Item 6ACITY OF
SOUTHLAKE
MEMORANDUM
July 26, 2016
To: Shana Yelverton, City Manager
From: Sharen Jackson, Chief Financial Officer
Subject: Resolution No. 16-028, approving the resolution of the Community
Enhancement and Development Corporation authorizing the issuance of
the Community Enhancement and Development Corporation Sales Tax
Revenue Bonds, Series 2016
Action
Requested: Approval of Resolution No. 16-028
Background
Information: On February 17, 2015, the City Council approved calling a special
election to ask voters to approve repurposing a portion of existing
sales tax from the Crime Control and Prevention District sales tax
to form a Type A Economic Development Corporation to assist
with the construction and operation of The Marq Southlake, as
well as implement the recommendations of the City's Economic
Development and Tourism Masterplan.
May 9, 2015 the special election was approved by 72.8%
of Southlake voters.
October 20, 2015 City Council approved Resolution 15-
044, approving the Certificate of Formation and Bylaws for
the Community Enhancement and Development
Corporation "CEDC".
October 2015 CEDC began collecting 3/8¢ sales tax and
the debt service will be paid through the sales tax revenue.
The bond proceeds will be used to begin the construction
of Phase II of The Marq as outlined in the capital
improvement plan approved on September 15, 2015.
CEDC Board is scheduled to approve a resolution
authorizing the issuance of Sales Tax Revenue Bonds,
Series 2016 immediately prior to the city council meeting at
5:00pm on August 2, 2016.
City Council's approval of Resolution 16-028 will set in motion the
legal requirements to obtain the proceeds. After approval, the
legal documents must be reviewed by the Texas Attorney
General's Office. The City would receive funding in late August.
Honorable Mayor and City Council
Page 2of2
Financial
Considerations: The debt will be repaid through the Community Enhancement and
Development Corporation sales tax revenue, anticipated revenue
for FY 2016 will be approximately $5 million.
Strategic Link: F2 Invest to provide and maintain high quality public assets
Citizen Input/
Board Review: Community Enhancement and Development Corporation Board is
scheduled to approve a resolution authorizing the issuance
immediately prior to the city council meeting at 5:00pm on August
2, 2016.
Legal Review: The law firm Fulbright and Jaworski serves as the City's bond
counsel, and as such has prepared the Resolution.
Alternatives: In the absence of issuing the certificates, construction would be
funded on a pay-as-you-go basis. Phase II of The Marq would be
delayed until funding was available.
Supporting
Documents: Resolution No. 16-028
Staff
Recommendation: Approval of Resolution No. 16-028
A RESOLUTION by the City Council of the City of Southlake, Texas approving
the resolution of the Southlake Community Enhancement and
Development Corporation authorizing the issuance of the "Southlake
Community Enhancement and Development Corporation Sales Tax
Revenue Bonds, Series 2016"; resolving other matters incident and
related to the issuance of such Bonds; and providing an effective date.
WHEREAS, Southlake Community Enhancement and Development Corporation (the
"Issuer") was created by the City of Southlake, Texas (the "City"), pursuant to the provisions of
the Texas Development Corporation Act, Texas Local Government Code, Title 12, Subtitle C1,
as amended (the "Act"); and
WHEREAS, pursuant to the Act, including specifically Chapters 501, 504 and 505
thereof, the Issuer is empowered to issue bonds for the purpose of defraying the cost of any
"project" defined as such by the Act; and
WHEREAS, the Board of Directors of the Issuer has found and determined that the
design, construction and equipment of a community entertainment and recreational center (the
"Project") constitutes a project within the meaning of the Act and the costs of constructing and
equipping such Project should be financed from the proceeds of sale of the "Southlake
Community Enhancement and Development Corporation Sales Tax Revenue Bonds, Series
2016" (the "Bonds");
AND WHEREAS, Section 501.204 of the Act requires the City Council of the City
approve the resolution of the Issuer providing for the issuance of the Bonds no more than
sixty (60) days prior to the delivery of the Bonds; now, therefore,
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF SOUTHLAKE, TEXAS:
SECTION 1: The Resolution authorizing the issuance of "Southlake Community
Enhancement and Development Corporation Sales Tax Revenue Bonds, Series 2016", adopted
by the Issuer (the "Issuer Resolution") on June 7, 2016 and submitted to the City Council this
day, is hereby approved in all respects. The Bonds are being issued to finance the costs of the
Project, which will be located within the City of Southlake, Texas.
