HomeMy WebLinkAbout2016-12-8461ORDINANCE NO. 2016-12-8461
AN ORDINANCE OF THE CITY OF PADUCAH, KENTUCKY
AUTHORIZING AND APPROVING A GENERAL OBLIGATION LEASE
WITH COMMUNITY FINANCIAL SERVICES BANK IN AN AGGREGATE
PRINCIPAL AMOUNT NOT TO EXCEED $3,000,000 TO PROVIDE
FINANCING FOR THE COSTS OF THE ACQUISITION, CONSTRUCTION,
INSTALLATION AND EQUIPPING OF IMPROVEMENTS TO THE JULIAN
CARROLL CONVENTION CENTER, INCLUDING RELATED AND
APPURTENANT COSTS; PROVIDING FOR THE PAYMENT AND
SECURITY OF THE LEASE; CREATING A SINKING FUND; AUTHORIZING
THE EXECUTION OF VARIOUS DOCUMENTS RELATED TO SUCH
LEASE; MAKING CERTAIN DESIGNATIONS REGARDING SUCH LEASE;
AND AUTHORIZING AND APPROVING AN INTERLOCAL COOPERATION
AGREEMENT WITH THE COUNTY OF MCCRACKEN, KENTUCKY TO
PROVIDE ADDITIONAL SOURCES OF PAYMENT FOR THE PRINCIPAL
OF, AND INTEREST ON, SUCH LEASE.
WHEREAS, the City of Paducah, Kentucky (the "City") has the power, pursuant to
Section 65.940 et seq. of the Kentucky Revised Statutes to enter into lease agreements with or
without the option to purchase in order to provide for the use of the property for public purposes;
WHEREAS, the City and the County of McCracken, Kentucky (the "County") have
determined that it is necessary and desirable for the City to finance improvements to the Julian
Carroll Convention Center (the "Project"), including related and appurtenant costs and the costs
of reimbursing the City for expenditures related thereto heretofore paid by the City, through a
General Obligation Lease Agreement in an aggregate principal amount not to exceed $3,000,000
(the "Financing Lease") between the City and Community Financial Services Bank (the
"Financing Lessor") to be entered into pursuant to the provisions of Section 65.940 through
65.956, inclusive, of the Kentucky Revised States, as amended (the "Governmental Leasing
Act"); and
WHEREAS, each of the City and the County have determined that the Project constitutes
a public project, for which either the City and the County would be individually authorized to
issue a general obligation lease under the Governmental Leasing Act; and
WHEREAS, the City and the County have determined that it is in the public interest that
the Project be financed by the City, as aforesaid; and
WHEREAS, pursuant to Sections 65.210 to 65.300, inclusive, of the Kentucky Revised
Statutes, as amended (the "Interlocal Act"), the City and the County may join together to
accomplish what each may accomplish individually; and
WHEREAS in order to induce the City to issue the Financing Lease and thereby provide
financing for the Project, the City and the County have determined that it is necessary and
desirable that the City and the County enter into an Interlocal Cooperation Agreement (the
"Interlocal Agreement") under the Interlocal Act to provide for the pledge of 33 1/3% of the
special transient room taxes levied by the County in accordance with Sections 91A.390 and
91A.392 of the Kentucky Revised Statutes, as amended, to the City for application to the
payment of the principal of, and interest on, the Financing Lease for so long as the Financing
Lease or obligations issued to refund the Financing Lease remain outstanding and unpaid in full;
provided, however, that such pledge shall remain inferior and subordinate to the pledge thereof
under an existing Interlocal Cooperation Compact dated as of June 1, 2001, as amended and
supplemented by the First Amendment to Interlocal Cooperation Compact dated as of July 1,
2010 (collectively, the "Existing Interlocal Compact") among the City, the County, the Paducah -
McCracken County Convention and Visitors Bureau, F/K/A Paducah -McCracken County Tourist
and Convention Commission (the 'Bureau") and the Paducah -McCracken County Convention
Center Corporation (the "Corporation").
NOW THEREFORE, BE IT ORDAINED BY THE CITY COMMISSION OF THE
CITY OF PADUCAH, KENTUCKY, AS FOLLOWS:
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Section 1. Recitals and Authorization of Financing Lease. The City hereby approves
the General Obligation Lease Agreement (the "Financing Lease") in an aggregate principal
amount not to exceed $3,000,000, in substantially the form attached hereto as Exhibit A and
made a part hereof. The recitals to this Ordinance are incorporated herein as if set forth in this
Section in their entirety and are hereby found and determined to be true and correct. It is further
found and determined that the Project identified in the Financing Lease is public property to be
used for public purposes, that it is necessary and desirable and in the best interests of the City to
enter into the Financing Lease for the purposes therein specified, and the execution and delivery
of the Financing Lease and all representations, certifications and other matters contained in the
closing memorandum with respect to the Financing Lease, or as may be required by Dinsmore
and Shohl, LLP, as Bond Counsel, prior to delivery of the Financing Lease, are hereby approved,
ratified and confirmed. The Mayor and City Clerk of the City are hereby authorized to execute
the Financing Lease, together with such other agreements or certifications which may be
necessary to accomplish the transaction contemplated by the Financing Lease, with such changes
in the Financing Lease not inconsistent with this Ordinance and not substantially adverse to the
City as may be approved by the officials executing the same on behalf of the City. The approval of
such changes by said officials, and that such are not substantially adverse to the City, shall be
conclusively evidenced by the execution of such Financing Lease by such officials.
