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Item 6FCITY OF SOUTHLAKE Item 6F MEMORANDUM April 30, 2014 To: Shana Yelverton, City Manager From: Sharen Jackson, Chief Financial Officer Subject: Resolution No. 14-018, authorizing issuance of Sales Tax Revenue Refunding Bonds, Series 2014 Action Requested: Approval of Resolution No. 14-018 authorizes the issuance and sale of Southlake Parks Development Corporation Sales Tax Revenue Refunding Bonds, Series 2014. Background Information: City staff and our financial advisor have continued to monitor the market to ensure that we capitalize on any refunding opportunities. Based on the current market, it would be advantageous for the city to refund the following bonds: • Refunding and Improvement Sales Tax Revenue Bonds, Series 1997 • Sales Tax Subordinate Lien Revenue Bonds, Series 2006 • Sales Tax Third Lien Revenue Refunding Bonds, Series 2005 The refunding will result in estimated savings of approximately $1,235,624 in debt service payments and further provide estimated present value savings of approximately $811,542. The SPDC certificates are issued and approved by adoption of resolution. Approval of Resolution No. 14-018 will set in motion the legal requirements to obtain the proceeds to refund the bonds. After approval, the legal documents must be reviewed by the Texas Attorney General's Office. SPDC will hold a meeting before the May 6, 2014 City Council meeting for their approval of the bond refunding. The bonds will be redeemed early June and mid -August. Financial Considerations: The bonds will be repaid through the'/2 cent sales tax. Page 2 of 2 Strategic Link: Citizen Input/ Board Review: Legal Review: Alternatives: Supporting Documents: F1 Adhere to financial management principles & budget; F3 Achieve fiscal wellness standards The Public Hearing is scheduled for May 6, 2014 The law firm Fulbright and Jaworski serves as the City's bond counsel, and as such has prepared the Resolution. Deny resolution and forgo the bond refunding savings. Resolution No. 14-018 Staff Recommendation: Approval of Resolution No.14-018 A RESOLUTION by the City Council of the City of Southlake, Texas, relating to the "Southlake Parks Development Corporation Sales Tax Revenue Refunding Bonds, Series 2014"; approving the resolution of the Southlake Parks Development Corporation authorizing the issuance of such Bonds; resolving other matters incident and related to the issuance of such Bonds; and providing an effective date. WHEREAS, Southlake Parks Development Corporation (the "Issuer") was created by the City of Southlake, Texas (the "City"), pursuant to the provisions of Chapters 501, 502 and 505 of the Texas Development Corporation Act, Texas Local Government Code, Title 12, Subtitle C1, as amended (formerly Vernon's Ann.Civ.St., Section 4B of Article 5190.6, as amended, and referred to herein as the "Act"); and WHEREAS, the Issuer is empowered to issue bonds for the purpose of refunding outstanding bonds issued on account of a "project" defined as such by the Act; and WHEREAS, the Issuer has determined to refund the following described outstanding bonds of the Corporation totaling in principal amount $17,295,000 (hereinafter collectively referred to as the "Refunded Bonds"), to wit: (1) Southlake Parks Development Corporation Refunding and Improvement Sales Tax Revenue Bonds, Series 1997, dated February 15, 1997, maturing on August 15 in each of the years 2014 through 2021, inclusive, and aggregating in principal amount $1,305,000; (2) Southlake Parks Development Corporation Sales Tax Third Lien Revenue Refunding Bonds, Series 2005, dated March 15, 2005, maturing on August 15 in each of the years 2014 through 2027, inclusive, and aggregating in principal amount $12,825,000; and (3) Southlake Parks Development Corporation Sales Tax Subordinate Lien Revenue Bonds, Series 2006, dated January 15, 2006, maturing on August 15 in each of the years 2014 through 2025, inclusive, and aggregating in principal amount $3,165,000; 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 Parks Development Corporation Sales Tax Revenue Refunding Bonds, Series 2014", adopted by the Issuer (the "Issuer Resolution") on May 6, 2014 and submitted to the City Council this day, is hereby approved in all respects. The Bonds are being issued to refund the Refunded Bonds (identified in the preamble hereof). 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 40575206.2 / 11402170 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 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. 40575206.2 / 11402170 2 (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. (c) No Private Use or Private Payments. 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 (including property financed with Gross Proceeds of the Refunded 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 (including property financed with the Gross Proceeds of the Refunded Bonds), 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 40575206.2 / 11402170 3 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 Federally 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 Arbitrage. 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 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. (h) Bonds Not Hedge Bonds. (1) At the time the original bonds refunded by the Bonds were issued, the Corporation reasonably expected to spend at least 85% of the spendable proceeds of such bonds within three years after such bonds were issued and (2) not more than 50% of the proceeds of the original bonds refunded by the Bonds were invested in Nonpurpose Investments having a substantially guaranteed Yield for a period of 4 years or more. 40575206.2 / 11402170 4 (i) Current Refunding. The Bonds are a current refunding of the Refunded Bonds as the Bonds will be issued within 90 days of the redemption of the Refunded Bonds. SECTION 5: 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 6: This Resolution shall be in force and effect from and after its passage on the date shown below. (remainder of page left blank intentionally} 40575206.2 / 11402170 5 PASSED AND ADOPTED, this May 6, 2014. CITY OF SOUTHLAKE, TEXAS Mayor ATTEST: City Secretary (City Seal) 40575206.2 / 11402170