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HomeMy WebLinkAboutCC-09-24-96-01 Sewer Works Refunding Revenue Bonds of 1985/RedeemRESOLUTION NO. cc-09-24-96-0 A Resolution concerning the defeasance of outstanding bonds of the sewage works, and other matters connected therewith WHEREAS, the City of Carmel (the "City") has heretofore established, constructed and financed a municipal sewage works, and now owns and operates said sewage works pursuant IC 36-9-23, as amended; and WHEREAS,' the Common Council of the City finds that there are outstanding bonds payable out of the revenues of the City's sewage works designated as Sewage Works Refunding Revenue Bonds of 1985, dated as of November 1, 1985 (the "1985 Bonds"), now outstanding in the total amount of Eight Hundred Thousand Dollars ($800,000) and maturing annually over a period ending on November 1, 1998, which 1985 Bonds constitute a first charge upon the net revenues of the sewage works; and WHEREAS, the Common Council fmds that it may defease such 1985 Bonds by providing for the redemption of said 1985 Bonds on November 1, 1996; and WHEREAS, the City finds that such redemption is not prohibited by Ordinance No. S- 47, the ordinance authorizing the 1985 Bonds (the "1985 Ordinance"); and WHEREAS, the City now f'mds that the amount of funds needed to redeem the 1985 Bonds on November 1, 1996, including the payment of the principal amount of said 1985 Bonds, redemption premium and interest on said 1985 Bonds is $844,600; and WHEREAS, the City now finds that there are funds on hand of the sewage works in the sum of $844,600 which may be used to redeem the 1985 Bonds on November 1, 1996; and 425308.1 WHEREAS, the City has determined to escrow the funds in a Trust Account pursuant to the terms of a Trust Agreement (as hereinafter defined) with a Trustee (as hereinafter def'med); and WHEREAS, the City intends to purchase Government Obligations (as def'med in the Trust Agreement) with the funds and to deposit the Government Obligations with the Trustee to provide for the redemption of the 1985 Bonds on November 1, 1996; and WHEREAS, the Common Council now f'mds that all conditions precedent to the defeasance and redemption of the 1985 Bonds have been complied with in accordance with the provisions of the governing ordinances and statutes; and BE IT RESOLVED BY THE COMMON COUNCIL OF THE CITY OF CARMEL, INDIANA: Sec. 1. That the City proceed with the defeasance and redemption of the 1985 Bonds. The redemption of said 1985 Bonds shall be completed on the next possible call date, November 1, 1996. Sec. 2. NBD Bank, N.A. is hereby appointed to serve as escrow trustee (the "Trustee") for the redemption of the 1985 Bonds in accordance with the terms of the Trust Agreement between the City and the Trustee (the "Trust Agreement"). The substantially final form of Trust Agreement attached hereto is hereby approved by the Common Council, and the Mayor and the Clerk-Treasurer axe hereby authorized and directed to complete, execute and attest the same on behalf of the City so long as its provisions are consistent with this ordinance. 425308.1 - 2 - Sec. 3. The City authorizes the deposit of $844,600 of funds currently existing in the City's municipal sewage works funds with the Trustee. The City also authorizes the Cleric- Treasurer to pay the fees charged by the Trustee for its services under the Trust Agreement. Sec. 4. The Government Obligations and any uninvested cash shall be deposited into the Trust Account in accordance with the Trust Agreement. The Government Obligations and cash will be used to provide the funds necessary to pay the principal of and interest on the 1985 Bonds maturing on and after November 1, 1996, and to redeem the 1985 Bonds on November 1, 1996 with a redemption premium of 2%. The City shall obtain a report of a certified public accountant as to the sufficiency of the funds deposited in the Trust Account under the Trust Agreement to accomplish the refunding. Sec. 5. This resolution shall be in full force and effect from and after its passage and execution by the Mayor. -3- 425308. I this PASSED AND ADOPTED by the Common Council of the City of Carmel, Indiana, on ~/ day of .._,f~7,C,~~~. ,1996. / (Seal) Attest: Common Council (iding Offi~r Clerk-Treasurer Presented by me to the Mayor .