Section 2. General Obligation Pledge for Financing Lease. Pursuant to the
Constitution of the Commonwealth and Chapter 66 of the Kentucky Revised Statutes, as
amended (the "General Obligation Statutes"), the obligation of the City created by the Financing
Lease shall be a full general obligation of the City and, for the prompt payment of the Lease
Payments (as defined in the Financing Lease), the full faith, credit and revenue of the City are
hereby pledged. During the period the Financing Lease is outstanding, there shall be and there
hereby is levied on all the taxable property in the City, in addition to all other taxes, without
limitation as to rate, a direct tax annually in an amount sufficient to pay the Financing Lease
Payments on the Financing Lease when and as due, it being hereby found and determined that
current tax rates are within all applicable limitations. Said tax shall be and is hereby ordered
computed, certified, levied and extended upon the tax duplicate and collected by the same
officers in the same manner and at the same time that taxes for general purposes for each of said
years are certified, extended and collected. Said tax shall be placed before and in preference to
all other items and for the full amount thereof; provided, however, that in each year to the extent
that the other taxes or revenues of the City are available for the payment of the Lease Payments
and are appropriated for such purpose, the amount of such direct tax upon all of the taxable
property in the City shall be reduced by the amount of such other taxes or revenues so available
and appropriated.
Section 3. Sinking Fund. There is hereby established, or it is acknowledged that there
has heretofore been established, a sinking fund (the "Sinking Fund") with the City in accordance
with the requirements of the Act, which is hereby ordered to be continued and maintained as
long as the Financing Lease shall remain outstanding. The funds derived from said tax levy
hereby required or other available taxes shall be placed in the Sinking Fund and, together with
interest collected on the same, are irrevocably pledged for the payment of all bonds issued under
the General Obligation Statutes and Tax Supported Leases, as defined in the General Obligation
Statutes, including the Financing Lease, when and as the same fall due.
Section 4. Designation of Financing Lease as Qualified Tax -Exempt Obligation.
Pursuant to Section 265(b)(3)(B)(ii) of the Internal Revenue Code of 1986 (the "Code"), the City
hereby specifically designates the Financing Lease as a "qualified tax-exempt obligation" for
purposes of Section 265(b)(3) of the Code. In compliance with Section 265(b)(3)(D) of the
Code, the City hereby represents that the City (including all "subordinate entities" of the City
within the meaning of Section 265(b)(3)(E) of the Code) reasonably anticipates that it will not
designate in calendar year 2017, "qualified tax-exempt obligations" in an amount greater than
$10,000,000.
Section 5. Authorization and Approval of Interlocal Agreement. The City hereby
approves the Interlocal Cooperation Agreement between the City and the County (the "Interlocal
Agreement") in substantially the form attached hereto as Exhibit B and made a part hereof. It is
hereby found and determined that the Interlocal Agreement is to be entered into in furtherance of
proper public purposes of the City and in accordance with the provisions of the Interlocal Act. It
is further determined that it is necessary and desirable and in the best interests of the City to enter
into the Interlocal Agreement for the purposes therein specified, and the execution and delivery
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of the Interlocal Agreement is hereby authorized and approved. The Mayor and Clerk of the
City are hereby authorized to execute the Interlocal Agreement, together with such other
agreements, instruments or certifications which may be necessary to accomplish the transactions
contemplated by the Interlocal Agreement with such changes in the Interlocal Agreement not
inconsistent with this Ordinance and not substantially adverse to the City as may be approved by
the officials executing the same on behalf of the City. The approval of such changes by said
officials, and that such are not substantially adverse to the City, shall be conclusively evidenced by
the execution of such Interlocal Agreement by such officials.
Section 6. Severability. If any one or more of the provisions of this Ordinance
- should be determined. by a court of competent jurisdiction to be contrary to law, then such
provisions shall be deemed to be severable from all remaining provisions and shall not affect the
validity of such other provisions.
Section 7. Inconsistent Actions. All prior ordinances, resolutions, orders or parts
thereof inconsistent herewith are hereby repealed.
Section 8. Open Meetings Compliance. All meetings of the City Commission and of
its committees and any other public bodies, at which the formal actions in connection with the
issuance of the Bonds were taken, or at which deliberations that resulted in such formal actions
were held, were open meetings, and such formal actions were taken and any such deliberations
took place while such meetings, after proper notice, were open to the public, in compliance with
all legal requirements including KRS Sections 61.805 through 61.850.
Section 9. Effective Date. This Ordinance shall become effective immediately upon
adoption and publication of a summary thereof, as provided by law.
INTRODUCED AND PUBLICLY READ ON FIRST READING on the 6th day of
December, 2016.
PUBLICLY READ, ADOPTED AND APPROVED ON SECOND READING, this the
13th day of December, 2016.
CITY OF PADUCAH, KENTUCKY
By: 0,
ayor
Attest:
By: -
City Clerk
\ord\loan -$3,000,000 — dome relocation & renovations for expo -convention center
Introduced by the Board of Commissioners December 6, 2016
Adopted by the Board of Commissioners December 13, 2016
Recorded by Tammara Brock, City Clerk, December 13, 2016
Published by The Paducah Sun, December 17, 2016
ORD\FINANCE\ loan -$3,000,000 - dome relocation & renovations for expo -convention center
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CERTIFICATION
I, the undersigned, do hereby certify that I am the duly qualified and acting City Clerk of
the City of Paducah, Kentucky, and as such City Clerk, I further certify that the foregoing is a
true, correct and complete copy of an Ordinance duly enacted by the City Commission of the
City at a duly convened meeting held on the 13th day of December, 2016, on the same occasion
signed by the Mayor as evidence of her approval, and now in full force and effect, all as appears
from the official records of the City in my possession and under my control.
