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RESOLUTION 84-17653 nut "- "1 ' RESOLUTION NO. 84-17653 A RESOLUTION OF THE CITY COMMISSION OF THE CITY OF MIAMI BEACH, FLORIDA, AUTHORIZING THE MAYOR TO EXECUTE A LETTER ADDRESSED TO THE BOND COUNSEL FOR THE $1, 000, 000 AGGREGATE PRINCIPAL AMOUNT OF BOND ANTICIPATION NOTES (THEATER OF THE PERFORMING ARTS PROJECT) , SERIES 1984A, IN CONNECTION WITH CERTAIN MATTERS PERTAINING TO THE EXEMPTION FROM INCLUSION IN GROSS INCOME OF THE INTEREST ON SAID NOTES , AND PROVIDING AND EFFECTIVE DATE . WHEREAS, the City Commission (the "Commission" ) of the City of Miami Beach (the "City" ) has on the date hereof authorized the issuance , sale and delivery of $1, 000, 000 Bond Anticipation Notes (Theater of the Performing Arts Project ) , Series 1984A, by Resolution No . 84-17652 ; and WHEREAS, Bond Counsel, Morgan, Lewis & Bockius , has advised the City by letter dated March 14, 1984 , that it is necessary to take certain actions in order to prevent said Notes from being defined as "industrial revenue bonds" as that term is defined in Section 103 (b) ( 2 ) of the Internal Revenue Code of 1954 , as amended, (the "Code" ) and the regulations (the "Regulations " ) promulgated thereunder, a copy of such letter being attached to this Resolution as EXHIBIT A and by this reference being incorporated herein; and WHEREAS , said Bond Counsel has requested a letter, in the form attached to this Resolution as EXHIBIT B, executed by the Mayor of the City, to the effect that the City acknowledges that it is in receipt of said letter from Bond Counsel , and within the terms of that letter, the City represents that it will not permit the aggregate use of the Theater of the Performing Arts ( "TOPA" ) during any fiscal year, by persons (whether or not described in Section 501 (c ) ( 3 ) of the Code ) on a basis other than that on which TOPA is used by other members of the general public , to exceed twenty five percent ( 25% ) of the total anticipated use of TOPA during such fiscal year without first obtaining Bond Counsel ' s written determination that, had such use been anticipated on the date that said Notes , or Bonds issued under Resolution No . 83-17557, adopted November 16 , 1983 , and entitled: "A RESOLUTION OF THE CITY COMMISSION OF THE CITY OF MIAMI BEACH, FLORIDA, AUTHORIZING THE ISSUANCE OF GENERAL OBLIGATION BONDS IN AN AGGREGATE PRINCIPAL AMOUNT NOT TO EXCEED $22 , 000, 000 FOR THE PURPOSE OF FINANCING STRUCTURAL AND ACCOUSTICAL ADDITIONS, RENOVATIONS AND IMPROVEMENTS TO THE THEATER OF THE PERFORMING ARTS, AUTHORIZED AT AN ELECTION HELD ON NOVEMBER 1, 1983" are issued, such use would not have prevented Bond Counsel from delivering its opinion with respect to the Notes , or any Bonds subsequently issued under said Resolution No . 83-17557 . NOW, THEREFORE, BE IT RESOLVED BY THE CITY COMMISSION OF THE CITY OF MIAMI BEACH, FLORIDA: Section 1. The Commission agrees to the representat- ions set forth in the letter attached hereto as Exhibit B and the Mayor of the City is hereby authorized and directed to executed said letter and to deliver the same to Bond Counsel . Section 2 . This Resolution shall take effect immediately upon its adoption. PASSED and ADOPTED THIS 14th DAY OF MARCH, 1984 . ' - i/C-- -f)1 ,A MAYOR ----- ATTEST: -- ATTEST: r �.b h 4• m --ljej--CleTY;2Elff V`rr. i. r 7% --)1:,__i_ca 'may t_' ,-.t.' ,- , .,</,r ',:',.:::"-' 1- '':—:. EXHIBIT A MORGAN, LEWIS & BOCKIUS PHILADELPHIA COUNSELORS AT LAW LOS ANGELES WASHINGTON 3200 MIAMI CENTER HARRISBURG NEW YORK100 CHOPI N PLAZA LONDON MIAMI,FLORIDA 33131 TELEPHONE(305)579-0300 CABLE ADDRESS MORLEBOCK TELEX.51-2552 March 14, 1984 City of Miami Beach 1700 Convention Center Drive Miami Beach , Florida 33139 Attention: Ms. Patricia De Young Assistant to the City Manager Re: $22, 000 , 000 General Obligation Bonds (Theater of the Performing Arts Project) , Series 1984 and $1, 000, 000 Bond Anticipation Notes (Theater of the Performing Arts Project) , Series 1984A Ladies and Gentlemen: We have served and are serving as Bond Counsel in connection with the issuance and sale of the captioned Notes and the anticipated issuance and sale of the captioned Bonds. In connection with such issuances , the City has or will covenant that it will take no action which would result in the interest on the Notes or Bonds being taxable as income to the holders under the Internal Revenue Code of 1954 , as amended (the "Code" ) , and the regulations (the "Regulations" ) , promulgated thereunder . In this respect we would advise you that such interest would be taxable were the Notes or Bonds to be "industrial development bonds" as that term is defined in Section 103 (b) (2) of the Code. An "industrial revenue bond" is an obligation which is issued as part of an issue (i) a major portion (more than twenty- five percent (25%) ) of the proceeds of which is to be used directly or indirectly in any trade or business carried on by any non-exempt person (the "trade or business test" ) , and (ii) the payment of a major portion of the principal and interest on which is (a) secured by any interest in property used or to be used in a trade or business , or any interest in payments in respect of such property, or (b) to be derived from payments in respect of property, or borrowed money, used or to be used in such a trade or business of a nonexempt person (the "security interest test") . For purposes of the trade or business test and the MORGAN, LEWIS & BOCKIUS City of Miami Beach March 14, 1984 Page 2 security interest test , non-exempt persons include all individuals , corporations or other entities , other than a governmental unit or an organization exempt under Section 501 (a) of the Code as a result of being described in Section 501 (c) (3) of the Code , when engaging in activities substantially related to its governmental