HomeMy WebLinkAbout#11 - Conduit Bonding Discussion STAFF REPORT
DATE: March 19, 2024
REGULAR
TO: Lake Elmo City Council
FROM: Clark Schroeder Interim City Administrator
AGENDA ITEM: Conduit Bonding Policy
REVIEWED BY: Jenny Boulton.
BACKGROUND:
Unlike almost all other bonds, “conduit bonds” are initiated by and issued for the benefit of private
entities. Under the state statutes that authorize these bonds, the city first issues the bonds and then
loans proceed to the private entity. That private entity repays the loan in an amount sufficient to pay
principal and interest on the bonds. As a practical matter, the loan is (normally) handled entirely by
a separate bond trustee (usually the trust division of a bank). After the bonds are issued, the city has
almost no role in payment or administration of the bonds.
The bonds are revenue bonds—the city does not pay debt service, or any other cost related to the
transaction. As such, the bonds have no effect on the issuing city’s credit rating and are not counted
against any statutory limitations on borrowing. When the bonds are sold, investors look only to the
credit of the private borrower (and any related private security, such as mortgages and guarantees).
While the city council must approve issuance of the bonds and all the bond documents, the
transaction is largely handled by the private borrower and the underwriter that usually serves as the
initial purchaser of the bonds. The city council does retain the responsibility to bond purchasers to
disclose any material facts they may know of that could impact the bonds, such as remaining
approvals for zoning approval or provision of utilities. The bond counsel for conduit bonds may be
the city’s regular bond counsel or may be retained by the private entity (this is a matter of city policy
and practice).
The types of private activity bonds are governed primarily by federal tax law. Congress in effect
created this kind of bond to provide tax-exempt (and therefore lower cost) borrowing to certain
favored activities carried out by private entities.
Much of today’s tax law regarding these bonds originated with the Tax Reform Act of 1986, which
sharply narrowed the scope of permissible private activity bonds (previously known as “industrial
development revenue bonds” or “IDR bonds”).
The three most common conduit bonds in Minnesota are:
• Qualified 501I(3) bonds, where the user of bond proceeds is a nonprofit 501(c)(3) entity. Typical
examples include nonprofits that own nursing homes, hospitals, senior and other affordable housing,
and schools (from K-12 to college). But any nonprofit with 501(c)(3) status is eligible for this type of
financing, so bonds have been issued for entities as diverse as the YMCA to Minnesota Public Radio.
• Housing revenue bonds (exempt facilities), where the user of bond proceeds is a private for-profit
entity that builds housing intended for occupancy by persons or families who meet specified low-
income guidelines.
• Small issue manufacturing bonds, where the user of the proceeds is a manufacturing business that
constructs manufacturing facilities that meet certain federal requirements.
There are other less common conduit bonds that cities may occasionally encounter, but the three listed
above represent the bulk of this bond type.
More Information can be had at the League of Minnesota Cities. HERE
ISSUE BEFORE COUNCIL: Should the city council direct staff to draft a conduit bonding
policy?
PROPOSAL DETAILS/ANALYSIS:
The city council can direct staff to come back with a policy with different allowable uses. This
would benefit the community by informing the what kind if any conduit bonding the city would
support.
FISCAL IMPACT: Conduit bonding is a money making venue for cities. Application fees are set
by the city to cover review and staff time. In addition, a fee of cities around, .25% to 1.00% of the
bond would be collected. A 10 million bond would yield the city $50,000 at .5% in administrative
fees, plus the $3,000 application fee.
RECOMMENDATION:
“Move to direct staff to develop a draft policy for conduit bonding for
the uses of:_________________”
ATTACHMENTS:
City of Oakdale policy,
City of Shakopee policy
City of Bloomington policy
CITY OF
OAKDALE
REQUEST FOR
COUNCIL ACTION
Meeting Date: October 11, 2022
Advisory Board/Commission
Requester: JZ Award of Bid
CA Approval: CV Consensus Motions C
Department:
Title: Policy Adoption: FR-023 -Conduit Debt
BACKGROUND
□ Open Forum □
□ Other: □
181 Public Hearing □
□
At the June 28, 2022 City Council Workshop, representatives from MWF Properties presented a concept
plan for a four story multi-family development consisting of 155 to 165 units on parcel
2902921330012, which is a vacant parcel north of Hy-Vee and The Waters of Oakdale.
As part of the plan review, MWF Properties also requested support from the City to obtain bond
financing for this project through the Minnesota Department of Management and Budget (MMB). For
the City to support the applicant's request through MMB, the City Council would need to provide a
resolution indicating that the City will serve as the conduit bond issuer. Doing so would enable the MWF
to be placed in the queue for future financing through the State.
During the concept plan discussion, it was identified that the city lacked a formal conduit debt policy.
Based on the request from MWF for the development project, and the potential requests of other
developers, staff was directed to begin the process of drafting a policy for Council's consideration.
At the September 27, 2022 council work session, staff presented a proposed draft policy on conduit
debt for council's review and feedback.
A conduit bond, often referred to as a Private Activity Bond (PAB) or Tax-Exempt financing, is a debt
financing mechanism whereby private entities can raise capital at lower costs. A conduit bond may be
taxable or tax-exempt. The taxable status of a bond directly affects the cost of borrowing, since a tax-
exempt bond often has a lower interest rate resulting in a lower cost for the bond buyer. Tax-exempt
conduit bonds are attractive to bond buyers because the interest received over the term of the bond is
exempt from federal, state, and local income taxes.
A municipality may issue tax-exempt obligations that are designated by the city as "bank qualified,"
which gives banks certain favorable tax treatment for governmental bonds and bonds issued for the
benefit of 501(c)(3) organizations. A city may designate up to $10 million of such bonds as bank
qualified in each calendar year. Bank qualified obligations tend to have lower interest rates than non-
bank qualified bonds, so they are preferable to the borrower when they can be used. There are
generally no legal risks or financial obligations to the City of Oakdale associated with this type of
financing.