SECTION 2: The approvals herein given are in accordance with Section 501.204 of the
Act and the Issuer's bylaws, and the Bonds shall never be construed an indebtedness or pledge
of the City, or the State of Texas (the "State"), within the meaning of any constitutional or
statutory provision, and the owner of the Bonds shall never be paid in whole or in part out of any
funds raised or to be raised by taxation (other than sales tax proceeds as authorized pursuant to
the Act) or any other revenues of the Issuer, the City, or the State, except those revenues
assigned and pledged by the Issuer Resolution.
SECTION 3: The City hereby agrees to promptly collect and remit to the Issuer the
Gross Sales Tax Revenues (as defined in the Issuer Resolution) in accordance with the terms
of the Issuer Resolution and the Act to provide for the prompt payment of the Bonds, and to
assist and cooperate with the Issuer in the enforcement and collection of sales and use taxes
imposed on behalf of the Issuer.
SECTION 4: The City hereby acknowledges and recognizes that the Bonds are being
issued as tax exempt obligations under and pursuant to section 103(a) of the Code (as defined
27286543.2 / 11605972
below) and, in connection therewith, the City hereby makes the following representations and
warranties to the Issuer:
(a) Definitions. When used in this Section, the following terms have the following
meanings:
"Closing Date" means the date on which the Bonds are first authenticated
and delivered to the initial purchasers against payment therefor.
"Code" means the Internal Revenue Code of 1986, as amended by all
legislation, if any, effective on or before the Closing Date.
"Computation Date" has the meaning set forth in Section 1.148-1(b) of the
Regulations.
"Gross Proceeds" means any proceeds as defined in Section 1.148-1(b)
of the Regulations, and any replacement proceeds as defined in Section
1.148-1(c) of the Regulations, of the Bonds.
"Investment" has the meaning set forth in Section 1.148-1(b) of the
Regulations.
"Nonpurpose Investment" means any investment property, as defined in
section 148(b) of the Code, in which Gross Proceeds of the Bonds are invested
and which is not acquired to carry out the governmental purposes of the Bonds.
"Rebate Amount" has the meaning set forth in Section 1.148-1(b) of the
Regulations.
"Regulations" means any proposed, temporary, or final Income Tax
Regulations issued pursuant to Sections 103 and 141 through 150 of the Code,
and 103 of the Internal Revenue Code of 1954, which are applicable to the
Bonds. Any reference to any specific Regulation shall also mean, as
appropriate, any proposed, temporary or final Income Tax Regulation designed
to supplement, amend or replace the specific Regulation referenced.
"Yield" of (1) any Investment has the meaning set forth in Section 1.148-
5 of the Regulations and (2) the Bonds has the meaning set forth in Section
1.148-4 of the Regulations.
(b) Not to Cause Interest to Become Taxable. The City shall not use, permit the use
of, or omit to use Gross Proceeds or any other amounts (or any property the acquisition,
construction or improvement of which is to be financed directly or indirectly with Gross
Proceeds) in a manner which if made or omitted, respectively, would cause the interest on any
Bond to become includable in the gross income, as defined in section 61 of the Code, of the
owner thereof for federal income tax purposes. Without limiting the generality of the foregoing,
unless and until the City receives a written opinion of counsel nationally recognized in the field
of municipal bond law to the effect that failure to comply with such covenant will not adversely
affect the exemption from federal income tax of the interest on any Bond, the City shall comply
with each of the specific covenants in this Section.
27286543.2 / 11605972 2
(c) No Private Use or Private Pavments. Except as permitted by section 141 of the
Code and the Regulations and rulings thereunder, the City shall at all times prior to the last
Stated Maturity of Bonds:
(1) exclusively own, operate and possess all property the acquisition,
construction or improvement of which is to be financed or refinanced directly or
indirectly with Gross Proceeds of the Bonds, and not use or permit the use of
such Gross Proceeds (including all contractual arrangements with terms different
than those applicable to the general public) or any property acquired, constructed
or improved with such Gross Proceeds in any activity carried on by any person or
entity (including the United States or any agency, department and instrumentality
thereof) other than a state or local government, unless such use is solely as a
member of the general public; and
(2) not directly or indirectly impose or accept any charge or other
payment by any person or entity who is treated as using Gross Proceeds of the
Bonds or any property the acquisition, construction or improvement of which is to
be financed or refinanced directly or indirectly with such Gross Proceeds, other
than taxes of general application within the City or interest earned on
investments acquired with such Gross Proceeds pending application for their
intended purposes.
