Title
Authorizing the Issuance of Revenue Bonds for Hmong College Prep Academy Project under Minnesota Statutes, Sections 469.152 through 469.1651 and Approving Related Documents
Body
WHEREAS, the Housing and Redevelopment Authority of the City of Saint Paul, Minnesota (the “Authority”) is duly organized and existing under the Constitution and laws of the State of Minnesota; and
WHEREAS, under the Minnesota Municipal Industrial Development Act, Minnesota Statutes, Sections 469.152-469.1651, as amended (the “Act”), each housing and redevelopment authority of the State of Minnesota, including the Authority, is authorized to issue revenue bonds to finance, in whole or in part, the costs of the acquisition, construction, improvement, or extension of projects, comprised of properties, real or personal, used or useful in connection with a revenue producing enterprise, whether or not operated for profit, for the benefit of a contracting party; and
WHEREAS, under the provisions of the Act, the Authority may issue revenue bonds to pay, purchase, or discharge all or any part of the outstanding indebtedness of a contracting party that is primarily engaged in educational activities as an elementary, secondary, or postsecondary school; and
WHEREAS, pursuant to the terms of an Indenture of Trust, dated as of September 1, 2006 (the “Series 2006 Indenture”), between the Authority and Wells Fargo Bank, National Association, as trustee (the “Series 2006 Trustee”), the Authority issued its: (i) Lease Revenue Bonds (Hmong Academy Project) Series 2006A (the “Series 2006A Bonds”), in the original aggregate principal amount of $8,445,000 and currently outstanding in the same amount; and (ii) Taxable Lease Revenue Bonds (Hmong Academy Project) Series 2006B (the “Series 2006B Bonds”), in the original aggregate principal amount of $530,000 and to be paid in full on September 1, 2012; and
WHEREAS, the Authority loaned the proceeds derived from the sale of the Series 2006A Bonds and the Series 2006B Bonds (collectively, the “Series 2006 Bonds”) to Hmong Education Reform Company, a Minnesota nonprofit corporation (the “Company”), pursuant to a Loan Agreement, dated as of September 1, 2006, as amended (the “Series 2006 Loan Agreement”), between the Authority and the Company, to finance the acquisition, construction, and equipping of a K-12 schoolhouse (the “Schoolhouse”) located at 1515 Brewster Street in the City of Saint Paul, Minnesota (the “City”); and
WHEREAS, the Schoolhouse is leased by the Company to Hmong College Prep Academy, a Minnesota nonprofit corporation and an operating public charter school (the “School”), pursuant to the terms of a Lease Agreement, dated as of September 1, 2006 (the “Original Lease Agreement”), between the Company and the School; and
WHEREAS, to secure the loan repayment obligations of the Company under the Series 2006 Loan Agreement, the Company delivered to the Series 2006 Trustee: (i) a Mortgage, Security Agreement and Assignment of Rents, dated as of September 1, 2006 (the “Original Mortgage”), from the Company to the Series 2006 Trustee; and (ii) an Assignment of Lease, dated as of September 1, 2006 (the “Original Assignment of Lease”), from the Company to the Series 2006 Trustee; and (iii) a Pledge and Covenant Agreement, dated as of September 1, 2006 (the “Original Pledge Agreement”), from the School to the Series 2006 Trustee; and