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As most cities have fees and charges associated with conduit debt financing, staff believes Oakdale
should consider formalizing our process when considering supporting this financing mechanism for non-
profit organizations.
As a base model for establishing a policy for Oakdale, the following were general guidelines through our
review of conduit debt financing policies from other cities:
• Conduit debt is tax-exempt debt issued in the name of the City on behalf of a private entity, but
for which the City has no obligation to pay.
• Conduit debt can be for low-income housing or capital projects of not-for-profit entities, subject
to approval by the City Council.
• The City will not issue conduit debt if it jeopardizes the bank-qualified status of existing or
planned direct debt.
• To be considered for approval, the private entity shall apply to the City, addressed to the City
Administrator, who will review the application and the City's bank-qualified status, and place it
on a City Council agenda for consideration.
• The City will charge fees to the private entity according to the City's Fee Schedule.
Staff has highlighted some key issues and terms of the policy, as follows:
• $3,000 application flat application fee.
• A one-time administrative fee equal to the greater of $10,000 or 0.50% of new bond issue
amount.
• Any interest rate differential between bank qualified and non-bank qualified bonds would be
estimated and paid by the borrower.
• Oakdale-based vs non-Oakdale projects (staff strongly supports approving conduit financing for
only Oakdale based projects or projects in the vicinity that directly benefit Oakdale)
STAFF AND/OR BOARD OR COMMISSION RECOMMENDATION
Staff recommends adoption of policy FR-O23 -Conduit Debt.
CITY COUNCIL ACTION REQUESTED
It is requested that the City Council adopt Policy FR-O23 -Conduit Debt.
Attachment
Policy FR-O23 -Conduit Debt
2
Policy Number: FR-023
Pages:3
Subject: Conduit Debt Policy
Approved: October 2022
1.0 Introduction
Standard Operating Policy
City of Oakdale
Amended:
1.1 Under the Minnesota Municipal Industrial development Act, Minnesota Statutes, Sections
469.152 to 469.165 (the "Industrial Development Act"), the City of Oakdale , Minnesota has
authority to issue revenue bonds or notes to attract or promote economically sound industry and
commerce to the City, including the development of facilities by qualified 501(c)(3) organizations.
1.2 Under Minnesota Statutes, Chapter 462C (the "Municipal Housing Act") the City is authorized to
issue housing revenue bonds to finance multi-family residential housing projects for low and
moderate income persona and elderly persons.
1.3 The City Council is aware that such financing for certain private activities may be of benefit to the
City and will consider requests for tax exempt financing subject to these Guidelines. The City
Council considers tax exempt financing to be a privilege, not a right.
1.4 It is the judgment of the City Council that tax exempt financing is to be used on a selective basis
to encourage certain development that offers a benefit to the City as a whole, including
employment and housing opportunities. It is the applicant's responsibility to demonstrate the
benefit to the City. The applicant should understand that although approval may have been
granted by the City for the issuance of financing for a similar project or a similar debt structure
that is not a basis upon which approval will be granted. Each application will be judged on the
merits of the project as it relates to the public purposes of the Housing Act or the Industrial
Development Act and the benefit to the City at the time the request for financing is being
considered
2.0 General Requirements
2.1 The City Council will consider tax exempt financing for manufacturing and health care facilities,
and other facilities operated by qualified 501(c)(3) organizations, under the Industrial
Development Act; and housing projects under the Housing Act. An applicant for tax-exempt
financing pursuant to the Industrial Development Act must submit to the City the application
attached to these Guidelines.
2.2 The project must be a positive benefit to the City. The project must be of a nature that the City
wishes to attract, or an existing business which the City wishes to retain or expand within the City,
considering employment opportunities, incentive for further development, impact on City
services, and support for the industrial, commercial or health care operations currently located in
the City. A housing project must provide significant housing opportunities for low and moderate
income persons, those with physical disabilities, or the elderly.
2.3 The City Council will, if requested, grant an applicant a pre -application review. The purpose of the
pre-application review is to inform applicants of the possibility of rejection or the possible basis
for such a rejection. The fact that the project is not rejected at the pre-application stage is not to
be construed as approval of the project or as an indication that the project will be approved upon
formal request to the Council. Requests for tax-exempt financing may be rejected by the City
whether or not the project was submitted to a pre-application review and regardless of the
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outcome or recommendation of that pre-application review.
A request for pre-application review must be in writing, addressed to the City Administrator, and
set forth the name of the project, the type of project intended and the name, address and
telephone number of the person who will be representing the applicant at the pre-application
review, together with such additional information as the applicant desires to submit.
The City will appoint bond counsel for the bond issue, which will normally be the City's regularly
retained bond counsel.
2.4 Pursuant to the Industrial Development Act and the Housing Act, consideration of an application
for tax exempt financing must be done at a public hearing held by the Council.
2.5 The City is to be reimbursed and held harmless for and from any out-of-pocket expenses related
to the tax-exempt financing including, but not limited to, legal fees, financial advisor fees, bond
counsel fees, the City's expenses in connection with the application, and any deposits or
application fees required under state law in order to secure allocation of bonding authority. A
non-refundable application fee in the amount of $3,000 must be included with the submission of
the application.
Prior to closing and delivery of the bonds for the project, the applicant must pay to the City, or
commit to pay, as the case may be, a one-time administrative fee equal to the greater of
$10,000 or 0.50% of bond issue amount. Notwithstanding anything to the contrary herein, the
administrative fees required by this paragraph will be reduced to the extent needed to ensure
that the fee does not affect the tax-exempt status of the bonds under Internal Revenue Code of
1986, amended and related regulations.
