HomeMy WebLinkAboutR-2009-082 Capitol Theatre G.O. Line of Credit for Expansion ProjectRESOLUTION NO. R-2009-82
A RESOLUTION of the City of Yakima, Washington, authorizing one or more
draws in the aggregate principal amount of not to exceed
$4,500,000 from the City's line of credit to fund costs
associated with the construction, rehabilitation, and
improvement of the Capitol Theatre.
WHEREAS, the City Council of the City of Yakima, Washington (the "City") passed
Ordinance No. 97-29 on May 6, 1997 establishing a line of credit in the aggregate principal
amount of not to exceed $5,000,000 to provide funds for various City capital projects; and
WHEREAS, the City issued its Limited Tax General Obligation Bond, 1997 (KeyBank
Line of Credit), dated June 9, 1997 (the "Bond"), to KeyBank National Association (the "Bank")
to evidence the line of credit; and
WHEREAS, Ordinance No. 2002-31 of the City, passed on May 21, 2002, amended
certain terms of Ordinance No. 97-29, including extending the maturity date of the Bond until
June 1, 2007; and
WHEREAS, Ordinance No. 2007-19 of the City, passed on April 17, 2007, further
amended certain terms of Ordinance No. 97-29, including extending the maturity date of the
Bond until June 1, 2012; and
WHEREAS, Section 11 of Ordinance No. 97-29, as amended by Ordinance No. 2002-31
and Ordinance No. 2007-19 (together, the "Ordinance"), authorizes the City to draw on the Bond
in a minimum amount of $10,000 subject to the approving legal opinion of bond counsel; and
WHEREAS, the City currently owns and operates the Capitol Theatre, a performing arts
and special events center, and is working with the Yakima Regional Public Facilities District (the
"District") on the expansion, rehabilitation and improvement of the Capitol Theatre (the
"Project"); and
WHEREAS, the Capitol Theatre, as expanded, rehabilitated and improved by the
Project, will serve as a "regional center" under RCW 35.57.030; and
WHEREAS, construction of the Project commenced on June 30, 2008, in satisfaction of
the requirement of RCW 82.14.485(1) that rehabilitation of an existing regional center be
commenced prior to January 1, 2009; and
WHEREAS, the District, as authorized by RCW 82.14.485, imposed a 0.025% sales and
use tax (the "Sales Tax"), effective January 1, 2008, to assist in financing the design,
development, acquisition, construction, operation, rehabilitation, improvement and management
of the Capitol Theatre; and
WHEREAS, the Sales Tax operates to shift 0.025% of the retail sales and use taxes
generated within the District boundaries to the District; and
WHEREAS, the City intends to issue bonds and apply bond proceeds to finance the
Project, in consideration of the District's pledge of all Sales Tax receipts to the City to pay debt
service on the bonds and other Project costs; and
WHEREAS, to provide interim financing for costs of the Project, the City hereby finds it
in the best interest of the City to authorize one or more draws on the Bond in the aggregate
principal amount of not to exceed $4,500,000 as further provided herein;
NOW, THEREFORE, BE IT RESOLVED BY the City of Yakima, Washington, as follows:
Section 1. Authorization of Draws. In accordance with Section 11 of Ordinance
No. 97-29, as amended (the "Ordinance"), the City Council hereby authorizes one or more
draws on the City's Limited Tax General Obligation Bond, 1997 (KeyBank Line of Credit) (the
"Bond") in the aggregate principal amount of not to exceed $4,500,000, to provide funds for the
construction, rehabilitation, and improvement of the Capitol Theatre (the "Project"). The
outstanding principal balance of the draws shall bear interest and shall be payable as provided
in the Ordinance. All proceeds received from draws on the Bond pursuant to this authorization
shall be deposited into the fund or account designated by the Director of Finance and Budget
and used to finance costs of the Project. The City hereby authorizes to the Director of Finance
and Budget to take any actions and execute such documents as may be necessary and
required by the Bank to complete such draws and to carry out the terms of this resolution.
