HomeMy WebLinkAboutResolution 084-2010 Resolution No. 84-10
Resolution Giving Approval to Certain Sewer Facilities Improvements; Giving
Approval to the Issuance and Sale of a Revenue Bond to Finance, Directly or
Indirectly, the Improvements to the Facilities; Approving the Form of the Loan
Agreement and the Revenue Bond and Pledging Revenues and Collateral to Secure
the Payment of the Revenue Bond; and Creating Special Funds and Accounts for the
Administration of Funds for Operation of the System and Retirement of the Revenue
Bond.
Whereas, one of the purposes of SDCL Chapter 9-40 (the "Act") as found and determined by the
Legislature is to provide for financing the acquisition, maintenance, operation, extension or
improvement of any system or part of any system for the collection, treatment and disposal of
sewage and other domestic, commercial and industrial wastes; or any system for the control of
floods and drainage; or any combination thereof, together with extensions, additions, and
necessary appurtenances; and,
Whereas, a municipality is authorized to issue revenue bonds to defray the cost of extensions,
additions and improvements to any utility previously owned and is authorized to pledge the net
income or revenues from the system in accordance with Section 15 of the Act; and,
Whereas, the City of Brookings (the "City") currently operates a sewer system for the collection,
treatment and disposal of sewage and other domestic, commercial and industrial wastes; and for
the control of floods and drainage and has determined that improvements to the sewer facilities
are necessary for the conduct of its governmental programs and qualifies as an improvement,
extension or addition to its sewer system; and,
Whereas, the City has determined to issue its revenue bonds to finance the improvements to its
sewer system for the purpose of collecting, treating and disposing of sewage and other domestic,
commercial and industrial wastes (the"System") and has applied to the South Dakota
Conservancy District (the "District") for a Clean Water State Revolving Fund Loan to finance the
improvements;
Whereas, the City adopted rates and charges to be pledged, segregated and used for the payment
of the Revenue Bond.
Now Therefore, Be It Resolved by the City as follows:
SECTION 1. Definitions. The terms when used in this Resolution shall have the following
meanings set forth in this section unless the context clearly requires otherwise. All terms used in
this Resolution which are not defined herein shall have the meanings assigned to them in the
Loan Agreement unless the context clearly otherwise requires.
"Act" means South Dakota Codified Laws Chapter 9-40.
"Loan" means the Loan made by the South Dakota Conservancy District to the City pursuant
to the terms of the Loan Agreement and as evidenced by the Revenue Bond.
"Project" means Brookings Storm Water Drainage Project as outlined in the facilities plan.
"Revenue Bond" means the revenue bond or bonds issued the date of the Loan Agreement
by the City to the South Dakota Conservancy District to evidence the City's obligation to
repay the principal of and pay interest and Administrative Expense Surcharge on the Loan.
"System" means the City's system of collecting, treating and disposing of sewage and other
domestic, commercial and industrial wastes.
SECTION 2. Declaration of Necessity and Findings.
2.1. Declaration of Necessity. The City hereby determines and declares it is
necessary to construct and finance improvements to its System described as the
Project.
2.2. Findings. The City does hereby find as follows:
2.2.1. The City hereby expressly finds that if the Project is not undertaken, the
System will pose a health hazard to the City and its inhabitants, and will
make the City unable to comply with state and federal law.
2.2.2. Because of the functional interdependence of the various portions of the
System, the fact that the System may not lawfully operate unless it
complies with State and federal laws, including SDCL Chapter 34A-2, and
the federal Clean Water Act, and the nature of the improvements
financed, the City hereby finds and determines that the Project will
substantially benefit the entire System and all of its users within the
meaning of Sections 15 and 17 of the Act.
2.2.3. The City hereby determines and finds that for the purposes of the Act,
including, in particular, Sections 15 and 17 of the Act, the only the net
income from the system as improved, financed by the Revenue Bond, be
pledged for its payment.
SECTION 3. Authorization of Loan. Pledge of Revenue and Security.
3.1. Authorization of Loan. The City hereby determines and declares it necessary
to finance up to $665,000.00 of the costs of the Project through the issuance of
bonds payable from net revenues of the system and other funds secured by the
City. The City hereby determines that because the Revenue Bond is issued in
connection with a financing agreement described in SDCL 46A-1-49, pursuant to
Section 15 of the Act no election is required to issue the Revenue Bond.