2.6 Should the tax exempt financing request cause the City's total bonding for the year to exceed
$10,000,000 in a year that the City would otherwise be eligible to issue bank qualified bonds,
(bonds with tax incentives to banks), any interest rate differential between bank qualified and
non-bank qualified bonds shall be estimated and the difference paid by the borrower. If the City
would have exceeded this amount without the tax-exempt issue, no differential would be
calculated or paid by the borrower.
2. 7 Applications for financing must be made on the forms attached to these Guidelines. In addition,
the applicant must furnish a description of the project, together with a brief description of
applicant and the proposed financing in such form as required at the time of application. The City
will not review financial statements, nor form any opinions as to the financial success of the
proposed business plan.
2.8 The City may, in its sole discretion, withdraw its preliminary approval of a project any time if in its
judgment the purposes of the Act will not be served by going forward with the project and it's
financing
3.0 Other Matters
3.1 The City will give its most favorable consideration to proposed tax-exempt bond issues that have
the rating of "A" or better by Moody's Investment Service Standard & Poor's Corporation, Fitch
Ratings or Kroll Ratings. Issues carrying lower ratings or non-rated issues may be sold only to
institutional or other investors on a private placement basis and must be in denominations of at
least $100,000. The City Council may depart from this guideline when, in its judgment, the
project is of a level of merit and public purpose to justify the departure; and in the case of such a
departure, the City Council must state its reasons therefore in the resolution awarding the sale of
bonds.
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3.2 The City Council may approve the refunding of a tax-exempt issue, but only upon a showing by the
applicant of (i) substantial debt service savings, (ii) the removal of bond covenants significantly
impairing the financial feasibility of the project, or (iii) both (i) and (ii). A non-refundable
application fee in the amount of $3,000 must be included with the submission of the application.
In the case of refunding of bonds for which the administrative fee listed in paragraph 5 of Part II
have been paid in full, the administrative fee shall be reduced to the greater of $10,000 or
0.25% of bond issue amount. If any fees related to the initial bond issue have not been paid,
such fees must be paid in full prior to closing the refunding bonds.
3.3 Where changes to the underlying documents or credit facilities of outstanding bond issues are to
be made and require Council action (including changes that are a "deemed reissuance" under
Internal Revenue Service regulation), no administrative fee is charged but a non-refundable fee
of $3,000 must be deposited with the City to cover administrative costs. No formal application
form is required.
3.4 The City may consider requests for tax-exempt financing of projects in the City by other political
subdivisions in cases where the project is done in conjunction with other communities, the
financing needed for the Oakdale portion not greater than 25% of the total multi-jurisdictional
project and the financed portion located within Oakdale is not more than $5,000,000 or where
the development provides community services to the vicinity including Oakdale. In these cases
the non-refundable application fee must be paid and all procedures through the approval of the
preliminary resolution followed.
3.5 The City Council conducts all tax-exempt financing matters at regularly scheduled City Council
meetings held on selected Tuesdays of each month. Documents for City Council consideration
must be at the City office no later than 14 days prior to the next City Council meeting. Council
meeting at which the matter is to be considered. In the case of a publicly offered bond issue, the
documents, when submitted, may specify a maximum price and maximum effective interest rate
if prices and rates have not yet been established.
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FINANCIAL MANAGEMENT POLICIES | City of Bloomington, MN
Conduit Debt Policy
City of Bloomington, Minnesota
Conduit Debt Policy
General
The City of Bloomington is granted the power to issue conduit revenue bonds and other conduit
revenue obligations under Minnesota Statutes, Section 469.152-469.165, as amended, and Minnesota
Statutes, Chapter 462C, as amended (the “Conduit Bonds Acts”). The Bloomington City Council, being
aware that such financing may prevent the emergence of blighted land, excessive unemployment and
the need for redevelopment financing from the State and Federal governments, has expressed its
support for the use of such financing but has reserved the right to approve or reject projects on a case-
by-case basis. The following criteria have, therefore, been developed as a guide for review of
applications:
Criteria
a.The project is to be compatible with the overall development plans and objectives of the City and of
the neighborhood in which the project is located.
b.New businesses locating in Bloomington must show relatively substantial new employment and tax
base being generated by the project.
c.Locating in areas of the City that the City wishes to develop, redevelop, or which in any way
complements any development plans or policy of the City, will constitute a prime purpose under
these guidelines. It is also the City’s intent to assist in business expansions or relocations within the
City where it can be shown that such would have a substantial, favorable impact on employment or
tax base, or both.
d.It is the City’s intent to assist new or existing businesses in the acquisition of existing facilities, where
such acquisition will maintain the stability of the tax base, or of employment, or both, and provided
that not less than 15% of the portion of the cost of acquiring the existing facility financed with the
net proceeds of the conduit bonds is to be used for rehabilitation of the existing facility.
e.The project must not put a burden on existing City services or utilities beyond that which can be
reasonably and economically accommodated.
f.The applicant (and/or the lessee in the case of property to be leased) must have a good financial
standing, show a substantial net worth, or equity in the project, or both, and have an acceptable
earnings history or pro forma. Projects are to show in the application for financing an owner equity
or other collateral (such as a bank Letter of Credit, a Bankers Acceptance, Pledge of a Certificate of
Deposit, insurance company guarantee, or similar security) which will be satisfactory to the end-
lender or rating agency, all determined with reference to total project costs, and applicant is to file
FINANCIAL MANAGEMENT POLICIES City of Bloomington
with the City, if requested, a final statement of total costs and project equity, certified to by an
authorized officer or partner, or the individual applicant, said statement to be filed at time of
requesting the Final Resolution.
g.The credit rating and method of offering conduit* bonds or notes of the City are important
considerations. The City will not entertain applications for such financings unless (i) the debt is rated
in the “A” category (or better) by a nationally recognized rating agency or (ii) the debt is sold in a
private placement. Debt will be considered sold in a private placement (i) if no advertising or
solicitation of the general public occurs, and (ii) if the bonds are initially sold to not more than ten
purchasers (not including any underwriter or placement agent as a purchaser) and (iii) the City
receives written certification from each initial purchaser (or each underwriter or placement agent
based on its reasonable belief) that: (a) such purchaser has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits and the risks of the debt,
and (b) such purchaser is not purchasing for more than one account or with a view to distributing
the debt.
