGE ACT OF 1933 AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER AND ONLY UPON COMPLIANCE WITH APPLICABLE STATE AND FEDERAL SECURITIES LAWS AND WITH THE AUTHORIZING ORDINANCE REFERRED TO HEREIN. $2,000,000 UNITED STATES OF AMERICA STATE OF ALABAMA CITY OF FAIRHOPE GENERAL OBLIGATION WARRANT $2,000,000 On July 1, 2010, the City Treasurer of the CITY OF FAIRHOPE (herein called the "City"), a municipal corporation in the State of Alabama, is hereby ordered to pay to Compass Bank, Fairhope, Alabama, or its assigns, the principal sum of TWO MILLION DOLLARS ($2,000,000) or so much as may be advanced and then outstanding hereunder by the registered holder hereof, with interest thereon from the date advanced, payable at a per annum rate equal to 65% of the one -month LIBOR plus 163 basis points, calculated on the basis of a 365-day year, applied to the actual number of days upon which principal is outstanding, by multiplying the product of the principal amount and the applicable rate by the actual number of days elapsed, and dividing by 365; provided, however, that the rate of interest borne hereby shall not be less than 2.28% at any time during the term hereof. Interest shall be paid on the first day of each calendar month and at maturity or on the first business day thereafter. The term "business day" means any day which is not a Saturday, Sunday or legal holiday in the State of Alabama on which banks are authorized or required to remain closed in Fairhope, Alabama. The interest rate is subject to change from time to time based on changes in an independent index (the "Index") which is the London Interbank Offered Rate ("LIBOR") for one -month contracts as published in the money rates column of The Wall Street Journal on the last business day of each calendar month, with an effective date of the first calendar day of the following month (such effective date for the initial advance of the Warrant to be the LIBOR in effect on the second business day next preceding the date of the said initial advance). The City understands that the Bank may make loans based on other rates and indexes as well. If the Index becomes unavailable during the term of this loan, the Bank may designate a substitute index after notice to the City. The Bank will advise the City of the current index rate upon the City's request. The interest rate change will not occur more often than each calendar month. Further, under no circumstances shall the interest rate on the Warrant be more than the maximum rate allowed by applicable law. This Warrant is payable in lawful money of the United States of America at the principal office of Compass Bank, Fairhope, Alabama. The City reserves the privilege of prepaying, in whole or in part, the principal on this Warrant on any date, without penalty or premium and without notice, provided that at the time of such prepayment the City pays the interest which shall have accrued, to the date of such prepayment, on the principal to be so prepaid with respect hereto, and provided that any principal prepayments shall be in amounts not less than $25,000. This Warrant has been issued pursuant to the applicable provisions of the constitution and laws of the State of Alabama, including particularly Section 11-47-1 of the Code of Alabama of 1975, as amended, and an ordinance of the governing body of the City duly and legally adopted to provide funds for purposes for which the City is authorized to borrow money under said section. This Warrant evidences a valid general obligation of the City for payment of the principal of and the interest on which the City has irrevocably pledged its full faith and credit. Amounts advanced under this Warrant may be prepaid from time to time by the City and subsequently readvanced by the holder, up to a maximum principal amount, at any one time outstanding, not exceeding the sum of $2,000,000. It is understood that, by reason of prepayments hereon, there may be times when no indebtedness is owing hereunder and, notwithstanding any such occurrence, this Warrant shall remain valid and shall be in full force and effect as to each subsequent principal advance made hereunder. Each advance and each payment on this Warrant shall be reflected by notations made by the holder hereon. The failure of the holder so to record any advance or payment shall not limit or otherwise affect the obligation of the City hereunder with respect to any advance and no payment of principal by the City shall be affected by the failure of the holder so to record the same. Advances hereunder by the Bank are to be made upon written request by the City to the Bank specifying the amount of the advance requested. Advances shall be paid, for requests duly made in writing, by not later than 12:00 noon, Fairhope, Alabama, time, on the business day immediately following the business day on which the request for the advance is received by the Bank. It is hereby certified that the indebtedness evidenced hereby has been duly and legally incurred and will at the maturity hereof become lawfully due without condition, abatement or offset of any description; that all conditions, actions and things required by the constitution and laws of the State of Alabama to exist, be performed and happen precedent to and in the issuance of this Warrant, exist, have been performed and have happened; and that the indebtedness evidenced by this Warrant, together with all other indebtedness of the City, was at the time the same was incurred and is now within every debt and other limit prescribed by the constitution and laws of the State of Alabama. 4 IN WITNESS WHEREOF, the City has caused this Warrant to be executed and its official seal to be hereunto affixed by the Mayor and has caused the same to be attested by its City Clerk, both of whom have hereunto subscribed their signatures and are hereunto duly authorized, and has caused this Warrant to be dated )3 , 2009. i [SEA Attest: i A. Hanks, City Clerk 5 CITY OF FAIRHOPE, ALABAMA (Form of Certificate of Registration by City Treasurer) I hereby certify that this Warrant was at the time of issuance thereof duly registered by me as a claim against the City of Fairhope, Alabama. CITY OF FAIRHOPE, ALABAMA (Record of Advances and Prepayments) Amount Advanced (or Prepaid) [End of warrant form] Date Section 7. Sale and Delivery of Warrant. The Warrant is hereby sold to Compass Bank, Fairhope, Alabama, at and for a purchase price equal to the face amount of all advances thereunder. The Mayor is hereby authorized and directed to deliver the Warrant, which shall have been executed, sealed, attested and registered