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HomeMy WebLinkAboutO-1461i ORDINANCE NO. 1461 AN ORDINANCE TO AUTHORIZE THE ISSUANCE OF THE CITY'S GENERAL OBLIGATION WARRANT IN THE PRINCIPAL AMOUNT OF $2,000,000 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, as the governing body of the City has found and ascertained and does hereby declare as follows: (a) it is necessary, desirable and in the public interest that the City establish a revolving line of credit to enable the City to acquire, construct and provide various public street improvements in the City (herein called the "Improvements"); (b) it is necessary, desirable and in the public interest that the Warrant hereinafter authorized be issued (in evidence of the City's indebtedness under the said line of credit) for the purpose of paying the costs of the Improvements and the costs of issuing the Warrant; and (c) RBC Bank (USA) 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, for the purpose of providing funds to pay the costs described in Section 1(b) hereof, the City is hereby authorized to borrow from RBC Bank (USA) (herein sometimes called the "Bank" or "RBC"), not exceeding the principal sum of $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 of its issuance (which shall be the date on which the loan evidenced thereby, or the initial advance thereunder, is made), shall be payable to the Bank or registered assigns, shall mature and come due (as to principal and any accrued but unpaid interest) twelve (12) months thereafter, and shall be payable at the principal office of the Bank in Raleigh, North Carolina (currently RBC Bank (USA), 301 Fayetteville Street, Suite 1100, Raleigh, North Carolina 27601, Attention: Public and Institutional Banking, or at such other location as the Bank may approve). The principal shall bear interest on the outstanding principal amount thereof from its date, payable on the first business day of February, May and August, 2012, and at maturity, at a variable per annum rate (herein called the "Variable Rate") equal to 80% of LIBOR (as defined and as determined as provided below) plus 100 basis points, 1 calculated on the basis of a 360-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 360; provided that if the interest on the Warrant is determined by the Internal Revenue Service to be includable in gross income under Section 103 of the Internal Revenue Code of 1986 (the "Code"), the Warrant shall bear interest on the principal amount thereof that is or was outstanding during the period covered by such determination from the date such interest must be included in such gross income at the rate of interest which would provide to the Bank the effective yield which it would have received had not the interest on the Warrant been determined to be includible in gross income. If such determination is made, the difference between (1) the interest then due computed at the higher rate, and (2) the interest already paid at the lower rate, shall be paid within thirty days after the date a written notice is mailed by the holder or former holder of the Warrant to the City stating that such a determination has been made and stating the amount of additional interest that is then due. The obligation to pay such additional interest shall survive the payment of the principal of the Warrant. The initial Variable Rate will be determined based on LIBOR as of the date of the initial principal advance. Thereafter, the Variable Rate will be determined two Business Days prior to the first Business Day of each calendar month, based on LIBOR as in effect on such determination date, and any Variable Rate so determined shall become effective on the first calendar day of the month immediately following such determination date. Once effective, any Variable Rate shall remain in effect until the effective date of the next Variable Rate established pursuant to this resolution. The Bank shall determine the Variable Rate pursuant to this resolution and, upon request, will give notice thereof by telex, telephone, telecopier, or telegraph, promptly confirmed in writing, to the City. As used herein, "LIBOR" is the London Interbank Offer Rate for U.S. dollars for a term of one month which appears on Bloomberg Professional screen BBAM (or any generally recognized successor method or means of publication) as of 11:00 A.M., London time, on any date of determination of the Variable Rate. If for any reason LIBOR (as so described) is not available, then LIBOR shall mean the rate per annum which banks charge each other in a market comparable to England's Eurodollar market on short-term money in U.S. dollars for an amount substantially equivalent to the principal amount due under the Warrant, as determined at 11:00 A.M., London time, on any date of determination of the Variable Rate. The determination by the Bank of such interest rate shall be conclusive, absent manifest error. If any payment due with respect to the Warrant is 10 days or more late, the City will be charged 5.00% of the unpaid portion of such payment. The Bank will advise the City of the current index rate upon the City's request. The interest rate on the Warrant will not change 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. Section 3. Subject to Prepayment. The City reserves the privilege of prepaying all or any part of the principal of the Warrant on any date, without penalty or premium and without prior written 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 and provided, further, that any such principal prepayments shall be in amounts not less than $25,000 (unless, at the time of such prepayment, the outstanding principal is less than $25,000, in which instance the entire amount may be prepaid). 2 Section 4. Execution of the Warrant; Rellistration. 