In addition, for a private placement either (a) all bonds or notes (except for one bond or note) must
always remain in minimum denominations of not less than $100,000, or (b) investment letters from
not only each initial purchaser, but from any subsequent purchaser must be obtained which
contains the above described certifications from the purchasers. Any offering material for a private
placement must prominently state in effect that: “THE CITY OF BLOOMINGTON HAS NOT ASSUMED
ANY RESPONSIBILITY TO REVIEW THIS OFFERING MATERIAL AND HAS NO RESPONSIBILITY FOR ITS
ACCURACY OR COMPLETENESS. THE CITY HAS NO FINANCIAL OBLIGATION OF ANY NATURE WITH
RESPECT TO THE OFFERED BONDS.”
Finally, to qualify as a private placement the financing documents must require annual financial
statements from the benefited private party (or the ultimate provider of credit) to be delivered to
each investor (or a trustee).
*The term “conduit” refers to any type of City revenue obligation the proceeds of which are loaned
to a private party and for which the City has no financial obligation.
h.Applications for acquisition of or replacement of machinery and equipment will be discouraged
unless in conjunction with a totally new business in Bloomington, a physical plant expansion of an
existing business, or where it is shown that the equipment acquisition is essential to the continued
operation of the business in Bloomington. Also, it is the City’s intent to assist where possible in the
acquisition of pollution control equipment for any new or existing business being required to meet
mandated standards.
i.A further permitted use under these guidelines are projects, whether profit or nonprofit, engaged in
providing health care services, including hospitals, nursing homes, and related medical facilities, but
only when the following findings can be made:
1)Number of new jobs and related payroll is relatively significant.
2)The project would provide a facility or service, or expansion thereof considered desirable or
necessary from a community services standpoint.
FINANCIAL MANAGEMENT POLICIES City of Bloomington
3)The project application also meets requirements of paragraph a, e, f and g of these guidelines.
Procedures
a.The applicant shall make an application for financing on forms available from the Finance
Department of the City of Bloomington. The completed application is to be returned to the Chief
Financial Officer, accompanied by the processing fee, whereupon the application will be forwarded
to the City Council with a Staff recommendation. Specific findings shall be made and recited
regarding the criteria as well as satisfaction of public purposes of the Conduit Bonds Acts.
b.The application cannot be considered by the City until tentative City Code findings and requirements
have been made with respect to zoning, building plans, platting, streets and utility services.
c.The applicant shall submit a timetable for completion of the project as part of the application and
any apparent major deviation from that timetable will automatically cause the application to be
brought back to the City Council for review. This timetable must relate to the State timetable for
entitlement and pool allocations. The financing must be completed within the calendar year for
which application is made.
d.The applicant is to select qualified financial consultants and/or underwriters, as well as legal
counsel, to prepare all necessary documents and materials. The City may rely on the opinion of such
experts and the application shall be accompanied by a financial analysis (pro forma income
statement, debt service coverage, mortgage terms, etc.) by the underwriter as to the economic
feasibility of the project and the underwriter’s ability to market the financing. Financial material
submitted is to also include most recent fiscal year-end, audited, financial statements of the
applicant and/or of any major lessee tenant, if readily available.
e.Further, in the case of the tax exempt mortgage placements, the applicant will be required to
furnish the City, before passage of the Final Resolution, a comfort letter (but not necessarily a letter
of commitment) from the lending institution, to the affect that said lending institution has reviewed
the economic feasibility of the project, including the financial responsibility of the guarantors and
find that, in their professional judgment, it is an economically viable project.
f.The applicant shall furnish along with the application, a description of the project, plat plan,
rendering of proposed building, etc., and a brief description of the applicant company, all in such
form as shall be required at the time of application. Such of this data as necessary may be furnished
to members of the City Council for background information.
g.If an allocation of bonding authority is required under Minnesota Statutes, Chapter 474A, as
amended (“Chapter 47 4A”, the applicant shall be required to pay any required application fee and
provide any required application deposit as specified in Chapter 474A, without regard to whether
the application fee or application deposit will be refunded.
h.The applicant shall covenant in the applicable conduit bond documents to comply with all applicable
requirements of the Internal Revenue Code of 1986, as amended (the “Code”), and the applicable
FINANCIAL MANAGEMENT POLICIES City of Bloomington
Treasury Regulations, including, but not limited to: (i) the arbitrage and rebate requirements of
Section 148 of the Code; and (ii) the qualified bonds provisions of Sections 141(e), 142, 143, 144,
and 145 of the Code. The applicant shall be the party responsible for monitoring the conduit bonds
for compliance with such requirements and to remediate nonqualified bonds in accordance with the
requirements of the Code and applicable Treasury Regulations. The applicant shall be the party
responsible for monitoring compliance with the requirements of Section 148 of the Code.
i.The applicant shall covenant in the applicable conduit bond documents to reimburse the City for all
costs paid or incurred by the City (including the fees of attorneys, financial advisors, accountants,
and other advisors) as a result of the City’s response to or compliance with an audit, inspection, or
compliance check (random or otherwise), by the Internal Revenue Service, the Minnesota
Department of Revenue, the Minnesota Office of the State Auditor, or any other governmental
agency with respect to the conduit bonds or the project financed with the proceeds of the conduit
bonds.
Administrative
a.The City Council reserves the right to deny any application for financing at any stage of the
proceedings prior to adopting the final resolution authorizing issuance of the industrial development
financing. The City Council may waive any provision of this Conduit Bonds Policy if the City Council
determines that such waiver is in the best interests of the City.
b.The City is to be reimbursed, and held harmless, for and from any out-of-pocket costs related to the
actual or proposed issuance of conduit revenue bonds. In addition, a nonrefundable processing fee
of $5,000 must be submitted with the application. Upon closing, an administrative fee of 0.75% of
par is due and payable to the City.