Section 2. Authorization of Bonds. For the purpose of providing funds necessary to
repay the Bond and to provide Tong -term financing for the Project, the City Council is hereby
authorized to issue limited tax general obligation bonds (the "Bonds") in such amount and form
and with such terms, as shall be determined by ordinance of the City Council. The proceeds of
the Bonds shall be paid into the proper accounts held by the City and applied, together with
other available funds, in amounts sufficient to repay the Bond.
Section 3. Provision for Tax Lew Payments. Pursuant to Section 8 of the
Ordinance, the City has irrevocably covenanted and agreed that for as long as the Bond is
outstanding and unpaid, each year it will include in its budget and levy ad valorem taxes upon
all the property within the City subject to taxation in an amount that will be sufficient to pay the
principal of and interest on the Bond as the same shall become due and payable. The City
hereby also irrevocably pledges the sales and use tax levied pursuant to RCW 82.14.485 and
hotel/motel taxes levied pursuant to chapter 67.28 RCW and all other revenues and money of
the City legally available for such purposes, toward the payment of principal of and interest on
the Bond as the same shall become due and payable.
Section 4. General Authorization; Ratification of Prior Acts. The Director of Finance
and Budget and other appropriate officers of the City are authorized to take any actions and to
execute documents as in their judgment may be necessary or desirable in order to carry out the
terms of, and complete the transactions contemplated by, this resolution. All acts taken
pursuant to the authority of this resolution but prior to its effective date are hereby ratified.
Section 5. This resolution shall be in effect from and after its adoption in accordance
with law.
ADOPTED BY THE CITY COUNCIL this 2nd day of J e, 2009.
ATTEST:
6.125-L,L.
City Clerk
-3-
avid dler, Mayor
P:120358 DG120358 OK2
CERTIFICATE
I, the undersigned, Clerk of the City of Yakima, Washington (the "City"), and keeper of
the records of the City Council (the "Council"), DO HEREBY CERTIFY:
1. That the attached Resolution No. R-2009- g 2- is a true and correct copy of a
resolution of the City Council, as finally adopted at a regular meeting of the Council held on the
2-1)-- day of Sane— , 2009, and duly recorded in my office.
2. That said meeting was duly convened and held in all respects in accordance with
law, and to the extent required by law, due and proper notice of such meeting was given; that a
legal quorum was present throughout the meeting and a legally sufficient number of members of
the Council voted in the proper manner for the passage of said Resolution; that all other
requirements and proceedings incident to the proper adoption of said Resolution have been fully
fulfilled, carried out and otherwise observed; and that I am authorized to exe9ute this certificate.
IN WITNESS WHEREOF, I have hereunto set my hand this 9 rn day of -3-u" - ,
2009.
City Clerk
BUSINESS OF THE CITY COUNCIL
YAKIMA, WASHINGTON
AGENDA STATEMENT
Item No. ! I
For Meeting Of: June 2, 2009
ITEM TITLE: (A) A Resolution authorizing a Ground Lease and a Development Agreement
with the Yakima Regional Public Facilities District for the purpose of financing,
expanding, operating and maintaining the Capitol Theatre, and (B) A
Resolution authorizing one or more draws on the City's G.O. Line of Credit in
an aggregate amount not to exceed $4.5 million dollars for the purpose of
providing bridge financing for the Capitol Theatre expansion project.
SUBMITTED BY: Finance Department
CONTACT PERSON/TELEPHONE: Rita DeBord, Finance Director 575-607
Tim Jensen, Treasury Services Officer 576-6
SUMMARY EXPLANATION:
40Background:
In June 2001 the Cities of Yakima, Selah and Union Gapformed the ed t e Yakima Regional Public
Facilities District (PFD) to take advantage of a tax credit (out of the State's share of sales tax
already being paid) to fund the expansion of the Yakima Convention Center. In 2007 the State
Continued on next page...
Resolution X (2) Ordinance Other (Specify)
Contract X Mail to (name and address): Yakima Regional Public Facilities District, Brian Johnson
President, 10 N. 8th Street Yakima, WA 98901
Funding Source .025% Sales Tax Credit Revenues from the Yakima PFD
APPROVED FOR SUBMITTAL:.
