Explanation
This ordinance authorizes the issuance of Notes in conjunction with the "Development Agreement" between the City and Nationwide Arena, LLC. This ordinance compliments Ordinance No. 2202-98 which authorized such Agreement when revenue from the tax increment financing districts (TIF's) related to the sale of the Old Penn Site do not reach a level of 65% of the debt service on the related bonds. Nationwide Arena, LLC is required to make payments to the City equating to 65% of the bond's debt service requirement less the amount of TIF revenues. As indicated in the ordinance the aggregate principal amount of all such notes shall not exceed $9 million. The City has received payments in 2002, 2003, and 2004. These notes will be payable solely from future TIF revenues when such revenue exceed 65% of the required debt service on the bonds. Payments are likely to be made to the City for several more years.
This ordinance does not require the waiver of a second reading and can be considered a 30 day ordinance. The City Auditor recommends and requests passage of this ordinance.
title
To authorize the issuance of Notes pursuant to the "Development Agreement" previously entered into between the City of Columbus and Nationwide Arena, LLC authorized by ordinance 2202-98. ( $9,000,000)
body
WHEREAS, pursuant to Ordinance No. 2202-98, passed by this Council on July 27, 1998, the City of Columbus, Ohio (the "City") entered into that certain Capital Improvements Project Development and Reimbursement Agreement for Nationwide Arena District dated as of September 15, 1998 (the "Development Agreement") between the City and Nationwide Arena, LLC (the "Company") (as assignee of NWD Investments, LLC under the Development Agreement), providing for, among other things, the construction of certain public improvements (the "Public Improvements") within an area of the City bounded by Spring Street, Neil Avenue, I-670, and High Street (the "Arena District");
WHEREAS, in the Development Agreement, the City agreed to create municipal tax increment financing districts (the "TIF's District") that includes the Arena District, and agreed to finance up to $16,610,000 of the costs of the Public Improvements by the issuance of general obligation bonds, payable from revenues, to the extent available, generated by payments in lieu of taxes in respect of property located within the TIF Districts (the "TIF's Payments");
WHEREAS, in Section X(G) of the Development Agreement, the Company agreed that in the event the TIF's Districts is established but payments in lieu of taxes are not sufficient to fund sixty-five percent (65%) of the annual debt service on the City's general obligation bonds issued to finance costs of the Public Improvements, the Company shall pay annually the difference up to sixty-five percent (65%) of the City's annual debt service on such bonds, including interest at a rate not greater than the City's rate of borrowing for general obligations;
WHEREAS, in Section X(G) of the Development Agreement, the City agreed that at such time as payments in lieu of taxes exceeds sixty-five percent (65%) of the annual debt service on such bonds, the City shall reimburse the Company for any payment it made in excess of payments otherwise due in lieu of taxes, plus interest on such payment equal to the City's rate of borrowing then applicable;
WHEREAS, pursuant to Ordinances No. 3004-98 and No. 3009-98 passed by this Council on November 16, 1998, No. 2619-99 passed by this Council on November 15, 1999, and No. 2358-00 passed by this Council on October 30, 2000 (collectively, the "Bond Ordinances"), the City issued bonds aggregating $37,334,968 (the "Bonds"), to finance costs of the Public Improvements;
WHEREAS, this Council has been advised by the Auditor of the City (the "Auditor") that the City has received from the Company the following amounts on the indicated dates in satisfaction of payment obligations to the City under Section X(G) of the Development Agreement for the indicated years: (i) $1,220,536.49 on April 18, 2002 for 2001; (ii) $1,836,912.89 on March 6, 2003 for 2002; and (iii) $1,542,076.95 on February 18, 2004 for 2003, (each a "Company Payment" and hereinafter referred to collectively with the "Future Company Payments" referred to below as the "Company Payments");
WHEREAS, the Company estimates that it will be required to pay pursuant to its payment obligation to the City under Section X(G) of the Development Agreement at various times during the years 2005 through 2009 amounts aggregating not to exceed an additional $4,400,473.67 (each a "Future Company Payment" and hereinafter referred to collectively as the "Future Company Payments"); and
WHEREAS, the Company has requested that the City issue promissory notes evidencing the City's obligation to reimburse the Company out of the TIF Payments for each of its Company Payments as such payments are made; and
WHEREAS, this Council has determined, as provided in this Ordinance, to authorize and provide for the issuance by the City of a Subordinated Note in the principal amount of each of the Company Payments (each a "Subordinated Note" and together the "Subordinated Notes") to evidence the City's obligation to reimburse the Company for the Company Payments as provided in Section X(G) of the Development Agreement provided that the aggregate principal amount of all such Subordinated Notes does not exceed $9,000,000; now, therefore:
BE IT ORDAINED BY THE COUNCIL OF THE CITY OF COLUMBUS:
Section 1. Unless specifically defined in this Ordinance, where used in this Ordinance (including its preambles), capitalized words and terms shall have the meanings ascribed to such words and terms in the Agreement.