WHEREAS, in order to facilitate a loan between Western Bank and the Company (the “Western Bank Loan”), the Company and the School entered into the following documents: (i) a First Amendment to Loan Agreement, dated December 1, 2009 (the “First Amendment to Loan Agreement”), between the Authority and the Company; (ii) the First Amendment to Lease Agreement, dated December 1, 2009 (the “First Amendment to Lease Agreement”), between the Company and the School; and (iii) the First Amendment to Pledge and Covenant Agreement, dated December 1, 2009 (the “First Amendment to Pledge Agreement”), between the School and the Series 2006 Trustee; and
WHEREAS, the Company and the School have requested that the Authority issue the following revenue bonds pursuant to the terms of an Indenture of Trust, dated on or after August 1, 2012 (the “Indenture”), between the Authority and Wells Fargo Bank, National Association, as trustee (the “Trustee”): (i) Charter School Lease Revenue Bonds (Hmong College Prep Academy Project), Series 2012A (the “Series 2012A Bonds”); and (ii) Taxable Charter School Lease Revenue Bonds (Hmong College Prep Academy Project), Series 2012B Bonds (the “Series 2012B Bonds”); and
WHEREAS, the Company and the School have further requested that the Authority loan the proceeds derived from the sale of the Series 2012A Bonds and the Series 2012B Bonds (collectively, the “Bonds”), to the Company pursuant to the terms of a Loan Agreement, dated on or after August 1, 2012 (the “Loan Agreement”), between the Authority and the Company to finance the following: (i) the renovation and expansion of the Schoolhouse, including the construction and equipping of a 78,000 square-foot addition to the Schoolhouse and the acquisition of an approximately 1.33-acre parking lot adjacent to the Schoolhouse (the “Series 2012 Project”); (ii) the payment in full of the Western Bank Loan; (iii) the payment of a portion of the interest on the Bonds; and (iv) the payment of a portion of the costs of issuing the Bonds; and
WHEREAS, under the terms of the Series 2006 Indenture and Series 2006 Loan Agreement, the Company cannot incur additional indebtedness on a parity with its indebtedness under the Series 2006 Loan Agreement and the School cannot incur additional indebtedness on a parity with its obligations under the Original Lease Agreement without the prior written consent of the beneficial owners of more than fifty percent (50%) of the aggregate outstanding principal amount of the Series 2006 Bonds (the “Majority Bondholder”), and the consent of the Majority Bondholder to a Second Amendment to Loan Agreement, dated on or after August 1, 2012 (the “Second Amendment to Loan Agreement”), between the Authority and the Company, and a Second Amendment to Pledge and Covenant Agreement, dated on or after August 1, 2012 (the “Second Amendment to Pledge Agreement”), between the School and the Series 2006 Trustee; and
WHEREAS, the beneficial owners of the Series 2006 Bonds constituting the Majority Bondholder have consented to: (i) the issuance of the Bonds on a parity basis with the Series 2006 Bonds (provided that the Bonds are issued on or before December 31, 2012, and in an aggregate principal amount not to exceed $18,500,000); (ii) the additional indebtedness of the Company represented by the Loan Agreement; (ii) the additional indebtedness of the School represented by a Second Amendment to Lease Agreement, dated on or after August 1, 2012 (the “Second Amendment to Lease Agreement”), between the Company and the School; (iii) the Second Amendment to Loan Agreement; and (iv) the Second Amendment to Pledge Agreement.
