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Tax-Exempt General Obligation Bonds Series 2015_$3M_Initiate Copyright 2014 City of Dubuque Items to be set for Public Hearing # 5. ITEM TITLE: Tax-Exempt General Obligation Bonds Series 2015 SUMMARY: City Manager recommending that a public hearing be set for May 4, 2015, on the proposition of selling not to exceed $3,000,000 in Tax-Exempt General Obligation Bonds, the proceeds of which will be used to pay the costs of the settlement of the franchise fee litigation. RESOLUTION Fixing date for a meeting on the proposition of the issuance of not to exceed $3,000,000 General Obligation Bonds of the City of Dubuque, State of Iowa (For an Essential Corporate Purpose), and providing for publication of notice thereof SUGGESTED DISPOSITION: Suggested Disposition: Receive and File; Adopt Resolution(s), Set Public Hearing for 5/4/15 ATTACHMENTS: Description Type ❑ MVM Memo City Manager Memo ❑ Staff Memo Staff Memo ❑ Public Notice of Public Hearing Supporting Documentation ❑ Resolution Fixing Date for Public Hearing Resolutions ❑ Bond Counsel Letter Supporting Documentation THE CITY OF Dubuque UBE I erica .i Masterpiece on the Mississippi 2007-2012-2013 TO: The Honorable Mayor and City Council Members FROM: Michael C. Van Milligen, City Manager SUBJECT: Proceedings to Set Public Hearing on the Issuance of Not to Exceed $3,000,000 Tax-Exempt General Obligation Bonds, Series 2015 DATE: April 14, 2015 Budget Director Jennifer Larson recommends that a public hearing be set for May 4, 2015, on the proposition of selling not to exceed $3,000,000 in Tax-Exempt General Obligation Bonds, the proceeds of which will be used to pay costs of the settlement of the franchise fee litigation. The bonds will be repaid using the debt service levy beginning in Fiscal Year 2016. The debt service levy amount related to the repayment of the bonds is $0.06614 per $1,000 of assessed valuation in Fiscal Year 2016. 1 concur with the recommendation and respectfully request Mayor and City Council approval. Michael C. Van Milligen MCVM/jml Attachment cc: Barry Lindahl, City Attorney Cindy Steinhauser, Assistant City Manager Teri Goodmann, Assistant City Manager Jennifer Larson, Budget Director Kenneth TeKippe, Finance Director THE CITY OF Dubuque UBE I erica .i Masterpiece on the Mississippi 2007-2012-2013 TO: Michael C. Van Milligen, City Manager FROM: Jennifer Larson, Budget Director SUBJECT: Proceedings to Set Public Hearing on the Issuance of Not to Exceed $3,000,000 Tax-Exempt General Obligation Bonds, Series 2015 DATE: April 14, 2015 INTRODUCTION The purpose of this memorandum is to recommend the setting of a public hearing on the proposal to issue General Obligation Bonds, the proceeds of which will be used for essential corporate purposes of the City for projects in the City budget previously approved by the City Council. A letter from attorney Mark Cory detailing information on the bond hearing is enclosed. DISCUSSION The $3,000,000 General Obligation Bond will be used to provide funds to pay the costs of the settlement of the franchise fee litigation. Since at least 1873, the Iowa Code has given Iowa cities the authority to grant franchises to utilities to use the public right-of-ways. Cities also had the authority to impose franchise fees for such use. Until 2010, the Code of Iowa did not limit the amount or basis of franchise fees. However, earlier Iowa Supreme Court cases indicated that a city's authority to impose a franchise fee was limited to reasonable costs of regulating, supervising, or enforcing the franchise. Franchise fees are typically based on a percentage of gross revenue of the franchisee. For example, the federal Cable Act of 1984 authorized cable franchise fees not to exceed 5% of gross revenue. The City of Dubuque has been collecting 5% fees on cable services based on gross revenue since at least 1984. In 1994, the City of Dubuque renewed its gas and electric franchises. Both agreements authorized the City Council to impose franchise fees no to exceed 3% of gross revenues on the sale of gas and electricity. The franchise agreements, including the right to impose franchise fees, were approved by citizens at an election. However, the City Council did not impose any franchise fees on gas and electricity sales until 2003 when it imposed a 2% fee. In 2005, Linda Kragnes filed a class action law suit against the City of Des Moines claiming that Des Moines' franchise fees were illegal