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HomeMy WebLinkAboutO-1457ORDINANCE NO. 1457 AN ORDINANCE TO AUTHORIZE THE ISSUANCE OF THE CITY'S GENERAL OBLIGATION WARRANT IN THE PRINCIPAL AMOUNT OF $4,200,000 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 that the City borrow the sum of $4,200,000 in order to provide a portion of the funds needed to refund, on a current basis, the City's General Obligation Warrants, dated September 1, 2002 (herein called the "2002 Warrants"), and aggregating $4,225,000 in principal amount, thereby achieving a substantial saving in interest expense; (b) the sum of $4,313,490.53 will be needed on November 15, 2011, to pay the principal and interest maturing on the 2002 Warrants on that date, and to redeem on that date those of the 2002 Warrants that have stated maturities in 2012 and thereafter, and, of that amount, there is now on deposit in the debt service fund for the 2002 Warrants the sum of $151,431.16; the balance of the proceeds derived from the issuance and sale of the Warrant hereinafter authorized will be applied to the payment of the expenses of issuing the Warrant; (c) it is necessary, desirable and in the public interest that the Warrant hereinafter authorized be issued for such purpose and for the purpose of paying the costs related to its issuance; and (d) Compass Mortgage Corporation has agreed to purchase the Warrant from the City. Section 2. Authorization. Pursuant to the provisions of Section 11-47-2 of the Code of Alabama 1975, as amended, and for the purposes described in Section 1 hereof, the City is hereby authorized to borrow from Compass Mortgage Corporation, Birmingham, Alabama (herein sometimes called "CMC"), the principal sum of $4,200,000 and, in evidence of the money so borrowed, is authorized to issue and deliver to CMC its General Obligation Warrant (herein called the "Warrant") in the principal amount of $4,200,000. The Warrant shall be dated the date on which the loan evidenced thereby is made, shall be issued as a single fully registered warrant, shall be payable to CMC, and shall bear interest at the rate of 2.55% per annum computed on the basis of a 360-day year with 12 months of 30 days each, based on the exact number of days elapsed. The principal shall be payable in installments on June 1 in the following years and amounts: Principal Year Amount 2012 $195,000 2013 250,000 2014 250,000 2015 255,000 2016 260,000 2017 260,000 2018 265,000 2019 275,000 2020 280,000 2021 360,000 2022 370,000 2023 380,000 2024 390,000 2025 410,000 and shall be payable by check or draft mailed to the then registered holder except as provided hereinafter. Interest on the Warrant shall be payable semiannually on each June 1 and December 1, commencing December 1, 2011, by check or draft mailed by the City to the registered holder; provided, that the principal of and the interest on the Warrant due on June 1, 2025, shall be made only upon the surrender of the Warrant to the City. Any installment of principal or interest not paid within ten (10) days of its due date shall be subject to a late charge equal to 5% of the amount due. Upon the occurrence of a Determination of Taxability (as defined below), the interest rate on the Warrant shall be changed to the Taxable Rate effective as of the last interest payment date prior to such occurrence. In addition, if as a consequence of the occurrence of such a Determination of Taxability it shall be necessary for the holder of the Warrant to include any interest previously received related to the Warrant in its gross income for federal income tax purposes, then the City shall be required to pay on the first interest payment date following the occurrence of such Determination of Taxability such additional interest for the period during which such interest shall have been deemed subject to inclusion in the gross income of the said holder for federal income tax purposes in an amount equal to the difference between the interest which would have been paid at the Taxable Rate and the total amount of interest actually paid related to the Warrant for such period. The term "Taxable Rate" shall mean the rate of 3.87% per annum and "Determination of Taxability" shall mean a final decree or judgment of any federal court or a final action of the Internal Revenue Service or of the United States Treasury Department determining that any interest payable on the Warrant is includable in the gross income of a holder. No such decree or action shall be considered final unless the City has been given written notice thereof and, if it is so desired by the City and is legally permissible, the City has been afforded the opportunity to contest the same, at its own expense, either directly or in the name of the holder and until the conclusion of any appellate review, if sought. A Determination 2 of Taxability shall be deemed to occur on the date as of which interest on the Warrant is deemed includable in the gross income of the holder thereof. 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 come due. Section 3. Allocation for Debt Limitation Purposes. For purposes of the limitation on municipal debt imposed by the Constitution of Alabama of 1901, as amended, the Council hereby finds and declares that $875,000 in principal amount of the Warrants (that is, those principal installments having stated maturities in 2024 and 2025 and $75,000 of the principal installment having a stated maturity in 2023) is being issued for the purpose of refunding a like principal amount of those of the 2002 Warrants issued for purposes that are not chargeable against the said limitation. Section 4. Subject to Prepayment. The City reserves the privilege of prepaying the principal of the Warrant in full or in part on June 1, 2019, and on any date thereafter, without penalty or premium and without notice, provided that at the time of each 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. Prepayments of principal made on or after such date shall be in amounts not less than $25,000 and, in any event, in increments of $5,000 and shall be deemed to apply to those principal installments with the latest maturities, in inverse order. Section 5. 