WHEREAS, the Bonds will be issued by the Authority on a parity basis with the Series 2006 Bonds; and
WHEREAS, the Bonds will constitute revenue obligations secured solely by: (i) the revenues derived from the Loan Agreement; (ii) a pledge and assignment of all School revenues, including money due to the School from the State of Minnesota Lease Aid Payment Program (the “Program”), subject to a parity pledge to the Series 2006 Bonds; (iii) an agreement to pay all money due to the School from the Program to a dedicated account subject to a monthly sweep to the trustee accounts for the benefit of the holders of the Bonds and the Series 2006 Bonds; (iv) other revenues pledged to or otherwise received by the Company, except for those revenues necessary for ordinary operational expenses and required under Minnesota law, subject to a parity pledge to the Series 2006 Bonds; (v) a reserve fund to be held by the Trustee under the terms of the Indenture for the benefit of the holders of the Bonds; (vi) the Original Mortgage, as amended by a First Amendment to Mortgage, Security Agreement and Assignment of Rents, dated on or after August 1, 2012 (the “First Amendment to Mortgage”), from the Company to the Series 2006 Trustee and the Trustee, securing the Bonds and the Series 2006 Bonds on a parity basis; and (vii) other security provided or arranged by the Company or the School; and
WHEREAS, under the terms of Section 147(f) of the Internal Revenue Code of 1986, as amended (the “Code”), the revenue bonds may not be issued as tax-exempt bonds unless the Board of Commissioners of the Authority approves the revenue bonds after a public hearing following publication of a notice published in accordance with the requirements of Section 147(f) of the Code and Treasury Regulations, Section 5f.103-2; and
WHEREAS, under the terms of Section 469.154, subdivision 4, of the Act, the Board of Commissioners of the Authority must conduct a public hearing on the proposal to undertake and finance the project and such public hearing must be preceded by the publication of a notice of the public hearing in the official newspaper of the Authority and a newspaper of general circulation in the City of Saint Paul at least once not less than fourteen (14) days nor more than thirty (30) days prior to the date fixed for the hearing; and
WHEREAS, following the publication of a notice (the “Public Notice”) of a public hearing in the Legal Ledger, the official newspaper of the Authority on May 7, 2012, and in the Pioneer Press, a newspaper of general circulation in the City on May 7, 2012, a public hearing was held before the regularly-scheduled meeting of the Board of Commissioners of the Authority on May 23, 2012, at which a reasonable opportunity was provided for interested individuals to express their views on the proposal to undertake and finance the Project and the proposed issuance of the Bonds; and
WHEREAS, the Public Notice included a general description of the Project, the maximum aggregate face amount of the revenue bonds to be issued with respect to the Project, the identity of the initial owner, operator, or manager of the Project, the location of the Project by street address, and a statement that a draft copy of the proposed application to the Minnesota Department of Employment and Economic Development, together with all attachments and exhibits, would be available for inspection at the offices of the Authority; and
WHEREAS, following the public hearing before the Board of Commissioners of the Authority on May 23, 2012, the Board of Commissioners adopted a resolution determining to proceed with the Project and its financing; and
NOW, THEREFORE, BE IT RESOLVED THAT:
1. For the purposes set forth above, there is hereby authorized the issuance, sale, and delivery of the Bonds in an original aggregate principal amount not to exceed $18,500,000. The Series 2012A Bonds and the Series 2012B Bonds shall be designated as provided in this resolution except as otherwise determined by the Chair of the Authority (or any Commissioner), the Executive Director of the Authority, and the Director of the Office of Financial Services (collectively, the “Authority Officials”), in their discretion. The Bonds shall be issued under the terms of the Indenture. The Bonds shall bear interest at fixed rates established by the terms of the Indenture. The Bonds shall be numbered, shall be dated, shall mature, shall be subject to redemption prior to maturity, shall be in such form, and shall have such other terms, details, and provisions as are prescribed in the Indenture, in the form now on file with the Authority, with the amendments referenced herein. The Authority hereby authorizes the Series 2012A Bonds to be issued as “tax-exempt bonds” the interest on which is excluded from gross income for federal and State of Minnesota income tax purposes. The Authority hereby authorizes the Series 2012B Bonds may be issued as “taxable bonds” if deemed necessary and appropriate by the Authority Officials and bond counsel.
All of the provisions of the Bonds, when executed as authorized herein, shall be deemed to be a part of this resolution as fully and to the same extent as if incorporated verbatim herein and shall be in full force and effect from the date of execution and delivery thereof. The Bonds shall be prepared in the forms in the Indenture on file with the Authority, which forms are hereby approved, with such necessary and appropriate variations, omissions, and insertions (including changes to the aggregate principal amount of each series of Series 2012 Bonds, the stated maturities of each series of Series 2012 Bonds, the principal amount of Bonds maturing on each maturity date, the interest rates on the Series 2012 Bonds, and the terms of redemption of the Series 2012 Bonds) as the Authority Officials, in their discretion, shall determine. The execution of the Series 2012 Bonds with the manual or facsimile signatures of the Authority Officials and the delivery of the Series 2012 Bonds by the Authority shall be conclusive evidence of such determinations.