taxes. The Polk County District Court agreed with Kragnes. On appeal, the Iowa Supreme Court in a 2006 opinion, agreed with the District Court and rejected Des Moines' home rule argument, holding that "any franchise fee charged by a city must be reasonably related to the city's administrative expenses in the exercise of its police power. These expenses include the reasonable costs of inspecting, licensing, supervising, or otherwise regulating the activity the city is franchising." Thus, under the Kragnes rule, "a city has the authority to assess a franchise fee expressed as a percentage of the gross receipts derived from the utility's sale of its services to the public, so long as the charge is reasonable related to the cost of the activity that is being franchised." The Supreme Court did not elaborate on what costs a city is entitled to recover. J. Thomas Zaber filed his class action lawsuit against the City of Dubuque in 2006 alleging, like Kragnes, that the City's gas, electric and cable franchise fees were illegal taxes. Very shortly after the Polk County ruling in Kragnes, the City of Dubuque retained Springsted International, a consulting firm specializing in infrastructure costs, to conduct a study to determine the city's "cost of inspecting, licensing, supervising, or otherwise regulating" the gas and electric utilities. Because the Supreme Court had not provided specific guidance in Kragnes as to what those costs were, we were left to speculate as to what costs to include in the study. Springsted's preliminary report in 2006 indicated that the city's franchise fees were roughly equivalent to the costs of regulating the utilities, based again on what we believed those costs might include. The Zaber case was essentially on hold while the Kragnes case was being litigated in the courts. In a subsequent hearing following the Kragnes appeal, the Polk County district court disallowed a number of Des Moines' costs, which included many of the costs which were part of the Springsted analysis. On appeal from the decision, the Iowa Supreme Court elaborated on the costs that could be recovered by a city as a franchise fee, allowing some of the costs that the Polk County district court had disallowed but still rejecting many of the costs that had originally been relied upon by Springsted. Following that 2012 opinion, Springsted updated its report and concluded that the City of Dubuque had collected franchise fees in excess of costs by around $2 million. While the franchise fee cases were pending, in 2010 the Iowa General Assembly authorized cities to collect cable franchise fees of 5% without regard to the cost of regulating the utilities, thus abrogating the Kragnes rule. The cable legislation also was made retroactive. Zaber challenged the constitutionality of the retroactivity provision of the law, but the District Court for Dubuque County agreed with Dubuque that the statute was constitutional. On appeal, the Iowa Supreme Court upheld that decision. As a result of that change in the law, Zaber's cable fee challenge was dismissed from the lawsuit, removing $3 million in cable fees from the lawsuit. In 2010 the Iowa General Assembly also authorized gas and electric franchise fees not to exceed 5% without the regard to the cost of regulating the utilities. However, the legislature did not make the legislation retroactive, a matter which did not go unnoticed by the Iowa Supreme Court in Kragnes. The court said that the legislature "declined to shield the City from the financial impact" of the claims like Zaber's. Had the legislature made the gas and electric legislation retroactive, a settlement would not be necessary. Based on the risks and costs of a trial, the costs and further delay of likely appeals, the City Attorney's Office and our retained counsel have concluded that it is in the best interest of the City to settle the case. The relief requested by Zaber in the lawsuit is essentially a refund to the class of gas and electric customers of the franchise fees that exceed the costs the city was authorized to collect between 2005 and 2009 when the law was changed. The parties have reached a tentative settlement of$2.6 million. A fairness hearing is yet to be scheduled to obtain Court approval of the settlement agreement and to determine what happens to unclaimed funds after the claims period is closed. The bond funds remaining after bond issuance fees are paid will be put into an escrow account by the City of Dubuque to