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2. Lyman Lumber Ind Dev Rev Bonds --,-- , CITY OF .....— c;'). .... \ ,,N,. , . CHANHASSEN \\--L 0,,. . _ 690 COULTER DRIVE • P.O. BOX 147 • CHANHASSEN, MINNESOTA 55317 '- (612) 937-1900 MEMORANDUM TO: Mayor and City Council FROM: Don Ashworth, City Manager DATE: August 22 , 1988 SUBJ: Public Hearing for Lyman Lumber Industrial Development Revenue Bonds The Council previously set this evening as the public hearing to consider the issuance of $1,000 , 000 in industrial development revenue bonds for Lyman Lumber' s expansion facility in Chanhassen. The bonds are solely payable from the assets of Lyman Lumber. No liability exists for the City even if a default occurs . [Note: This sale is proposed as a private placement to a major financial or other institution. No liability exists for a City even if the bonds are sold as a public offering. However, cities have spent thousands of dollars simply defending them- selves from "widows and orphans" suits (most of which truly being doctors who did not read the fine print) . The private placement requirement removes the potential of an unsuspecting buyer. ] Congress virtually eliminated all industrial revenue bond financing as a part of the Tax Reform Act of two years ago. We have seen the two primary exceptions during this past year, i .e. revenue housing bonds to fund apartments meeting the 20% low and moderate income requirements; and certain industrial manufac- turing expansions for smaller local firms (Lyman Lumber) . The benefit to the firm receiving IRB approval is the IRB' s tax exempt interest - such producing costs of 2% to 3% under market. The true gain is considerably less in that IRBs carry higher fixed costs (additional legal documentation, registration, paying agent fees , etc. ) . Projects less than $500 ,000 may have a higher net interest cost than with a market rate loan. Benefactors of IRB approvals typically are sales of $3 million to $5 million. Approval is recommended based upon the following: - Escrowing of sufficient monies with the city to insure that all direct costs associated with attorney/financial adviser review are paid in advance; and Mayor and City Council August 22, 1988 Page 2 - Approval of such review by both the attorney and finan- cial adviser; and - Payment of the of 1% of the par value of the bonds at time of closing; and - The approval is subject to the proposed sale being a "private placement" . DORSEY & WHITNEY A PARTNHRSftIP INCLUDING PROFESSIONAL CORPORATIONS 350 PARK AVENUE 2200 FIRST BANK PLACE EAST 1200 FIRST INTERSTATE CENTER NEW YORK,NEW YORK 10022 MINNEAPOLIS, MINNESOTA 55402 401 NORTH 31ST STREET (212)415-9200 P.0.BOX 7188 (612)340-2600 0 GRACECHUHCH STREET BILLINGS,MONTANA 59103 LONDON EC3V OAT,ENGLAND TELEX 29-0605 (406)252-3800 01-929-3334 TELECOPIER(612)340-2868 201 DAVIDSON BUILDING 36,RUE TRONCHET 8 THIRD STREET NORTH 75009 PARIS,FRANCE 01-42-66-59-49 GREAT FALLS,MONTANA 59401 (406)727-3632 340 FIRST NATIONAL BANK BUILDING JEROME P. GILLIGAN P 0.BOX 848 (612) 340-2962 127 EAST FRONT STREET ROCHESTER,MINNESOTA 55903 MISSOULA,MONTANA 59802 (507)288-3156 (406)721-6025 510 NORTH CENTRAL LIFE TOWER 445 MINNESOTA STREET 315 FIRST NATIONAL BANK BUILDING ST.PAUL,MINNESOTA 55101 Au lISt 10,, 1988 WAYZATA,MINNESOTA 55391 (612)227-8017 g (612)475-0373 Mr, Don Ashworth City Manager City of Chanhassen 690 Coulter Street Chanhassen, Minnesota 55317 Re: Proposed $1, 000, 000 Industrial Development Revenue Bonds (Lyman Lumber Company Project) City of Chanhassen, Minnesota Dear Mr. Ashworth: In connection with the proposed bond issue referred to above, enclosed are the following items : 1. Form of minutes of August 22nd public hearing and of resolution of the City Council giving preliminary approval to the project to be financed with the bonds; 2 . Form of application to Minnesota Department of Trade and Economic Development for approval of project; and 3 . The following items which are required attachments to the Application to the Minnesota Department of Trade and Economic Development: (a) form of opinion of Dorsey & Whitney; (b) Comprehensive Statement of City; (c) form of employment preference letter of Lyman Lumber; and • ..3 AU G 1 0 1988 CITY OF CHANIniA SIN DORSEY & WHITNEY Page -2- Mr. Don Ashworth August 10 , 1988 (d) letter from Allison-Williams Company as to financial feasibility of project. These items should be placed on file and be available for public inspection prior to the August 22nd Council meeting. Assuming that the Council adopts