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Item 6DCITY OF SOUTH LAKE MEMORANDUM May 10, 2011 To: Shana Yelverton, City Manager From: Sharen Jackson, Director of Finance Subject: Resolution No. 11 -024, Approving the issuance of an issuer note by the Italy Higher Education Facilities Corporation for the Clariden School Action Requested: Approval of Resolution No. 11 -024 Background Information: On September 17, 2002, City Council approved Resolution No. 02 -060 approving the issuance of education revenue bonds by the Italy Higher Education Facilities Corporation for Clariden School. Clariden School borrowed $6,300,000 in tax exempt bonds through Italy Higher Education Facilities Corporation. The funds were used to finance the school campus at 100 Clariden Ranch Road here in Southlake. Clariden School would like to refinance the outstanding portion of the 2002 bonds (approx. $2,200,000). In addition, the school wants to borrow approximately an additional $156,000 (i) to refinance a 2008 conventional loan used to install a security system, and (ii) to buy new technology equipment including a phone system and computers. Clariden School is a 501(c)(3) nonprofit corporation and under the provisions of both state and federal income tax requirements, 501(c)(3) corporations can borrow through the use of tax exempt bonds. The City of Southlake's approval is required under Section 147 (f) of the Internal Revenue Code. The section requires that the bond issue be approved both by the "issuing" jurisdiction (i.e. Italy, Texas) and by the "host" jurisdiction where the School project is located (i.e. Southlake). The City of Italy approved the transaction on April 11, 2011. The procedure for this approval requires two steps: 1) a public hearing; and 2) approval by the City by Resolution. The bonds are paid back solely by payments made by the Clariden School and do not constitute any obligation of the City of Southlake. Southlake's sole involvement with the project is to give the approval required by the tax code. Additionally, the school gives the city an indemnity in regard to this financing and the bank acknowledges in the debt instruments that the City of Southlake (as well as the City of Italy) have no liability to repay the bank. Approval of Resolution No. 11 -024 would approve the issuance of issuer notes by Italy Higher Honorable Mayor and City Council Page 2 of 2 Education Facilities Corporation for Clariden School in an amount not to exceed $2,500,000. Financial Considerations: The obligation to repay the note is solely that of Clariden School. Strategic Link: C5 Promote opportunities for partnerships and volunteer involvement. Citizen Input/ Board Review: Public hearing scheduled for May 17, 2011. Legal Review: The law firm Fulbright and Jaworski serves as the City's bond counsel, and as such has reviewed the Resolution. Alternatives: Deny. Supporting Documents: Resolution No. 11 -024 Staff Recommendation: Approval of Resolution No. 11-024 CERTIFICATE FOR RESOLUTION THE STATE OF TEXAS COUNTY OF TARRANT CITY OF SOUTHLAKE, TEXAS I, the undersigned City Secretary of the CITY OF SOUTHLAKE, TEXAS (the "City "), hereby certify as follows: 1. The City Council (the "City Council ") of the City convened in REGULAR MEETING ON THE DAY OF , 2011, at its regular meeting place in the Italy City Hall (the "Meeting "), and the roll was called of the duly constituted officers and members of the City Council to wit. All members of the City Council were present, except the following: , thus constituting a quorum, whereupon among other business, the following was transacted at the Meeting, a written: RESOLUTION APPROVING THE ISSUANCE OF AN ISSUER NOTE BY THE ITALY HIGHER EDUCATION FACILITIES CORPORATION FOR THE CLARIDEN SCHOOL (the "Resolution ") was duly introduced for the consideration of the City Council. It was then duly moved and seconded that the Resolution be adopted; and, after due discussion, such motion, carrying with it the adoption of the Resolution prevailed and carried by the following votes: AYES: NOES: ABSTENTIONS: 2. A true, full, and correct copy of the Resolution adopted at the meeting described in the above and foregoing paragraph is attached to and follows this Certificate; the Resolution has been recorded in the City Council's minutes of the Meeting pertaining to the adoption of the Resolution; the persons named in the above and foregoing paragraph are duly chosen, qualified, and acting officers and members of the City Council's and duly and sufficiently notified officially and personally, in advance, of the time, place, and purpose of the Meeting, and that the Resolution would be introduced and considered for adoption at the Meeting and each such officers and members consented, in advance, to the holding of the Meeting for such purpose; and the Meeting was open to the public, and public notice was given, all as required by Chapter 551, Texas Government Code. {01476020.DOCx \} -1- RESOLUTION OF CITY OF SOUTHLAKE SIGNED AND SEALED THIS DAY OF , 2011. City Secretary, City of Southlake, Texas {01476020.DOCx \} -2- RESOLUTION OF CITY OF SOUTHLAKE RESOLUTION NO. 