3.2. Approval of Loan Agreement. The execution and delivery of the Revenue
Obligation Loan Agreement (the "Loan Agreement"), the form of which is on file
with the City Finance Officer (the "Finance Officer") and open to public
inspection, between the City as Borrower and the District, is hereby in all
respects authorized, approved and confirmed, and the Mayor and Finance Officer
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are hereby authorized and directed to execute and deliver the Loan Agreement
in the form and content attached hereto, with such changes as the Attorney for
the City deems appropriate and approves, for and on behalf of the City. The
Mayor and Finance Officer are hereby further authorized and directed to
implement and perform the covenants and obligations of the City set forth in or
required by the Loan Agreement. The Loan Agreement herein referred to and
made a part of this Resolution is on file in the office of the Finance Officer and is
available for inspection by any interested party.
3.3. Approval of Revenue Bond. The issuance of a revenue bond in a principal
amount not to exceed $665,000.00 as determined according to the Loan
Agreement in the form and content set forth in Appendix B attached to the form
of Loan Agreement (the "Revenue Bond") shall be and the same is, in all
respects, hereby authorized, approved, and confirmed and the Mayor, Finance
Officer, and other appropriate officials shall be and are hereby authorized and
directed to execute and seal the Revenue Bond and deliver the Revenue Bond to
the District, for and on behalf of the City, upon receipt of the purchase price,
and to use the proceeds thereof in the manner set forth in the Loan Agreement.
The Mayor and Finance Officer are hereby authorized to approve the final terms
of the Revenue Bond and their execution and delivery thereof shall evidence that
approval. The Revenue Bond shall be issued under the authority of SDCL
Chapter 9-40 and SDCL Chapter 6-8B, and the provisions of the Act are hereby
expressly incorporated herein as provided in Section 19 of the Act.
3.4. Pledge of Revenues. The Revenue Bond together with the interest thereon,
shall not constitute a charge against the City's general credit or taxing power,
but shall be a limited obligation of the City payable solely out of the Project Debt
Service Account, which payments, revenues and receipts are hereby and in the
Loan Agreement pledged and assigned for the equal and ratable payments of the
Revenue Bond and shall be used for no other purpose than to pay the principal
of, interest and Administrative Surcharge on the Revenue Bond, except as may
be otherwise expressly authorized in the Loan Agreement (including the purpose
of securing Additional Bonds issued as permitted by the terms thereof). The
City hereby irrevocably pledges to the South Dakota conservancy District all
income and revenues of the System, including, without limitation, fees, charges to
users of the System, penalties and hook-up fees, sign-up fees, proceeds of
business interruption insurance, proceeds from the sale of property constituting
part of the System and investment income on all such revenues, but only to the
extent that the revenues exceed the amounts necessary to operate and maintain
the System, provided there shall be excluded from this pledge the proceeds of
any federal or state grant or loan, and the investment income therefrom, to the
extent such exclusion is a condition of such grant or loan. The City covenants
and agrees to charge rates for all services from the System or establish charges
or rates which will be sufficient to provide for the payments upon the Revenue
Bond issued hereunder as and when the same become due, and as may be
necessary to provide for the operation and maintenance and repairs of the
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System, and depreciation, and the Rate Ordinance shall be revised from time to
time so as to produce these amounts. The City hereby reserves the right to
determine on a periodic basis the appropriate allocation of operation and
maintenance expenses, depreciation, repair and reserves associated with the
facilities financed with the Revenue Bond, provided that such determination of
allocable operation and maintenance expenses shall in no event abrogate, abridge
or otherwise contravene the covenant of the City set forth in this Section 3 or
any other covenant or agreement in the Loan Agreement.
SECTION 4. Rates. Certification. Segregation and Review.
4.1. Rates and collection. There shall be charged rates for each fiscal year which
shall ensure that its Net Revenues Available for Debt Service will equal at least
1 10% of its System Debt Service for such fiscal year.
4.2. Certification. In each fiscal year, or as soon as practicable, and in any event by
the date of the delivery of the unaudited financial statements required in the
Loan Agreement, the City shall (a) calculate its Net Revenues Available for Debt
Service and System Debt Service for the fiscal year, and (b) certify such figures to
the South Dakota Conservancy District. The certification described in clause (b)
of the preceding sentence shall be substantially in the form of the certificate
attached as Appendix E to the Loan Agreement. If the City fails to meet the
Rate Covenant set forth in Section 6.4 of the Loan Agreement, the City shall
supply the District with quarterly reports on the actions it is taking to correct its
coverage deficiency until it delivers an annual coverage certificate showing
compliance with the first sentence of this Section.
4.3. Segregation. The Finance Officer shall setup bookkeeping accounts in
accordance with South Dakota Legislative Audit guidelines for the segregation of
the revenue.