the resolution giving preliminary approval to the project on August 22nd I will then be in contact with you to arrange for the filing of the Application with the Minnesota Department of Trade and Economic Development. Thank you for your cooperation on this matter. If you have any questions or comments, please give me a call. Yours truly, t) 2meligan 1 JPG:cmn Enclosures cc: James Hurd Margaret Gearhart CERTIFICATION OF MINUTES RELATING TO INDUSTRIAL DEVELOPMENT REVENUE BONDS Issuer: City of Chanhassen, Minnesota Governing Body: City Council Kind, date, time and place of meeting : A regular meeting, held on August 22 , 1988, at o ' clock P.M. , at the City Hall . Members present : Members absent : Documents Attached: Minutes of said meeting (pages) : MINUTES OF PUBLIC HEARING ON PROPOSED PROJECT and RESOLUTION NO. RESOLUTION GIVING PRELIMINARY APPROVAL TO A PROJECT ON BEHALF OF LYMAN LUMBER COMPANY AND ITS FINANCING UNDER THE MUNICIPAL INDUSTRIAL DEVELOPMENT ACT; REFERRING THE PROPOSAL TO THE MINNESOTA DEPARTMENT OF TRADE AND ECONOMIC DEVELOPMENT FOR APPROVAL; AND AUTHORIZING PREPARATION OF NECESSARY DOCUMENTS I , the undersigned, being the duly qualified and acting recording officer of the public corporation issuing the obligations referred to in the title of this certificate, certify that the documents attached hereto, as described above, have been carefully compared with the original records of the corporation in my legal custody, from which they have been transcribed; that the documents are a correct and complete transcript of the minutes of a meeting of the governing body of the corporation, and correct and complete copies of all resolutions and other actions taken and of all documents approved by the governing body at the meeting , insofar as they relate to the obligations ; and that the meeting was duly held by the governing body at the time and place and was attended throughout by the members indicated above, pursuant to call and notice of such meeting given as required by law. WITNESS my hand officially as such recording officer and the seal of the City this day of August, 1988 . Signature Don Ashworth, City Manager Name and Title f <1 The Mayor stated that this was the time and place fixed by Resolution No . of this Council, adopted on July 25, 1988 , for a public hearing on the proposal that the City undertake and finance a project (the Project) on behalf of Lyman Lumber Company, a Minnesota corporation (the Borrower) pursuant to Minnesota Statutes , Sections 469 . 152 through 469 . 165 . The City Manager presented an affidavit showing publication of the notice of public hearing at least once not less than 15 nor more than 30 days prior to the date fixed for the public hearing, in the , the official newspaper of the City, and a newspaper of general circulation throughout the City. The affidavit was examined, found to be satisfactory and ordered placed on file with the City Manager. The Mayor then opened the meeting for the public hearing on the proposal to undertake and finance the Project on behalf of the Borrower . The purpose of the hearing was explained, the nature of the Project and of the proposed revenue bonds was discussed, the draft copy of the Application to the Minnesota Department of Trade and Economic Development with draft copies of all attachments and exhibits were available, and all persons present who desired to do so were afforded an opportunity to express their views with respect to the proposal to undertake and finance the Project , in response to which the following persons either appeared, were recognized and made statements , or filed written comments with the City Manager before the date set for the hearing, summaries of which appear opposite their respective names : Name of Speaker Summary of Views The City Manager [reported that no written comments had been] [read a summary of the written comments] * filed in the office of the City Manager before the date of the hearing . After all persons who wished to do so had stated or filed their views on proposal , the Mayor declared the public hearing to be closed. After some discussion, Councilmember moved for adoption of the following resolution: * Strike inappropriate language RESOLUTION NO. RESOLUTION GIVING PRELIMINARY APPROVAL TO A PROJECT ON BEHALF OF LYMAN LUMBER COMPANY AND ITS FINANCING UNDER THE MUNICIPAL INDUSTRIAL DEVELOPMENT ACT; REFERRING THE PROPOSAL TO THE MINNESOTA DEPARTMENT OF TRADE AND ECONOMIC DEVELOPMENT FOR APPROVAL; AND AUTHORIZING PREPARATION OF NECESSARY DOCUMENTS BE IT RESOLVED by the City Council of the City of Chanhassen, Minnesota (the Municipality) , as follows : SECTION 1 Recitals and Findings 1 . 