HomeMy WebLinkAboutOrdinance 4389 ORDINANCE NO. 4389
AN ORDINANCE AUTHORIZING THE ISSUANCE AND SALE OF NOT
TO EXCEED $25,000,000 OF SALES AND USE TAX CAPITAL
IMPROVEMENT BONDS, SERIES 2002, BY THE CITY OF
FAYETTEVILLE, ARKANSAS FOR THE PURPOSE OF FINANCING A
PORTION OF THE COST OF IMPROVEMENTS TO THE CITY'S
WASTEWATER TREATMENT, SEWERAGE AND RELATED
FACILITIES; AUTHORIZING THE EXECUTION AND DELIVERY OF A
TRUST INDENTURE PURSUANT TO WHICH THE BONDS WILL BE
ISSUED AND SECURED; AUTHORIZING THE EXECUTION AND
DELIVERY OF AN OFFICIAL STATEMENT PURSUANT TO WHICH
THE BONDS WILL BE OFFERED; AUTHORIZING THE EXECUTION
AND DELIVERY OF A BOND PURCHASE AGREEMENT PROVIDING
FOR THE SALE OF THE BONDS; AUTHORIZING THE EXECUTION
AND DELIVERY OF A CONTINUING DISCLOSURE AGREEMENT;
AND PRESCRIBING OTHER MATTERS RELATING THERETO.
WHEREAS, the City Council of the City of Fayetteville, Arkansas (the "City") has
determined that there is a great need for a source of revenue to finance the costs of acquisition,
construction, reconstruction, extension, improving and equipping of wastewater treatment plants,
sewerage and related facilities (the "Project'); and
WHEREAS, the City is authorized and empowered under the provisions of the
Constitution and laws of the State of Arkansas, including particularly Amendment 62 to the
Constitution of the State of Arkansas ("Amendment 62") and Arkansas Code Annotated ( 1998
Repl. & 2001 Supp.) Sections 14- 164-301 et seg. (as from time to time amended, the "Local
Government Bond Act'), to issue and sell its capital improvement bonds to finance the costs of
various capital improvements such as those comprising the Project, which capital improvement
bonds may be secured by and payable from the receipts of the special city-wide sales and use tax
authorized by the Local Government Bond Act; and
WHEREAS, pursuant to the provisions of Ordinance No. 4327 of the City, adopted and
approved on August 7, 2001 (the "Election Ordinance"), there was submitted to the qualified
electors of the City the question of the issuance of not to exceed $ 125,000,000 in aggregate
principal amount of capital improvement bonds pursuant to Amendment 62 and the Local
Government Bond Act to finance the Project improvements described in the Election Ordinance,
said bonds to be secured by a pledge of and lien upon all of the receipts of a special city-wide
sales and use tax levied at the rate of three-quarters of one percent (0.75%) pursuant to the Local
Government Bond Act (the "Sales and Use Tax"); and
WHEREAS, at a special election held November 6, 2001 , a majority of the qualified
electors of the City voting on the question approved the issuance of said capital improvement
bonds (and the corresponding levy of the Sales and Use Tax and the pledge of Sales and Use Tax
receipts to the payment of the capital improvement bonds); and
10-34907.02
• • Ord . 4389
WHEREAS, as authorized under the provisions of Amendment 62 and the Local
Government Bond Act and as approved by the qualified electors of the City, the City has now
determined to issue and sell its Sales and Use Tax Capital Improvement Bonds, Series 2002, in
the principal amount of not to exceed $25,000,000 (the "Bonds"), in order to provide for the
funding of a portion of the Project; and
WHEREAS, as authorized by the provisions of the Election Ordinance, the City has
previously made arrangements for the sale of the Bonds to Stephens Inc. , Little Rock, Arkansas
(the "Underwriter"), pursuant to the terms of a Bond Purchase Agreement between the City and
the Underwriter (the "Bond Purchase Agreement') in substantially the form presented to the City
Council before this meeting;
NOW, THEREFORE, BE IT ORDAINED by the City Council of the City of
Fayetteville, Arkansas that:
Section 1 . Under the authority of the Constitution and laws of the State of Arkansas,
including particularly Amendment 62 to the Constitution of the State of Arkansas and the Local
Government Bond Act, there is hereby authorized the issuance of bonds of the City to be
designated as "Sales and Use Tax Capital Improvement Bonds, Series 2002" (the "Bonds"). The
Bonds shall be issued in the original aggregate principal amount of not to exceed Twenty-Five
Million Dollars ($25,000,000), shall mature not later than December 31 , 2009, and shall bear
interest at the rates specified in the Bond Purchase Agreement. The average yield on the Bonds
as a whole shall not exceed 4.00% per annum, and the yield on no single Bond shall exceed
4.00%. The proceeds of the Bonds will be utilized to finance a portion of the cost of the
acquisition, construction, reconstruction, extension, improving and equipping of the Project, to
establish a debt service reserve for the Bonds or purchase a surety bond for reserve purposes, to
pay a premium for bond insurance, if deemed economically beneficial, and to pay printing,
underwriting, legal and other expenses incidental to the issuance of the Bonds. The Bonds shall
be issued in the forms and denominations, shall be dated, shall be numbered, shall mature, shall
be subject to redemption prior to maturity, and shall contain such other terms, covenants and
conditions, all as set forth in the Trust Indenture submitted at this meeting.