Witness my hand and the seal of said City as of the day of , 2017
City Clerk
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Exhibit A
Mom of FinancingLease]
easel
LEASE AGREEMENT
BY AND BETWEEN
COMMUNITY FINANCIAL SERVICES BANK
AND
CITY OF PADUCAH, KENTUCKY, KENTUCKY
Dated as of January 24, 2017
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TABLE OF CONTENTS
(The Table of Contents is not part of the Lease Agreement, but for convenience of reference only)
PAGE
Section 1.
Certain Defined Ten -ns and References.....................................................................610
Section2.
Lease of Project.........................................................................................................611
Section3.
Deposit of Funds........................................................................................................612
Section4.
Disbursements...........................................................................................................612
Section 5.
Acceptance of Project................................................................................................612
Section6.
Tenn...........................................................................................................................612
Section7.
Rent............................................................................................................................612
Section 8.
Actions Relating to Tax Exemption of Interest Components....................................613
Section 9.
Authority and Authorig-ation; General Obligation Pledge.........................................614
Section10.
Title..........................................................................................................................614
Section11.
Real Propggy...........................................................................................................614
Section 12.
Use; Maintenance and Repair; Indemnification ......................................................614
Section13.
Alterations...............................................................................................................615
Section 14.
Location; Inspection................................................................................................615
Section 15.
Liens and Encumbrances.........................................................................................615
Section 16.
Risk of Loss; Damage; Destruction.........................................................................615
Section17.
Insurance...................................................................................................................615
Section 18.
Purchase Option.......................................................................................................615
Section19.
Assi mg nents.............................................................................................................615
Section 20.
Events of Default.....................................................................................................615
Section21.
Remedies.................................................................................................................616
Section22.
Notices.....................................................................................................................616
Section23. Headings..................................................................................................................616
Section 24. Governing Law........................................................................................................616
Section 25. Delivery of Related Documents..............................................................................616
Section 26. Special Representations and Covenants of Lessor ..................................................616
Section 27. Special Representations and Covenants of Lessee ..................................................616
Section 28. Disclaimer of Warranties.........................................................................................616
Section 29. Entire Agreement; Amendment: Severability .........................................................617
Signatures...............................................................................................................................12
Acknowledgments.........................................................................................................................13
ExhibitA - Project.........................................................................................................................14
ExhibitB - Lease Payments...........................................................................................................15
Exhibit C - Purchase Schedule......................................................................................................16
615
LEASE AGREEMENT
This Lease Agreement ("Lease"), made and entered into as of this 24th day of January,
2017, by and between COMMUNITY FINANCIAL SERVICES BANK, a banking corporation
duly organized and existing under the laws of the Commonwealth of Kentucky ("Lessor"), and the
CITY OF PADUCAH, KENTUCKY, a municipal corporation and political subdivision of the
Commonwealth of Kentucky, duly organized and existing under and by virtue of the laws and
Constitution of the Commonwealth of Kentucky (the "Lessee").
WITNESSETH:
WHEREAS, the purpose of this Lease is to provide financing for the acquisition,
construction, installation and equipping of improvements to the Julian Carroll Convention Center
(the "Project"), which shall be owned by the Paducah -McCracken County Convention Center
Corporation, a non-profit, charitable corporation established at the direction of the Lessee and
the County of McCracken, Kentucky (the "County") to act as their agency and instrumentality
for the purpose of promoting convention and trade shows; and
WHEREAS, Lessee plans to acquire, construct, install and equip the Project, and Lessor
has agreed to provide financing for the Project, as further described in Exhibit A, in accordance
with the provisions of Sections 65.940 through 65.956, inclusive, of the Kentucky Revised Statutes
(the "Governmental Leasing Act"); and
WHEREAS, Lessor wishes to lease to the Lessee, and the Lessee wishes to lease from
Lessor, such Project, subject to the terms and conditions set forth in this Lease.
NOW THEREFORE, in consideration of the rent to be paid hereunder and the covenants
and agreements contained herein, it is agreed by and between the parties as follows:
Section 1. Certain Defined Terms and References. (a) In addition to the terms defined
elsewhere in this Lease, the following terms have the meanings given below unless the context
clearly requires otherwise:
"Acquisition Fund" means the Acquisition Fund established pursuant to Section 3 of the
Lease and to be held at the Construction Fund Depository.
"Additional Rent" means the payments required to be made pursuant to Section 7 in
addition to the Base Rent.
"Authorized Officer," when used:
(i) With respect to Lessee, means the Mayor of the Lessee or any officer of Lessee
who is designated in writing by the Lessee as an Authorized Officer for the purposes of
this Lease.
(ii) With respect to Lessor, means the City President or any other officer of Lessor
who is designated in writing as an Authorized Officer for purposes of this Lease.
(iii) With respect to any successor to Lessor, means the officer or the successor
who is designated in writing by the successor's governing body as an Authorized Officer
for purposes of this Lease.
"Base Rent" means the payments, including the principal and interest components thereof,
specified in Exhibit B attached hereto and made a part hereof.
"City" means the Lessee.
"Commencement Date" means January _, 2017.
"Commonwealth" means the Commonwealth of Kentucky.
"Construction Fund Depository" means Independence Bank of Kentucky, Paducah,
Kentucky
"Default Rate" means, while any Event of Default exists under the Lease, the interest rate
identified as such in Exhibit B.
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"Event of Default" means any Event of Default described in Section 20.
"Final Maturity Date" means January _, 2032.
"Fiscal Period" means July 1 of any calendar year through June 30 of the next succeeding
calendar year.