1 . This Council has received a proposal that the Municipality finance a portion or all of the cost of a proposed project under Minnesota Statutes , Sections 469 . 152 through 469 . 165 (the Act) , consisting of the construction and equipping of an approximately 30 , 240 square foot addition to the existing facility owned by Lyman Lumber Company, a Minnesota corporation (the Borrower) and to be leased by the Borrower to Automated Building Components , Inc . , a corporation affiliated to the Borrower by common management and common ownership for use principally for prefinishing and assembly of building products and related storage (the Project) . The Project is located at 18800 West 78th Street in the Municipality. 1 . 2 . At a public hearing , duly noticed and held on August 22 , 1988, in accordance with the Act and Section 147(f) of the Internal Revenue Code of 1986 , as amended, on the proposal to undertake and finance the Project , all parties who appeared at the hearing were given an opportunity to express their views with respect to the proposal to undertake and finance the Project and interested persons were given the opportunity to submit written comments to the City Manager before the time of the hearing . Based on the public hearing, such written comments ( if any) and such other facts and circumstances as this Council deems relevant, this Council hereby finds , determines and declares as follows : (a) The welfare of the State of Minnesota requires active promotion, attraction, encouragement and development of economically sound industry and commerce through governmental acts to prevent, so far as possible , emergence of blighted lands and areas of chronic unemployment , and the State of Minnesota has encouraged local government units to act to prevent such economic deterioration. (b) The Project would further the general purposes contemplated and described in Section 469 . 152 of the Act . (c) The existence of the Project would add to the tax base of the Municipality, the County and the School District in which the Project is located and would provide increased opportunities for employment for residents of the Municipality and surrounding area . (d) This Council has been advised by representatives of the Borrower, that conventional, commercial financing to pay the cost of the Project is available only on a limited basis and at such high costs of borrowing that the economic feasibility of constructing and operating the Project would be significantly reduced, but that with the aid of municipal borrowing, and its resulting lower borrowing cost, the Project is economically more feasible . (e) This Council has been advised by representatives of the Borrower that the Project would not be undertaken but for the availability of industrial development bond financing . (f) This Council has also been advised by representatives of the Borrower that on the basis of its discussions with potential buyers of tax-exempt bonds , revenue bonds of the Municipality (which may be in the form of a revenue note or notes) could be issued and sold upon favorable rates and terms to finance the Project . (g) The Municipality is authorized by the Act to issue its revenue bonds to finance capital projects consisting of properties used and useful in connection with a revenue producing enterprise, such as that of the Borrower, and the issuance of the bonds by the Municipality would be a substantial inducement to the Borrower to acquire, construct and equip the Project . SECTION 2 Determination To Proceed with the Project and its Financing 2 . 1 . On the basis of the information given the Municipality to date, it appears that it would be desirable for the Municipality to issue its revenue bonds under the provisions of the Act to finance the Project in the maximum aggregate face amount of $1, 000 , 000 . -2- 2 . 