The Mayor is hereby authorized and directed to execute and deliver the Bonds in one or
more series, each series to be in substantially the form thereof contained in the Trust Indenture
submitted to this meeting, and the City Clerk is hereby authorized and directed to execute and
deliver the Bonds and to affix the seal of the City thereto, and the Mayor and City Clerk are
hereby authorized and directed to cause the Bonds to be accepted and authenticated by the
Trustee. The Mayor is hereby authorized to confer with the Trustee, the Underwriter and Kutak
Rock LLP, Little Rock, Arkansas ("Bond Counsel'), in order to complete the Bonds in
substantially the form contained in the Trust Indenture submitted at this meeting, with such
changes as shall be approved by such persons executing the Bonds, their execution to constitute
conclusive evidence of such approval.
Section 2. In order to pay the principal of and interest on the Bonds as they mature or
are called for redemption prior to maturity, there is hereby pledged all of the receipts of the Sales
and Use Tax levied by the Election Ordinance. The levy and collection of the Sales and Use Tax
shall continue until such time as the Bonds are no longer outstanding or sufficient funds are on
10-34907.02 2
• 0 Ord . 4389
deposit with the Trustee under the Trust Indenture to redeem the Bonds in full. The City
covenants and agrees that all receipts from the Sales and Use Tax will be accounted for
separately as special funds on the books of the City, and receipts of said Sales and Use Tax will
be deposited and will be used solely as provided in the Trust Indenture.
Section 3. To prescribe the terms and conditions upon which the Bonds are to be
executed, authenticated, issued, accepted, held and secured, the Mayor is hereby authorized and
directed to execute and acknowledge a Trust Indenture (the "Trust Indenture"), by and between
the City and Simmons First Trust Company, N.A., Pine Bluff, Arkansas (the "Trustee"), and the
City Clerk is hereby authorized and directed to execute and acknowledge the Trust Indenture and
to affix the seal of the City thereto, and the Mayor and the City Clerk are hereby authorized and
directed to cause the Trust Indenture to be accepted, executed and acknowledged by the Trustee.
The Trust Indenture is hereby approved in substantially the form submitted at this meeting,
including, without limitation, the provisions thereof pertaining to the pledge of Sales and Use
Tax receipts and the terms of the Bonds. The Mayor is hereby authorized to confer with the
Trustee, the Underwriter and Bond Counsel in order to complete the Trust Indenture in
substantially the form submitted at this meeting, with such changes as shall be approved by such
persons executing the Trust Indenture, their execution to constitute conclusive evidence of such
approval.
(Advice is given that a copy of the Trust Indenture in substantially the form authorized to
be executed is on file with the City Clerk and is available for inspection by any interested
person.)
Section 4. There is hereby authorized and approved a Preliminary Official Statement
of the City, including the cover page and appendices attached thereto, relating to the Bonds. The
Preliminary Official Statement is hereby "deemed final" by the City within the meaning of U.S.
Securities and Exchange Commission Rule 15c2- 12. The distribution of the Preliminary Official
Statement is hereby approved. The Preliminary Official Statement, as amended to conform to
the terms of the Bond Purchase Agreement, including Exhibit A thereto, and with such other
changes and amendments as are mutually agreed to by the City and the Underwriter, is herein
referred to as the "Official Statement," and the Mayor is hereby authorized to execute the
Official Statement for and on behalf of the City. The Official Statement is hereby approved in
substantially the form of the Preliminary Official Statement submitted at this meeting, and the
Mayor is hereby authorized to confer with the Trustee, the Underwriter and Bond Counsel in
order to complete the Official Statement in substantially the form of the Preliminary Official
Statement submitted at this meeting, with such changes as shall be approved by such persons, the
Mayor's execution to constitute conclusive evidence of such approval.
(Advice is given that a copy of the Preliminary Official Statement is on file with the City
Clerk and is available for inspection by any interested person.)