as herein provided, to the Bank upon the agreement of the Bank to make the advance, as provided in the Warrant Purchase Agreement or as hereinafter authorized. Section 8. Receipt of Documents. At the time of each request by the City to the Bank for an advance, the City shall furnish to the Bank: (a) a written request for an advance, specifying the amount of the advance; (b) a statement that there is no litigation pending, or to the best of the knowledge of the City threatened, questioning the legality or validity of the Warrant or the validity or enforceability of the Warrant Purchase Agreement; and (c) a statement that the indebtedness evidenced by the Warrant (after giving effect to the advance requested), when added to all other then outstanding indebtedness of the City and chargeable to the constitutional debt limit of the City, will not result in the City exceeding its constitutional debt limit. Any notice or statement required by this section may be given by facsimile transmission followed by a copy mailed by United States Mail as provided in the said Warrant Purchase Agreement. Section 9. Use of Proceeds. The proceeds of each advance or draw made under the Warrant shall be paid to the City and immediately applied for the purpose or purposes specified in Section 1 hereof. Section 10. Authorization of Warrant Purchase Agreement. The Council does hereby authorize and direct the Mayor of the City to execute and deliver, for and in the name and on behalf of the City the Warrant Purchase Agreement, and does hereby authorize and direct the City Clerk of the City to affix the corporate seal of the City to the Warrant Purchase Agreement and to attest the same. The Warrant Purchase Agreement shall be in substantially the form presented to the meeting at which this Ordinance is adopted and attached hereto as Exhibit A, with such additions, omissions and changes as may be approved by the Council, the execution of the Warrant Purchase Agreement by the Mayor being conclusive evidence of such approval. Section 11. Additional Documents Authorized. The Mayor and the City Treasurer, or either of them, are each hereby authorized and directed to execute such other documents or certificates as may be necessary in order to carry out the transactions contemplated by this Ordinance. The City understands that one of the principal inducements to the purchase of the Warrant by the purchaser thereof is that the interest income on the Warrant be and remain exempt from federal income taxation. Accordingly, without in any way limiting the generality of the foregoing, the Mayor and the City Treasurer are each hereby authorized and directed to cause P-1 to be prepared, signed on behalf of the City and filed with the Internal Revenue Service a Form 8038-G or other form prescribed by the Internal Revenue Service as a condition to the exemption of the interest income on the Warrant from federal income taxation. The Mayor and the City Clerk are each hereby authorized and directed to execute such certificates, agreements and other documents respecting the Internal Revenue Code of 1986, as amended (herein called the "Code"), as contemplated by this Ordinance, to the end that the interest income on the Warrant be and remain exempt from federal income taxation. Section 12. Concerning the Code. (a) General. The City recognizes that the Code imposes certain conditions to the exemption from federal income taxation of interest income on the Warrant. Accordingly, the City agrees that it will continually comply with all requirements imposed by the Code as a condition to the exemption from federal income taxation of the interest income on the Warrant. With respect to any question arising under this Section 12, the City may rely upon an opinion of nationally recognized bond counsel acceptable to it. (b) Warrant not to be a "Private Activity Bond." The City will not apply the proceeds of the Warrant in a manner that would cause the Warrant to be a "private activity bond" within the meaning of Section 141(a) of the Code. (c) Concerning the Arbitrage Provisions of the Code. The City agrees that it will comply with all provisions of the Code necessary to preclude the Warrant being considered an "arbitrage bond" within the meaning of Section 148 of the Code. (d) Required Rebate and Other Provisions Related to Federal Taxation. The City recognizes and agrees that, absent the expenditure of all the proceeds of the Warrant within twenty-four months from the date of each respective advance under the Warrant in accordance with the so-called two-year spend -down exemption, it will be necessary for all Required Rebates to be made in order for the interest income on the Warrant to be and remain exempt from federal income taxation. As used in this Section 12, the term "Required Rebates" means the amounts, if any, required by the provisions of Section 148(f) of the Code and any regulations of the Department of Treasury issued thereunder, to be paid by the City to the United States of America in order that the Warrant shall not be treated as an "arbitrage bond" within the meaning of Section 103(b)(2) and Section 148 of the Code. (e) Concerning Section 256(b)(3)(B) of the Code. The City designates the Warrant as a "qualified tax-exempt obligation" for purposes of paragraph (b)(3)(B) of Section 265 of the Code and, in connection therewith and after due investigation and consideration, finds, determines and declares that the amount of tax-exempt obligations and indebtedness that have heretofore during the current calendar year been issued or incurred by the City and the reasonably anticipated amount of tax-exempt obligations and indebtedness that will be issued or incurred by the City during the current calendar year (including the Warrant) will not exceed $30,000,000. E Section 13. Audited Financial Statements. The City agrees to provide its audited financial statements to the Bank not later than 180 days after the end of each fiscal year, so long as any portion of the Warrant is outstanding and unpaid. Section 14. Creation of Contract. The provisions of this Ordinance shall constitute a contract between the City and the Holder of the Warrant. Section 15. Provisions of Ordinance Severable. The provisions of this Ordinance are hereby declared to be severable. In the event any provision hereof shall be held invalid by a court of competent jurisdiction, such invalidity shall not affect any other portion of this Ordinance. ADOPTED this 13`h day of July, 2009. f _ 11` , Debbie W. Quinn, Council President A : Lisq A. Hanks, City Clerk APPROVED this 13t' day of July, 2009. 10