2 . It is hereby determined to proceed with the Project and its financing and this Council hereby declares its present intent to have the Municipality issue its revenue bonds under the Act to finance the Project . Notwithstanding the foregoing, however, the adoption of this resolution shall not be deemed to establish a legal obligation on the part of the Municipality or its City Council to issue or to cause the issuance of such revenue bonds . All details of such revenue bond issue and the provisions for payment thereof shall be subject to final approval of the Project by the Minnesota Department of Trade and Economic Development and may be suhject to such further conditions as the Municipality may specify. The revenue bonds , if issued, shall not constitute a charge, lien or encumbrance, legal or equitable, upon any property of the Municipality, except the revenues specifically pledged to the payment thereof, and each bond, when, as and if issued, shall recite in substance that the bond, including interest thereon, is payable solely from the revenues and property specifically pledged to the payment thereof, and shall not constitute a debt of the Municipality within the meaning of any constitutional, statutory or charter limitation. 2 . 3 . The Application to the Minnesota Department of Trade and Economic Development, with attachments , is hereby approved, and the Mayor and City Manager are authorized to execute said documents on behalf of the Municipality. 2 . 4 . In accordance with Section 469 . 154 , Subdivision 3 of the Act, the Mayor and City Manager are hereby authorized and directed to cause the Application to be submitted to the Minnesota Department of Trade and Economic Development for approval of the Project . The Mayor, City Manager, City Attorney and other officers, employees and agents of the Municipality are hereby authorized and directed to provide the Department with any preliminary information needed for this purpose . The City Attorney is authorized to initiate and assist in the preparation of such documents as may be appropriate to the Project, if approved by the Department . SECTION 3 General 3 . 1 . If the bonds are issued and sold, the Municipality will enter into a lease, sale or loan agreement or similar agreement satisfying the requirements of the Act (the Revenue Agreement) with the Borrower . The lease rentals , installment sale payments , loan payments or other amounts payable by the Borrower to the Municipality under the Revenue Agreement shall be sufficient to pay the principal of , and interest and redemption premium, if any, on, the bonds as and when the same shall become due and payable. -3- ft 3 .2 . The Borrower has agreed and it is hereby determined that any and all direct and indirect costs incurred by the Municipality in connection with the Project, whether or not the Project is carried to completion, and whether or not approved by the Minnesota Department of Energy and Economic Development, and whether or not the Municipality by resolution authorizes the issuance of the bonds , will be paid by the Borrower upon request . 3 . 3 . The Mayor and City Manager are directed, if the bonds are issued and sold, thereafter to comply with the provisions of Section 469 . 154 , Subdivisions 5 and 7 of the Act . Adopted this day of August, 1988 . Mayor Attest : City Manager The motion for the adoption of the foregoing resolution was duly seconded by Councilmember and, upon vote being taken thereon, the following voted in favor thereof : and the following voted against the same: whereupon the resolution was declared duly passed and adopted and was signed by the Mayor, which signature was attested by the City Manager . -4- 3 , (revised 11/85) 9 STATE OF MINNESOTA DEPARTMENT OF ENERGY AND ECONOMIC DEVELOPMENT _ FINANCIAL MANAGEMENT DIVISION APPLICATION FOR APPROVAL OF INDUSTRIAL DEVELOPMENT BOND PROJECT PURSUANT TO CHAPTER 474 (please submit this form in duplicate - all supporting data in single copy only) Date: August , 1988 • The governing body of Chanhassen , County of Carver , Minncsot hereby applies to the Minnesota Department of Energy and Economic Developmc (Department) for approval of a proposed Industrial Development Bond issuc as required Minn. Stat. 474.01, subd. 7a. An allocation of issuance authority under Minn. Stat. (1984) 474.16 - 474-24 for th proposed issue has , has not been received from the Department. (if an allocation has been received, please show source: Entitlement , Competitive Pool ) We have entered into preliminary discussions with: Firm: Lyman Lumber Company Attorney: Brenner , Workinger & Address: 300 Morse Avenue Thompson Address: 7900 International Drive Excelsior 1000 International Plaza MN City: State: City: Minneapolis State: MN Name of Project: Lyman Lumber Company Project This firm is engaged primarily in (nature of business): Retail sales of lumber products to contractors. The proceeds from the sale of the Industrial Development Bonds will be used to (describe the project): Construction and equipping on an approximately 30, 240 square foot addition to the existing facility of Lyman Lumber Company