~/.J-~-,~c~ ~ , 1996, at the hour of ~'~ of the City of Carmel on the ~9' day of This Ordinance approved and signed by me on the ~°"/dA day of 1996, at the hour of ~ · O (~_f_.m. L 425308.1 - 4 - ICE MILLER DONADIO & RYAN September 13, 1996 City of Carmel Carmel, Indiana Re: Sewage Works Refunding Revenue Bonds of 1985 (the ~'Bonds") Ladies and Gentlemen: We have examined a certified transcript of proceedings relating to the above-captioned Bonds and a form of Trust Agreement which authorizes the defeasance and redemption of the Bonds. We have relied upon the certified transcript of proceedings of the City of Carmel ("Issuer") and the form of Trust Agreement and have not undertaken to verify any facts by independent investigation. The redemption and defeasance of the Bonds as described in the Trust Agreement will not be subject to a transferred proceeds penalty under the Internal Revenue Code of 1986, as amended to this date. We are expressing the professional judgment of the attorneys participating in the transaction as to the legal issues addressed herein. By expressing that judgment, the undersigned does not become an insurer or guarantor of that expression of professional judgment or of the transaction. Nor does'the rendering of that judgment guarantee the outcome of any legal dispute that may arise out of the .transaction. We are qualified to practice law only in the State of Indiana. We express no views with respect to the laws of any jurisdiction other than the internal laws of the State of Indiana and the federal laws of the United States of America. This expression of judgment is based upon laws in effect on the date hereof and we expressly disclaim any undertaking to advise you of any subsequent changes therein. [~'~itO ~!j7Tces itt hldia~tapoli,~ rlnd,S'ol~lD IJe~itl One American Stiu;u-e · Box 82t)01 · lndi:umpolis, [ndi:ul:t 46282-0002 · ( 3 I7') 236,210{} · FAX (317) 236-2219 211 West Washington · Suite 2420 · 5~)uth Belial h~di:ln:t 46601-1785 · (219) 234-7933 · FAX (2 [ 9) 234-7965 City of Carmel September 13, 1996 Page 2 This information is being furnished to you for your sole use only in connection with this transaction and no other party is entitled to rely on it without our written consent. Very truly yours, September 13, 1996 To~ Mayor James Brainard City County Council Members Robert Battreall Ronald Carter Kevin Kirby James lvfiller Norm Rundle Luci Snyder Billy Walker From: Carol McManama Senior Utility Accountant In 1960, 1968, 1974, 1981 and 1982 the City of Carmel issued bonds in order to pay for sewage works construction projects. The interest rates for the 1981 bonds ranged from 11.75% to 13.5% per annum and the interest rate for the 1982 bonds was 11.5%. By 1985 interest rates had declined and the city reduced its interest burden by purchasing Government Obligationi sufficient to pay the 1960, 1968, 1974, and 1982 bonds to maturity and to call the 1981 bonds as of January 1, 1993. (To call a bond is to pay it offbefore its maturity date. The bond ordinance establishes the details of when a bond may be called. When this is done, an additional fee is paid to the bond holder as partial compensation for the potential interest which they will not receive due to the call. This fee is referred to as the bond call premium.) These Govermnent Obligations were placed in trust for the purpose of redeeming the outstanding bond issues. In 1985, the city was able to establish the trust by paying $995,350.40 in available cash and by obtaining $2,520,000 from the issuance of the Sewage Works Refunding Revenue Bonds of 1985. The interest rates for these bonds ranged from 5.25% to 8.5%. The calculated savings from this transaction was $351,348.10. Bond Ordinance S47 (the bond ordinance for the 1985 bonds), contains a call provision that permits the calling of the bonds semi-annually on May 1 or November 1 starting in 1995. The call premium is two percent (2%) from May 1, 1995 to November 1, 1996 and one percent (1%) after May 1, 1997. The final maturity date is November 1, 1998. In 1995 there was some congern that there would be an interest penalty for calling the bonds. However, according to the attached September 13, 1996 opinion letter from Ice, Miller; Donadio, and Ryan, that penalty would only apply if the call was accomplished with funds obtained through a bond issue (as happened with the earlier bond redemptions). There is no need for the issuance o£new bonds as there are sufficient funds which have been obtained from rate payers. These funds were accumulated through regular contributions to the Sewer Bond and Interest Fund in accordance with the Bond Ordinance S47. Attached are analyses of the effects of calling the bonds on either November 1, 1996 or May 1, 1997, prepared by Crowe Chizek. The numbers in parentheses identify estimated costs and the other numbers identify estimated savings. As you can see, the City can definitely save money by calling the bonds and more in November of 1996 than in May of 1997 or thereafter. According to Ice Miller, the bonds are callable at the option of the City. Ice, Miller interprets "the City" to mean the legislative body. Thus, the Council needs to authorize the call of the bonds and the payment to accomplish that call. Adoption of the attached Resolution CC-09-24-96-01 would accomplish tiffs procedure. The funding of the trust account legally defeases the 1985 bonds, rendering Bond Ordinance 2-47 satisfied and no longer in eff'ect. Prior to the funding of the trust account on the November 1, 1996 call date, notice needs to be given between September 1st and October 1st to all bondholders which notice NBD has agreed to give. I have also attached Crowe Chizek's September 5 1996 ietter detailing Crowe Chizek's opinion of the steps needed in order to call the bonds. TRUST AGlZF.