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 Clerk 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 Clerk, 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 not be transferable. 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: 3 [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. $2,000,000 UNITED STATES OF AMERICA STATE OF ALABAMA CITY OF FAIRHOPE GENERAL OBLIGATION WARRANT $2,000,000 Twelve (12) calendar months from the date hereof, 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 , 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 80% of LIBOR (as defined and determined in the ordinance of the City authorizing the issuance of this Warrant) plus 100 basis points, calculated on the basis of a 360-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 360; provided that if the interest on this Warrant is determined by the Internal Revenue Service to be includable in gross income under Section 103 of the Internal Revenue Code of 1986 (the "Code"), this Warrant shall bear interest on the principal amount hereof that is or was outstanding during the period covered by such determination from the date such interest must be included in such gross income at the rate of interest which would provide to the Bank the effective yield which it would have received had not the interest on this Warrant been determined to be includible in gross income. If such determination is made, the difference between (1) the interest then due computed at the higher rate, and (2) the interest already paid at the lower rate, shall be paid within thirty days after the date a written notice is mailed by the holder or former holder of this Warrant to the City stating that such a determination has been made and stating the amount of additional interest that is then due. The obligation to pay such additional interest shall survive the payment of the principal of this Warrant. The Bank will advise the City of the current index rate upon the City's request. The interest rate on the Warrant will not change more often than each calendar month. Further, under no circumstances shall the S interest rate on the Warrant be more than the maximum rate allowed by applicable law. If any payment due with respect to the Warrant is 10 days or more late, the City will be charged 5.00% of the unpaid portion of such payment. This Warrant is payable in lawful money of the United States of America at the principal office of RBC Bank (USA), Raleigh, North Carolina (currently RBC Bank (USA), 301 Fayetteville Street, Suite 1100, Raleigh, North Carolina 27601, Attention: Public and Institutional Banking, or at such other location as the Bank may approve). The City reserves the privilege of prepaying all or any part of the principal on this Warrant on any date, without penalty or premium and without prior written 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 this Warrant and provided, further, 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 11-47-2 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. 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 shall be paid, for requests duly made in writing by not later than 12:00 noon, Birmingham, Alabama, time, on the second 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 5 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. CITY OF FAIRHOPE, ALABAMA •. ern'•, d .r By: 5- Ti oth M. Kant, SEA �\,-ATTEST: isa A. s, MC City Clerk [Form of Certificate of Registration by City Clerk] 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. Lisa . Hanks, City Clerk of the CITY OF FAIRHOPE, ALABAMA Section 7. Sale and Delivery of Warrant. The Mayor and the City Clerk are hereby authorized to effect the borrowing authorized in this ordinance for the purpose for which such borrowing is herein authorized; provided however, that the total principal amount advanced and outstanding at any time under the Warrant shall not exceed $2,000,000. The proceeds derived from each advance shall be used solely for the purpose for which said money was borrowed and the Warrant authorized to be issued. Requests for advances hereunder must be in writing, signed by either the Mayor or the City Clerk and received two business days in advance. Section 8. Use of Proceeds. The proceeds of the Warrant shall be paid to the City, paid into an account separate and apart from other funds of the City and used for the purposes specified in Section 1 hereof. Section 9. 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 10. 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. (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. 7 (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. As used in this Section 10, 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 11. Agreements. So long as any principal of or interest on the Warrant is outstanding and unpaid, the City agrees to provide to RBC such financial information regarding the City as RBC shall reasonably request, including but not limited to, (a) audited financial statements within 180 days of the end of each fiscal year of the City, and (b) 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 agreement set forth in this Section 11 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. The City agrees to proceed with due diligence to cure any such failure on its part after written notice of such failure is given by the Bank and in any event within 30 days after the giving of such notice. Section 12. Creation of Contract. The provisions of this Ordinance shall constitute a contract between the City and the Holder of the Warrant. Section 13. 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. 8 ADOPTED this 14t" day of November, 2011. 41 �� �� rf sAs, Lisa A. a C City Clerk Lonnie L. Mixon, Cou cil President APPROVED this 14' day of November, 2011. M. Kant. Mavc 0j