2. The Bonds shall be special limited obligations of the Authority payable solely from the revenues provided by the Company pursuant to the Loan Agreement and from the revenues and security pledged, assigned, and granted pursuant to the following documents: (i) the Original Mortgage as amended by the First Amendment to Mortgage; (ii) the Original Assignment of Lease, as amended by a First Amendment to Assignment of Lease, dated on or after August 1, 2012 (the “First Amendment to Assignment of Lease”), from the Company, as assignor, to the Trustee, as assignee; and (iii) the Pledge and Covenant Agreement, dated on or after August 1, 2012 (the “Pledge Agreement”), between the School and the Trustee. The Board of Commissioners of the Authority hereby authorizes and directs the Authority Officials to execute and deliver the Indenture to the Trustee, and hereby authorizes and directs the execution of the in accordance with the terms of the Indenture, and hereby provides that the Indenture shall provide the terms and conditions, covenants, rights, obligations, duties, and agreements of the owners of the Bonds, the Authority, and the Trustee as set forth therein.
All of the provisions of the Indenture, when executed as authorized herein, shall be deemed to be a part of this resolution as fully and to the same extent as if incorporated verbatim herein and shall be in full force and effect from the date of execution and delivery thereof. The Indenture shall be substantially in the form on file with the Authority, which is hereby approved, with such necessary and appropriate variations, omissions, and insertions as do not materially change the substance thereof, or as the Authority Officials, in their discretion, shall determine, and the execution thereof by the Authority Officials shall be conclusive evidence of such determination.
3. The loan repayments to be made by the Company under the Loan Agreement are fixed to produce revenues sufficient to provide for the prompt payment of principal of, premium, if any, and interest on the Bonds issued under this resolution when due, and the Loan Agreement also provides that the Company is required to pay all expenses of the operation and maintenance of the Project, including, but without limitation, adequate insurance thereon and insurance against all liability for injury to persons or property arising from the operation thereof, and all lawfully imposed taxes and special assessments levied upon or with respect to the Project and payable during the term of the Loan Agreement.
4. As provided in the Loan Agreement, the Bonds shall not be payable from nor charged upon any funds other than the revenue pledged to their payment, nor shall the Authority or the City be subject to any liability thereon, except as otherwise provided in this paragraph. No holder of the Bonds shall ever have the right to compel any exercise by the Authority or the City of any taxing powers to pay the Bonds or the interest or premium thereon, or to enforce payment thereof against any property of the Authority or the City except the interests of the Authority in the Loan Agreement and the revenues and assets thereunder, which will be assigned to the Trustee under the terms of the Indenture. The Bonds shall recite that the Bonds are issued pursuant to the Act, and that the Bonds, including interest and premium, if any, thereon, are payable solely from the revenues and assets pledged to the payment thereof, and the Bonds shall not constitute a debt of the Authority or the City within the meaning of any constitutional or statutory limitations.
5. The Authority Officials are hereby authorized and directed to execute and deliver the Loan Agreement and a Bond Purchase Agreement, dated on or after August 1, 2012 (the “Bond Purchase Agreement”), between the Authority, Piper Jaffray & Co. (the “Underwriter”), the Company, and the School. All of the provisions of the Loan Agreement and the Bond Purchase Agreement, when executed and delivered as authorized herein, shall be deemed to be a part of this resolution as fully and to the same extent as if incorporated verbatim herein and shall be in full force and effect from the date of execution and delivery thereof. The Loan Agreement and the Bond Purchase Agreement shall be substantially in the forms on file with the Authority which are hereby approved, with such omissions and insertions as do not materially change the substance thereof, or as the Authority Officials, in their discretion, shall determine, and the execution of the Loan Agreement and the Bond Purchase Agreement by the Authority Officials shall be conclusive evidence of such determination.
