278968 WHITE - CITY CLERK -„/' J�7��Q
PINK - FINANCE COUIICII IGr/Qy�;�
CANARY - DEPARTMENT G I T Y O F � S A I N T PA U L
BLUE - MAYOR File N O.
Council Resolution
Presented By r.l� v /I
Referred To Committee: Date
Out of Committee By Date
WHEREAS:
l . On June 22, 1982, the Port Authority Commission adopted Resolution No. 2011 giving
preliminary approval to the issuance of revenue bonds in the initial principal amount of
approximately $3,400,000 to finance the construction of a 56,860 square foot, two-story
clinic facility in the Como Shops of Energy Park for Share Health.
2. Laws of Minnesota 1976, Chapter 234, provides that any issue of revenue bonds
authorized by the Port Authority of the City of Saint Paul , shall be issued only with the
consent of the City Council of the City of Saint Paul , by resolution adopted in accordance
with law;
3. The Port Authority of the City of Saint Paul has requested that the City Council
give its requisite consent pursuant to said law to facilitate the issuance of said revenue
bonds by the Port Authority of the City of Saint Paul , subject to final approval of the
details of said issue by the Port Authority of the City of Saint Paul .
RESOLVED, by the City Council of the City of Saint Paul , that in accordance with Laws
of Minnesota 1976, Chapter 234, the City Council hereby consents to the issuance of the
aforesaid revenue bonds for the purposes described in the aforesaid Port Authority Resolution
No. 2011 the exact details of which, including, but not limited to, provisions relating
to maturities, interest rates, discount, redemption, and for the issuance of additional
bonds are to be determined by the Port Authority, pursuant to resolution adopted by the
Port Authority, and the City Council hereby authorizes the issuance of any additional bonds
(including refunding bonds) by the Port Authority, found by the Port Authority to be
necessary for carrying out the purposes for which the aforesaid bonds are issued.
COUNC[LMEN
Yeas Nays „/� Requestg Department of:
�,��
Hunt �
�� [n Favor
Maddox �
McMahon B
showa�ter _ Against Y
Tedesco
son
Adopted by Council: Date ��� � � 1982 Form Approved by City Attorney
Certifie assed u ci e4cretary gy � C
By '� ' 6 o�-Y--�
App v by Ylayor: � ��� d by Mayor for b i3sion to Council
By
E�fBLtSNED ,!�}� � � �
- P � � T . . �
,AUTHORlTI� �����8
QF TH� CITY OF ST. PAUL
Merr�orandum
T�: BOARD OF COMMISSICINERS DATE: June 9, 1982
(June 22, 1982 Re�ular Meeting)
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FROM: B.A. Maus ;��� `
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SUBJECT: SHARE NEALTH
PUBLIC HEARING - PRELIMINARY & UNDERWRITING AGREEMENT
$3,400,000 RESOLUTION 876 REVENUE BOND ISSUE
ENERGY PARK
RESOLUTION N0. 2011
1 . THE COMPANY
Share of Bloomington, Minnesota is a non-profit corporation incorporated
under the laws of Minnesota. Share's primary purpose is to operate
a health maintenance organization (HMO) to provide comprehensive health
maintenance services to enrollees either directly or through arrangements
with providers.
Share is a federally approved HMO which employs staff madel clinics
and contracts with outside physician's clinics to provide health care
services to Share members. Share markets its health maintenance services
through Twin City employers and other groups at a flat monthly fee which
is generally paid partially by the employee with the balance paid by
the employer. For this monthly fee, the enrolled member is provided
comprehensive in-patient and out-patient medical services at generally
no cost to the enrollee. The enrollee is free to choose the affiliated
clinic which he/she will utilize.
, Formed in 1974, Share has grown from a medical and administrative staff
of 20 serving a membership of 3,000 in a single clinic facility to a
current staff of 215 serving a membership of nearly 50,000 through eight
medical centers (six of which are participating physician clinics).
Share' s volume has grown from less than �l million in 1974 to �36 million
projected by the end of 1982. Volume has tripled in just the past two
years.