In the case of a refinancing, the fee shall be calculated at 50% of the above schedule. The City will be
reimbursed for any technical changes to a bond issue previously issued to be calculated at 25% of
the above schedule.
c.All applications and supporting materials and documents shall remain the property of the City. Note
that all such materials may be subject to disclosure and/or public review under applicable provisions
of State law.
d.The Finance Department shall, report all conduit debt issues in the Comprehensive Annual Financial
Report in accordance with Generally Accepted Accounting Principles and shall report any material
events with regard to all conduit debt issued by the City, and still outstanding, to the City Council.
(Adopted by City Council - 4/10/78, Revised complete Policy and Criteria - 6/12/78, Sections lc., 1g. and
1h. amended - 4/09/79, Sections lb., 1c., 1f., 1g. and 2e. amended - 11/19/79, Section 1i. added -
10/15/80, Section 1f. and 1g. amended - 4/27/81, Section 1f. amended - 8/02/82, Section 1f. amended -
7/25/83, Section 1d. amended, 1j. added, 2d. amended, 2h. added and Section 4 added - 7/30/84,
Section lg., 2b., 2g. and 3d. amended - 4/13/92, Section 3b. - amended 3/15/93, Revised complete Policy
5/17/2010, Section 2h and 2i amended – September 12, 2011; Amended Administrative Section b –
11/18/2019)
FINANCIAL MANAGEMENT POLICIES City of Bloomington
FINANCIAL MANAGEMENT POLICIES
ADOPTION
The Financial Management Policies shall be adopted by resolution by the City Council. The policies shall
be reviewed by the Finance and Accounting staff on an ongoing basis and any modifications made
thereto must be approved by the City Council.
Adopted by City Council August 31, 1987; Adopted by Bloomington Housing and Redevelopment
Authority and Bloomington Port Authority November 10, 2009.
Policy Origination
Date
Last Revision
Date
Page #
Financial Management Policies 8/31/1987 2/22/2021 All
Abatement District Policy 5/20/2002 1/27/2020 35
Budgetary and Financial Control Policy 1/23/2012 1/2/2018 7
Business Subsidy Policy 11/19/2007 11/18/2019 37
Capital Improvement Program Policy undated 1/2/2018 23
Conduit Debt Policy 4/10/1978 11/18/2019 24
Debt Policy undated 5/20/2002 28
External Auditor Independence Policy 5/20/2002 1/23/2012 6
Forfeited Funds Policy undated 1/23/2012 10
Fund Balance Year-End Classification Policy undated 12/19/2011 47
Investment Policy 3/3/1997 12/1/2014 12
Mileage Reimbursement Policy undated 4/20/2018 72
Post-Issuance Compliance Policy for Tax-Exempt Govt. Bonds 6/22/2009 1/27/2020 29
Public Purpose Expenditure Policy undated 5/22/2017 50
Purchasing Policy 5/20/2002 9/12/2011 54
Revenue Policy 8/31/1987 1/23/2006 60
Risk Management Policy undated 1/19/2006 62
Self-Insurance Reserve Policy 1/23/2012 1/23/2012 63
Tax Increment Policy 6/10/1991 1/27/2020 43
Travel Policy 11/1/1980 2/4/2019 65
Uniform Grant Guidance Policy 2/22/2021 2/22/2021 57
Utility Collection Policy 10/21/2013 10/21/2013 61
FINANCIAL MANAGEMENT POLICIES City of Bloomington
CITY OF SHAKOPEE, MINNESOTA
PRIVATE ACTIVITY REVENUE BOND POLICY
I.INTRODUCTION
The City of Shakopee, Minnesota (the "City ") has the authority to issue revenue bonds
pursuant to Minnesota Statutes, Sections 469.152 to 469.1651 (the "Industrial Development Act ")
and Minnesota Statutes, Chapter 462C (the "Housing Act "). The City Council of the City will
consider the issuance of private activity bonds (both taxable and tax - exempt) to finance the
following types of projects:
1) Manufacturing / industrial facilities;
2) Multifamily housing;
3) Health care facilities;
4) Other projects on behalf of 501(c)(3) organizations; and
5) Other projects authorized by state statutes and federal law.
In extraordinary circumstances, the City Council of the City may consider and approve
the issuance of private activity bonds by the Economic Development Authority for the City of
Shakopee (the "EDA ").
II. GENERAL REQUIREMENTS
The following are the general guidelines and requirements the City will use to evaluate
requests for private activity bond financing. The City has complete discretion regarding whether
to issue private activity bonds and reserves the right to approve only proposals which, in the
opinion of the City, meet the needs of the City and have a strong likelihood of success. All
proposals for the issuance of private activity bonds must meet the following general
requirements:
A. Be consistent with the City's Comprehensive Plan.
B. Fulfill all of the applicable federal and state requirements for the issuance of
bonds.
C.Comply with all applicable federal, state, regional, and City laws, including
zoning and land use regulations and ordinances applicable to the project.
D. The applicant agrees to use the legal services of a bond attorney designated by the
City of Shakopee.
E.The applicant for bond financing and the applicant's chosen bond underwriter,
placement agent or lender shall hold the City and its respective officers,
consultants, and agents harmless from any alleged or actual violations of any
securities laws, state or federal, in connection with the issuance of bonds for the
project. In addition, the City shall not be held responsible for any debt repayment
of the bond issue or other costs relating to the project to be financed, should it fail
financially for any reason.
F.The City is to be reimbursed and held harmless for and from any out -of- pocket
expenses related to the bonds including, but not limited to, legal fees, financial
analyst fees, bond counsel fees, the City staffs expenses in connection with the
application, and any deposits or application fees required under state law in order to
secure allocation of bonding authority. The applicant must execute a letter to the
City undertaking to pay all such expenses. A form of the required letter is set forth
in Exhibit C.