"Governing Body" means the City Commission of the Lessee.
"Governmental Leasing Act" means Sections 65.040 through 65.956, inclusive, of the
Kentucky Revised Statutes, as the same may be amended from time to time
"Independent Counsel" means any attorney or attorneys duly admitted to practice law before
the highest court of any state and not an officer or full time employee of Lessor or Lessee and who
is not reasonably objected to by Lessee.
"Lease" means this Lease Agreement as the same may be amended or supplemented from
time to time.
"Lease Payment Date" means the payment dates as set forth in a schedule to Exhibit B
hereto, and if such date is not a business day, then the next succeeding business day, to and
including the Final Maturity Date.
"Lease Payments" means the sum of the Base Rent and Additional Rent due at or during a
stated time.
"Lease Term" means the term of this Lease, being the Commencement Date through the
Final Maturity Date.
"Lessee" means the City of Paducah, Kentucky, Kentucky, a municipal corporation and
political subdivision of the Commonwealth of Kentucky.
"Lessor" means Community Financial Services Bank, or its successors or assigns.
"Ordinance" means the ordinance adopted by the Governing Body of the Lessee on
December 13, 2016.
"Project" means, the Project, as described in Exhibit A, and any replacements or additions
thereto permitted under the provisions of Section 13 hereof.
"Project Costs" means all costs of payment of, or reimbursement to the Lessee of
amounts paid or advanced by it for costs of acquisition, construction, installation and equipping
of the Project.
"Purchase Price" means, as of any Purchase Price Date, the amount set forth in Exhibit C,
which Lessee may pay to purchase the Project.
"Purchase Price Date" means the applicable date referred to in Exhibit C on which Lessee
may purchase the Project by payment of the applicable Purchase Price.
"Reimbursement Amount" means $ , the amount expended by the Lessee
on the Project prior to the Commencement Date.
"Sinking Fund" means the fund established or maintained by the Lessee in accordance with
the Ordinance, from which Lease Payments shall be made.
"Taxable Rate of Interest" means the interest rate identified as such in Exhibit B.
(b) References to sections or exhibits, unless otherwise indicated, are to sections of or
exhibits to this Lease.
Section 2. Lease of Project. Lessor hereby demises, leases and lets to Lessee, and Lessee
rents, leases and hires from Lessor, the Project in accordance with the provisions of this Lease, to
have and to hold for the Lease Term. Upon the acquisition of the Project, all leasehold rights
granted to Lessee by Lessor under this Lease shall vest in Lessee, without any further action on the
part of Lessor.
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Section 3. Deposit of Funds. There is hereby established by the Lessee with the
Construction Depository an Acquisition Fund, into which the net proceeds of the Lease, after
disbursement of the Reimbursement Amount, in the amount of $ shall be deposited.
On the Commencement Date the Lessor shall remit to the Lessee the Reimbursement Amount and
thereupon transfer the balance of the proceeds of the Lease to the Construction Depository for
deposit in the Acquisition Fund. Any funds in the Acquisition Fund shall be invested by the Lessee
and in accordance with Section 66.480 of the Kentucky Revised Statues, as amended.
Section 4. Disbursements. The Lessee may disburse the moneys in the Acquisition Fund
for payment of, or reimbursement for payment of, the following:
(i) The Project Costs;
(ii) Expenses incurred in connection with the authorization, issuance and delivery
of the Lease and the preparation and delivery of all agreements, instruments and
documents related thereto, including, but not limited to, all financial, legal,
administrative, accounting and printing fees, expenses and charges and all recording,
filing, title examination or insurance, and any other fees, expenses or charges relating to
the Project or the Lease; and
(iii) Any other costs, expenses, fees and charges properly chargeable to the
Project Costs; and
The Lessee shall maintain complete and accurate records of any disbursements from the
Acquisition Fund for the payment of Project Costs.
Section 5. Acceptance of Project. Upon any disbursement from the Acquisition Fund as
provided in Section 4 hereof, the Lessee shall certify to the Lessor its acceptance of that portion
of the Project which is the subject of such disbursement.
Section 6. Term. (a) The term of this Lease will be the period commencing on the
Commencement Date and ending on the Final Maturity Date, unless the Lessee exercises its
Purchase Option prior to the Final Maturity Date, and this Lease will terminate at the earlier of
12:00 p.m. on the Final Maturity Date, the payment of all Lease Payments or on a sooner Purchase
Price Date.
Section 7. Rent. (a) Lessee agrees to pay to Lessor during the Lease Term the Lease
Payments, including the interest components thereof, equal to the amounts provided below in
this Section. The Lease Payments during the Lease Term will be absolute and unconditional in
all events and will not be subject to any set-off, defense, counterclaim or recoupment for any
reason whatsoever.
(b) Lessee agrees to deposit the Base Rent in the Sinking Fund and to pay directly to the
Lessor from the Sinking Fund the following amounts:
(i) Lessee agrees to pay the Lease Payments specified in Exhibit B. Each
payment shall be applied first to payment of the interest component of the Lease
Payment. Lessee may make an advance payment of the full amount of the principal
components then outstanding of Base Rent; provided, however, that such advance
payment shall also include the prepayment premium set forth in Section 18 hereof.
(c) Lessee agrees to pay to the Lessor the following amounts as Additional Rent:
(i) Lessee represents that no charges or taxes (local, state or federal) are currently
imposed on the ownership, leasing, rental, sale, purchase, possession or use of the
Project, exclusive of taxes on or measured by Lessor's income, and acknowledges that no
provision has been made for the inclusion of any such charges or taxes in the Base Rent.
