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Approving the District Energy Subordination Agreement and consenting to the issuance by the Saint Paul Port Authority of additional bonds for District Energy.
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WHEREAS:
A. The City of Saint Paul, was awarded an Urban Development Action Grant (No. B-81-AA-0028, the "UDAG") for the purposes of the District Energy System (the "District Energy System") owned and operated by District Energy St. Paul, Inc. (f/k/a District Heating Development Company, d/b/a District Energy St. Paul, Inc.) ("District Energy"); and
B. In connection with the development of the District Energy System, the City made a loan to District Energy from the proceeds of the UDAG pursuant to a City Loan Agreement dated as of December 1, 1982 as amended from time to time, including amendments dated as of December 1, 1985, August 5, 1988, and July 1, 1997 and a Global Amendment to District Energy Documents and Supplemental Mortgage dated as of December 1, 2007 (the "Global Amendment") (collectively, the "City District Energy Loan Agreement"), and the City District Energy Loan Agreement also provided for loans to District Energy by the City of Community Development Block Grant and tax increment funds, all of which loans, and the obligations of District Energy under the City District Energy Loan Agreement, are secured by a City Mortgage, Fixture Financing Statement and Security Agreement dated as of December 1, 1982, from time to time, including amendments dated December 1, 1985 and the Global Amendment (collectively, the "District Energy City Mortgage"); and
C. The Housing and Redevelopment Authority of the City of Saint Paul, Minnesota (the "HRA") has previously issued its Variable Rate Demand Purchase District Heating Revenue Bonds in 1982, 1985, 1997 and 1999 for the purpose of financing the District Energy System all of which revenue bonds have since been repaid; and
D. The Port Authority of the City of Saint Paul (the "Port Authority") has, pursuant to a Joint Powers Agreement with the HRA dated as of April 1, 2003 (the "District Energy Joint Powers Agreement"), previously issued its Variable Rate District Heating Revenue Bonds in 2003, 2005, 2006 and January 2009 and has loaned the proceeds of such Bonds to District Energy for purposes of financing the District Energy System; and
E. Proceeds of all of the Bonds issued to date have been disbursed pursuant to the terms of a Disbursing Agreement dated as of December 1, 1982 and entered into among the City, the HRA, the Trustee and District Energy; and
F. District Energy has proposed that the Port Authority issue its District Energy Variable Rate Tax-Exempt Bonds, 2012 Series T and District Heating Variable Rate Taxable Bonds, 2012 Series U (collectively the "2012 District Heating Bonds"), in the aggregate principal amount of approximately $6,205,000 to provide funds to finance improvements to the District Energy System; and
G. The 2012 District Heating Bonds are to be issued by the Port Authority pursuant to the District Energy Joint Powers Agreement; and
H. District Energy will secure its obligation to repay the loan of the proceeds of the January 2009 Bonds and the 2012 District Heating Bonds by granting a first lien leasehold mortgage and security interest in certain real property by executing and delivering an Amended and Restated Mortgage, Fixture Financing Statement and Security Agreement dated as of June 1, 2012 (the "District Energy Bond Mortgage"); and
I. The City has previously authorized and executed certain subordination agreements pursuant to which the City has subordinated the liens and security interests granted in the District Energy City Mortgage to the rights of the Trustee under the Mortgage securing the January 2009 Bonds; and
J. The loan to be made by the Port Authority from the proceeds of the 2012 District Heating Bonds will require subordination of the City's security interest in the Mortgaged District Energy Property to the interests of the Trustee for the District Heating Bonds (including the January 2009 Bonds and the 2012 District Heating Bonds), and the interest of the bank which issues the letter(s) of credit securing the 2012 District Heating Bonds, which subordination will be evidenced by a Subordination Agreement to be dated as of June 1, 2012 (the "District Energy Subordination Agreement").
K. District Energy has also requested that, in connection with the issuance of the 2012 District Heating Bonds, the 1982 Disbursing Agreement be amended and restated to add the Port Authority as a party and to make certain other changes to reflect the history and stability of the District Energy System; and
L. Minnesota Statutes, Chapter 469.084(11), provides that any issue of revenue bonds authorized by the Port Authority shall be issued only with the consent of the City Council of the City of Saint Paul, by resolution adopted in accordance with law; and
M. To meet the requirements of state law, the Port Authority has requested that the City Council give its requisite approval to the issuance of the proposed 2012 District Heating Bonds by the Port Authority, subject to final approval of the details of said bonds by the Port Authority; and
N. A Public hearing on the projects to be financed with the proceeds of the 2012 District Heating Bonds was held by the Port Authority after notice was published, and materials made available for public inspection at the offices of the Port Authority, as required by Section 147(f) of the Internal Revenue Code of 1986, as amended (the "Code"), at which public hearing all those appearing who so desired to speak were heard.
NOW THEREFORE, BE IT RESOLVED by the City Council of the City of Saint Paul, Minnesota, as follows:
City Subordination Agreements
1. The City hereby finds that the liens and security interests of the City under the District Energy City Mortgage and the Mortgage is and shall remain subordinate to the liens and security interests securing all bonds issued under the Amended and Restated District Energy Indenture, dated as of September 9, 2009, including specifically the Second Supplement thereto executed in connection with the 2012 District Heating Bonds.
2. The City approves the Subordination Agreement in substantially the form on file with the Office of Financial Services. The Subordination Agreement is hereby authorized and directed to be executed by the appropriate officers of the City, subject to approval of the form thereof by the City Attorney, and with such variations, modifications, additions or deletions as may be necessary and approved by the City Attorney. Any such changes shall be deemed to have been agreed to by virtue of execution of the documents.
3. The loan balances due to the City as of May 16, 2012, which are hereby subordinated to the 2012 District Heating Bonds are:
City/HRA Loan $0.00
City UDAG Loan $1,139,732.25
2007 Capital Loan Note $5,750,000.00
2007 Franchise Fee Note $4,908,734.46
4. As a condition to granting the requested subordination, the City is requiring the payment of a Subordination Fee of $17,697.70, which District Energy has agreed to pay.
Consent to Issuance of 2012 District Heating Bonds
5. In accordance with the requirements of Minnesota Statutes 469.084(11) and Section 147(f) of the Code, the City Council hereby approves the issuance of the aforesaid 2012 District Heating Bonds by the Port Authority for the purposes described in the Port Authority resolutions adopted May 22, 2012, the exact details of which, including but not limited to, provisions relating to maturities, interest rates, discount and redemption are to be determined by the Port Authority.
Consent to Amended and Restated Disbursing Agreement
6. The City hereby finds that it is appropriate to amend and restate the 1982 Disbursing Agreement. The City approves the Amended and Restated Disbursing Agreement in substantially the form on file with the Office of Financial Services. The appropriate officers of the City are hereby authorized and directed to execute the Amended and Restated Disbursing Agreement with such additions, changes or deletions as are approved by the City Attorney.