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 Clerk 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 8 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 CMC and shall be transferable only to an "accredited investor" (as that term is hereinafter referred to). Section 6. 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 7. Warrant Fund. (a) Payments Therein and Use and Continuance Thereof. There is hereby created a special fund to be designated the "City of Fairhope 2011 Warrant Fund," for the purpose of providing for the payment of the principal of and interest on the Warrant, at the respective maturities of said principal and interest, which special fund shall 3 be maintained until the principal of and interest on the Warrant have been paid in full. Payments into the Warrant Fund shall be made as follows: (i) there shall be paid into the Warrant Fund, simultaneously with the issuance of the Warrant and out of the proceeds derived from the sale thereof, that portion of said proceeds, if any, which may be referable to the accrued interest received by the City on any such sale; and (ii) on or before the 28th day of November, 2011, and on or before the 28th day of each May and November thereafter until the principal of and interest on the Warrant shall have been paid in full, the City will pay into the Warrant Fund such amount as, when added to the amount then in the Warrant Fund that is not needed to pay any principal or interest theretofore matured but not then paid, will equal the sum of the interest that will mature on the Warrant on the then next succeeding interest payment date, plus the principal, if any, that will mature on the Warrants on the then next succeeding interest payment date; provided, that there shall be credited one time on the amount required by this paragraph (ii) to be paid into the Warrant Fund an amount equal to the amount paid therein pursuant to the provisions of paragraph (i) hereof. The City will make the payments provided for in this paragraph (ii) out of all general revenues of the City available therefor. All moneys paid into the Warrant Fund shall be used only for payment of the principal of and interest on the Warrant, upon or after the respective maturities of such principal and interest or upon mandatory redemption; provided, that, if at the final maturity of the Warrant, howsoever the same may mature, there shall be in the Warrant Fund moneys in excess of the amount required to retire the Warrant, then any such excess shall thereupon be returned to the City. When the amount of money on deposit in the Warrant Fund equals or exceeds the aggregate of the principal and interest to their respective maturities on the Warrant at the time outstanding, no further payments need be made into the Warrant Fund except to make good the moneys paid therein which may become lost or which may not be immediately available for withdrawal under the provisions of this section. (b) Depository for Warrant Fund. The City hereby designates Compass Bank, Fairhope, Alabama, as the depository for the Warrant Fund with respect to payment of principal of and interest on the Warrants. The City reserves the right from time to time to designate one or more banks as a depository for the Warrant Fund. In the event that any bank at any time designated as depository for any portion of the Warrant Fund should at any time decline to act as such depository, or should resign as such depository, or should cease to be a member of the Federal Deposit Insurance Corporation (or any agency which may succeed to its duties), or should cease to be duly qualified and doing business within the State of Alabama, then any other bank or banks at the time designated as depository or depositories for the same portion of the Warrant Fund shall continue to serve as such depository or depositories without designation by the City of any additional depository or depositories; but if, at any time the sole remaining depository for any portion of the Warrant Fund should resign, cease to be a member of said Federal Deposit Insurance Corporation (or successor agency thereto) or should cease to be duly qualified and doing business within the State of Alabama, then the Council shall by resolution designate a successor to such depository; provided, that, any such successor depository shall be and remain a member of the Federal Deposit Insurance Corporation (or of any agency which may succeed to its duties) and shall be and remain duly qualified and doing business in the State of Alabama. (c) Trust Nature of and Security for the Warrant Fund. The Warrant Fund shall be and at all times remain public funds impressed with a trust for the purpose for which the Warrant Fund is herein created. Each depository for any part of the Warrant Fund shall at all times keep the moneys on deposit with it in the Warrant Fund continuously secured for the benefit of the City and the holder of the Warrant either (i) by holding on deposit as collateral security, United States Securities or other marketable securities eligible as security for the deposit of trust funds under regulations of the Board of Governors of the Federal Reserve System, having a market value (exclusive of accrued interest) not less than the amount of moneys on deposit in the Warrant Fund, or (ii) if the furnishing of security in the manner provided in the foregoing clause (i) of this sentence is not permitted by the then applicable law and regulations, then in such other manner as may be required or permitted by the applicable