fund the franchise fee refund process. The cost of the settlement is not covered by the City's insurance carrier, Iowa Communities Assurance Pool. Damages and expenses not covered under the City's insurance include tax activities meaning damages and expenses resulting from any wrongful act by the insured in connection with any tax assessment, fine, fee or adjustment or the collection, refund, disbursement or application of any taxes. The bonds will be repaid using the debt service levy beginning in Fiscal Year 2016. The debt service levy amount related to the repayment of the bonds is $0.06614 per $1 ,000 of assessed valuation in Fiscal Year 2016. RECOMMENDATION I respectfully recommend the adoption of the enclosed resolution fixing the date of May 4, 2015 for a public hearing on the proposition of selling not to exceed $3,000,000 Tax- Exempt General Obligation Bonds, Series 2015 and providing publication of notice. JML Attachment cc: Barry Lindahl, City Attorney Cindy Steinhauser, Assistant City Manager Teri Goodmann, Assistant City Manager Kenneth TeKippe, Finance Director AHLERS &COONEY, P.C. 100 COURT AVENUE, SUITE 600 DES MOINES, IOWA 50309-2231 FAx: 515-243-2149 WWW.AHLERSLAW.COM R.Mark Cory Direct Dial; RCory@ahlerslaw.com 515.246.0378 April 10, 2015 Via E-Mail Jenny Larson Budget Director City of Dubuque 50 West 13th Street Dubuque, Iowa 52001 Re: City of Dubuque, State of Iowa - General Obligation Bonds Dear Jenny: We have now prepared and are enclosing suggested proceedings to be acted upon by the Council in fixing the date of a meeting on the proposition to issue the above mentioned bonds and ordering publication of a notice of hearing consistent with the pfovisions of Code Section 384.25. (See publication requirement.) Also enclosed is an extra copy of the proceedings to be filled in as the original and certified back to this office, together with publisher's affidavit of publication of notice of hearing. We are also enclosing an extra copy of the notice of hearing to be delivered to the newspaper for publication purposes. A certificate to attest the proceedings is also enclosed. At the time of hearing the Council shall receive oral or written objections from any resident or property owner to the proposed action to issue the bonds. After all objections have been received and considered, the Council is required, at that meeting or at any adjournment thereof, to take additional action for the issuance of the bonds or to abandon the proposal to issue the bonds. The Council is required by statute to adopt the resolution instituting proceedings to issue the bonds at the hearing--or an adjournment thereof. Publication Requirement -Notice of Hearing. Notice of this meeting must be published at least once in a legal newspaper, printed wholly in the English language, published at least once weekly, and having general circulation in the City. The date of publication is to be not less than four clear days nor more than twenty days before the date of the public meeting on the issuance of bonds. In computing time, the date of publication should be excluded. If the last day falls on Sunday, the whole of the following Monday should be excluded. [See Section ICS 4.1(34)] WISHARD&BAILY-1888;GUERNSEY&BAILY-1893;GAILY&STIPP-1901;STIPP,PERRY.BANNISTER&STARZINGER-1914;BANNISTER,CARPENTER. AHLERS&COONEY-1950;AHLERS,COONEY,DORWEILER,ALLBEE,HAYNIE&SMITH-1974;AHLERS,COONEY,DORWEILER,HAYNIE.SMITH&ALLBEE,P.C.-1990 April 10, 2015 Page 2 We will prepare and forward to you in the near future, suggested procedure to be acted upon on the date of hearing. If you have any questions pertaining to the proceedings enclosed or the above instructions,please do not hesitate to either write or call. Very tr y'yours �44 R. Mark Cory FOR THE FIRM RMC:csm Enclosures cc: Barry Lindahl Ken TeKippe Kevin Firnstahl 01101577-1\10422-000 (This Notice to be posted) NOTICE AND CALL OF PUBLIC MEETING Governmental Body: The City Council of the City of Dubuque, State of Iowa. Date of Meeting: April 20, 2015 Time of Meeting: 6:30 o'clock P.M. Place of Meeting: Historic Federal Building, 350 West 6th Street, Dubuque, Iowa. PUBLIC NOTICE IS HEREBY GIVEN that the above mentioned governmental body will meet at the date, time and place above set out. The tentative agenda for the meeting is as follows: Not to Exceed $3,000,000 General Obligation Bonds. • Resolution fixing date for a meeting on the proposition to issue. Such additional matters as are set forth on the