2. TNE PROJECT
Share proposes to develop a clinic facility in the Como Shops of Energy
Park known as Bandana Square. Share will develop 55,860 sq.ft. as a
two-story fac� lity. This facility will replace the 35,000 square feet
currently occupied at Samaritan Hospital where their lease is due to
expire.
t ,
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BOARD OF C0�4MISSIONERS
June 9, 1982
Page -2-
Construction is planned to begin in July of 1982 and occupancy af the
facility is scheduled for July of 1983. At the time of bond sale, Share
will have entered into a binding commitment (a letter of agreement now
exists) with AHW to provide 450 parking spaces for a term not less than
30 years. In addition, that agreement will also contain a provision
to sublease Share the real estate and the shell facilities in the Como
Shops which AHW is now leasing from the Port Authority.
Total projected cost for Share is estimated at $5,750,000. This new
development will bring 140 jobs to Energy Park initially; and when
operating at full capacity, there will be approximately 240 jobs.
3. FINANCING
The proposed financing is as follows:
Bond Issue Equ;ty
Construction $2,911 ,750 Cash $1 ,000,000.00
Capitalized Interest 361 ,250 Reserve (Cash) 453,587.50
Bond Issue Expense 25,000 Equipment 900,000.00
Underwriter's Discount 102,000
3, 00,000 2,353,587.50.
The Port Authority will assess it standard fiscal and administrative
fees on the project of .42% of the principal amount of the bonds per
year for the first 10 years of the term of the lease, .54� for the
second 10 years and .66% for the third 10 years.
Financial information and opinions were prepared by Deloitte, Haskins
an� Sells, a national accounting firm. The Twin City office of this
firm specializes in advising the health care industry. Attached for
your review are the following:
a) Last three years audited statements.
b) Unaudited statement as of April 30, 1982.
c) Marketing and Medical Staff Brochures '
d) A 5-year pro forma financial projections and opinion statement from
Deloitte, Haskins & Sells.
Share has shown phenomenal growth since its beginning in 1974; however,
it is important to note that the corporation did experinece an operating
loss in 1980 which is shown in the 1980 audit. During 1980, Share did
maintain a positive net worth in a year that was the culmination of
a two-year major expansion. Share's newest facility in Bloomington,
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BOARD OF COMMISSIONERS
June 9, 1982
Page -3-
also houses the corporate offices, increased the organization's capacity
by 40%. This was an entirely new facility with no membership. The
proposed facility in Energy Park involves the transfer of some 26,000
members from the current location in Samaritan Hospital . At the end
of 1979 or the beginning of 1980, the year the corporation experienced .
an operating loss , Share had $9 million in revenues. At its current
rate of growth, it is anticipated that Share will finish 1982 with $36
million in revenues. Net worth at the end of May of this year is
$886,000 and is projected to finish 1982 at $1 ,644,000. This growth
is assumed to continue as summarized from the pro forma:
1981 1982 1983 1984 1985 1986
$(000).
Assets $ 5,799 $ 9,756 $11 ,876 $13,929 $16,393 $19,509
Net Worth 661 1 ,644 2,261 2,772 3,654 4,965
Revenue 22,251 36,214 51 ,048 65,075 79,470 94,882
The pro forma prepared by Deloitte, Haskins & Sells describes two options
for the purpose of demonstrating the feasibility of the project. Option �
includes projections based upon the assumption of Share owning the building,
and Option 2 is based upon the assumption that Share would sublease the
. building from a tax oriented partnership which Share would form for the
purpose of selling its tax credits. In either case, Share is the
guarantor for the term of the bond issue. The potential sale of tax
credits was not taken into account in Option 1 in order to produce a
financially conservative projection. Share intends to fund the required
equity and reserve from proceeds from the sale of limited partnerships.
The net income cash flow and debt service coverage shown in the pro
forma is summarized below.