6. The Authority hereby approves the Second Amendment to Loan Agreement, the First Amendment to Mortgage, the Second Amendment to Lease Agreement, the Second Amendment to Pledge Agreement, and the Pledge Agreement, all substantially in the respective forms of such documents now on file with the Authority. The Authority hereby approves a Disbursing Agreement, dated on or after August 1, 2012 (the “Disbursing Agreement”), between the Company, the Trustee, and a disbursing agent to be selected by the Company; a Debt Service Reserve Fund Agreement, dated on or after August 1, 2012 (the “Reserve Fund Agreement”), between the Authority, the Trustee, and Charter School Financing Partnership, LLC; an Intercreditor Agreement, dated on or after August 1, 2012 (the “Intercreditor Agreement”), between the Series 2006 Trustee, the Trustee, and the Company; and a Tax Regulatory Agreement, dated on or after August 1, 2012 (the “Tax Regulatory Agreement”), between the Company, the School, and the Trustee, substantially in the respective forms of such documents now on file with the Authority. The Trustee is hereby authorized to execute the Disbursing Agreement, the Reserve Fund Agreement, the Intercreditor Agreement, and the Tax Regulatory Agreement, and the Authority is hereby authorized to execute the Second Amendment to Loan Agreement, substantially in the forms now on file with the Authority with such necessary and appropriate variations, omissions, and insertions as do not materially change the substance thereof, or as the Trustee, in its discretion, and as the Authority, in its discretion, shall determine.
7. The Authority Officials and other officers, employees, and agents of the Authority are hereby authorized to execute and deliver, on behalf of the Authority, such other documents as are necessary or appropriate in connection with the issuance, sale, and delivery of the Bonds, including various certificates of the Authority; the Information Return for Tax-Exempt Private Activity Bond Issues, Form 8038; a certificate as to arbitrage and rebate; and similar documents. The Authority hereby approves the execution and delivery by the Trustee of the Indenture and all other instruments, certificates, and documents prepared in conjunction with the issuance of the Bonds that require execution by the Trustee, and the execution and delivery by the Series 2006 Trustee of any documents prepared in conjunction with the Series 2006 Bonds that require execution by the Series 2006 Trustee. The Trustee is hereby appointed as Bond Registrar and paying agent with respect to the Bonds. The Authority hereby authorizes Kennedy & Graven, Chartered, as bond counsel of the Authority, to prepare, execute, and deliver its approving legal opinion with respect to the Bonds, or with respect to the amendments of documents related to the Series 2006 Bonds.
8. The Authority has not participated in the preparation of the Preliminary Official Statement or the Official Statement relating to the offer and sale of the Bonds (collectively, the “Official Statement”), and has made no independent investigation with respect to the information contained therein, including the appendices thereto, and the Authority assumes no responsibility for the sufficiency, accuracy, or completeness of such information. Subject to the foregoing, the Authority hereby consents to the distribution and the use by the Underwriter of the Official Statement in connection with the offer and sale of the Bonds. The Official Statement is the sole material consented to by the Authority for use in connection with the offer and sale of the Bonds. The Authority hereby approves the Continuing Disclosure Agreement, dated on or after August 1, 2012 (the “Continuing Disclosure Agreement”), between the Company, the School, and the Trustee, in the form now on file with the Authority, and hereby authorizes the Trustee to execute and deliver the Continuing Disclosure Agreement.
9. Except as otherwise provided in this resolution, all rights, powers, and privileges conferred and duties and liabilities imposed upon the Authority or the Board of Commissioners by the provisions of this resolution or of the aforementioned documents shall be exercised or performed by the Authority or by such members of the Board of Commissioners, or such officers, board, body, or agency thereof as may be required or authorized by law to exercise such powers and to perform such duties.
No covenant, stipulation, obligation, or agreement herein contained or contained in the aforementioned documents shall be deemed to be a covenant, stipulation, obligation, or agreement of any member of the Board of Commissioner of the Authority, or any officer, agent, or employee of the Authority in that person’s individual capacity, and neither the Board of Commissioners of the Authority nor any officer or employee executing the Bonds shall be liable personally on the Bonds or be subject to any personal liability or accountability by reason of the issuance thereof.
