OTTAWA UNIVERSITY - SUMMARY LETTER.PDF
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4760050.1 08/26/20 A P R O F E S S I O N A L C O R P O R A T I O N One North Central Avenue, Suite 1200 Phoenix, Arizona 85004 P 602.440.4800 F 602.257.9582 Offices in Arizona & Colorado www.rcalaw.com John J. Fries Direct Line: 602-440-4819 E-mail: jfries@rcalaw.com August 26, 2020 To: Board of Supervisors Board of Directors of Maricopa County, Arizona The Industrial Development Authority of the County of Maricopa Re: Not to Exceed $41,000,000 The Industrial Development Authority of the County of Maricopa Educational Facilities Revenue Bonds (Ottawa University), Series 2020A and Series 2020B Ladies and Gentlemen: At the Authority Board meeting on September 8, 2020, the Authority Board will be asked to grant final approval to the financing for Ottawa University and to adopt a resolution authorizing the issuance and sale of the bonds as described above (the “Bonds”). The purpose of this letter is to provide a summary review of the proposed financing. THE AUTHORITY The Authority is an Arizona nonprofit corporation, formed with the permission of Maricopa County and incorporated under and pursuant to the Arizona Industrial Development Financing Act, Title 35, Chapter 5, Arizona Revised Statutes, as amended (the “Act”), and the Authority is designated by law to be a political subdivision of the State of Arizona. THE APPLICANT/BORROWER The Applicant/Borrower for financing is Ottawa University, a Kansas nonprofit corporation designated as a 501(c)(3) organization under the Internal Revenue Code of 1986, as amended (the “Code”), and a liberal arts college with its main campus located in Ottawa, Kansas, and a satellite campus in Surprise, Arizona, which opened in 2017. The Borrower previously obtained bond financing through the Authority. On October 19, 2018, the Authority issued $19,500,000 in Bonds to finance its Educational Facilities Revenue Bonds for the Borrower’s O’Dell Athletic Complex. Board of Supervisors Maricopa County, Arizona Board of Directors of The Industrial Development Authority of the County of Maricopa August 26, 2020 Page 2 THE PROJECT Ottawa University will use the bond proceeds, together with other funds available to it, as follows (the “Project”): a.) Approximately $32 million, will be used to purchase the OUAZ Residence Hall and Student Union at the Surprise, Arizona campus from Novo Development, L.L.C., which currently leases them to Ottawa University; b.) Approximately $1.9 million will be used at the Surprise campus to refinance capital leases for furniture, kitchen and dining equipment for the OUAZ Residence Hall and Student Union, the lighting system for the O’Dell Athletic Complex and various technology-related items; c.) Approximately $1.7 million will be used at the Ottawa, Kansas campus to finance the multi-purpose turf of the AdventHealth Field and some smaller technology-related items; d.) fund any required reserve funds; e.) pay capitalized interest on a portion of the Bonds; and f.) pay costs incurred in connection with the authorization, issuance and sale of the Bonds. NOTIFICATION TO ARIZONA ATTORNEY GENERAL As required by the provisions of Arizona Revised Statutes, Section 35-721.F, the Authority has notified the Arizona Attorney General of the Authority’s intention to issue the Bonds. PUBLIC HEARING A public hearing pursuant to Section 147(f) of the Internal Revenue Code of 1986, as amended, was held by a representative of the Authority on September 2, 2020, and a Report of Public Hearing will be delivered to the Maricopa County Board of Supervisors. Board of Supervisors Maricopa County, Arizona Board of Directors of The Industrial Development Authority of the County of Maricopa August 26, 2020 Page 3 ALLOCATION FOR TAX EXEMPT FINANCING No allocation of the Arizona “volume cap” is required for the issuance of the Bonds since the Applicant/Borrower is a nonprofit corporation designated as a 501(c)(3) organization under the Code. FINANCING PARTICIPANTS The major participants in the financing are as follows: Issuer: The Industrial Development Authority of the County of Maricopa Issuer Counsel: Ryley Carlock & Applewhite Applicant/Borrower: Ottawa University Borrower Counsel: Husch Blackwell Underwriter: Ziegler Investment Banking Underwriter’s Counsel: Gilmore & Bell, P.C. Bond Counsel: Engelman Berger, P.C. Trustee: US Bank Global Corporate Trust PRINCIPAL FINANCING DOCUMENTS Document Parties Master Trust Indenture Borrower, Borrower's Subsidiary and Trustee Master Note(s) Borrower and Trustee Supplemental Master Trust Indenture No. 1 Borrower and Trustee Board of Supervisors Maricopa County, Arizona Board of Directors of The Industrial Development Authority of the County of