If during the Lease Term, the ownership, leasing, rental, sale, purchase, possession or use
of the Project shall result in the imposition on Lessor of any charges or taxes (local, state
or federal), exclusive of taxes on or measured by Lessor's income, Lessee shall promptly
pay to Lessor, upon receipt from Lessor of a statement therefor, as Additional Rent an
amount equal to those charges and taxes imposed on Lessor;
(ii) Should the Lessee materially breach its obligations under this Lease, the
Lessee will pay to Lessor as Additional Rent all reasonable costs and expenses incurred
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or to be paid by the Lessor under the Lease, including Lessor's out-of-pocket expenses
and Lessor's reasonable attorney fees and out-of-pocket expenses incurred during the
term of the Lease which were not part of the original cost of the Project, reasonably
related to the Lessee's material breach; and
(iii) Lessee shall pay the Lessor as Additional Rent the Default Rate on the
amount overdue from the applicable Lease Payment Date to the date of payment in the
event any Lease Payment is fifteen (15) days late.
(d) If Lessee shall not make payment of all or any part of that Additional Rent, the
Lessor shall have the right, but shall not be obligated, to pay or advance the amount of such
Additional Rent. If the Lessor pays any portion of such Additional Rent, Lessee shall pay
Lessor, no later than the next Lease Payment Date, an amount equal to the sum of such
Additional Rent and the costs incurred by Lessor in making such payment or advance, including
the amount Lessor would have earned from investment of the amount paid or advanced before
repayment thereof as determined by using the Default Rate. Lessor shall notify Lessee in writing
of the costs incurred in any case of its paying or advancing such Additional Rent. If Lessor pays
or advances such Additional Rent, and is repaid as provided for in this paragraph, then such
initial failure to pay shall be deemed to be cured and shall not be deemed to be an Event of
Default under Section 20 of this Lease. Lessor shall provide the Lessee written notice of its
intent to pay any monies as contemplated by the paragraph. Notice must be delivered to the
Lessee twenty-four hours before Lessor pays any monies so that Lessee has an opportunity to
first cure.
(e) Lease Payments shall be payable at the principal commercial lending office of the
Lessor or at such other place as Lessor may from time to time designate in writing.
Section 8. Actions Relating to Tax Exemption of Interest Components. (a) Lessee
covenants that it will restrict the use of moneys realized under this Lease or otherwise in connection
with the acquisition and financing of the Project in such manner and to such extent, if any, as may
be necessary, after taking into account reasonable expectations at the time of entering into this
Lease, so that there will not exist at any time any obligation in connection with this Lease or the
Project that constitutes an obligation the interest on which is includable in gross income for federal
income tax purposes or constitutes an "arbitrage bond" under Section 148 of the Internal Revenue
Code of 1986, as amended (the "Code"), and the regulations prescribed under that Section and any
subsequent amendments or modifications thereto. Any officer of the Lessee having responsibility
with respect to the execution and delivery of this Lease shall, alone or in conjunction with any other
officer, employee or agent of or consultant to the Lessee, give an appropriate certificate of the
Lessee pursuant to Sections 103 and 148 of the Code and those regulations, setting forth the
reasonable expectations of the Lessee on the date of entering into this Lease regarding this Lease
and the use of those moneys. Lessee agrees to complete and file or cause to be filed in a timely
manner an information reporting return on IRS Foran 8038-G with respect to this Lease as required
by the Code.
(b) Lessee represents and covenants that it will not use the Project, or permit the Project
to be used, in such a manner as would result in the loss of the exclusion from gross income for
federal income tax purposes of the component of the Lease Payments designated as interest on
Exhibit B afforded under Section 103(a) of the Code.
(c) The Lessor and Lessee each covenant to take all action required to maintain exclusion
from gross income for federal income tax purposes afforded under Section 103(a) of the Code, of
the Lease Payments designated as the Interest Component on Exhibit B hereto.
(d) In the event that at anytime the yield to the Lessor is decreased by any change in the
limitation in the deductibility of the interest paid on debt incurred by the Lessor to carry tax
exempt obligations from that which is presently incurred by the Lessor, or in the event there shall
occur any other change in law which lessens the Tax Equivalent Yield to the Lessor, then the
Lessee shall make a supplemental payment to the Lessor annually, on written demand by the
Lessor, in an amount which is equal to the amount necessary on an after tax basis to preserve the
same Tax Equivalent Yield. For purposes of this paragraph, Tax Equivalent Yield means the
rate used to determine the interest portion of the Lease Payments (the "Implicit Rate of Interest")
divided by the remainder resulting from subtracting the current maximum federal corporate
income tax rate from one. In the event that for any reason the interest portion of the Lease
Payments is determined not to be exempt from Federal income tax, the Implicit Rate of Interest
will increase to a rate equal to the Taxable Rate of Interest. In addition, Lessee will pay an
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amount equal to the difference between the portion of the Lease Payments which constituted
interest which were actually paid and the interest which would have been paid if the Implicit
Rate of Interest would have been the Taxable Rate of Interest from the Commencement Date,
plus any penalties, interest, assessments and additions to tax payable by the Lessor as a result of
the loss of the tax-exempt status of interest on the Lease.
Section 9. Authority and Authorization; General Obligation Pledge. Lessee represents,
covenants and warrants, and will deliver to Lessor an opinion of its counsel to the effect that: (i) the
Lessee is a political subdivision of the Commonwealth, duly organized and validly existing under
and by virtue of the laws of the Commonwealth; (ii) the execution, delivery and performance by the
Lessee of this Lease have been duly authorized by all necessary action on the part of the Lessee; and
(iii) this Lease constitutes a legal, valid and binding obligation of the Lessee enforceable in
accordance with its terms. Lessee agrees and warrants that: (i) it will do or cause to be done all
things necessary to preserve and keep the Lease in full force and effect; (ii) it has complied with all
requirements applicable to it, and has taken all steps for approval and adoption of this Lease as a
valid obligation on its part; and (iii) it has duly adopted the Ordinance adopting the tax to provide
sufficient funds to pay all amounts due under this Lease.