additional 5 page(s) attached hereto. (number) This notice is given at the direction of the Mayor pursuant to Chapter 21, Code of Iowa, and the local rules of the governmental body. r•°' .00 City Cl-rk, City of DubuqueState of Iowa April 20, 2015 The City Council of the City of Dubuque, State of Iowa, met in regular session, in the Historic Federal Building, 350 West 6th Street, Dubuque, Iowa, at6:30 P.M., on the above date. There were present Mayor Pro Tem Karla Braig, in the chair, and the following named Council Members: David Resnick, Kevin Lynch, Roy Buol (via phone), Karla Braig, Joyce Connors, Lynn Sutton, Ric Jones Absent: Council Member Lynch introduced the following Resolution entitled "RESOLUTION FIXING DATE FOR A MEETING ON THE PROPOSITION OF THE ISSUANCE OF NOT TO EXCEED $3,000,000 GENERAL OBLIGATION BONDS OF THE CITY OF DUBUQUE, STATE OF IOWA (FOR AN ESSENTIAL CORPORATE PURPOSE), AND PROVIDING FOR PUBLICATION OF NOTICE THEREOF", and moved that the same be adopted. Council Member Jones seconded the motion to adopt. The roll was called and the vote was, AYES: David Resnick, Kevin lynch, Roy Buol, Karla Braig Joyce Connors, Lynn Sutton, Ric Jones NAYS: Whereupon, the Mayor declared the resolution duly adopted as follows: RESOLUTION NO. 133-15 RESOLUTION FIXING DATE FOR A MEETING ON THE PROPOSITION OF THE ISSUANCE OF NOT TO EXCEED $3,000,000 GENERAL OBLIGATION BONDS OF THE CITY OF DUBUQUE, STATE OF IOWA (FOR AN ESSENTIAL CORPORATE PURPOSE), AND PROVIDING FOR PUBLICATION OF NOTICE THEREOF WHEREAS, it is deemed necessary and advisable that the City of Dubuque, State of Iowa, should issue General Obligation Bonds, to the amount of not to exceed $3,000,000, as authorized by Section 384.25, of the Code of Iowa, for the purpose of providing funds to pay costs of carrying out an essential corporate purpose project as hereinafter described; and WHEREAS, before the Bonds may be issued, it is necessary to comply with the provisions of the Code, and to publish a notice of the proposal to issue such bonds and of the time and place of the meeting at which the Council proposes to take action for the issuance of the Bonds and to receive oral and/or written objections from any resident or property owner of the City to such action. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF CITY OF DUBUQUE, STATE OF IOWA: Section 1. That this Council meet in the Historic Federal Building, 350 West 6th Street, Dubuque, Iowa, at 6:30 P.M., on the 4th day of May, 2015, for the purpose of taking action on the matter of the issuance of not to exceed $3,000,000 General Obligation Bonds, for an essential corporate purpose, the proceeds of which bonds will be used to provide funds to pay the costs of the settlement of any part or all of the legal indebtedness of a city, whether evidenced by bonds, -2- warrants, or judgments, or the funding or refunding of the same, whether or not such indebtedness was created for a purpose for which general obligation bonds might have been issued in the original instance. Section 2. To the extent any of the projects or activities described in this resolution may be reasonably construed to be included in more than one classification under Division III of Chapter 384 of the Code of Iowa, the Council hereby elects the "essential corporate purpose" classification and procedure with respect to each such project or activity, pursuant to Section 384.28 of the Code of Iowa. Section 3. That the Clerk is hereby directed to cause at least one publication to be made of a notice of the meeting, in a legal newspaper, printed wholly in the English language, published at least once weekly, and having general circulation in the City. The publication to be not less than four clear days nor more than twenty days before the date of the public meeting on the issuance of the Bonds. Section 4. The notice of the proposed action to issue bonds shall be in substantially the following form: 3 (To be published on or before: April 28, 2015) NOTICE OF MEETING OF THE CITY COUNCIL OF THE CITY OF DUBUQUE, STATE OF IOWA, ON THE MATTER OF THE PROPOSED ISSUANCE OF NOT TO EXCEED $3,000,000 GENERAL OBLIGATION BONDS OF THE CITY (FOR AN ESSENTIAL CORPORATE PURPOSE), AND THE HEARING ON THE ISSUANCE THEREOF PUBLIC NOTICE is hereby given that the City Council of the City of Dubuque, State of Iowa, will hold a public hearing on the 4th day of May, 2015, at .M., in the Historic Federal Building, 350 West 6th Street, Dubuque, Iowa, at which meeting the