No provision, covenant, or agreement contained in the aforementioned documents, the Bonds, or in any other document relating to the Bonds, and no obligation therein or herein imposed upon the Authority or the breach thereof, shall constitute or give rise to any pecuniary liability of the Authority or any charge upon its general credit or taxing powers. In making the agreements, provisions, covenants, and representations set forth in such documents, the Authority has not obligated itself to pay or remit any funds or revenues, other than funds and revenues derived from the Loan Agreement which are to be applied to the payment of the Bonds, as provided therein and in the Indenture.
10. Except as herein otherwise expressly provided, nothing in this resolution or in the aforementioned documents expressed or implied, is intended or shall be construed to confer upon any person, firm, or corporation, other than the Authority or any holder of the Bonds issued under the provisions of this resolution, any right, remedy, or claim, legal or equitable, under and by reason of this resolution or any provisions hereof, this resolution, the aforementioned documents and all of their provisions being intended to be and being for the sole and exclusive benefit of the Authority and any holder from time to time of the Bonds issued under the provisions of this resolution.
11. In case any one or more of the provisions of this resolution, other than the provisions contained in Section 4 hereof, or of the aforementioned documents, or of the Bonds issued hereunder shall for any reason be held to be illegal or invalid, such illegality or invalidity shall not affect any other provision of this resolution, or of the aforementioned documents, or of the Bonds, but this resolution, the aforementioned documents, and the Bonds shall be construed and endorsed as if such illegal or invalid provisions had not been contained therein.
12. The Bonds, when executed and delivered, shall contain a recital that they are issued pursuant to the Act, and such recital shall be conclusive evidence of the validity of the Bonds and the regularity of the issuance thereof, and that all acts, conditions, and things required by the laws of the State of Minnesota relating to the adoption of this resolution, to the issuance of the Bonds, and to the execution of the aforementioned documents to happen, exist, and be performed precedent to the execution of the aforementioned documents have happened, exist, and have been performed as so required by law.
13. The officers of the Authority, bond counsel, other attorneys, engineers, and other agents or employees of the Authority are hereby authorized to do all acts and things required of them by or in connection with this resolution, the aforementioned documents, and the Bonds for the full, punctual, and complete performance of all the terms, covenants, and agreements contained in the Bonds, the aforementioned documents, and this resolution. In the event that for any reason any of the Authority Officials is unable to carry out the execution of any of the documents or other acts provided herein, such documents may be executed and such actions may be taken by any official or employee of the Authority or the City delegated the duties of any such Authority Official with the same force and effect as if such documents were executed and delivered by such Authority Official.
14. The Company has agreed and it is hereby determined that any and all costs incurred by the Authority in connection with the financing of the Project will be paid by the Company. It is understood and agreed that the Company shall indemnify the Authority against all liabilities, losses, damages, costs and expenses (including attorney’s fees and expenses incurred by the Authority) arising with respect to the Project or the Bonds, including in connection with any audit or information request by the Internal Revenue Service or the State of Minnesota, as provided for and agreed to by and between the Company and the Authority in the Loan Agreement.
15. On any date subsequent to the date of issuance of the Bonds, the Authority Officials are hereby authorized to execute and deliver any amendments or supplements to any of the documents referred to in this resolution or other documents executed and delivered in connection with the issuance of the Bonds if, after review by bond counsel, the Authority Officials determine that the execution and delivery of such amendment or supplement is in the interests of the Authority and the City. The Authority Officials may impose any terms or conditions on the execution and delivery of any such amendment or supplement as the Authority Officials deem appropriate.
16. This resolution shall be in full force and effect from and after its passage.
Adopted by the Board of Commissioners of the Housing and Redevelopment Authority of the City of Saint Paul, Minnesota, this 8th day of August, 2012