Section 5. In order to prescribe the terms and conditions upon which the Bonds are to
be sold to the Underwriter, the Mayor is hereby authorized and directed to execute a Bond
Purchase Agreement on behalf of the City, to be dated as of the date of its execution (the "Bond
Purchase Agreement"), by and between the City and the Underwriter, and the Bond Purchase
Agreement is hereby approved in substantially the form submitted at this meeting, and the Mayor
I0-34907.02 3
• Ord . 4389
is hereby authorized to confer with the Underwriter and Bond Counsel in order to complete the
Bond Purchase Agreement in substantially the form submitted at this meeting, with such changes
as shall be approved by such persons executing the Bond Purchase Agreement, their execution to
constitute conclusive evidence of such approval.
(Advice is given that a copy of the Bond Purchase Agreement in substantially the form
authorized to be executed is on file with the City Clerk and is available for inspection by any
interested person.)
Section 6. In order to provide for continuing disclosure of certain financial and
operating information with respect to the Sales and Use Tax and the City in compliance with the
provisions of Rule 15c2- 12 of the U. S. Securities and Exchange Commission, the Mayor is
hereby authorized and directed to execute a Continuing Disclosure Agreement to be dated as of
the date of its execution (the "Continuing Disclosure Agreement'), by and between the City and
the Trustee, and the Mayor is hereby authorized and directed to cause the Continuing Disclosure
Agreement to be executed by the Trustee. The Continuing Disclosure Agreement is hereby
approved in substantially the form submitted at this meeting, and the Mayor is hereby authorized
to confer with the Trustee, the Underwriter and Bond Counsel in order to complete the
Continuing Disclosure Agreement in substantially the form submitted at this meeting, with such
changes as shall be approved by such persons executing the Continuing Disclosure Agreement,
their execution to constitute conclusive evidence of such approval.
(Advice is given that a copy of the Continuing Disclosure Agreement in substantially the
form authorized to be executed is on file with the City Clerk and is available for inspection by
any interested person.)
Section 7. In order to secure lower interest rates on the Bonds, the Underwriter has
proposed that the City consider the purchase of a policy of bond insurance with a portion of the
proceeds of the Bonds, which policy would guarantee the payment of the principal of and interest
on the Bonds when due. If deemed economically advantageous by the Mayor, upon the advice
of the Underwriter, the Mayor is hereby authorized to execute an insurance commitment and to
do any and all things necessary to accomplish the delivery of a bond insurance policy with
respect to the Bonds.
Section 8. The Mayor and City Clerk, for and on behalf of the City, are hereby
authorized and directed to do any and all things necessary to effect the issuance, sale, execution
and delivery of the Bonds and to effect the execution and delivery of the Trust Indenture, the
Bond Purchase Agreement, the Official Statement, the Continuing Disclosure Agreement and a
Tax Regulatory Agreement relating to the tax exemption of interest on the Bonds, and to perform
all of the obligations of the City under and pursuant thereto. The Mayor and the City Clerk are
further authorized and directed, for and on behalf of the City, to execute all papers, documents,
certificates and other instruments that may be required for the carrying out of such authority or to
evidence the exercise thereof.
Section 9. As previously provided in the Election Ordinance, Kutak Rock LLP, Little
Rock, Arkansas, is hereby confirmed as Bond Counsel on behalf of the City in connection with
the issuance and sale of the Bonds.
10-34907.02 4
• . 1 Ord . 4389
Section 10. The provisions of this Ordinance are hereby declared to be severable, and
if any section, phrase or provision shall for any reason be declared to be illegal or invalid, such
declaration shall not affect the validity of the remainder of the sections, phrases or provisions of
this Ordinance.
Section 11 . All ordinances, resolutions and parts thereof in conflict herewith are
hereby repealed to the extent of such conflict.
PASSED and APPROVED this the 7`s day of May, 2002.
APPROVED:
By:
DA COODY, Mayor
ATT!
cuff, City Clerk
` itis. i
10-34907.02 5
0 0
NAME OF FILE: Ordinance No. 4389
CROSS REFERENCE:
05/07/02 Ordinance No. 4389
04/19/02 Memo to Mayor and City Council from Ted Webber, Director of Admin.
Services, regarding the Sales and Use Tax Bond Ordinance for the
Wastewater System Improvements Project
05/07/02 Staff Review Form
05/08/02 Memo to Ted Webber, Administrative Services, from Heather Woodruff,
City Clerk
05/18/02 Statement of Legal Advertising from Arkansas Democrat Gazette
NOTES :
FAYETTEVILLE
THE CITY OF FAYETTEVILLE, ARKANSAS
ADMINISTRATIVE, SERVICES DEPARTMENTAL CORRESPONDENCE
To: Mayor and City Council ,
From : Ted H. Webber, Director of Administrative Servic�J� u Jglt' �,
Date: April 19, 2002
Subject: Sales and Use Tax Bond Ordinance for the
Wastewater System Improvements Project
Background
On November 6, 2001 , voters of the City of Fayetteville approved a Sales and Use Tax to
repay up to $ 125 million of sales tax bonds whose proceeds will , in turn , be used pay for
the planning and construction of wastewater system improvements. The Arkansas Soil
and Water Conservation Commission has earmarked up to $ 100 million for a State
Revolving Fund (SRF) loan, at an interest rate of 3% , to partially finance the cost of these
improvements. On the SRF application , the City requested funding for the entire project
cost. However, the State agency did not award the entire requested amount and it cannot
guarantee that future SRF funding will be available for the project cost not already set
aside. This requires the City to consider the use of non-SRF financing for the remaining
cost of the project.