The obligation of the Lessee created by this Lease shall be a full general obligation of the
Lessee and, for the payment of the Lease Payments, the full faith, credit and revenue of the Lessee
are hereby pledged for the prompt payment thereof. During the period of the Lease is outstanding,
there shall be levied on all taxable property in the City, in addition to all other taxes, without
limitation as to rate, a direct tax annually in an amount sufficient to pay the Lease payments when
and as due; provided, however, that in each year to the extent that the other taxes of the Lessee are
available for the payment of the Lease Payments and are appropriated for such purpose, the amount
of such direct tax upon all of the taxable property in the City shall be reduced by the amount of such
other taxes so available and appropriated. As provided in the Ordinance, the funds derived from
said tax levy hereby required or other available taxes shall be placed in the Sinking Fund and,
together with interest collected on the same, are irrevocably pledged for the payment of all bonds
issued under KRS Chapter 66 and Tax Supported Leases, as defined in KRS Chapter 66, including
the Lease Payments, when and as the same fall due.
Section 10. Title. (a) Lessee will retain title to the Project during the Lease Term,
subject to the Lessor's rights under this Lease. Lessor and Lessee agree that this Lease or any
other appropriate documents may be filed or recorded to evidence the parties' respective interests
in the Project and the Lease.
(b) The Project shall become the property of Lessee in fee simple absolute and Lessor's
interest therein shall pass to Lessee without cost upon (i) Lessee's exercise of the Purchase Option
granted in Section 18 hereof, or (ii) the complete payment and performance by Lessee of all of its
obligations during the Lease Term. It is hereby acknowledged by Lessor and Lessee that Lessee
will purchase the Project on the terms set forth in this Lease.
Section 11. Real Property. The Project constitutes and will remain real property and not
personal property.
Section 12. Use; Maintenance and Repair; Indemnification. (a) Lessee will: (i) use the
Project in a careful manner for the use contemplated by this Lease and the Kentucky Revised
Statutes with respect to public property; (ii) comply with all laws, insurance policies and regulations
relating to the use and maintenance of the Project; and (iii) pay all costs, claims, damages, fees and
charges arising out of its possession, use or maintenance of the Project.
(b) Lessee, at its expense, will: (i) keep the Project in good condition and fizrnish all parts,
mechanisms and devices required therefor, and (ii) obtain and maintain any governmental licenses
and permits required for ownership of the Project.
(c) Lessee will maintain, or by contract provide for the proper maintenance of, the Project
in accordance with this Section 12 during the Lease Term.
(d) Lessor agrees that during the Lease Term it will not impair the Lessee's abilities to
maintain the Project.
(e) To the extent permitted by law, Lessee releases Lessor from, agrees that Lessor shall not
be liable for and indemnifies Lessor against causes of action, costs and expenses (including, without
limitation, reasonable attorneys' fees and expenses except as may be limited by law or judicial order
614
or decision entered in any action brought to recover moneys under this Section) imposed upon,
incurred by or asserted against Lessor on account of (a) ownership of any interest in the Project or
any part thereof, (b) any accident, injury or death to persons or damage to property occurring on or
about the Project or any part thereof or the adjoining sidewalks, curbs, streets or ways, (c) any use,
disuse or condition of the Project or any part thereof, or the adjoining sidewalks, curbs, streets or
ways, (d) any failure on the part of Lessee to perform or comply with any of the terms hereof or (e)
the performance of any labor or services or the furnishing of any materials or other property in
respect of the Project or any part thereof. In case any action, suit or proceeding is brought against
Lessor for any such reason, Lessee, upon the request of Lessor, will at Lessee's expense, cause such
action, suit or proceeding to be resisted and defended by Independent Counsel.
Section 13. Alterations. Following completion of the Project, Lessee will not make any
alterations, additions, substitutions or replacements to the Project which would have an adverse
effect on either the nature of the Project or the functionality or value of the Project. Any
alterations, additions or improvements to the Project and any substitutions or replacements, shall
be and be considered to constitute apart of the Project.
Section 14. Location, Inspection. Lessor will be entitled to enter upon the Project or
elsewhere during reasonable business hours to inspect, or observe the use of the Project.
Section 15. Liens and Encumbrances. Except for liens and encumbrances to which Lessee
and Lessor consent in writing, Lessee and Lessor shall keep the Project free and clear of all liens
and encumbrances except those created or permitted under this Lease.
Section 16. Risk of Loss; Damage; Destruction. Lessee assumes all risk of loss or damage
to the Project from any cause whatsoever. No loss of or damage to, or appropriation by
governmental authorities of, or defect in or unfitness or obsolescence of, the Project will relieve
Lessee of the obligation under this Lease. Lessee will promptly repair or replace any portions of
Project lost, destroyed, damaged or appropriated which are necessary to maintain the Project.
Section 17. Insurance. (a) Lessee, during the term of this Lease, shall maintain, with any
loss deductible commonly used by Lessee, casualty insurance covering all parts of the Project.
(b) Casualty insurance may be provided under blanket or similar coverage insuring other
facilities of the Lessee. Such insurance may be a combination of self-insurance and an excess
liability policy.