2011 - RESOLUTION APPROVING THE ISSUANCE OF AN ISSUER NOTE BY THE ITALY HIGHER EDUCATION FACILITIES CORPORATION FOR THE CLARIDEN SCHOOL WHEREAS, the City of Italy, Texas, pursuant to the provisions of Chapter 53, Texas Education Code, as amended (now including Chapters 53 and 53A of the Texas Education Code, with Chapter 53A being the "Act "), approved and created the Italy Higher Education Facilities Corporation (the "Corporation ") as a nonprofit corporation to exercise the powers enumerated and provided in the Act for and on behalf of the City; and WHEREAS, the Corporation may issue revenue bonds or other obligations to provide funds for any of its purposes including financing or refinancing costs to acquire, construct, enlarge, extend, repair, renovate, or otherwise improve "educational facilities" or "housing facilities" for certain educational institutions permitted under the Act, including The Clariden School, a Texas nonprofit corporation created under the laws of the State of Texas (the "School "), and regardless if such facilities are located within or without the city limits of the City of Italy; and WHEREAS, the City has been informed by the School that the School is requesting the Corporation to issue a new tax exempt Note (the "Issuer Note ") for the benefit of the School; and WHEREAS, the Issuer Note shall be issued by the Italy Higher Education Facilities Corporation in an amount not to exceed $2,500,000. The proceeds of the Note will be loaned to the School (i) to refinance the outstanding balance due on the Italy Higher Education Facilities Corporation Education Revenue Bonds (Clariden School Project) Series 2002; (ii) to refinance the outstanding balance due on a Note dated May 15, 2008, from the School to Citizens National Bank of Texas, (iii) to acquire certain new technology equipment for the School, and (iv) to pay costs of issuance of the new Note. All of these items relate to the financing or refinancing of the School campus, consisting of buildings for administration, a lower school, an upper school, a fine arts building and a gymnasium /auditorium, and providing a security system and technology equipment for the School (the "Project "), all to be located at the School campus at 100 Clariden Ranch Road, Southlake, Texas; and WHEREAS, the Issuer Note will be payable solely from revenues derived by the Corporation from the School pursuant to provisions of a Loan Agreement between the Corporation and the School and other applicable documents being entered into by the Corporation in connection with the issuance of the Issuer Note, and the City of Southlake, Texas, will have no responsibility in any manner for the payment of the debt service requirements of the Issuer Note; and WHEREAS, Section 147(f) of the Internal Revenue Code of 1986, as amended, requires the City Council of the City of Southlake (as the "applicable elected {01476020.DOCx \) -3- RESOLUTION OF CITY OF SOUTHLAKE representative" of the "Government unit" where the Project is located) to approve the issuance of the Issuer Note; and WHEREAS, on , 2011, a public hearing was held by this City Council, with respect to the Issuer Note and the related Project, and notice of such public hearing was published in a newspaper of general circulation in Southlake at least 14 days prior to such public hearing; and WHEREAS, the documents authorizing issuance of the Issuer Note shall contain wording stating that the Issuer Note imposes no liability on the City of Southlake, its officials, officers, or employees; and WHEREAS, it is hereby deemed necessary and advisable that this resolution be adopted. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF SOUTHLAKE, TEXAS: 1. That all of the recitals and preambles hereinabove stated are found to be true and correct and are incorporated herein and made a part of this resolution. 2. That in order to satisfy the requirements of Section 147(f) of the Internal Revenue Code of 1986, as amended, the City of Southlake hereby approves the issuance of the Issuer Note described above in an aggregate principal amount not to exceed $2,500,000 in order to obtain funds for the School to finance or refinance the Project. Proceeds of the Issuer Note may also be used for paying certain expenses in connection with the issuance of the Issuer Note, all pursuant to the requirements of the Act and other applicable laws. 3. That this resolution shall become effective immediately upon its adoption. 4. That this approval in no event shall make the City of Southlake liable in any manner whatsoever with regard to the Issuer Note or with regard to the Project to be financed with the proceeds of the Issuer Note. 5. That it is hereby officially found and determined that the meeting at which this resolution is passed is open to the public as required by law, and that public notice of the time, place and purpose of said meeting was given as required by law. {01476020.DOCx \) -4- RESOLUTION OF CITY OF SOUTHLAKE PASSED AND APPROVED this day of ' 2011. ATTEST: City Secretary City of Southlake, Texas Mayor City of Southlake, Texas {01476020.DOCx \} -5- RESOLUTION OF CITY OF SOUTHLAKE