1981 1982 1983 1984 1985 1986
$(000)
Net Income '
Option 1 $ 578 � 983 $ 617 $ 511 � 882 � 1 ,311
Option 2 578 1 ,038 750 766 1,143 1,579
Cash Flow*
Option 1 - - - 1 ,968 2,�70 4,823 7,090 9,950
Option 2 - - - 3,022 4,124 6,065 8,426 11 ,392
* Ending Balance - Cash & Short Term Investments
Debt Service
Coverage
Option 1 - - - 20. 15x 3.85x 2.59x 3. lOx 3.62x
Option 2 �21 .00x 3.81x 2.65x 3. 14x 3.67x
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BOARD OF COMMISSIONERS
June 9, 1982
Page -4-
When calculating debt service in the pro forma, the following information
was included:
a) Debt service on the bond issue.
b) Port Authority fees.
c) 30-year lease with AHW Corporation for parking.
d) Payment to AHW for the shell and underlying real estate.
Required at the t�ime of bond sale is an agreement between Share and
AHW Corporation to provide 450 spaces of parking of which Share will
guarantee payment of $137,000 a year for a term of 30 years to AHW.
This amounts to approximately 40% of the debt service on the parking
ramp bond issue. The agreement will also sublease the real estate to
Share over a term of 30 years with an accelerated payback schedule.
It was structured in this fashion as an incentive to Share to come into
Bandana Square. At the time Share opens its facility in Energy Park,
approximately 10,000 members of Share will enter Bandana Square each
month which will provide a significant stimulus to the rest of the
Bandana Square development.
On April 7, 1982, the Department of Housing and Urban Development
approved an Urban Development Action Grant to the City of St. Pau1 in
' the amount of $3,421 ,000 for infrastructure improvements in Energy Park.
The grant which was approved provided the assurance that $22,707,000
in private investment would come from Gould National Battery, J.L.
Shiely Company and AHW Corporation. The capital investment of $5.75
million made by Share in this facility is a first step in satisfying
the evidentiary requirement of UDAG r�garding the private/public leverage.
4. RECOMMFNDATIONS
Staff recognizes this is a special purpose facility; consequently, when
developing this proposal , the $1 million cash equity and the $450,000
cash reserve were required up front. In addition, the Port Authority
has the security of the real estate and the shell which is not part
� of the bond issue; therefore, appraised value of the project when
complete is estimated to be in excess of $6.5 million.
This is a major step in the development of Energy Park which will
contribute significantly to the success of Bandana Square.
Early notice was sent to the affected districts and no response was
received.
Staff recommends approval of Resolution No. 201� ,
BAM:ca
Attach. .
� ` � - � � � �'78�68
Resolution No. a �'/�
RESOLUTION OF
THE PORT AUTHORITY OF THE CITY OF SAINT PAUL -�
WHE:tEAS, the purpose of Chapter 474, Minnesota
Statutes, known as the Minnesota Municipal Industrial Develop-
ment Act (hereinafter called "Act") as found and determined by
the legislature is to promote the welfare of the state by the
active attraction and encouragement and development of economi-
cally sound industry and commerce to prevent so far as possible
the emergence of blighted and marginal lands and areas of
chronic unemployment and to aid in the developmsnt of existing
areas of blight, marginal land and persistent unemployment; and
WHEI2EAS, factors necessitating the active promotion
and development of economical.ly sound industry and commerce are
the increasing concentration of population in the metropolitan
areas and the rapidly rising increase in the amount and cost of
governmental services required to meet the needs of the
increased population and the need for development of land use
which will provide an adequate tax base to finance these
increased costs and access to employment opportunities for such
population; and
WHEREAS, The Port Authority of the City of Saint Paul
(the "Authority") has received from SHARE, a Minnesota
nor.profit corporation (hereinafter referred to as "Company") a
request that the Authority issue its revenue bonds to finance
the acquisition, installation and construction of facilities
for the rehabiZitation of an existing building in Saint Paul
Energy Park for use by the Company as a medical facility
(hereinafter collectively called the "Project" ) pursuant to a
lease entered into between the Authority and either the Company
or a limited partnership, yet to be formed, that will Sublease
the entire Project to the Company, all as is more fully
described in the staff report on file; and .