The City's Financial Advisor, Stephens, Inc. , has recommended that the City at this time
issue additional bonds on the open market to cover this remaining cost and provide the
City with the greatest flexibility to finance this project. The recommended approach is to
issue $25 million in short term sales tax bonds and subsequently downsize the $ 100
million SRF loan as dictated by actual project costs. This short term approach is at very
competitive interest rates and results in less overall interest costs for the project.
Why formulate a bond issue at this time ? Amendment 62 to the Arkansas Constitution
places a limit on the amount of interest that the City can pay on bonds that it issues. For
any sales tax bonds issued to finance the costs of the Wastewater System Improvement
Project, the constitution places a limit on bond interest paid , which is a maximum of 2%
above the Federal Discount Rate on the date of the election when the tax collections were
authorized by the voters. The election for the Water and Sewer Sales and Use Tax Bonds
was November 6, 2001 and the Federal Discount Rate on that day was 2% . This means
that, per the Arkansas Constitution , any bond issue that the City sells pursuant to the
election on November 8 , 2001 , must have a coupon rate less than the mandated ceiling of
4%
Page 1 of 2
Due to the uncertainties of the financial markets and their volatility, the City's ability to
place these bonds within the constraints of Amendment 62 of the State Constitution may
become severely limited . When bond rates rise, under these constitutional usury limits, the
City is very limited in how much capital it can raise beyond the SRF loan proceeds which
may be needed for the remaining unfunded Wastewater Systems Improvement Project
cost. Therefore, the City has a real need to pursue a bond issue at this time. If the City
does not pursue this in the immediate future, depending on the speed with which the bond
rates rise, then the City may be prohibited foreverfrom selling bonds that can be repaid by
the Sales and Use Tax proceeds.
The project's implementation plan , as being developed by the Public Works Department,
anticipates that significant expenditures will be required in the near term as the design ,
segmented construction and priority items of the project are completed . The $ 100 million
SRF loan proceeds are not available to the City until the loan is closed , following the formal
approval of the project's design and the bidding of the resultant contracts. Accordingly, the
sale of this portion of the bonds now will provide interim funding for these required activities
and will also be used to pay those costs that are not allowable under the SRF rules (these
costs are generally for real estate easements and right-of-way acquisitions).
Recommendation :
On May 7, 2002 , we recommend that the City Council pass the attached Bond Ordinance
which will ensure that this bond issue can be sold expeditiously, thereby mitigating the
negative impact of any rise in the bond rates that may be announced by the Federal
Reserve Board in the future. The City's best financial interests are served by getting this
bond issue to the market without delay.
Page 2 of 2
• STAFF REVIEW FORM •
X AGENDA REQUEST
CONTRACT REVIEW
• GRANT REVIEW
For the Fayetteville City Council meeting of May 7 , 2002
e
FROM :
Ted Webber Admin Admin
Name Division Department
ACTION REQUIRED : An Ordinance authorizing the issuance and sale of up to $25 million of Sales
and Use Tax capital Improvement Bonds for the Wastewater System Improvement Project .
COST TO CITY :
NA
Cost of this Request Category/ Project Budget Category/Project Name
Account Number Funds Used To Date Program Name
Project Number Remaining Balance Fund
BUDGET REVIEW : Budgeted Item Budget Adjustment Attached
Bjdq`ee Manager Administrative Services Director
CONTRACT/GRANT/LEASE REVIEW : GRANTING AGENCY :
Accounting �Mannaag-erg D to ADA Coordinator _ _ Date
�y/G✓�.�� 2s oZ 2310Y
ty At rney ate Internalitor Date
49
4
a3 1d2--
Purchasing Officer Date Grant Officer Date
STAFF RECOMMENDATION :
Division Head Date Cross Reference
New Item : Yee No
Depar ent ' r for Date
L5�071� Prev Ord/ Res # :
Adm ' $VCS ector Date
Orig Contract Date :
Mayor Date
• STAFF REVIEW FORM • Page 2
Description Meeting Date
Comments :
Budget Coordinator Reference Comments :
Accounting Manager Reference Comments :
City Attorney Reference Comments :
Purchasing Officer Reference Comments :
ADA Coordinator Reference Comments :
Internal Auditor Reference Comments :
Grants Offcier Reference Comments :
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