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CI'fY OF
Presented by
co�a�sr Fi�e u b - )
Green Sheet # 3084016
RESOLUTION ��
41NT PAUL, MINNESOTA
RESOLUTION DESIGNATING THE CITY OF SAINT PAUL RECOVERY ZONE FOR PURPOSES OF SECTIONS 1400U-
1, 1400U-2 AND 1400U-3 9Pt THE INTERNAL REVE1ViTE CODE OF 1986, AS AMENDED
e�
WHEREAS, Section 1400U-1 of the Intemal Revenue Code of 1986, as amended (the "Code") authorizes the City of Saint Paul
{the "Ciry") to desi�ate a"recovery zone" for the purpose of issuing Recovery Zone Economic Development Bonds under
section 1400U-2 of the Code, and for the purpose of issuing Recovery Zone Facility bonds under Section 1400U-3 of the Code;
and
WHEREAS, the term "recovery zone" means (1) any azea designated by the Ciry as having significant poverty, unemployment,
rate of home forecloswes, or general distress, (2) any azea designated by the City as economically distressed by reason of the
closure or realignment of a military installation pursuant to the Defense Base Closure and Realignment Act of 1940, and (3) any
area for which a desigiation as an empowerment zone or a renewal community is in effect; and
WHEREAS, under IRS Notice 2009-50 that was issued to provide guidance, the IRS said that a municipality with a recovery
zone bond allocation "may make these designations of recovery zones in any reasonable manner as it shall determine in good
faith in its discretion": and
WHEREAS, the Ciry of Saint Paul has census tracts with significant poverty where greater than 20% of households have
incomes at or below the poverty per the United States Census definition of poverry; and
WHEREAS, the City of Saint Paul has census ffacts with significant foreclosure rates with census tracts where 3.6°fo to 5.7°l0 of
residential uniu are in foreclosure; and
WHEREAS, the City of Saint Paul central business district census tract area is experiencing significant distress due to a high
commercial competitive office vacancy rate in excess of 20% per the Building Owners and Managers Association of Saint
PauPs most recent report; and
WEIEREAS, the City of Saint Paul has other azeas of significant general distress;
NOW, THEREFORE, BE TT RESOLVED BY THE CITY COUNCIL OF THE CITY OF SAINT PAUL:
1. The City's "recovery zone" for purposes of Sections 1400U-1, 1400U-2 and 1400U-3 ofthe Code is hereby
designated to be the area denoted on ffie map accompanying this resolution consisting of an overlaying of the
following categories: (a) census tract areas with where greater than 20% of households have incomes at or below
the poverty rate, (b) areas where 3.6% to 5.7% or more of the residential units are in forecloswe, (c) the downtown
census tract area where the competitive commercial office space vacancy rate is greater than 20% (d) census tract
areas where greater than 20% of households have poverty level incomes (e) other areas of significant general
distress
o�—a���
��� 45
Requested by Deparnnent oE
B Y' �E�F.L s� -�'°�
Approved by the Office of inancial S rv' es
By:
Form
Adoption Ce�rtifi�ed by Coun�c 1 Secretary By:
BY ! / /L/_//l�iC i/,iC��;i:�
A
pproved b a r Date �Q`'_�j�/;� __ Form
Y Y
By: ��G�� By:
....., � ...,u...,... .,u. i- • i � i
� Green Sheet Green Sheet Green Sheet. Green Sheet Green Sheet Green Sheet �
)epartrnentlOfftcefCounGl: Date Inftiated:
��-��5�
PE _Planni�g&Economic �30CT2069 Green Sheet N0: 3084016
Development � _ - _ � �
Cor��tact Person & Phone:
i
Marie Franchett
6-67F12
Must Be on Couneil Agenda by (Date):
Doc. Type: RESOLUTION
E-DOCUment Required: Y
Document Contaet: Depi,Se,"�'aylor
CorrtactPhone: G G (o `��{
� 0
1
Assign 2
Number 3 -
Por
Routing 4
Orcfer 5
Total # of Signature Pages �_(Clip NI Locations forSigrraNre)
Appioval of attached resolution to dsignate St. Paul's Recovecy Zone Acea
Recomme�dations: Approve (A) or Rejed (R):
� Plarining Commission
CIB Committee
Crvil Service Commission
Personal Servlce Contracts AAust Answer the Following Questions:
� 1. Has ihis person/firm ever worked under a contract for Mis department?