G. If the City determines that issuance of the bonds requested by the applicant is
reasonably expected to cause governmental bonds issued by the City in that
calendar year to be ineligible for designation as "qualified tax exempt obligations"
under Section 265(b)(3) of the Internal Revenue Code of 1986, as amended (also
known as "bank qualified "), the applicant will be required to reimburse the City,
at the time of issuance of the City' s bonds, for any interest rate differential
between bank qualified and non -bank qualified bonds.
H. Applications for financing must be made on the forms attached to this Private
Activity Revenue Bond Policy.
I.The applicant must deposit all required fees on a timely basis.
J.The Council may, in its sole discretion, impose conditions exceeding those required
under the City building code in respect to exterior building materials, landscaping,
signage lighting, and such other aspects as the Council may consider appropriate on
a case -by -case basis.
K. The Council may, in its sole discretion, withdraw its preliminary approval of a
project any time if in its judgment the purposes of the Industrial Development Act or
the Housing Act will not be served by going forward with the project and its
financing.
III. TYPES OF PROJECTS
1.Manufacturing / Industrial Facilities
Bonds for manufacturing facilities are issued under the Industrial Development Act and
either Section 144(a) or Section 141 of the Internal Revenue Code, as amended (the "Code "). In
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addition, the bonds are generally subject to the volume cap allocation requirements of Minnesota
Statutes, Chapter 474A, as amended. The purpose of issuing bonds for such facilities is to
encourage the development of appropriate industrial projects that will benefit the community by
providing jobs and economic development, eliminating blight, and increasing property values.
Manufacturing bonds are available only for "core" manufacturing projects, and only for relatively
small manufacturers (cannot expect to have more than the maximum IRS allowable capital
expenditures in the City in the six -year period surrounding issuance of the bonds).
2.Multifamily Housing
Housing bonds to fmance privately -owned multi - family housing facilities within the City
are authorized under the Housing Act and either (a) in the case of facilities owned by 501(e)(3)
entities, Section 145 of the Code or (b) in the case of facilities owned by non- 501(c)(3) entities,
Section 142(d) of the Code. The purpose of issuing multifamily housing bonds is to benefit the
community by encouraging the availability of multifamily housing opportunities for residents of the
City. The City within its sole discretion will determine whether or not to approve Housing bonds
and if so, which multifamily project or projects it will finance. All housing projects financed with
tax- exempt bonds must comply with the restrictions set for in the Housing Act and Section 142(d)
of the Code and the Treasury Regulations promulgated thereunder.
3.Health Care Facilities
Health care facility revenue bonds are issued to finance hospitals, nursing homes or
assisted living facilities within the City owned and operated by 501(c)(3) entities. Such bonds
are issued in accordance with the Industrial Development Act or the Housing Act and Section 145
of the Code. The purpose of issuing health care bonds is to benefit the community by encouraging
the availability of affordable health care services for residents of the City.
4.Facilities for other 501(0(3) Organizations
Bonds may be issued to finance facilities within the City providing services that benefit
the City and its residents (including, without limitation, educational services) owned and
operated by 501(c)(3) entities. Such bonds are issued in accordance with the Industrial
Development Act or the Industrial Development Act and Section 145 of the Code. The purpose of
issuing such bonds is to benefit the community by encouraging the availability of beneficial
services for residents of the City.
IV. DESIGN AND MAINTENANCE STANDARDS
A. The project to be financed shall use building and design materials that are in
compliance with applicable state and local building and licensing codes and
designated maintenance standards.
B. The design and maintenance must be compatible with other neighboring land
uses, building architecture, and landscaping.
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V. FEES
A. A non - refundable application fee of $1,000 is due at the time the application is
made. This fee shall be due in the case of an application for either a new money
bond issue or a refunding bond issue. This application fee is in addition to the
other fees set forth below and is not a credit against said additional fees.
B. A bond administration fee of the greater of $10,000 or 0.50% of the principal
amount of the bonds is due at the time of closing on the bonds, subject to a
maximum fee of $50,000. This fee shall be due in the case of all new money
issues.
C. For bonds to be issued to refund a bond issue not issued by the City and for which
the bond administration fee in paragraph B was previously paid to the City, no
additional bond administration fee will be required.
D. For bonds to be issued to refund a bond issue previously issued by the City or its
EDA, a bond administration fee of the greater of $10,000 or 0.25% of the
principal amount of the refunding bonds is due at the time of closing on the
bonds, subject to a maximum fee of $50,000.
E.All fees and expenses in relation to the issuance of the bonds (in addition to the
foregoing application fee and bond administrative fee), including the fees of the
City's bond counsel, shall be the responsibility of the applicant, regardless of
whether the bonds are actually issued.
F.For applications requiring an allocation of bonding authority from Minnesota
Management and Budget ( "MMB ") pursuant to the provisions of Chapter 474A,
an application, in the form prescribed by MMB, must be submitted to MMB along
with the appropriate application deposit and nonrefundable application fee due to
MMB.
VI. HOST APPROVAL
The City will consider requests for the issuance of bonds by other political subdivisions to
finance of projects in the City. In these cases, the non - refundable application fee must be paid. No
administrative fee is charged, except actual costs incurred by the City, including costs associated
with a review by the City's bond counsel (if necessary), must be reimbursed. The City reserves the
right to reject such requests for any reason, including without limitation a determination by the City
that such issuance by another political subdivision would impair the City's ability to issue
governmental bonds as "bank qualified bonds" in that calendar year.
VII. REFUNDING BONDS
Previous issuance of bonds by the City does not commit the City to the issuance of
refunding bonds at a future date. Applications for the refunding of previously issued bonds will
be evaluated in terms of general benefit to the City based on such factors as financial benefit to
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the applicant, the project's past operating history, including property maintenance and
employment, and the applicant's future plans for operations in the City. To the extent
appropriate, the provisions of this Private Activity Revenue Bond Policy shall apply to refunding
bonds.