Section 2. This Council hereby determines that it is necessary to provide for issuance of the Subordinated Notes to evidence the City's obligation under Section X(G) of the Development Agreement to reimburse the Company for its Company Payments. Each Subordinated Note shall be in the principal amount of the corresponding Company Payment and the aggregate principal amount of all the Subordinated Notes to be issued pursuant to this Ordinance shall not exceed $9,000,000 and shall be issued on or before December 31, 2009. The proceeds of all Company Payments shall be used solely for the payment of debt service on the Bonds.
Section 3. Each Subordinated Note shall be dated the date the City received the corresponding Company Payment evidenced by that Subordinated Note and shall mature not more than twenty years from its date with the specific maturity date to be established in the Certificate of Award referred to in Section 8 of this Ordinance, subject to payment and prepayment as provided herein and therein. The Subordinated Note for the Company Payment made on April 18, 2002 shall bear interest at the rate of five and sixteen one-hundredths per cent (5.16%) per year; the Subordinated Note for the Company Payment made on March 6, 2003 shall bear interest at the rate of four and sixth-one one-hundredths per cent (4.61%) per year; and the Subordinated Note for the Company Payment made on February 18, 2004 shall bear interest at the rate of four and forty-one one-hundredths (4.41%) per year; and any Subordinated Note for any Future Company Payment shall bear interest at a rate to the most recently published Bond Buyer 11 Bond Index preceding the City's receipt of that Future Company Payment with that rate to be confirmed as provided in the Certificate of Award for that Note. Interest on all Subordinated Notes shall be computed on the basis of a 360-day year consisting of twelve 30-day months.
Each Subordinated Note shall be a special obligation of the City payable as to principal and interest from payments in lieu of taxes received by the City in respect of property located in the TIF's Districts (such payments in lieu of taxes received by the City are hereinafter referred to as "TIF Collections"), with that pledge of TIF Collections subordinate to the pledge of such TIF Collections to the Bonds, and shall not otherwise be an obligation of the City, the State of Ohio, or of any political subdivision thereof.
Interest on the then outstanding Subordinated Notes shall be payable only if the amount of TIF Collections for the prior calendar year is at least equal to sixty-five percent of the City's annual debt service on the Bonds for that year, all as provided in Section X(G) of the Agreement (the "Payment Test"). For each year that the Payment Test is met, the City shall on or before March 1 of the succeeding year (the "Payment Date") pay to the registered owner(s) of the then outstanding Subordinated Notes the amount of TIF Collections in excess of sixty-five percent of the annual debt service on the Bonds in the prior year, with that payment to be applied first to accrued but unpaid interest on, and then to outstanding principal of, the outstanding Subordinated Notes. Each Subordinated Note shall bear interest from the most recent date to which interest has been paid or provided for or, if no interest has been paid or provided for, from its date.
The Subordinated Notes shall be prepayable in whole or in part at the sole option of the City at any time prior to maturity without penalty or premium. Prepayment prior to maturity shall be made by deposit with the Note Registrar of the principal amount of any Subordinated Note then to be prepaid, together with interest accrued thereon to the date of prepayment. This City's right of prepayment shall be exercised by mailing or deliverying a notice of prepayment, stating the date of prepayment and the name and address of the Note Registrar, by certified or registered mail to the registered owner of the Subordinated Note, and at its address as shown on the Note Register hereinafter provided for at the close of business on the day preceding the mailing of the notice. The notice shall be mailed not less than seven days prior to the date of that deposit, unless that notice is waived by the registered owner of the Subordinated Note. If moneys for prepayment are on deposit with the Note Registrar on the specified prepayment date following the giving of that notice (unless the requirement of that notice is waived as stated above), interest on the principal amount prepaid shall cease to accrue on the prepayment date, and upon the request of the Auditor the registered owner of the Subordinated Note shall arrange for the delivery of the Subordinated Note to the Note Registrar for prepayment and surrender and cancellation.