Section 18. Purchase Option. Lessee, upon 30 days prior written notice to Lessor shall
have the right to purchase the Project on any Purchase Price Date by paying to Lessor the Lease
Payment then due together with the Purchase Price relating to that date. The Purchase Price shall
be the amount set forth in Exhibit B hereto..
Section 19. Assignments. (a) Lessee may not, without the prior written consent of Lessor:
(i) assign, transfer, pledge, hypothecate or grant any security interest in or otherwise dispose of this
Lease or the Project (without replacement or substitution) or any interest in this Lease or the Project,
or (ii) sublease the Project or permit it to be operated by anyone other than Lessee, Lessee's
employees or persons authorized by Lessee in connection with Lessee's operation and maintenance
of the Project.
(b) Lessor may, at any time and from time to time without Lessee's consent, assign,
transfer or otherwise convey all or any part of its interest in the Project or this Lease, including
Lessor's rights to receive the Lease Payments or any part thereof (in which event Lessee agrees
to make all Lease Payments thereafter to the assignee designated by Lessor) and to receive tax
indemnity payments pursuant to Section 8(d) hereof. During the term of this Lease, Lessee shall
keep, or cause to be kept, a complete and accurate record of all such assignments in form
necessary to comply with Section 149 of the Code.
(b) Subject to the preceding subsection this Lease inures to the benefit of and is binding
upon the successors or assigns of the parties to this Lease.
Section 20. Events of Default. The occurrence of any one or more of the following events
constitutes an "Event of Default" under this Lease:
(a) Lessee's failure to make any Lease Payment (or any other payment) as it becomes due
in accordance with the terms of this Lease, and the failure continues for 15 days after the due date;
615
(b) Lessee's failure to perform or observe any other covenant, condition or agreement to be
performed or observed by it under this Lease, and the failure is not cured or steps satisfactory to
Lessor taken to cure the failure, within 15 days after written notice of the failure to Lessee by
Lessor; or
(c) The discovery by Lessor that any material statement, representation or warranty made
by Lessee in this Lease or in any writing delivered by Lessee pursuant to or in connection with this
Lease is false, misleading or erroneous in any material respect.
Section 21. Remedies. Upon the occurrence of an Event of Default, and as long as the
Event of Default is continuing, Lessor may, at its option, exercise any one or more of the following
remedies as to the Project, to whichever the Event of Default pertains:
(a) Upon an Event of Default described in Section 20(a) hereof, by appropriate court
action, enforce the pledge set forth in Section 2 of the Ordinance and Section 9 of this
Agreement so that during the remaining Lease Term there is levied on all the taxable property in
the City of Paducah, Kentucky, Kentucky, in addition to all other taxes, without limitation as to
the rate or amount, a direct tax annually in an amount sufficient to pay the Lease Payments when
and as due;
(b) Exercise any other right, remedy or privilege which may be available to it under the
applicable laws of the Commonwealth of Kentucky or any other applicable law or proceed by
appropriate court action to enforce the terms of this Lease or to recover damages for the breach of
this Lease or to rescind this Lease as to any or all of the Project.
Lessee will remain liable for all covenants and obligations under this Lease, and for all legal
fees and other costs and expenses, including court costs awarded by a court of competent
jurisdiction, incurred by Lessor with respect to the enforcement of any of the remedies under this
Lease, when a court of competent jurisdiction has finally adjudicated that an Event of Default has
occurred and enforced the remedies set forth in clauses (a) and (b) of this Section 21. The remedy
set forth in clauses (a) of this Section 21 shall only be available for an Event of Default described in
Section 20(a) and any satisfaction of Lease Payments as a result of actions taken under clause (b) of
this Section 21 shall reduce the amount of the direct annual tax required to be levied under clause
(a) of this Section 21.
Section 22. Notices. All notices to be given under this Lease shall be made in writing and
mailed by certified or registered mail, return receipt requested, to the party at its address stated
below or at such other address as the party may provide in writing from time to time. All parties
listed below shall be sent a copy of any notice sent to any party pursuant to this Lease.
If to Lessee: City of Paducah, Kentucky, Kentucky
300 South 5" Street
Paducah, Kentucky 42003
Attn: Finance Director
and a copy to the then City Attorney
If to Lessor: Community Financial Services Bank
P.O. Bix 467
Benton, Kentucky 42025
Attention: Mr. Randell Blackburn
Section 23. Headings. All section headings contained in this Lease are for convenience of
reference only and are not intended to define or limit the scope of any provision of this Lease.
Section 24. Governing Law. This Lease shall be construed in accordance with and
governed by the laws of the Commonwealth of Kentucky.
Section 25. Delivery of Related Documents. Lessee will execute or provide, as requested
by Lessor, such other documents and information as are reasonably necessary with respect to the
transaction contemplated by this Lease.
Lessor and Lessee agree that this Lease or any other appropriate documents may be filed
or recorded to evidence the parties' respective interests in the Project and this Lease.
.:
Section 26. Special Representations and Covenants of Lessor. Lessor represents that
Lessor is a banking corporation duly organized, existing and in good standing under the laws of
the Commonwealth of Kentucky; has full and complete power to enter into the Lease and to
enter into and carry out the transactions contemplated hereby, and to carry out its obligations
under this Lease; is possessed of full power to own and hold real and personal property, and to
lease the same; and has duly authorized the execution and delivery of this Lease.
Section 27. Special Representations and Covenants of Lessee. Lessee represents that it
is a municipal corporation and political subdivision of the Commonwealth of Kentucky
responsible for promoting the health, safety, moral and general welfare of the inhabitants of the
City and that the acquisition and financing of the Project, and the leasing of the Project, will
advance such purposes. Lessee further represents that it intends to the maximum extent possible
to support and maintain the Project due to the essential nature of said Project.