Yes No
2. Has ihis persoNfirtn ever been a city employee?
Yes No
3. Does 8iis person/firtn possess a skill not normalty possessed by any
curtent dty empbyee? _
Yes No
Explatn aN yes aqswers on separete sheet and aNach M green sheet. �
InitiaNng Problem, lssues, Opportunity (Who, What, When, Where, Why�:
The City may issue Recovery Zone Economic Developxaent Bonds ( RZEDBs) and Recovery Zone Faciliry (RZFBs) Bond projecu
cvithin a Recovery Zone Area Use of these bonds will allow the City to lower the effec6ve interest rate for eligible projects. The Ciry
rnust establish the Econotnic Recovery Zone azea priar to iss�wce of The bonds. _
Advanfages If ApQroved: ' . "
The City will be able to issue RZEDBs and RZFBs for projects located in the Recovery Zone Area
Disadva�Wges If Approved:
None
Disadvanpges If Not Approved:
The City won't be able to issue Recovery Zone Bonds.
Tota( Amount of
Trensaelion:
Eurtd(ng Source:
Finantia� Information:
. (Explairt)
CosflRevenue Budgeted:
Activity Number. ,
October 13, 2009 4:08 PM Page 1
b I�I I��
City Council Staff Report
October 21, 2009
Re: Establishment of City of Saint Paul Recovery Zone
"I'he American Recovery and Reinvestment Act of 2009 made changes to the tas code
relating to tas-exempt revenue bonds. The creation of Recovery Zone Economic
Development Bonds (RZEDBs) and Recovery Zone Facility Bonds (RZFBs) provides
new financing opportunities for the City of Saint Paul and its businesses. These bonds
can only be issued for projects located within a Recovery Zone. Saint Paul needs to
designate a Recovery Zone prior to issuing the Economic Development and Facility
bonds.
The City's ability to issue these bonds will be constrained by federal allocation limits and
the bonds must be issued in 2009-2010. St. Paul has an allocation of $8,672,000 far
RZEDBs and $13 million for RZFBs. Saint Paul is coordinating with Ramsey County
regazding their plans for designation of Recovery Zone areas and utilization of their
$11,655,000 bond allocation.
Recovery Zone Economic Development Bonds (RZEDB)
RZEDBs are taxable bonds issued for "economic development purposes" where the
federal govemment rebates to the issuer 45% of the interest. These governmental bonds
can be used for public infrastructure, public facilities, job �aining and educarion
programs located in a Recovery Zone (including working capital). These bonds cannot
be used for private activity purposes. This type of financing can be used for government
owned facilities.
The City issues G.O. or revenue bonds for a variety of projects. The issuance of
RZEDBs could provide the City with a more economical alternative. The savings
depends on the term of the bond. Currently the longer the term, the gxeatex the interest
rate savings from the t�able rate, less the 45% credit, compared to taY-exempt rates.
Recovery Zone Facility Bonds
The City can issue qualified private activity RZFBs as taY-exempt obligations and loan
the proceeds to a private party for projects located within a Recovery Zone. The RZFBs
broaden our ability to issue tax-exempt revenue bonds for projects that previously would
have been done on a tasable basis. For example, if a company is proposing a mixed-use
building within a Recovery Zone, the City could issue taY-exempt revenue bonds at a
lower interest rate for the project. High credit quality businesses could expect an interest
rate reduction of approximately 1.0% to 1.5% on average.
��-� ti��
Designation of the Saint Paul Recovery Zone
According to the American Recovery and Reinvestment Act of 2009, the recovery zone
must:
1. have significant poverty, unemployment, general distress, or rate of home
foreclosures;
2. be an area for which a designation as an empowerment zone or renewal
community is in effect; ox
3. an area designated by the issuer as economically distress by reason of the closure
or real amunent of a military installation pursuant to the Defense Base Closure and
Realignment Act of 1990.
The proposed Saint Paul Recovery Zone is based on an overlay of the following areas:
1. Census tracts where 20% or gseater of the households haue incomes at or below
the poverty level
2. Census tracts with residential foreclosure rates of 3.6% to 5.7%
3. Areas of significant distress
4. The downtown central business dish census tract area that is experiencing
significant distress with a competitive office space vacancy rate in excess of 20%
per the Building Owner and Managers Association latest report.
Future Actions
Staff will bring requests for bond financing to the City Council and/or HRA as we
currently do for other forms of general obligation and revenue bond financing. The
projects will need to be underwritten and sold in the capital mazkets. Interest rates will
fluctuate with market conditions.
Staff Recommendation:
Staff recommends that attached map designating the Saint Paul Recovery Zone be
approved.
Sponsored by: Councilmember Lantry
Staf£ Marie Franchett, 266-6702