Council proposes to take additional action for the issuance of not to exceed $3,000,000 General Obligation Bonds, for an essential corporate purpose, to provide funds to pay the costs of the settlement of any part or all of the legal indebtedness of a city, whether evidenced by bonds, warrants, or judgments, or the funding or refunding of the same, whether or not such indebtedness was created for a purpose for which general obligation bonds might have been issued in the original instance. At the above meeting the Council shall receive oral or written objections from any resident or property owner of the City to the above action. After all objections have been received and considered, the Council will at the meeting or at any adjournment thereof, take additional action for the issuance of the Bonds or will abandon the proposal to issue said Bonds. This notice is given by order of the City Council of the City of Dubuque, State of Iowa, as provided by Section 384.25 of the Code of Iowa. Dated this day of , 2015. City Clerk, City of Dubuque, State of Iowa (End of Notice) 4 PASSED AND APPROVED this 20th day of April, 2015. Karla A. Braig, Mayor Pro Vm ATTEST: CERTIFICATE STATE OF IOWA ) SS COUNTY OF DUBUQUE I, the undersigned City Clerk of the City of Dubuque, State of Iowa, do hereby certify that attached is a true and complete copy of the portion of the corporate records of the City showing proceedings of the Council, and the same is a true and complete copy of the action taken by the Council with respect to the matter at the meeting held on the date indicated in the attachment, which proceedings remain in full force and effect, and have not been amended or rescinded in any way; that meeting and all action thereat was duly and publicly held in accordance with a notice of public hearing and tentative agenda, a copy of which was timely served on each member of the Council and posted on a bulletin board or other prominent place easily accessible to the public and clearly designated for that purpose at the principal office of the Council (a copy of the face sheet of the agenda being attached hereto) pursuant to the local rules of the Council and the provisions of Chapter 21, Code of Iowa, upon reasonable advance notice to the public and media at least twenty-four hours prior to the commencement of the meeting as required by law and with members of the public present in attendance; I further certify that the individuals named therein were on the date thereof duly and lawfully possessed of their respective city offices as indicated therein, that no vacancy existed except as may be stated in the proceedings, and that no controversy or litigation is pending, prayed or threatened involving the incorporation, organization, existence or boundaries of the City or the right of the individuals named therein as officers to their respective positions. WITNESS my hand and the seal of the Council hereto aff ethis 22nd day of April, 2015. (SEAL) City k, City of Dub State of Iowa CERTIFICATE STATE OF IOWA ) SS COUNTY OF DUBUQUE I, the undersigned, do hereby certify that I am now and was at the times hereinafter mentioned, the duly qualified and acting Clerk of the City of Dubuque, in the County of Dubuque, State of Iowa, and that as such Clerk and by full authority from the Council of the City, I have caused a NOTICE OF MEETING OF THE CITY COUNCIL OF THE CITY OF DUBUQUE, STATE OF IOWA, ON THE MATTER OF THE PROPOSED ISSUANCE OF NOT TO EXCEED $3,000,000 GENERAL OBLIGATION BONDS, OF THE CITY OF DUBUQUE, AND THE HEARING ON THE ISSUANCE THEREOF of which the clipping annexed to the publisher's affidavit hereto attached is in words and figures a correct and complete copy, to be published as required by law in the "Telegraph Herald", a legal newspaper published at least once weekly, printed wholly in the English language, published regularly and mailed through the post office of current entry for more than two years and which has had for more than two years a bona fide paid circulation recognized by the postal laws of the United States, and has a general circulation in the City, and that the Notice was published in all of the issues thereof published and circulated on the following date: April 24 , 2015. WITNESS my official signature at Dubuque, Iowa, this 27 t h day of April ,2015. City Clerk, ity of Dub que (SEAL) of Iowa STATE OF IOWA {SS: DUBUQUE COUNTY CERTIFICATION OF PUBLICATION I, Suzanne Pike, a Billing Clerk for Woodward Communications, Inc., an