It is recognized that projects previously financed may not have met the foregoing
requirements applicable to new financing requests. Applications that include the refunding of
previously issued bonds will be evaluated based on such factors as substantial debt service
savings, removal of bonding covenants significantly impairing the financial feasibility of the
project, significant rehabilitation or physical improvements of the property, or enhancements to
the affordability of existing rents.
VIII. POST - ISSUANCE COMPLIANCE
The City will require that each applicant demonstrate to the City that it will comply with
substantially the same procedures for post- issuance compliance that apply to City governmental
bonds under the City's Post Issuance Debt Compliance Policy, approved December 1, 2009, as
amended from time to time. The City may require that applicants retain a trustee and/or an
independent arbitrage consultant for the term of the bonds.
IX. APPLICATION PROCESS
The process for obtaining bond financing is as follows:
A. An application for the issuance of bonds must be submitted in the form specified
by City staff along with the required application fee. Please submit applications
to:
Finance Director
City of Shakopee
129 Holmes St. South
Shakopee, MN 55379
B. City staff will complete an initial review to evaluate the proposal and determine
whether it qualifies for consideration for financing.
C. Staff will consult with the City's bond counsel as necessary to verify the project's
qualifications for financing.
D. For bonds requiring a bond allocation from the Department prior to issuance, the
proposal will be presented to the City Council for a preliminary resolution. The
resolution will identify the preliminary intent of the City to issue bonds, a
description of the proposed project, and the amount of bonds to be issued. Upon
adoption of the preliminary resolution, the applicant, working with the City's
bond counsel, shall prepare the application to be submitted by the City for a bond
allocation to MMB.
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E. All of the bonds for new money projects described in this Private Activity
Revenue Bond Policy require a public hearing held by the City at some time after
the public hearing. Housing bonds under Chapter 462C require, prior to
publication of notice of the public hearing, submission of a Housing Program to
the Metropolitan Council. The Housing Program must be approved by the
Metropolitan Council. Following such public hearing, the City will adopt a final
bond resolution approving the documentation to be executed by the City and
authorizing the execution of said documents and the issuance of the bonds.
F.Prior to the issuance of bonds (other than housing bonds issued under the Housing
Act), and following the public hearing, the City must file an application for
approval of the bond issue with the Minnesota Department of Employment and
Economic Development ( "DEED "). The application is considered routine if the
proper documentation is filed including the completed application form, the City's
bond resolution, a preliminary bond counsel opinion, evidence of the public
hearing, and a letter of preliminary intent from the applicant's chosen bond
underwriter, placement agent or lender to underwrite the bond issue. DEED
approval is required before issuance of the bonds.
G. Until the bonds are issued, the City reserves the right to:
1) Reject applicant's choice of underwriter, trustee, paying agent, placement
agent, or legal counsel.
2) Require corrections or amendments to any legal document.
3) Reject the proposal and the issuance of the bonds if the City determines, in
its sole discretion, that the financing is not in furtherance of the City's
goals or is otherwise unacceptable, even if preliminary approval for the
proposal or any part of the proposal being separately considered has
previously been given.
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APPROVED AND ADOPTED this 18 of June, 2013 by the City Council of the City of
Shakopee, Minnesota.
CITY OF SHAKOPEE, MINNESOTA
By:
Brad Tabke, Mayor
ATTEST:
Julie Linnihan, City Clerk
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Exhibit A
APPLICATION FOR ISSUANCE OF
SHAKOPEE
PRIVATE ACTIVITY BONDS
Industrial, Health Care or Other Non - Housing Non - Profit Projects)
1.APPLICANT
a.Business Name:Date of Application:
b.Business Address:
c.Primary Business Contact Name:
Telephone number:Email:
d.Authorized Business Representative:
e.Structure:
Corporation Partnership Sole Proprietorship LLC n Other:
2.PURPOSE OF REQUESTED FINANCING:
New Facility Expansion Refunding
3.ESTIMATED PROJECT COSTS: (Not required for refunding)
Land
Building
Equipment
Architectural, Engineering
Costs of Issuance
Capitalized Interest (including discount)
Other
Total Financing Requested
5.AMOUNT OF FINANCING REQUESTED: $of project costs)
6.TYPE OF FINANCING PROPOSED:
a. 111 Publicly Sold Bonds Privately Placed Bonds (Bonds sold to a Bank)
b. Expected Term of Financing Years
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c. Security:
Mortgage El Letter of Credit Guarant (third party)
Guaranty (personal)Unsecured Other (specify)
7.BUSINESS PROFILE: (Not required for refunding)
a. Job Information
1. Current number of Full Time Equivalent Employees:
Full Time Equivalent (FTE) is based on total annual hours of 2080
2. Number of New Permanent Jobs to be Created:
3. Number of Construction Jobs to be Created:
4. Number of Jobs to be Relocated:
b. Length of Time in Business:
c. Do you have facilities in other locations? Yes No
If yes, where:
8.NAMES OF:
a.Underwriter, Place Agent or Lender Name:
Contact Person Name:
Telephone:Email:
b.Corporate Counsel Name:
Telephone:Email:
c.Counsel to Underwriter, Place Agent or Lender Name:
Telephone:Email:
9.WHAT IS YOUR TARGET DATE FOR:
a.Construction start:
b.Construction completion:
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10. ATTACHMENTS:
Attach the following information with the application. Application is not considered complete until all
documents have been received.
a) Description of the project;
b) Give a brief description of the nature of the business, principal products, etc.;
c) Plot plan, elevation of proposed buildings, landscape, lighting, and site preparation;
d) Preliminary sources and uses for financing project;
e) Initial application fee; and
f) Indemnification Letter of Agreement.
