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Case #2: <br /> <br />Consider Authorizing the Issuance of Approximately $11.8 Million in Lease <br />Revenue Bonds for PACT Charter School and the Execution of Various <br />Documents in Connection with the School Project <br /> <br />Finance Officer Lund explained that at the December 16, 2003 meeting, Council adopted <br />Resolution #03-12-334 giving prelilninary approval to the issuance of revenue bonds for the <br />PACT Charter School Project. State and Federal law allows cities to issue bonds and loan the <br />proceeds to nonprofit corporations to finance capital expenditures. By issuing tax-exempt bonds <br />through the City, the Charter school reduces their borrowing costs due to the tax-exempt status. <br />She advised that the PACT Charter School is now asking for the authorization for the actual <br />issuance of the revenue bonds associated with their school project. The amount to be issued will <br />not exceed $11.8 million. Finance Office Lund reviewed the documents relating to the bond <br />issuance that also need to be executed. She advised that the PACT Charter School ag-rees to pay <br />all principal and interest on the bonds so the City is merely a conduit and the money and <br />obligation are between PACT and the trustee for the bondholders. PACT Charter School will be <br />held responsible for all fees that are incurred for the issuance of this bond. Also, PACT will be <br />required to cover all fees associated with costs incurred by the City relating to their own bond <br />issuance if PACT's bond issue causes the City to become non-bank qualified. To remain bank <br />qualified, which offers lower interest rates, the City must not borrow more than $10 million in <br />any one calendar year. Staff recommends the Council adopt the draft resolution authorizing the <br />issuance of lease revenue bonds and authorizing the execution of various documents in <br />connection with the PACT School project. <br /> <br />City Attorney Goodrich advised approval of the resolution would be contingent on his review. <br /> <br />Councilmember Kurak stated she agees with this resolution, however, she was troubled that she <br />Could not find an escrow fund that is set up. She stressed the importance that this be very clear. <br /> <br />City Attorney Goodrich advised page 117, para~aph 2A states the company would compensate <br />the City for its inability to designate its bonds as bank qualified in 2004. <br /> <br />Councilmember Kurak questioned when the funds will be put into escrow. <br /> <br />Finance Officer Lund explained the funds will be held in escrow with the school's trust agency. <br />In the loan agreement on Section 4.2B it states that the school will be responsible for payment to <br />the City fol' any costs that are incurred from being non-bank qualified. <br /> <br />Councihnember Kurak questioned if the escrow will be guaranteed in an account. <br /> <br />City Attorney Goodrich explained the funds will come out of the bond sale and will be escrowed. <br /> <br />A representative of PACT Charter School, explained the money will be held by the trustee of the <br />bonds, which is Wells Fargo National Bank. <br /> <br />Councilmember Strommen clarified the school will be responsible for the fees if the City were to <br />become non-bank qualified and that there is no other liability to the City for these bonds. <br /> <br />City Attorney Goodrich explained page 119, paragraph 3G of the resolution states "...as <br />provided in the Loan Agreement and Indenture, the Bonds are not to be payable from nor <br />charged upon any funds other than amounts payable pursuant to the Loan A~eement and money <br /> <br />City Council/February 10, 2004 <br /> Page 7 of 18 <br /> <br />P35 <br /> <br /> <br />