4.4. Periodic review. The sewer rates shall be reviewed from time to time, not
less than yearly, and shall be modified in order to produce such funds as are
necessary and required to comply with the Loan Agreement's rate covenant and
to pay principal of, interest and Administrative Surcharge on the Revenue Bond
when due. The rates may be set by ordinance or resolution in accordance with
this Section. The rate ordinance or resolution shall be necessary for the support
of government and shall be effective upon passage.
SECTION 5. Additional Bonds. As permitted by Section 8 and 9 of the Act, Additional
Bonds payable from revenues and income of the System may be issued, as permitted in the
Loan Agreement, and no provision of this Resolution shall have the effect of restricting the
issuance of, or impairing the lien of, such additional parity bonds with respect to the net
revenues or income from the extensions, additions or improvements. The City shall have the
right to issue additional bonds secured by a lien subordinate to the lien from the Revenue Bond
pursuant to the Loan Agreement.
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SECTION 6. Project Fund Accounts. For the purpose of application and proper allocation
of net income of the System and to secure the payment of principal, Administrative Surcharge
and interest on the Revenue Bond, the following mandatory asset segregations shall be included
in the sewer system account of the City and shall be used solely for the following respective
purposes until payment in full of the principal of and interest on the Revenue Bond:
6.1. Project Revenue Account. There shall be deposited periodically into the
Project Revenue Account the net revenues as defined in Section 17 of the Act
derived from the operation of the Project collected pursuant to the Ordinances
and resolutions of the City of Brookings, South Dakota (collectively the "Rate
Ordinance"). Moneys from the Project Revenue Account shall be transferred
periodically into separate funds and accounts as provided below.
6.2. Project Debt Service Account. Out of the revenues in the Project Revenue
Account, there shall be set aside no later than the 25`h day of each month into
the account designated Project Debt Service Account, a sum sufficient to
provide for the payment as the same become due of the next maturing principal
of, interest and Administrative Surcharge on the Revenue Bonds and any reserve
determined by the City's governing body to be necessary. The amount set aside
monthly shall be not less than one-third of the total principal, interest, and
Administrative Surcharge payable on the following January 15, April 15,July 15,
or October 15 and if there shall be any deficiency in the amount previously set
aside, then the amount of such deficiency shall be added to the current
requirement.
6.3. Depreciation Account. There shall be established a General Depreciation
Account. Out of the revenues of the Project Revenue Account there shall be
set aside each month into the General Depreciation Account an amount
determined by the City Council to be a proper and adequate amount for repair
and depreciation of the Project.
6.4. Project Surplus Account. There shall be established the Project Surplus
Account. Revenues remaining in the Project Revenue Account at the end of any
fiscal year after all periodic transfers have been made therefrom as above
required, shall be deemed to be surplus and shall be transferred to the Project
Surplus Account. If at any time there shall exist any default in making any
periodic transfer to the Project Debt Service Account, the City Council shall
authorize the City Finance Officer to rectify such default so far as possible by the
transfer of money from the Project Surplus Account. If any such default shall
exist as to more than one account or fund at any time, then such transfer shall
be made in the order such funds and accounts are listed above.
When not required to restore a current deficiency in the Project Debt Service
Account, moneys in the Project Surplus Account from time to time may be used
for any of the following purposes and not otherwise:
a. To redeem and prepay the Revenue Bond when and as such Revenue
Bond becomes prepayable according to its terms;
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b. To pay for repairs of or for the construction and installation of
improvements or additions to the System; and, if the balances in the
Project Debt Service Account and the Project Depreciation Account are
sufficient to meet all payments required or reasonably anticipated to be
made there from prior to the end of the then current fiscal year, then:
c. To be held as a reserve for redemption and prepayment of any bonds of
the System which are not then but will later be prepayable according to
their terms; or
d. To be used for any other authorized municipal purpose designated by the
City Council.
e. No moneys shall at any time be transferred from the Project Surplus
Account or any other account of the Fund to any other fund of the City,
nor shall such moneys at any time be loaned to other municipal funds or
invested in warrants, special improvements bonds or other obligations
payable from other funds, except as provided in this Section.
SECTION 7. Approval of Paying Agent/Registrar. The Revenue Bond shall be payable at
the office of The First National Bank in Sioux Falls, Sioux Falls, South Dakota, hereby designated
as paying agent and registrar.
SECTION 8. Approval of Bond Counsel. Meierhenry Sargent LLP is hereby retained as
Bond Counsel with respect to the Revenue Bond.