WHEREAS, the Authority desires to facilitate the
selective development of the community, to retain and improve
its tax base and to help it provide the range of services and
employment opportun�.ties required by its population, and said
� ' , . ��Vaj�v
, � Project will assist the City in achieving that cabjective. Said
Project will help to increase the assessed valuation of the
City and help maintain a positive relationship b�etween assessed
valuation and debt and enhance the image and reputation of the
City; and
WHEREAS, the Project to be financed by revenue bonds _
will result in substantial employment opportunit38s in ti�e -
Project; _
WHEREAS, the Authority has been advisec3 by repre-
sentatives of the Company that conventional, commercial '
financing to pay the capital cost of the Project is available
only on a limited basis and at such high costs �f borrowing
that the econonic feasibility of operating the Project would be
significantly reduced, but the Company has also advised this
Authority t11at with the aid of revenue bond financing, and its
resulting low borrowing cost, the Project is ecanamically more
feasible;
WHEREAS, Miller & Schroeder Municipals, Inc. (the
"Underwriter") has made a proposal in an agreercte�nt (the
"Underwriting Agreement") relating to the purchase of the
revenue bonds to be issued to finance the Project;
WHEREAS, the Authority, pursuant to Minnesota
Statutes, Section 474.01, Subdivision 7b did publish a notice,
a copy of which with proof of publication is on file in the
office of the Authority, of a public hearing on the proposal of
the Company that the Authority finance the Project hereinbefore
described by the issuance of its industrial revenue bonds; and
' WHEREAS, the Authority did conduct a �ublic hearing
pursuant to said notice, at which hearing the recommendations
contained in the Authority' s staff msmorandum to the
Commissioners were reviewe3, and all nersons who appeared at
the hearing were given an opportunity to express their views
with respect to the proposal.
L70W, THEREFORE, BE IT RESOLVED by the Commissioners
of the Port Authority of the City of Saint Paul, Minnesota as
follows:
1. On the basis of inforrnation available to the
Authority it appears, and the Authority hereby f'inds, that said
Project constitutes properties, used or useful in connection
with one or more revenue producing enterprises engaged in any
business within the meaning of Subdivision 1(a) t�f Section
474.02 of the Act; that the Project furthers tne nurposes
. ���ss�
' stated in Section� 474.01 of the Act, that the availability of
� the financing under the Act and willingness of the Authority to
furnish such financing will be a substantial inducernent to the
Company to undertake the Project, and that the ef€ect of the
Project, if undertaken, will be to encourage the development of
economically sound industry and commerce and assist in the
prevention of the emergence of blighted and marginal l�nd, and
will help to prevent chronic unemployment, and wiil help the -
City to retain and improve its tax .base and provide the range
of services and employment opportunities required by its -
population, and will help to prevent the movement of talented �
and educated persons out of the state and to areas witY►in the
state where their services may not be as effectively used and
will result in more intensive development and use of land
within the City and will eventually result in an increase in
the City' s tax base; and that it is in the best interests of
the port district and the people of the City of Saint Paul and
in furtherance of the general plan of development to assist the
Company in financing the Project.
2. Subject to the mutual agreement of the
Authority, the Company and the purchaser of the revenue bonds
as to the details of the lease or other revenae agreement as
defined in the Act, and ot;:er documents necessary to evidence
and effect the financing of the Project and the issuance of the
revenue bonds, the Project is hereby approved and authorized
and the issuance of revenue bonds of the Authority in an amount
not to exceed approximately $4,000,000 (other than such
additional revenue bonds as are needed to complete the Project)
is authorized to finance the costs of the Project and the
recommendations of the Authority' s staff, as set forth in the
staff inemorandum to the Commissioners which was gresented to
the Comrnissioners, are incorporated herein by reference and
approved.