function or to the purposes on which its tax exemption is based . You have represented that the gross revenues currently derived from TOPA do not exceed $300, 000 per annum, an amount not in excess of 25% of the anticipated annual debt service on the Notes and Bonds. If this situation were to continue, the Notes and Bonds would not satisfy the security interest test and therefore would not be industrial development bonds. However , we understand that the City has no basis to expect that the magnitude of the revenues will not increase once the project is completed. Were a major part of the debt service on the Bonds to be derived from the revenues generated by TOPA, there is no assurance that the security interest test would not be met ; if the trade or business test also were met the Bonds could be deemed industrial development revenue bonds , the interest on which would be taxable to the holders. For this reason, as a prerequisite to the delivery of our opinion, we have insisted that the City establish a procedure to assure that the Notes and Bonds do not satisfy the trade or business test . The trade or business test is satisfied if , in the aggregate , more than 25% of the proceeds of the Notes are used in the trade or business of nonexempt persons. In the case of a publicly owned facility, such as TOPA, use of the facility by a nonexempt person in his trade or business on the same transient , rate-scale basis as that on which the facility is used by other members of the general public need not be included in the aggregation. However , use of the facility pursuant to an arrangement granting special or exclusive rights to the user must be included. As previously noted , use by an organization described in Section 501 (c) (3) of the Code, when engaging in an activity which is substantially related to the purposes for which its exemption has been granted, also need not be included in the aggregation. However , use of TOPA by a Section 501 (c) (3) organization in an activity not so related (i .e . , in an "unrelated trade or business" as defined in Section 512 of the Code) must be treated in the same manner as would be used by any other nonexempt person (i .e. , transient , rate-scale use would not count toward the trade or business test but preferential or continuing contractual use would so count) . MORGAN, LEWIS BOCKIUS City of Miami Beach March 14, 1984 Page 3 The question of whether a particular use or pattern of use of TOPA by a Section 501 (c) (3) organization constitutes use in an unrelated trade or business is a difficult question of law and of fact and depends on the particular circumstances of the user organization and the contemplated use. For that reason, in delivering our opinion in connection with the issuance of the Notes and Bonds , we have relied and will rely upon the representation of the City, contained in a letter to us dated March 14, 1984 , that it will not permit the aggregate of the use of TOPA during any fiscal year , by persons (whether or not described in Section 501 (c) (3) of the Code) on a basis other than that on which TOPA is used by other members of the general public, to exceed 25% of the total anticipated use of TOPA during such fiscal year , unless the City first obtains a determination by us that , had such use been anticipated on the date the Notes or Bonds were issued, such use would not have prevented us from delivering that opinion. If you have any questions or wish to discuss this matter , please call upon us at your convenience. Very Truly Yours , EXHIBIT "B" %:�.M/---BF `, ( %, ',� \,� Q�A OFFICE OF THE MAYOR 4 i :,---4-:7;;•"-1 * INCG�P ^k�,1ED *s CITY OF M IAM I BEACH • .%1'\179�•..:-"�;•.••"oj�= MIAMI BEACH, FLORIDA -,!.."),•/_.2 . : MALCOLM H. FROMB ERG MAYOR March 14, 1984 Morgan, Lewis & Bockius 3200 Miami Center 100 Chopin Plaza Miami, Florida 33131 RE: $22,000,000 GENERAL OBLIGATION BONDS (THEATER OF THE PERFORMING ARTS PROJECT), SERIES 1984 AND $1,000,000 BOND ANTICIPATION NOTES (THEATER OF THE PERFORMING ARTS PROJECT), SERIES 1984A Gentlemen: The City of Miami Beach, Florida (the "City") is delivering this letter to you as Bond Counsel in connection with the issuance of the above Notes and Bonds, to provide you with factual representations upon which you may rely in opining that interest on the Notes and on the Bonds is not subject to Federal income taxation. The City acknowledges that it is in receipt of your letter of March 14, 1984, and within the terms thereof represents that it will not permit the aggregate of the use of TOPA during any fiscal year, by persons (whether or not described in Section 501(c)(3) of the Code) on a basis other than that on which TOPA is used by other members of the general public, to exceed 2.5% of the total anticipated use of TOPA during such fiscal year without first obtaining your written determination that, had such use been anticipated on the date the Notes or Bonds were issued, such use would not have prevented you from delivering the aforesaid opinions. Sincerely, Malcolm H. Fromberg Mayor M HF:rs • .e ORIGINAL RESOLUTION NO. 84-17653 (Authorizing the Mayor to execute a letter addressed to the Bond Counsel for the $1,000,000 Aggregate Principal amount of Bond Anticipation Notes (Theater of the Performing Arts Project) , Series 1984A in connection with certain matters per- taining to the exemption from inclusion in Gross Income of the Interest on said notes and providing and effective date) ORIGINAL RESOLUTION NO. 84-17653 (Authorizing the Mayor to execute a letter addressed to the Bond Counsel for the $1,000,000 Aggregate Principal amount of Bond Anticipation Notes (Theater of the Performing Arts Project) , Series 1984A in connection with certain matters per- taining to the exemption from inclusion in Gross Income of the Interest on said notes and providing and effective date)