Section 4. Each Subordinated Note shall be signed by the Mayor of the City (the "Mayor") and the Auditor, each of which signatures may be a facsimile signature. Each Subordinated Note shall be numbered as determined by the Auditor, and shall express upon its face the purpose, which may be in summary terms, for which it is issued and that it is issued pursuant to this Ordinance. A Subordinated Note shall not be valid or obligatory for any purpose and shall not be entitled to any security or benefit under this Ordinance unless and until the certificate of authentication printed on the Subordinated Note is signed by the Note Registrar as authenticating agent. Authentication by the Note Registrar shall be conclusive evidence that the Subordinated Note so authenticated has been duly issued, signed and delivered under, and is entitled to the security and benefit of, this Ordinance. The certificate of authentication may be signed by any authorized officer or employee of the Note Registrar or by any other person acting as an agent of the Note Registrar and approved by the Auditor.
Section 5. The Board of Trustees of the Sinking Fund of the City is hereby appointed to act as the authenticating agent, bond registrar, transfer agent and paying agent for the Subordinated Note (the "Note Registrar").
Section 6. Principal of and interest on the Subordinated Notes shall be payable in lawful money of the United States of America as determined by the Auditor in the Certificate of Award, and shall be payable, without deduction for the services of the Note Registrar as paying agent. Payments of principal and interest on a Subordinated Note shall be wire transferred or paid on each Payment Date by check or draft mailed to the person in whose name that Subordinate Note is registered, and to that person's address appearing, on the Note Register (as defined in Section 7) at the close of business on the fifteenth day of the calendar month next preceding that Payment Date; provided, however, that the final payment consisting of all unpaid principal and interest, shall be payable upon presentation and surrender of the Subordinated Note at the office of the Note Registrar.
Section 7. So long any Subordinated Note remains outstanding, the City shall cause the Note Registrar to maintain and keep at its office all books and records necessary for the registration, exchange and transfer of that Subordinated Note as provided in this Section 7 (the "Note Register"). Subject to the provisions of Section 6 hereof, the person in whose name the Subordinated Note is registered on the Note Register shall be regarded as the absolute owner of the Subordinated Note for all purposes of this Ordinance. Payment of or on account of debt service on the Subordinated Note shall be made only to or upon the order of that person; neither the City nor the Note Registrar shall be affected by any notice to the contrary, but the registration may be changed as provided in this Section 7. All such payments shall be valid and effectual to satisfy and discharge the City's liability upon the Subordinated Note, including interest, to the extent of the amount or amounts so paid.
A Subordinated Note may be transferred only on the Note Register upon presentation and surrender of the Subordinated Note at the office of the Note Registrar, together with an assignment signed by the registered owner or by a person legally empowered to do so, in a form satisfactory to the Note Registrar; provided, however, that each registered owner by acceptance of a Subordinated Note shall agree that it will not transfer the Subordinated Note except in compliance with all applicable federal and state securities laws. Upon exchange or transfer, the Note Registrar shall complete, authenticate and deliver a new Subordinated Note or Subordinated Notes of any authorized denomination or denominations requested by the registered owner equal in the aggregate to the unmatured principal amount of the Subordinated Note surrendered and bearing interest at the same rate and maturing on the same date.
If manual signatures on behalf of the City are required, the Note Registrar shall undertake the exchange or transfer of a Subordinated Note only after a new Subordinated Note or Notes are signed by the authorized officers of the City. In all cases of Subordinated Notes exchanged or transferred, authorized officers of the City shall sign and the Note Registrar shall authenticate and deliver Subordinated Notes in accordance with the provisions of this Ordinance. The exchange or transfer shall be without charge to the registered owner, except that the City and Note Registrar may make a charge sufficient to reimburse them for any tax or other governmental charge required to be paid with respect to the exchange or transfer. The City or the Note Registrar may require that those charges, if any, be paid before the procedure is begun for the exchange or transfer. All Subordinated Notes issued and authenticated upon any exchange or transfer shall be valid obligations of the City, evidencing the same debt, and entitled to the same security and benefit under this Ordinance, as the Subordinated Notes surrendered upon that exchange or transfer.
Section 8. The Subordinated Notes shall be sold at not less than par plus accrued interest, if any, at private sale by the Auditor in accordance with law and the provisions of this Ordinance. The Auditor shall sign the Certificate of Award referred to in Section 3 evidencing that sale to the original purchaser, cause the Subordinated Notes to be prepared, and have the Surbordinated Notes signed and delivered, together with a true transcript of proceedings with reference to the issuance of the Notes if requested by the original purchaser, to the original purchaser upon payment of the purchase price. The Auditor and any other officials of the City, as appropriate, are each authorized and directed to sign any transcript certificates, financial statements and other documents and instruments and to take such actions as are necessary or appropriate to consummate the transactions contemplated by this Ordinance. The Auditor is authorized, if it is determined to be in the best interest of the City, to combine the Notes with one or more other note issues of the City into a consolidated note issue pursuant to Section 133.30(B) of the Revised Code.