3. In accordance with Subdivision 7a of Section
474.01, Minnesota Statutes, the Executive Vice-President of the
AUTHORITY is hereby authorized and directed to submit the
proposal for the above described Project to the Commissioner of
Energy, Planning and Development, requesting his anproval, and
other officers, employees anc� agents of the Authority are
hereby authorized to provide the Commissioner with such
� preliminary information as he may require.
4. TYiere has heretofore oeen filed with the
Authority a form of Prelicninary Agreement between the Authc�rity
and Company, relating to the proposed construction and
financing of the Project and a form of the Underwriting
Agreement. The form of said Agreements have been examined by
the Commissioners. It is the purpose of said Agreements to
evidence the commitment of the parties and their intentions
. � 2'78�68.
• with respect to the proposed Project in order that the Campany
may proceed without delay with the commencement of the
acquisition, installation and construction of the Project with
the assurance that there has been sufficient "official action"
under Section I03 (b) of the Internal Revenue Code of 1954, as
amended, to allow for the issuance of industrial revenue bonds
( including, if deemed appropriate, any interim note or notes to_
provide temporary financing tnereof) to finance the entire cos�
of the Project upon agreement being reached as to the ultimate .
details of the Project and its financing. Said Agreements are
hereby approved, and the Presidenz and Secretary of the
Authority are hereby authorized and directed to execute said �
Agreements.
5. Upon execution of the Prelirninary Agreement by
the Company, the staff of the Authority are authorized and
directed to continue negotiations with the Company so as to
resolve the remaining issues necessary to the preparation of
the lease and other docunents necessary to the ado�tion by the
Authority of its final bond resolution and the issuance and
delivery of the revenue b�nds; provided that the President (or
Vice-President if the President is absent) and the Secretary
(or Assistant Secretary if tne Secretary is absent) of the
Authority, or if either of such ofiicers (and his alternate}
are absent, the Treasurer of the Authority in lieu of such
absent officers, are hereby authorized in accordance with the
provisions oi Minnesota Statutes, Section 475.06, �ubdivision
1, to accept a final offer of the Underwriters :nade by the
Underwriters to purchase said bonds and to execute an
underwriting agreement setting forth such offer on behalf of
the Authority. Such acceptance shall bind the Un3erwriters to
said offer but shall be subject to approval and ratification by
' the Port Authority in a forinal supplemental bond resolution to
be adopted prior to the delivery of said revenue bor�ds.
6. The revenue bonds and interest thereon shall not
constitute an indebtedness of the Authority or the City of
Saint Paul within the rn�aning of any constitutional or
statutory limitation and shall not constitute or give rise to a
pecuniary liability of the Authority or the City or a charge
against their general credit or taxing powers and neither tne
full faith and credit nor the taxing powers of the Authority or
the City is pledged for the payment of the bonds or interest
thereon.
7. In order to facilitate cornpletion of the revenue
bond financing herein contemplated, the City Council is hereby
requested to consent, pursuant to Laws of t•iinne.�ota, 1976,
Chapter 234, to the issuance of the revenue bonds herein
• � , ,
� contemplated and any additional bonds which the Authority may
prior to issuance or fron time to time thereafter deem
necessary to complete the Project or to refund such revenue
bonds; and for such purpose the Executivz Vice President of the
Authority is liereby authorized and directed to forward to the
City Council copies of this resolution and said Preliminary
Agreement and any additional available inforrlation the City _
Council may request. -
8. The actions of the Executive Vice-President of .
the Authority in causing public notice of the public hearing
and in describing the general nature of the Project and •
estimating the principal amount of bonds to be issued to
finance the Project and in �reparing a draft of the proposed
application to the Commissioner of Energy, Planning and
Development, State of Minnesota, for approval of the Project,
which has been available for inspection by the public at the
office of the Authority from and after the publication of
notice of the hearing, are in all respects ratified anc�
confirmed.