in the City. Address of Project: 18800 West 78th Street Chanhassen, Minnesota Proceeds from the sale of the bonds of approximately $1, 000, 000 , will be applied toward payment of costs now estimated as follows: Acquisition of land: $ _0_ New construction and Demolition and site preparation: 655, 000 Acquisition and Installation of Equipment: 100, 000 Fees: Architectural, engineering, inspection, fiscal, legal, administration, or printing: 50, 000 Construction Interest: 95, 000 Initial Bond Reserve: 100, 000 Contingencies: ntI,A.. -; This approval shall not be deemed to be an approval by the Department or the State of the feasibility of the project or the terms of the revenue agreement to be executed or the bonds to be issued therefor. Authorized Signature,-Minnesota Department of Date of Approval Energy and Economic Development Please return to: Minnesota Department of Energy and Economic Development Financial Management Division 900 American Center Building 150 East Kellogg Blvd. St. Paul, Minnesota 55101 August , 1988 Commissioner Minnesota Department of Trade and Economic Development 900 American Center 150 East Kellogg Boulevard St . Paul , Minnesota 55101 Re: $1, 000 , 000 Industrial Development Revenue Bonds (Lyman Lumber Company Project) City of Chanhassen, Minnesota Dear Sir : We have reviewed a resolution adopted by the governing body of the City of Chanhassen, Minnesota (the City) , on August 22 , 1988, entitled "Resolution Giving Preliminary Approval to a Project on Behalf of Lyman Lumber Company and its Financing Under the Municipal Industrial Development Act; Referring the Proposal to the Minnesota Department of Trade and Economic Development for Approval; and Authorizing Preparation of Necessary Documents" (the Resolution) , relating to a proposal that the City issue its revenue bonds under Minnesota Statutes, Sections 469 . 152 through 469 . 165 , to finance, in whole or in part , a project (the Project) on behalf of Lyman Lumber Company, a Minnesota corporation (the Borrower) . On the basis of our review of the Resolution and preliminary discussions with representatives of the Borrower as to the nature of the Project and the proposed financing thereof, it is presently our opinion that the Project constitutes a "project" within the meaning of Minnesota Statutes , Section 469 . 153 , Subdivision 2 (a) , and that the City is authorized, assuming further proceedings are taken in accordance with the provisions of Sections 469 . 152 through 469 . 165 and any other applicable law, to issue its revenue bonds as proposed by the Resolution. We have reviewed certain proceedings of the City which show that a public hearing has been held with respect to the Project and the financing thereof with the proceeds of the revenue bonds in compliance with the requirements of Section 147( f) of the Internal Revenue Code of 1986, as amended, and applicable Treasury Regulations thereunder . Very truly yours, DORSEY & WHITNEY By Jerome P. Gilligan v . .r 9 COMPREHENSIVE STATEMENT The undersigned, being the duly qualified and acting Mayor and City Manager of the City of Chanhassen, Minnesota (the Municipality) , certify that the City Council has been provided by a representative of Lyman Lumber Company, a Minnesota corporation (the Borrower) , with certain information concerning a proposed Project under the Minnesota Municipal Industrial Development Act, Minnesota Statutes , Sections 469 . 152 to 469 . 165 . On the basis of such information the City Council , by resolution adopted August 22, 1988 , has given preliminary approval to the proposed Project and the financing thereof by the issuance of revenue bonds of the Municipality. The following are factors considered by the City Council in determining to give preliminary approval to the Project : 1 . The Project consists generally of the construction and equipping of an approximately 30 , 240 square foot addition to the facility owned by the Borrower, located at 18800 West 78th Street in the Municipality. The Project will be leased by the Borrower to Automated Building Components , Inc. , a corporation affiliated to the Borrower by common management and common ownership . The Project is intended to be used principally for prefinishing and assembly of building products and related storage. 2 . Bond Counsel is of the opinion that the Project constitutes a "project" within the meaning of Minnesota Statutes , Section 469 . 153 , Subdivision 2 ( a) . 