I certify that the information provided above contains no misrepresentations, omissions or concealments of
material facts and that the information given is true and complete to the best of my knowledge. I have been
furnished a copy of the Procedure for Application to the City of Shakopee for Private Activity Revenue
Bond Financing and I am aware of its content and agree to be bound by its terms and the terms of the
indemnification letter.
Signature / Title Date
NOTICE TO COMPANY: Data Practices Act
The information that you supply in your application to the City of Shakopee /Shakopee EDA ( "City ") will
be used to assess your eligibility for financial assistance. The City will not be able to process your
application without this information. The Minnesota Government Data Practices Act (Minnesota
Statutes, Chapter 13) governs whether the information that you are providing to the City is public or
private. If financial assistance is provided for the project, the information submitted in connection with
your application will become public, except for those items protected under Minnesota Statutes, Section
13.59, Subdivision 3(b) or Section 13.591, Subdivision 2.
I have read the above statement and I agree to supply the information to the City with full knowledge of
the matters contained in this notice. I certify that the information submitted in connection with the
application is true and accurate.
Signature / Title Date
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Exhibit B
APPLICATION FOR PRIVATE ACTIVITY BONDS
SHAKOPEE Multi - Family Housing)
1.APPLICANT
a.Business Name:Date of Application:
b.Business Address:
c.Primary Business Contact Name:
Telephone number:Email:
2.PROJECT INFORMATION
a.Project Name:
b.Business Location:
3.RENTAL INFORMATION
Monthly Rent Units
Efficiency
One Bedroom
Two Bedroom
Three Bedroom
Parking (included in rent)
Parking (not included in rent)
Laundry
Utilities included in monthly rent:
4. OPERATING EXPENSES:of Gross (Annual)
5. TOTAL PROJECT COST: 6. DEVELOPER EQUITY:
7. DEBT SERVICE:8. *HARD COSTS:
9. LAND VALUE:10. SOFT COSTS:
Hard Costs are all project costs the IRS has determined to be eligible items for depreciation.
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11. ANTICIPATED INTEREST RATES:
12. ANTICIPATED TERM OF DEBT:
13. If the project were conventionally fmanced, what interest rate would you expect to pay?
14. EQUIPMENT: $of project cost is for equipment (e.g., washers/dryers)
15.
ANTICIPATED INCREASES:ANTICIPATED VACANCY RATE:
Revenue:per year First Year:
Expenses:per year After First Year:
16. CONSTRUCTION SCHEDULE
Anticipated construction commencement date:
Anticipated construction completion date:
17. ATTACHMENTS:
Attach the following information with the application. Application is not considered complete until all
documents have been received.
a) Description of the project;
b) Plot plan, elevation of proposed buildings, landscape, lighting, and site preparation;
c) Preliminary sources and uses for financing project;
d) Initial application fee; and
e) Indemnification Letter of Agreement.
I certify that the information provided above contains no misrepresentations, omissions or concealments of
material facts and that the information given is true and complete to the best of my knowledge. I have been
fumished a copy of the Procedure for Application to the City of Shakopee for Private Activity Revenue
Bond Financing and I am aware of its content and agree to be bound by its terms and the terms of the
indemnification letter.
Signature / Title Date
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NOTICE TO COMPANY: Data Practices Act
The information that you supply in your application to the City of Shakopee /Shakopee EDA ( "City ") will
be used to assess your eligibility for financial assistance. The City will not be able to process your
application without this information. The Minnesota Government Data Practices Act (Minnesota
Statutes, Chapter 13) governs whether the information that you are providing to the City is public or
private. If financial assistance is provided for the project, the information submitted in connection with
your application will become public, except for those items protected under Minnesota Statutes, Section
13.59, Subdivision 3(b) or Section 13.591, Subdivision 2.
I have read the above statement and I agree to supply the information to the City with full knowledge of
the matters contained in this notice. I certify that the information submitted in connection with the
application is true and accurate.
Signature / Title Date
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EXHIBIT C
INDEMNIFICATION LETTER OF AGREEMENT
The Mayor of the City of Shakopee
and Members of the City Council
City of Shakopee
129 Holmes St. South
Shakopee, MN 55379
RE: Application of for Private Activity Bond Financing by the City of Shakopee
Dear Mayor and Members of the City Council:
This letter of agreement is given by a under the laws of
Minnesota ( "Applicant ") as required by the City of Shakopee, Minnesota in connection with its
consideration of an application for private activity bond financing for the project described in the
application.
Applicant agrees as follows:
1. Applicant agrees to pay or reimburse the City for any and all costs and expenses which the City may
incur in connection with its consideration of the project and the granting of bond financing therefor,
whether or not the project is preliminarily approved by the City, whether or not the project is
approved by the State of Minnesota, if necessary, whether or not revenue bond financing is finally
approved by the City, and whether or not the bonds are issued and sold.
2. Applicant agrees to indemnify and hold the City, its officers, employees and agents harmless against
any and all losses, claims, damages, expenses or liabilities, including attorneys fees incurred in their
defense, to which the City, its officers, employees and agents may become subject in connection with
the City's consideration, issuance or sale of the bonds for Applicant's project and the carrying out of
the transactions contemplated by this agreement and any resolutions adopted, or agreements executed
by the City in connection with the issuance of its bonds for this project.
3. Applicant hereby releases the City, its officers, agents and employees from any claims, causes of
action, losses, damages, or liabilities which it may have against the City, its officers, agents, and
employees or which it may incur in connection with: the City's consideration of the application for
industrial development revenue bond financing for Applicant's project; the failure of the City, in its
discretion, to issue bonds for Applicant's project; the issuance and sale of the bonds; the construction
of the project; or any other matter or thing of any type or nature whatsoever which may arise in
connection with the foregoing.
4. Applicant is aware of the City's application and administrative fee structure for bonds and agrees and
covenants that all such fees will be paid in the amount and at the times required.
Dated:APPLICANT NAME]
By
Its
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