state and federal laws and regulations respecting the security for, or granting a preference in the case of, the deposit of public funds; provided, however, that it shall not be necessary for any such depository so to secure any portion of the moneys on deposit in the Warrant Fund that may be insured by the Federal Deposit Insurance Corporation (or by any agency of the United States of America that may succeed to its functions) or any portion of the said moneys that may be invested pursuant to the provisions of subsection (d) of this section. (d) Investment of Moneys in the Warrant Fund. So long as the City shall not be in default hereunder it may, at any time and from time to time as it in its sole discretion shall deem advisable, cause to be invested in such investments as may be permitted by the laws of Alabama any or all of the moneys in the Warrant Fund; provided, that, each such investment shall mature not later than the interest payment date next following the date such investment is made. In the event of any such investment, the securities in which the investment is made shall become a part of the Warrant Fund and shall be held by the depository for the moneys so invested to the same extent as if they were moneys on deposit in the Warrant Fund. The City may likewise at any time and from time to time cause any securities in which any such investment shall be made to be sold or otherwise converted into cash, whereupon the net proceeds derived from any such sale or conversion, after payment of all necessary expenses incident to such sale or conversion, shall become a part of the Warrant Fund. Each depository 5 for the Warrant Fund shall be fully protected in making investments, sales, and conversions of any such securities upon direction given to it in a resolution adopted by the Council. Section 8. 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: Cel (Form of Warrant) THIS WARRANT MAY BE TRANSFERRED ONLY 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. $4,200,000 UNITED STATES OF AMERICA STATE OF ALABAMA CITY OF FAIRHOPE GENERAL OBLIGATION WARRANT $4,200,000 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 Mortgage Corporation, or its assigns, the principal sum of FOUR MILLION TWO HUNDRED THOUSAND DOLLARS ($4,200,000) with interest thereon from the date hereof until the maturity hereof as is hereinafter specified at the rate of 2.55% per annum, computed on the basis of a 360-day year (with 12 months of 30 days each) based on the actual number of days elapsed. The principal hereof shall be due in installments on June 1 in the following years and amounts: Principal Year Amount 2012 $195,000 2013 250,000 2014 250,000 2015 255,000 2016 260,000 2017 260,000 2018 265,000 2019 275,000 2020 280,000 2021 360,000 2022 370,000 2023 380,000 2024 390,000 2025 410,000 7 and shall be payable by check or draft mailed to the then registered holder except as provided hereinafter. The interest hereon shall be payable semiannually on each June 1 and December 1, commencing December 1, 2011, by check or draft mailed to the said registered holder; provided, that the principal of and the interest on the Warrant due on June 1, 2025, shall be made only upon the surrender of the Warrant to the City. Any installment of principal or interest not paid within ten (10) days of its due date shall be subject to a late charge equal to 5% of the amount due. Upon the occurrence of a Determination of Taxability (as defined below), the interest rate on this Warrant shall be changed to the Taxable Rate effective as of the last interest payment date prior to such occurrence. In addition, if as a consequence of the occurrence of such a Determination of Taxability it shall be necessary for the holder of this Warrant to include any interest previously received related to the Warrant in its gross income for federal income tax purposes, then the City shall be required to pay on the first interest payment date following the occurrence of such Determination of Taxability such additional interest for the period during which such interest shall be have been deemed subject to inclusion in the gross income of the said holder for federal income tax purposes in an amount equal to the difference between the interest which would have been paid at the Taxable Rate and the total amount of interest actually paid related to the Warrant for such period. "Taxable Rate" means the rate of 3.87% per annum. The term "Determination of Taxability" shall mean a final decree or judgment of any federal court or a final action of the Internal Revenue Service or of the United States Treasury Department determining that any interest payable on this Warrant is includable in the gross income of a holder. No such decree or action shall be considered final unless the City has been given written notice thereof and, if it is so desired by the City and is legally permissible, the City has been afforded the opportunity to contest the same, at its own expense, either directly or in the name of the holder and until the conclusion of any appellate review, if sought. A Determination of Taxability shall be deemed to occur on the date as of which interest on this Warrant is deemed includable in the gross income of the holder thereof. The City reserves the privilege of prepaying, in whole or in part, the principal on the Warrant on June 1, 2019, and on any date thereafter, without penalty or premium, or notice, provided that at the time of each 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. Prepayments of principal made on or after such date shall be in amounts not less than $25,000 and, in any event, in increments of $5,000 and shall be deemed to apply to those principal installments with the latest maturities, in inverse order. This Warrant has been issued pursuant to the applicable provisions of the constitution and laws of the State of Alabama, including particularly Section 11-47-2 of the Code of Alabama 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. 