3 . Based upon an estimated total cost of construction of $655 , 000 , it is the opinion of the City Council that the Project, when completed, will add to the tax base of the Municipality, the County and the School District in which the Project is located. 4 . Representatives of the Borrower estimate that upon completion of the Project , approximately five (5) additional persons will be employed in the operation of the Project, which would provide increased employment opportunity for residents of the Municipality and the surrounding area . 5 . Representatives of the Borrower estimate that the construction and equipping of the Project will result in an additional annual payroll of approximately $85, 000, based on wage rates currently in effect . The City Council believes that a substantial percentage of that additional payroll will be spent on housing , food and other goods and services in the Municipality and the surrounding area, thus benefiting the local economy. 6 . The Municipality will provide the Minnesota Department of Trade and Economic Development with the information required by Minnesota Statutes , Section 469 . 154 , Subdivision 5 , upon entering into a revenue agreement (as defined in the Act) with the Borrower, and the information required by Minnesota Statutes , Section 469 . 154 , Subdivision 7, as required. -2- 7 . The Project does not include any property to be sold or affixed to or consumed in the production of property for sale, and does not include any housing facility to be rented or used as a permanent residence. 8 . A public hearing on the proposal to undertake and finance the Project was conducted pursuant to Minnesota Statutes, Section 469 . 154 , Subdivision 4 and Section 147(f) of the Internal Revenue Code of 1986, on August 22, 1988 , at o ' clock P.M. , at the City Hall, at which public hearing all interested parties were afforded an opportunity to express their views . A draft copy of the application to the Minnesota Department of Trade and Economic Development with all attachments was available for public inspection prior to the public hearing . Dated: August , 1988 . Mayor (SEAL) City Manager -3- ... [Draft of compliance of employment preference letter] Honorable Mayor and City Council City of Chanhassen 690 Coulter Street Chanhassen, Minnesota 55317 Re: Proposed $1, 000 , 000 Industrial Development Revenue Bonds (Lyman Lumber Company Project) City of Chanhassen, Minnesota Plan of Compliance With Minnesota Statutes , Section 474 . 01, Subdivision 11 Dear Mayor and Councilmembers : This letter is intended to satisfy the requirements of item 10 of the Application For Approval of Industrial Development Bond Project to be filed by the City of Chanhassen, Minnesota (the City) , with the Minnesota Department of Trade and Economic Development in connection with the project to be financed with the above-referenced bonds, and may be attached as an exhibit to said Application. It is the plan and intent of Lyman Lumber Company, a Minnesota corporation (the Borrower) , to comply with the provisions of Minnesota Statutes, Section 469 . 154 , Subdivision 7 (to the extent that compliance by the Borrower is legally required by such provisions) , and, upon request, to assist and cooperate with the City in complying with those reporting requirements of said Subdivision 11 which may be applicable to the City. Nothing herein contained shall be construed so as to impose any obligation or requirement on the Borrower or the City which is not otherwise imposed by said Subdivision 7 . Very truly yours , LYMAN LUMBER COMPANY By Its r M ALLISON-WILLIAMS COMPANY INVESTMENT BANKERS 1 2700 LINCOLN CENTRE 333 SOUTH 7TH STREET ESTABLISHED 1919 MINNEAPOLIS, MINNESOTA 55402 TELEPHONE(612)333-3475 July 22, 1988 Honorable Mayor and City Council Chanhassen, MN RE: Lyman Lumber Company Gentlemen: Our firm has investigated the financial feasibility of Lyman Lumber Company to construct and equip an addition to the Millwork plant in the City of Chanhassen. It is our conclusion, on the basis of current financial conditions, that the project is financially and economically feasible and that the bonds can successfully be issued and sold subject to approval of the project by the City of Chanhassen and the Minnesota Department of Trade and Economic Development of the State of Minnesota. It is, therefore, our intent to use our best efforts to privately place the Industrial Development Revenue Bonds in a maximum amount of not to exceed $1,000,000, subject to terms and conditions established at a later date. Very truly yours, ALLISON-WILLIAMS COMPANY John//D. Hickerson Senior Vice President JDH/sck