Section 28. DISCLAIMER OF WARRANTIES: THE LESSOR MAKES NO
WARRANTY OR REPRESENTATION, EITHER EXPRESS OR IMPLIED, AS TO THE
VALUE, DESIGN, CONDITION, MERCHANTABILITY, FITNESS FOR PARTICULAR
PURPOSE OR FITNESS FOR USE OF ANY PORTION OF THE PROJECT OR AS TO ITS
TITLE THERETO OR ANY OTHER REPRESENTATION OR WARRANTY WITH
RESPECT TO THE PROJECT.
Section 29. Entire Agreement; Amendment; Severability. (a) This Lease, together with
attachments and exhibits, and other documents or instruments executed by Lessee and Lessor in
connection with this Lease, constitute the entire agreement between the parties with respect to the
lease of the Project.
(b) This Lease may not be modified, amended, altered or changed except with the written
consent of Lessee and the Lessor.
(c) In any provision of, or any covenant, obligation or agreement contained in this Lease is
determined by a court to be invalid or unenforceable, that determination shall not affect any other
provision, covenant, obligation or agreement, each of which shall be construed and enforced as if
the invalid or unenforceable portion were not contained in this Lease. The invalidity or
unenforceability shall not affect any valid or enforceable application thereof, and each such
provision, covenant, obligation or agreement shall be deemed to be effective, operative, made,
entered into or taken in the manner and to the full extent permitted by law.
IN WITNESS WHEREOF, the parties have executed this Lease Agreement by their
authorized officers on the dates of the respective acknowledgments but as of January 24, 2017.
ATTEST:
City Clerk
CITY OF PADUCAH, KENTUCKY,
KENTUCKY
Mayor
[Signatures continue on the following page.]
COMMUNITY FINANCIAL SERVICES BANK
By:
Title:
617
EXHIBIT A
PROJECT
The Project consists of the acquisition, construction, installation and equipping of improvements
to the Julian Carroll Convention Center located on the following site:
618
[-F -� 1-1 r- - - - . �z . ,, - ...",
EXHIBIT B
LEASE PAYMENTS
*The Interest Component of Base Rent is based on an interest rate equal to 1.98% per
annum through and including the Final Maturity Date.
"Taxable Rate of Interest" means an interest rate per annum equal to 3.15%.
619
Principal
Interest
Total
Declining
Date
Component
Component*
Base Rent
Balance
7/24/2017
$21,208
30,855.00
52,063.00
$3,000,000.00
1/24/2018
21,209
29,490.04
50,699.04
2,978,792.00
7/24/2018
24,102
29,280.07
53,382.07
2,957,583.00
1/24/2019
24,102
29,041.46
53,143.46
2,933,481.00
7/24/2019
23,622
28,802.85
52,424.85
2,909,379.00
1/24/2020
23,623
28,568.99
52,191.99
2,885,757.00
7/24/2020
23,821
28,335.13
52,156.13
2,862,134.00
1/24/2021
23,820
28,099.30
51,919.30
2,838,313.00
7/24/2021
24,158
27,863.48
52,021.48
2,814,493.00
1/24/2022
24,158
27,624.32
51,782.32
2,790,335.00
7/24/2022
24,639
27,385.15
52,024.15
2,766,177.00
1/24/2023
24,639
27,141.23
51,780.23
2,741,538.00
7/24/2023
25,265
26,897.30
52,162.30
2,716,899.00
1/24/2024
25,265
26,647.18
51,912.18
2,691,634.00
7/24/2024
26,241
26,397.05
52,638.05
2,666,369.00
1/24/2025
26,241
26,137.27
52,378.27
2,640,128.00
7/24/2025
26,071
25,877.48
51,948.48
2,613,887.00
1/24/2026
26,071
25,619.38
51,690.38
2,587,816.00
7/24/2026
203,103
25,361.28
228,464.28
2,561,745.00
1/24/2027
203,103
23,350.56
226,453.56
2,358,642.00
7/24/2027
207,144
21,339.84
228,483.84
2,155,539.00
1/24/2028
207,145
19,289.11
226,434.11
1.948,395.00
7/24/2028
211,267
17,238.38
228,505.38
1,741,250.00
1/24/2029
211,266
15,146.83
226,412.83
1,529,983.00
7/24/2029
215,470
13,055.30
228,525.30
1,318,717.00
1/24/2030
215,470
10,922.15
226,392.15
1,103,247.00
7/24/2030
219,758
8,788.99
228,546.99
887,777.00
1/24/2031
219,758
6,613.39
226,371.39
668,019.00
7/24/2031
224,130
4,437.78
228,567.78
448,261.00
1/24/2032
224,131
2,218.90
226,349.90
224,131.00
$3,000,000.00
$667,825.19
$3,667,825.19
*The Interest Component of Base Rent is based on an interest rate equal to 1.98% per
annum through and including the Final Maturity Date.
"Taxable Rate of Interest" means an interest rate per annum equal to 3.15%.
619
EXHIBIT C
PURCHASE SCHEDULE
On any Lease Payment Date, a sum necessary to pay the then existing aggregate Declining
Balance, as set forth in Exhibits B, plus any Interest Component accrued to the date of such
prepayment.
10856616vl
620
EXHIBIT C
PURCHASE SCHEDULE
On any Lease Payment Date, a sum necessary to pay the then existing aggregate Declining
Balance, as set forth in Exhibits B, plus any Interest Component accrued to the date of such
prepayment.
10856616v1
621