SECTION 9. Tax Matters. The Interest on the Revenue Bond shall be excludable from
gross income for federal income tax purposes under the Internal Revenue Code of 1986, as
amended ("the Code") and applicable Treasury Regulations (the "Regulations").
SECTION 10. Covenants. The City hereby covenants and agrees with the District and other
owners of the Revenue Bond as follows:
10.1. The City will punctually perform all duties with reference to the Project, the
System and the Revenue Bond required by the constitution and laws of the State
of South Dakota and by this Resolution.
10.2. The City agrees and covenants that it will promptly construct the improvements
included in the Project.
10.3. The City covenants and agrees that pursuant to Sections 25 through 27 of the
Act, the lawful holders of the Revenue Bond shall have a statutory mortgage lien
upon the Project and the extensions, additions and improvements thereto
acquired pursuant to the Act, until the payment in full of the principal and
interest on the Revenue Bond, and the City agrees not to sell or otherwise
dispose of the System, the Project, or any substantial part thereof, except as
provided in the Loan Agreement and shall not establish, authorize or grant a
franchise for the operation of any other utility supplying like products or services
in competition therewith, or permit any person, firm or corporation to compete
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with it in the distribution of water for municipal, industrial, and domestic
purposes within the City.
10.4. The City covenants and agrees with the District and other owners of the Revenue
Bond that it will maintain the System in good condition and operate the same in an
efficient manner and at a reasonable cost, so long as any portion of the Revenue
Bond remains outstanding; that it will maintain insurance on the System for the
benefit of the holders of the Revenue Bond in an amount which usually would be
carried by private companies in a similar type of business; that it will prepare, keep
and file records, statements and accounts as provided for in this Resolution and the
Loan Agreement. The Revenue Bond shall refer expressly to this Resolution and
the Act and shall state that it is subject to all provisions and limitations thereof
pursuant to Series 19 of the Act.
SECTION 11. Depositories. The Finance Officer shall cause all moneys pertaining to the
Funds and Accounts to be deposited as received with one or more banks which are duly
qualified public depositories under the provisions of SDCL Ch. 4-6A, in a deposit account or
accounts, which shall be maintained separate and apart from all other accounts of the City, so
long as any of the Bonds and the interest thereon shall remain unpaid. Any of such moneys not
necessary for immediate use may be deposited with such depository banks in savings or time
deposits. No money shall at any time be withdrawn from such deposit accounts except for the
purposes of the Funds and Accounts as authorized in this Resolution; except that moneys from
time to time on hand in the Funds and Accounts may at any time, in the discretion of the City's
governing body, be invested in securities permitted by the provisions of SDCL 4-5-6; provided,
however, that the Depreciation Fund may be invested in such securities maturing not later than
ten years from the date of the investment. Income received from the deposit or investment of
moneys shall be credited to the Fund or Account from whose moneys the deposit was made or
the investment was purchased, and handled and accounted for in the same manner as other
moneys therein.
SECTION 12. Consent to Appointment. In the event of mismanagement of the Project, a
default in the payment of the principal or interest of the Revenue Bond, or in any other
condition thereof materially affecting the lawful holder of the Revenue Bond, or if the revenues
of the Project are dissipated, wasted or diverted from their proper application as set forth in
the Loan Agreement, Revenue Bond, or herein, the City hereby consents to the appointment of
a receiver pursuant to Section 33 of the Act, and agrees that the receiver will have the powers
set forth therein, and in Section 34 and 35 of the Act to operate and administer the Project,
and charge and collect rates as described therein.
SECTION 13. Severability. If any section, paragraph, clause or provision of this Resolution,
the Loan Agreement, the Revenue Bond, or any other Loan Document shall be held invalid, the
invalidity of such section, paragraph, clause or provision shall not affect any of the other provisions
of this Resolution or said Loan Agreement, Revenue Bond, or any other Loan Document.
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SECTION 14. Authorization of City Officials. The Mayor, Finance Officer, City Attorney
and City officials shall be and they are hereby authorized to execute and deliver for and on behalf
of the City any and all other certificates, documents or other papers and to perform such other
acts as they may deem necessary or appropriate in order to implement and carry out the actions
authorized herein.
SECTION 15. Effective Date. This Resolution shall take effect on the 20th day following its
publication, unless suspended by a referendum.
Adopted at Brookings, South Dakota, this 14th day of September 2010.
CITY OF BROOKINGS
Ge
Tim Reed, Mayor
(SEAL)
�1c�7 sCC 11
181 1CQ
7-771„
Shari ornes, City Clerk
Published: September 17, 2010
Effective: October 7, 2010
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