~.MENT THE · CITY OF CARMEL, INDIANA AND NBD BANK, N.A. As Escrow Tru.~¢ TRUST AGREEMENT This agreement hereinafter the "Trust Agreement") made and entered into as of ~-~5'~ , 1996, by and between the City of Carmel, Indiana (the "Issuer"), a municipal corporation existing under the laws of the State of Indiana and NBD Bank, N.A. (hereinafter the '"Escrow Trustee"), a banking and financial institution incorporated under the laws of the United States of America having its principal office in the City of Indianapolis, Indiana, as Escrow Trustee under this Trust Agreement w~ith .the Issuer. WITNESSETH WHEREAS, the Issuer has heretofore issued its Sewage .Works Refunding Revenue Bonds of 1985, dated November 1, 1985 (hereinafter, the "1985 Bonds") pursuant to Ordinance~ No. S-47 (the "1985 Ordinance"), in the total amount of Two Million Five Hundred Twenty Thousand Dollars ($2,520,000) of which Eight Hundred Thousand Dollars ($800,000) in principal amount are now outstanding; and WHEREAS, the Issuer has accumulated moneys in the funds and accounts created by the 1985 Ordinance sufficient tO pay'the principal of and redemption premium and' accrued interest on the 1985 Bonds until November 1, 1996, the earliest date on which the 1985 Bonds 9an be called for redemption; and WHEREAS, the Issuer has concurrently with the execution and delivery of this Trust Agreement, deposited with the Escrow Trustee $844,600 from moneys held pursuant to the 1985 Ordinance (the "Issuer's Funds"); and WHEREAS, the execution and delivery of this Trust Agr6ement have been in all respects duly and validly authorized by an ordinance duly passed and approved by the Common Council of the Issuer; NOW THEREFORE, THIS AGREEMENT WITNESSETH: That in order to secure the payment of the-principal of and redemption premium and interest on the 1985 Bonds according to their ten6r, purport and effect, and in order to secure the performance and obserVance of all of the covenants and conditions herein and in the 1985 Bofids, and for and in considerat!on of the mutual covenants herein contained, and of the acceptance by the Escrow Trustee of the trust hereby created, the Issuer has executed and delivered this Trust Agreement. 'TO HAVE AND TO HOLD the same unto the Escrow Trustee, and its successor or successors and its or their assigns forever; IN TRUST, NEVERTHELESS, upon the terms, and trusts herein set forth, to secure the payment of the 1985 Bonds and .the redemption premium and interest payable thereon, and io secure also the .observance and performance of all the .terms, provisions, covenants and 425511,1 conditions of this Trust Agreement, and for the equal and ratable benefit and semlrity of all and singular owners of all 1985 Bonds without preference, priority or distinction a~ to lien or oth.erwise~ except as otherwise hereinafter provided, of any one 1~t5 Bond, or as between prirmipal and interest; and i~ is hereby mutually covenanted and agr~ that the t~rms and. conditions upon which the 1985 Bonds are to be paid and redeemed and a portion of tho Issuer's Funds iaves.ted, and the trusts and conditions upon which the pledged Gove,,,_._.~t Obligations and the Cash Requiniment (each as hereinafter defined) are to be lmlct and disbursed, are as follows: 1. The Escrow Trustee aclm0wiedges receipt, from the Issuer, of the Issuer's Funds ~_nri the use thereof to purchase the securities set forth in .Ex~.'bit A attached hen:to, (the ,Governmem Obligations") with the residual tO be held as cash m the amount of $ '/.,~/: 7~ (the "Cash Requirement") to be applied on the principal of ami interest on the 1985 Bonds marring on November 1, 1996 and thereafter and tO redeeIll on November I, 1996 all 1985 Bonds, with a redemption premium of 2%. The Goveaua~t Obligations have been d~osited with the Escrow Trustee and_ will bear interest at such ram and will mature at such time and In. such mounts so that, when paid according to their respective terms, together with the Cash Requirement, sufficient moneys will be available to pay the 1985 Bonds maturing on and aftei: November 1,. 