STAFF RECOMMENDATION: Adopt Resolution(s) authorizing Lease and Development
Agreements and Line of Credit Draw
BOARD/COMMISSION RECOMMENDATION: The Lease and Development agreements have
been authorized by the Yakima Regional PFD
•COUNCIL ACTION:
Legislature authorized an additional Sales Tax Credit for the purpose of building, developing,
rehabilitating, operating and maintaining, etc. a performing arts center with fewer than 2,000
seats. This legislation was drafted with the expansion of and improvements to Yakima's Capitol
Theatre in mind. The legal and financing structures necessary for the expansion of the Capitol
Theatre are very similar to those used for the Convention Center project. Resolution A authorizes
the lease and 'development agreements for the Capitol Theatre expansion, enclosed.
Also presented in this packet as Resolution B, is a Resolution to authorize draws on the City's GO
Line of Credit in an aggregate amount not to exceed $4.5 Million for bridge financing; which may
be utilized to cover project costs prior to the issuance of the LTGO bonds. Staff is targeting a
bond sale date in July 2009, and closing date and receipt of bond proceeds in August; at which
time the Line of Credit borrowings, if any, will be paid off. Interest costs on the Line of Credit
borrowing is based on a variable formula, but is not expected to exceed the 2.5% to 3% range.
Project Overview:
The Capitol Theatre Board currently has identified the following elements to be included in Phase
1 of the project; however, these are subject to change until bonds are issued:
• Construction of a Production Center which will allow the Theatre to promote larger, more
elaborate shows;
• Construction of a basement underneath the Production Center to provide storage for the
facility;
• Construction of a 500 seat "black box" theatre for smaller more intimate venues;
• Construction of an outdoor patio with room for 150 diners with food to be provided by
outside caterers
it
Key elements of the legal and financial structure and necessary agreements related to the Capitol
Theatre expansion project are outlined below.
Legal / Financial Structure:
• The PFD is authorized to collect 0.025% Sales Tax Credit from what would otherwise be
sent to the State from the sales taxes already being generated within the PFD (cities of
Yakima, Union Gap and Selah) and to utilize these funds to purchase, construct,
rehabilitate, expand,improve, operate and maintain a Regional Center;
This sages tax credit is available for a maximum of 25 years (the PFD Board imposed this
credit effective January 1, 2008);.
• The City owns the Capitol Theatre and will issue bonds to pay for its expansion; the bon('
will be approx 24 yr bonds — to coincide with the remaining time over which the PFD will
Page 2 of 4
•
receive the 0.025% sales tax revenues. The City anticipates issuing LTGO bonds this
summer; for a principal amount approximately $7.2 million.
• The City will lease the Capitol Theatre to the PFD for a period of time similar to that of the
bond issue (approx. 24 years). The lease of the Capitol Theatre to the PFD will satisfy (a)
the requirement that the PFD have an ownership interest in the facility in order to utilize
PFD funds to support its expansion, and (b) the requirement for local matching funds in an
amount not less than 33% of the net present value of revenues received from the sales tax
credit. ($10.3 million = net present value of the estimated Sales Tax Credit Revenues over
25 year period, and $6.4 million = 2009 assessed value of Capitol Theatre);
• The PFD irrevocably pledges to Yakima all sales tax revenues generated from the 0.025%
credit for as long as it flows in consideration of Yakima's agreement to issue bonds to fund
the expansion and upgrades to the Capitol Theatre;
• The total project cost, including debt service, must be at least $10 million to qualify for the
sales tax credit, (City anticipates issuing bonds for approx. $7.2 million; representing a
portion of the total cost of the project);
• Yakima will utilize the sales tax revenues from the PFD to pay debt service on the bonds;
• The PFD will sublease the Capitol Theatre back to the City for the duration of the bonds
being outstanding; and the City agrees to design, develop, construct, and finance the
expansion and to operate and maintain the facility;
• City will pledge the sales tax revenues it receives from the PFD along with Hotel / Motel tax
revenues and the Full Faith and Credit of the City to pay the debt service on the bonds.