Section 9. There are hereby pledged, subordinate to any use of them to pay debt service on the Bonds but in priority to all other expenses, claims and payments, to the security of the Subordinated Notes and for the payment of debt service on the Subordinated Notes, the amount of TIF Collections received by the City and necessary to pay debt service on the Subordinated Notes. The TIF Collections received by the City and subject to the pledge of this Section 9 shall be placed in a separate and distinct debt service fund which is irrevocably pledged for the payment of debt service on the Subordinated Notes when and as the same fall due.
Section 10. The City covenants that it will use, and will restrict the use and investment of, the proceeds of each Subordinated Note in such manner and to such extent, if any, as may be necessary so that (a) the Subordinated Note will not (i) constitute private activity bonds, arbitrage bonds or hedge bonds under Sections 141, 148 or 149 of the Internal Revenue Code of 1986, as amended (the "Code"), or (ii) be treated other than as bonds to which Section 103(a) of the Code applies, and (b) the interest thereon will not be treated as a preference item under Section 57 of the Code.
The City further covenants that (a) it will take or cause to be taken such actions that may be required of it for the interest on each Subordinated Note to be and to remain excluded from gross income for federal income tax purposes, and (b) it will not take or authorize to be taken any actions that would adversely affect that exclusion, and (c) it, or persons acting for it, will, among other acts of compliance, (i) apply the proceeds of the Subordinated Note to the governmental purpose of the borrowing, (ii) restrict the yield on investment property acquired with those proceeds, (iii) make timely and adequate payments to the federal government, (iv) maintain books and records and make calculations and reports, and (v) refrain from certain uses of those proceeds, and, as applicable, of property financed with such proceeds, all in such manner and to the extent necessary to assure such exclusion of that interest under the Code.
The Auditor, as the fiscal officer, or any other officer of the City having responsibility for issuance of the Subordinated Notes, is hereby authorized (a) to make or effect any election, selection, designation, choice, consent, approval, or waiver on behalf of the City with respect to a Subordinated Note as the City is permitted or required to make or give under the federal income tax laws, including, without limitation thereto, any of the elections provided for in Section 148(f)(4)(C) of the Code or available under Section 148 of the Code, for the purpose of assuring, enhancing or protecting favorable tax treatment or status of the Subordinated Note or interest thereon or assisting compliance with requirements for that purpose, reducing the burden or expense of such compliance, reducing the rebate amount or payments or penalties, or making payments of special amounts in lieu of making computations to determine, or paying, excess earnings as rebate, or obviating those amounts or payments, as determined by that officer, which action shall be in writing and signed by the officer, (b) to take any and all other actions, make or obtain calculations, make payments, and make or give reports, covenants and certifications of and on behalf of the City, as may be appropriate to assure the exclusion of interest from gross income and the intended tax status of the Subordinated Note, and (c) to give one or more appropriate certificates of the City, for inclusion in the transcript of proceedings for the Subordinated Note, setting forth the reasonable expectations of the City regarding the amount and use of all the proceeds of the Subordinated Note, the facts, circumstances and estimates on which they are based, and other facts and circumstances relevant to the tax treatment of the interest on and the tax status of the Subordinated Note.
Section 11. This Council determines that all acts and conditions necessary to be performed by this Council or to have been met precedent to and in the issuing of the Subordinated Notes in order to make each a legal, valid and binding special obligation of the City have been performed and have been met, or will at the time of delivery of the Subordinated Note have been performed and have been met, in regular and due form as required by law; that no statutory or constitutional limitation of indebtedness or taxation will have been exceeded in the issuance of the Subordinated Note; and the Subordinated Note is being authorized and issued pursuant to Chapter 133 of the Revised Code, this Ordinance, and other authorizing provisions of law.
Section 12. This Council finds and determines that all formal actions of this Council concerning and relating to the passage of this Ordinance were taken in an open meeting of this Council and that all deliberations of this Council that resulted in those formal actions were in meetings open to the public in compliance with the law.
Section 13. That this ordinance shall take effect and be in force from and after the earliest period allowed by law.