Iowa corporation, publisher of the Telegraph Herald,a newspaper of general circulation published in the City of Dubuque, County of Dubuque and State of Iowa; hereby certify that the attached notice was published in said newspaper on the following dates: April 24, 2015, and for which the charge is $24.07. Subscribed to before me, a Notary Public in and for Dubuque County, Iowa, this ,,,Pfz day of (j ,20/5 . otary Public in and for Dubuque County, Iowa. A K. YESFERtMEYER Commission Number 154&e. v Comm. 1. Exp. FEB. 1, 2017 CITY OF DUBUQUE, IOWA OFFICIAL NOTICE NOTICE OF MEETING OF THE CITY COUNCIL, OF THE 'CITY OF DUBUQUE, STATE OF IOWA, ON THE MATTER OF THE PROPOSED ISSUANCE'. OF NOT TO EXCEED $3,000,000 GENERAL OBLIGATION BONDS OF THE CITY (FOR AN ESSENTIAL CORPOR- ATE PURPOSE), AND THE HEARING ON THE ISSUANCE THEREOF_ PUBLIC NOTICE is hereby given that the 1 City Council of the City of Dubuque, State of Iowa, will hold a public hearing on the 4th day of May, 2015, at 6:30 R.M., in the Historic Federal Building, 350 West 6th Street, Dubu- que, Iowa, at which meeting the Council proposes to take additional action for the issuance of not to exceed $3,000,000 Gen- eral Obligation Bonds, for an essential cor- porate purpose, to providefunds to pay the costs of the settlement, of any part or all of the legal. indebtedness of a city, whether evidenced by bonds, warrants, or judgments, or the funding or refunding of the same, whether or not such indebtedness was created for a pur- pose for which general obligation, bonds might have been issued in the.! original instance. At the above meeting the Council shall re- ceive oral or written objections from any resident or property owner of the City to the above action. After all objections have been received and considered, the Council will at the meeting or at any adjournment thereof, take additional action for the issuance of the Bonds or will abandon the proposal to issue said Bonds. This notice is given by order of the City Council of the City of Dubuque, State of I Iowa, as provided by Section 384.25 of the Code of Iowa. Dated this 24th day of April, 2015. Kevin S. Firnstahl City Clerk, City of Dubuque, State of Iowa, It 4/24 CERTIFICATE of the CITY CLERK STATE OF IOWA ) SS: COUNTY OF DUBUQUE ) I, Kevin S. Firnstahl, do hereby certify that I am the duly appointed, qualified, City Clerk of the City of Dubuque, Iowa, in the County aforesaid, and as such City Clerk, I have in my possession or have access to the records of the proceedings of the City Council. I do further state that the hereto attached Resolution No. 133-15 is a true and correct copy of the original. In Testimony Whereof, I hereunto set my hand and official seal of the City of Dubuque, Iowa. Dated at Dubuque, Iowa, on this 22nd day of April, 2015. Kevi r S. Firnstahl, CMCJ; City Clerk (SEAL) CITY OF DUBUQUE, IOWA OFFICIAL NOTICE NOTICE OF MEETING OF THE CITY COUNCIL OF THE CITY OF DUBUQUE, STATE OF IOWA, ON THE MATTER OF THE PROPOSED ISSUANCE OF NOT TO EXCEED $3,000,000 GENERAL OBLIGATION BONDS OF THE CITY (FOR AN ESSENTIAL CORPORATE PURPOSE), AND THE HEARING ON THE ISSUANCE THEREOF PUBLIC NOTICE is hereby given that the City Council of the City of Dubuque, State of Iowa, will hold a public hearing on the 4th day of May, 2015, at 6:30 P.M., in the Historic Federal Building, 350 West 6th Street, Dubuque, Iowa, at which meeting the Council proposes to take additional action for the issuance of not to exceed $3,000,000 General Obligation Bonds, for an essential corporate purpose, to provide funds to pay the costs of the settlement of any part or all of the legal indebtedness of a city, whether evidenced by bonds, warrants, or judgments, or the funding or refunding of the same, whether or not such indebtedness was created for a purpose for which general obligation bonds might have been issued in the original instance. At the above meeting the Council shall receive oral or written objections from any resident or property owner of the City to the above action. After all objections have been received and considered, the Council will at the meeting or at any adjournment thereof, take additional action for the issuance of the Bonds or will abandon the proposal to issue said Bonds. This notice is given by order of the City Council of the City of Dubuque, State of Iowa, as provided by Section 384.25 of the Code of Iowa. Dated this 24th day of April, 2015. Kevin S. Firnstahl City Clerk, City of Dubuque, State of Iowa