(Note: pledging the Hotel / Motel taxes on these bonds will continue the flow of the "double
dip" revenues.);
• The project incurred approximately $500,000 in utility work performed in 2008, these costs
were paid from PFD sales tax revenues received last year;
• It should be noted that the City of Yakima alone is guaranteeing the debt service on the
bonds; thus the City is solely responsible for payment of debt service should the revenues
from the PFD be insufficient to cover the full amount.
Ground Lease Agreement:
• The City will lease the Capitol Theatre to the PFD;
• Lease effective when both parties have executed both the Lease and the Development
Agreements; and terminates simultaneously with termination of Development Agreement;
• Term approx. 24 years (as noted above);
•
Page 3 of 4
The Design, Development, Construction, Financing, Operating and Lease Agreement:
• PFD sub -leases Capitol Theatre to City and City accepts responsibility for financing,
constructing and operating and maintaining the Theatre;
• Effective when both parties have executed the Agreement; terminates on the later of the
date the bonds are no longer outstanding or the date on which the sales tax expires;
• Includes the terms and conditions of the design, development and construction of the
expansion and improvements to the Capitol Theatre;
• Identifies the authorized usage of the revenues received from the PFD;
• Defines' terms used in both this Agreement and the Ground Lease Agreement;
• Provides for the authorized utilization of the net Bond proceeds;
• Identifies the scope of the new Regional Center (i.e.: Capitol Theatre expansion project);
• Provides for proper accounting of PFD revenues and debt service on the bonds;
• Establishes the role, responsibilities, commitments and warranties of each party;
• Establishes the City's sole responsibility for debt service on the bonds;
• Establishes Project scope, development criteria and oversight,
Documents for Council Consideration (enclosed):
• Resolution A
• Ground Lease
• Design, Development, Construction, Financing, Lease and Operating Agreement
• Resolution B (with related legal opinion)
Note: In order to properly account for the revenues and expenditures related to the Capitol
Theater expansion project and the on-going operating and maintenance costs of this facility as a
Regional Cent'ier under the jurisdiction of the PFD, the City needs to establish a new fund
specifically designated for this purpose and make an appropriation to the new Fund in the 2009
budget. Therefore, staff has submitted to Council as a separate Agenda Item, two Ordinances for
consideration which would create the new Fund and related 2009 budget appropriation.
Page 4 of 4
•K&L GATES
•
June 2, 2009
City of Yakima
Yakima, Washington
KeyBank National Association
K&t Preston Gates Ellis «P
925 Fourth Avenue
Suite 2900
Seattle, WA 98104-1158
T 206,623.7580 www.klgates.com
Re: Request for Draw on the City of Yakima, Washington, Limited Tax General Obligation
Bond, 1997 (KeyBank Line of Credit)
Ladies and Gentlemen:
We have acted as bond counsel for the City of Yakima, Washington (the "City"), in
connection with its Limited Tax General Obligation Bond, 1997 (KeyBank Line of Credit),
originally issued in the aggregate principal amount of not to exceed $5,000,000 (the "Bond"),
establishing a line of credit with KeyBank National Association (the "Bank") to provide funds
for acquiring and constructing various City capital projects. The Bond was issued pursuant to
Ordinance No. 97-29 of the City passed on May 6, 1997, as amended by Ordinance No. 2002-31,
as further amended by Ordinance No. 2007-19 (collectively, the "Bond Ordinance"). Pursuant to
the Bond Ordinance, draws on the line of credit are subject to the prior written approval of bond
counsel to the City. Pursuant to a resolution of the City adopted on June 2, 2009 (the
"Resolution"), the City has authorized and intends to make one or more draws on the Bond in an
aggregate principal amount of not to exceed $4,500,000 to provide interim financing for the
construction, rehabilitation and improvement to the City's Capitol Theatre (the "Project").
Based upon our examination of the Bond Ordinance, the Resolution and other documents
that we believe to be necessary, it is our opinion that the City's draws on the Bond for the Project
are consistent with the Bond Ordinance and are consistent with the tax-exempt status of the
Bond.
K:\2025739\00087'20358 DG\20358L20W2
Very truly yours,
K&L PRESTON GATES ELLIS
iii /4