8 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. 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. 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 , 2011. [SEAL] Attest: Lisa A. Hanks, MMC City Clerk CITY OF FAIRHOPE, ALABAMA Timothy M. Kant, Mayor 01 (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. Nancy K. Wilson, City Treasurer of the CITY OF FAIRHOPE, ALABAMA 10 Section 9. Sale and Delivery of Warrant. The Warrant is hereby sold to Compass Mortgage Corporation, at and for a purchase price equal to $4,200,000. The Mayor is hereby authorized and directed to deliver the Warrant, which shall have been executed, sealed, attested and registered as herein provided, to CMC upon payment to the City by CMC of an amount equal to the purchase price of the Warrant. Section 10. Use of Proceeds. The proceeds of the Warrant shall be paid to the City and immediately applied for the purposes specified in Section 1 hereof. Section 11. Additional Documents Authorized. The Mayor and the City Clerk, 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 Clerk are each hereby authorized and directed to cause 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. The City recognizes and agrees that 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. 11 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. Section 13. Redemption of 2002 Warrants and Other Matters. The City hereby calls for redemption on November 15, 2011, those of the 2002 Warrants that have stated maturities in 2012 and thereafter. Regions Bank, as the paying agent for the 2002 Warrants, is hereby authorized and directed to give notice of and effect said redemption of the 2002 Warrants in the manner provided in Section 4 of the ordinance authorizing the issuance of the 2002 Warrants. Upon delivery of the Warrant and receipt of the funds from the sale thereof, the City Treasurer is ordered and directed to transfer the sum of $4,162,059.37 to Regions Bank, as paying agent for the 2002 Warrants for deposit to the Warrant Fund created for the benefit of the 2002 Warrants, to be held in trust therein (along with the sum of $151,431.16, already on deposit therein) until such funds are needed to effect the redemption of the 2002 Warrants on November 15, 2011. The balance of the proceeds derived from the sale of the Warrant shall be applied for payment of the costs related to the issuance of the Warrant. Section 14. Agreements. So long as any principal of or interest on the Warrant is outstanding and unpaid, the City agrees as follows: (a) it shall maintain in effect insurance against loss or damage by such hazards and risks as are customarily insured by similarly situated municipalities in the State of Alabama and shall, upon request, provide proof of such in form and content acceptable to CMC; and (b) it shall provide to CMC such financial information regarding the City as CMC shall reasonably request, including but not limited to, (i) audited financial statements within 120 days of the end of each Fiscal Year of the City, and (ii) the City's annual budget not later than 30 days after the start of each Fiscal Year. It is understood that the delay or failure of the City to comply with the agreements set forth in this Section 14 shall not, in any instance, give rise to any cause of action that would result in monetary damages against the City or the acceleration in payment of all or any portion of the indebtedness evidenced by the Warrant. Section 15. Creation of Contract. The provisions of this ordinance shall constitute a contract between the City and the Holder of the Warrant. 12 Section 16. 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. ATTEST: Lk'a A. nks, MMC City Clerk ADOPTED this 1 Oth day of October, 2011 r�L� g*ey��= Lonnie L. Mixon, Council President APPROVED this 1 Oth day of October, 2011 13 RESOLUTION NO. 1857-11 BE IT RESOLVED 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 ascertained and determined and hereby finds and declares as follows: (a) The City proposes to issue its $2,000,000 general obligation warrant (herein called the "Warrant") for the purpose, among other things, of paying the costs of providing and constructing various public street repairs and improvements in the City; (b) The City expects the Warrant will be issued by not later than December 1, 2011; (c) Prior to the issuance of the Warrant, the City expects to incur certain costs in connection with the said improvements and proposes to expend certain moneys in payment of such costs prior to the issuance of the Warrant; (d) The City expects to allocate to itself, from the proceeds of the Warrant, moneys to reimburse itself for the expenditures made prior to the issuance of the Warrant and it is expected that the maximum amount of such proceeds that will be allocated to reimburse the City will not exceed $200,000; and (e) Expenditures with respect to the acquisition and construction costs will be paid by the City out of its general fund pending the issuance of the Warrant. Section 2. Declaration of Intent. This declaration of intent by the City to reimburse its general fund out of the said proceeds derived from the sale of the Warrant shall constitute a declaration of official intent under Section 1.103-18 of the regulations issued by the Internal Revenue Service under the Internal Revenue Code of 1986, as amended. This declaration of official intent shall be made available for public inspection and shall be set out in the official minutes of the meeting of the Council at which it is adopted. ADOPTED this 1 Oth day of October, 2011 By-� --/ Lonnie L. Mixon, Council President ATTEST: By / Lisa . Hanks, MMC City Clerk APPROVED this loth day of October, 2011 By. imot M. Kant, v ayor