Adopted June 22 , 1982 __ � r
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Attest �� � � , u-
�
� P�esid-en
f" The Por Authority of the City
of Saint Paul
Z r-y� 1"
' e retary
i � • . � �
OM O1 : 12/1975
• Rev. . 9j8�8
EXPLANATION f ADMINIST12�4TIVE 4RDERS, �
RESOLUT ONS, AND ORDINANCES : RECEIV�I, j
�a- 9� �
. ; ��' JUNZa �gg� �
Date: June 22, 1982
CITY ATTORNEY 4
,
!
T0: MAYOR G RGE LATIMER �
. RECEIVED �
FR: Eugene . St.4 Paul Port Autho ity ��� Z 4 '�2 i
RE: SHARE HE TH '
$3,400,000 REVENUE BOND ISSUE MAYORS OFFICE �
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ACTION REQUESTED: • - �
I
In accordance with the Laws of Minnesota Chapter 234, it is requested that the City
Council , by Resolution, a draft copy of hich is attached hereto, approve the iss•uance
of revenue bonds in the amount of approximately $3,400,000 to finance the construction .
of a 56,860 square foot, two-story clini facility in the Como Shops of Energy Park �
for Share Health. �
;
f
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PURPOSE AND RATIONALE FOR THIS ACTION:
The purpose of the -bond issue is .to finan e a 56,860 square foot medical clinic in Energy'
Park for Share Health for a term of 30 ye rs. Approximately 20 new jobs will be created �
as a result of the project. i
, . �
This new facility will replace the 35,000 square feet currently occupied at Samaritan , �
,, Hospital where their lease is due to expi e. This new development will bring 140 jobs I
, to Energy Park initially; and when operat'ng at full capacity, there will be approx- "
imately 240 jobs. �
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ATTACHMENTS: I
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Staff Memorandum � � � � � �
Draft City Council Resolution �
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Port Authority Resolution No. 2011
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� � ' � � Dote ; July 9, 1982 �
°pt.. '� .
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. �. . C4I� 1�111TTEE � REP4f� i � .
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� Tp : Soin� PQUI Cit�y Councit � � -
F� Q � � Com m i-t�e� O Cl FZNANCE, MANAGEI�IENT & PERSO�IEL - I
. ,Tames' Scheibel , cnoi�man, . �
The Finance Committee; "at the meeting of �8� , recommended approval of the followin :
_.._�y._.�..___._ .�_...___ _. _.._---------
l. Approval of minutes of ineeting held July 1, 1982. U7�_
2. Resolution authorizing an Amendatory Agreement between }3rig�s & riorgan .
Drofessional Association for bond counsel services sa as to increase fees
for issuance of general obligation bonds from 50 cents to 75 cents per
thousand. �iPPrdJe-�► 3"d•
3. Resolution authorizing an agreement with the Firearms InFirmar}• providin�
for the inspection, service and repair of City owned firearms. ''0�1e-��1�'
4. Resolution approving the issuance of revenue bonds ($3,�i00,�00) to iinance
the construction of a clinic facility in the ComQ Shops of Energy Park for
Share Health. ��� 3-D
j. Resolution approving the issuance of revenue bonds (�2,585,000) to finance
� the construction of a parking ra�p to serve the needs of Bandana Square in
Energy Park for AH[J Corporation. A A�oJ� 3--Q. . �
�..
6. ResoZution amending the 1979 and 1980 Capi.tal Itnprover.►ent Budgets to provide
County�aid funding for certai.n street resurFacing projects (as outlined in
the resolution.) C�f1�D OVE�Q
7. Fesolution permitting the Nest Sector Patrol Unit to n�ove frora Ed�ecum5e
School [o the Unidale riall_ A�pro��' 3-O.
E. Discussion of the proposal to allow city employees voluntary leave without
pay as a money saving incentive. CThe Finance Committee voted pn a motion
which ap�roves Councilman Tedesco'•s resolution. They also requested that the
� administration proceed with surve�ng city employees to find our their response
to this incentive. Those results of the survey will be returned to the Finance
Committee prior to this resolution being on the City Council agenda. �Z�I F1����
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