(d) No Private Loan. Except to the extent permitted by section 141 of the Code and
the Regulations and rulings thereunder, the City shall not use Gross Proceeds of the Bonds to
make or finance loans to any person or entity other than a state or local government. For
purposes of the foregoing covenant, such Gross Proceeds are considered to be "loaned" to a
person or entity if: (1) property acquired, constructed or improved with such Gross Proceeds is
sold or leased to such person or entity in a transaction which creates a debt for federal income
tax purposes; (2) capacity in or service from such property is committed to such person or entity
under a take -or -pay, output or similar contract or arrangement; or (3) indirect benefits, or
burdens and benefits of ownership, of such Gross Proceeds or any property acquired,
constructed or improved with such Gross Proceeds are otherwise transferred in a transaction
which is the economic equivalent of a loan.
(e) Not to Invest at Higher Yield. Except to the extent permitted by section 148 of
the Code and the Regulations and rulings thereunder, the City shall not at any time prior to the
final Stated Maturity of the Bonds directly or indirectly invest Gross Proceeds in any Investment
(or use Gross Proceeds to replace money so invested), if as a result of such investment the
Yield from the Closing Date of all Investments acquired with Gross Proceeds (or with money
replaced thereby), whether then held or previously disposed of, exceeds the Yield of the Bonds.
(f) Not Federallv Guaranteed. Except to the extent permitted by section 149(b) of
the Code and the Regulations and rulings thereunder, the City shall not take or omit to take any
action which would cause the Bonds to be federally guaranteed within the meaning of section
149(b) of the Code and the Regulations and rulings thereunder.
(g) Payment of Rebatable Arbitraae. Except to the extent otherwise provided in
section 148(f) of the Code and the Regulations and rulings thereunder:
(1) The City shall account for all Gross Proceeds (including all receipts,
expenditures and investments thereof) on its books of account separately and
27286543.2 / 11605972 3
apart from all other funds (and receipts, expenditures and investments thereof)
and shall retain all records of accounting for at least six years after the day on
which the last outstanding Bond is discharged. However, to the extent permitted
by law, the City may commingle Gross Proceeds of the Bonds with other money
of the City, provided that the City separately accounts for each receipt and
expenditure of Gross Proceeds and the obligations acquired therewith.
(2) Not less frequently than each Computation Date, the City shall
calculate the Rebate Amount in accordance with rules set forth in section 148(f)
of the Code and the Regulations and rulings thereunder. The City shall maintain
such calculations with its official transcript of proceedings relating to the issuance
of the Bonds until six years after the final Computation Date.
(3) As additional consideration for the purchase of the Bonds by the
Purchasers and the loan of the money represented thereby and in order to
induce such purchase by measures designed to insure the excludability of the
interest thereon from the gross income of the owners thereof for federal income
tax purposes, the City shall remit to the Issuer for payment to the United States
the amount described in paragraph (3) above and the amount described in
paragraph (4) below, at the times, in the manner and accompanied by such
forms or other information as is or may be required by Section 148(f) of the Code
and the Regulations and rulings thereunder.
(4) The City shall exercise reasonable diligence to assure that no errors
are made in the calculations and payments required by paragraph (2), and if an
error is made, to discover and promptly correct such error within a reasonable
amount of time thereafter (and in all events within one hundred eighty (180) days
after discovery of the error), including the amount remitted to the Issuer for
payment to the United States of any additional Rebate Amount owed to it,
interest thereon, and any penalty imposed under Section 1.148-3(h) of the
Regulations.
SECTION 5: The Mayor, the Mayor Pro Tem, the City Secretary, the City Manager and
the Chief Financial Officer of the City are hereby authorized, jointly and severally, to execute
and deliver such endorsements, instruments, certificates, documents, or other papers
necessary and advisable to carry out the intent and purposes of this Resolution and the Issuer
Resolution.
SECTION 6: It is officially found, determined, and declared that the meeting at which
this Resolution is adopted was open to the public and public notice of the time, place, and
subject matter of the public business to be considered at such meeting, including this
Resolution, was given, all as required by Texas Government Code, Chapter 551, as amended.
SECTION 7: This Resolution shall be in force and effect from and after its passage on
the date shown below.
(remainder of page left blank intentionally}
27286543.2 / 11605972 4
PASSED AND ADOPTED, this June 7, 2016.
CITY OF SOUTHLAKE, TEXAS
Mayor
ATTEST:
City Secretary
(City Seal)
27286543.2 / 11605972