Maricopa August 26, 2020 Page 4 Bond Indenture Issuer and Trustee Loan Agreement Issuer and Borrower Leasehold Deed of Trust, Security Agreement, Assignment of Rents and Leases and Fixture Filing Borrower, Trustee and First American Title Bond Purchase Contract Issuer, Borrower and Underwriter Official Statement (Preliminary and Final) Borrower and Underwriter Tax Certificate and Agreement Issuer, Borrower and Trustee Various assignment of contract instruments Borrower Continuing Covenant Agreement Borrower and Bond Purchaser PLAN OF FINANCING The Bonds will be purchased by the Underwriter and the proceeds lent to the Borrower for the Project pursuant to the Loan Agreement. The Borrower will execute one or more master notes as Obligated Group Representative to the Master Trustee under the Master Trust Indenture. Ottawa Investment Management Services, LLC, a Kansas limited liability company and wholly-owned subsidiary of the Borrower, will join in the Master Trust Indenture and be a part of the Obligated Group. The Borrower will execute and deliver a Leasehold Deed of Trust, Security Agreement, Assignment of Rents and Leases, and Fixture Filing on the OUAZ Residence Hall and Student Union as security. It is anticipated that the Bonds will be issued in two series, one being for tax- exempt bonds and the second being for taxable bonds. The Bonds will be sold in a public offering pursuant to an Official Statement. Finally, the Issuer and Borrower will enter into a Tax Certificate and Agreement in a form prescribed by the Bond Counsel. Board of Supervisors Maricopa County, Arizona Board of Directors of The Industrial Development Authority of the County of Maricopa August 26, 2020 Page 5 FINAL APPROVAL At the Authority Board meeting on September 8, 2020, the Authority Board will be asked by the Applicant/Borrower to grant final approval to the application for financing and to adopt a Resolution authorizing the issuance and sale of the Bonds. BOARD OF SUPERVISORS APPROVAL If the Authority Board acts to grant final approval for the financing and to adopt a Resolution authorizing the issuance and sale of the Bonds, the Maricopa County Board of Supervisors will be requested, at its meeting on September 16, 2020, to act as required by law to adopt a Resolution approving the proceedings of the Authority for the issuance of the Bonds. Under the provisions of the Act, specifically A.R.S. § 35-721.B., the proceedings under which the Bonds of the Authority are to be issued require the approval of the Maricopa County Board of Supervisors for each issuance of bonds. Under the provisions of the Act, specifically A.R.S. § 35-742, Maricopa County is not in any event liable for the payment of principal or interest on bonds issued by the Authority or for the performance by the Authority of any pledge, mortgage, obligation or agreement of any kind undertaken by the Authority and bonds of the Authority or any of its agreements or obligations shall not be construed to constitute an indebtedness of Maricopa County within the meaning of any constitution or statutory provision. TRANSACTION CLOSING If the required approvals of the Authority Board and the Maricopa County Board of Supervisors are received, it is currently anticipated that the Bonds will be issued in October, 2020. At the time the Bonds are issued, it is anticipated the designated Bond Counsel, will deliver its written opinion to the effect the Bonds have been validly issued and that as to the portion of the Bonds designated as being tax-exempt, the interest on the Bonds is exempt from federal and Arizona income taxation and that as to the portion of the Bonds which are not designated as tax-exempt, the interest on such Bonds will be exempt from Arizona income taxation. LEGAL COUNSEL RECOMMENDATION As counsel to the Authority, we have reviewed drafts of the principal financing documents, we have been advised that these documents are now in substantially final form, and based upon our review of such and our review of the proceedings to date relating to the proposed Board of Supervisors Maricopa County, Arizona Board of Directors of The Industrial Development Authority of the County of Maricopa August 26, 2020 Page 6 issuance of the Bonds, we believe the financing documents and proceedings are in substantial conformance with the policies and guidelines of the Authority and are in both form and substance acceptable for the Authority Board and Maricopa County Board of Supervisors to act upon and that the Resolution presented to the Authority Board relating to authorizing the issuance and sale of the Bonds, and related matters, and the Resolution of the Maricopa County Board of Supervisors will be asked to adopt are in form and substance acceptable for the adoption.