1996 with interest thereon and tO redeem on November 1, 1996, the earliest date the 1985 Bond~ can be called for redemptiou, all remaining 1985 Bona~, with a redemption premium of 2 %. 2. (a) A Trust Account is created hereby. The Government Obligations and the Cash Requirement will be held in trust by the Escrow Trustee in tim Trust Account and such Government Obligations on deposit with the Escrow 'Ikus~, including imerest to be earned thereon, together with the Cash Requirement, are pledged solely and irrevocably for the b~-efit of the owners of the 1985 Bonds. Pursuant to this Section, the Issuer irrevocably imtmets the Escrow Trustee to pay the principal of and interest on all the 1985 Bonds maturing on November · 1, 1996 and to redeem on November 1, 1996 all 1985 Bonds with a redempfionpremialm of 2%, and the Escrow Trustee hereby agrees to follow said instruction. (b) The Escrow Trustee and the Issuer agree to redeem on November 1, 1996, ali outs~adiag 1985 BO ~nds clue on and after November 1, 1997. The Escrow Trustee and the Issuer shall complete the notice attached a~ F. xhibit B and mail the notice in accordance with Exhibit B subs~ntially in the form attached hereto as E~hibit B; (c) All interest earnings generated in the Trust Account which remain in tim Trust Account after redemption of all th~ 1985 'Bonds shall be deposlt~t with the Issuer. 3.. The Escrow Trustee hereby accepts the tmsu imposed upon it by this Trust Agreement and agrees to perform said trusts as a corporate trustee ordinarily.would perform said trusts under a corporate indenture. -2. Thc Escrow Trustee may execute any of the trusm or powers hereof and perform any of its dudes by or through attorneys, agoras, receivers or cmployees but shall be answerable for the conduct of the sallie in accordance with thc standard specified above, and shall be entitled to advice of counsel concerning all matters of trusts hereof and the duties heretmder, and may in all cases pay such reasonable compensation to all such attorneys, certified public acconnmrltS, agents, receivers and employees as may reasonably be employed in connection with the txmts lmrcoL The Escrow Trustee may a~t upon the opinion or advice of any attorney (who may be the attorney or attorneys for the Issuer). The Escrow Truce shall not be responsible for any loss or damage resulting from any action or non-action in good faith in reliance upon amh opinion or advice. The Escrow Trustee shall be entitled to payment and/or reimbursement from ttm Issuer in connection with services under this Trust Agreement. The Escrow Trustee shnll receive its payment, in the total amount of $ ~ ?~W , upon the funding of the Tntst Account. The payment to be made to the Escrow Trustee shall not comfitute a lien against the Trust Account. 4. The Escrow Trustee shall lmve the power to sell, transfer, request the redemption or otherwise dispose of some or all of the Government Obligatiom in the Tsug Account and to substitute other Government.Obligations of equal or gn:ater s~curity therefor pmvkled that the Escrow Trustee shall receive the unqualified opinion of a certified public accountant or a firm of certified public accountant, to the effect that such disposition and substitution shall not reduce the sufficieucy and adequacy of th~ Trust Account to fully provide for ail paymenn enumerated in this Trust Agreement. IN WITNESS WHEREOF, the 'parties hm'eto have caused this Trust Agreemem tO be executed for and on their be, half the day and year frrst he~4nabove written. CITY OF CARMEL, INDIANA Attest: (SEAL) ~DBANK, N.A. ~nt~d: DANIEL A. LANE VICE PRESIDENT Attest: *":'":' ': ~'": ":': ..... OFF!OER -4- EXHIBIT A AtUched to and made a part of thc Trust Agrcem~ executed by hh¢ City of Cannel, ~ and NBD Bank, N.A,; as rascmw Trus~ Dated as of P-..25, ~99~ SCHEDULE OF UNITED STATICS OBLIGATIONS Maturity c°Uvon Rate NOTICE OF I~-DEMPTION Owners of the Five Hundred Biff-five Thou~,-d Dollars ($$55,000) in aggregate prindpal amount of Sewage Works Refll~qlng l:~evellue ~olldS of 1985 of tl~ City of Camel, Indicts. d~tecl November 1, 1985, numbered ~ through ,,, , and ma_~_~ing on November 1, 1997 through November 1, 1998 (the "Bonds"), are hereby notified ~ such Bonds will be redeemed upon pre~ntation, at tile paying agent for th~ Bonds, tiao principal corporate trust office of NBD Bank; N.A., Attention Corporate Trot Department, One ~ · ~quare, Indiam~olis, Indiana 46266, on November 1, 1~96, at face value, plus a premium of two percent (2%) of the face value, plus accrued interest to November 1, 1996~ All of such Bonds shall cease to b~ar interest on November 1, 1996, Dated this _ day of. ., 1996. NBD BANK, N.A. · CITY OF CARMEL: INDIANA Mail 'to registered owners at least thirty (30) days but not more tb~n sixty (60) days prior November I, 1996.