NEW ISSUE BOOK‑ENTRY ONLY
Ratings: See "RATING" herein
In the opinion of Co-Bond Counsel, under existing law and assuming compliance with the tax covenants described herein, and the accuracy of certain representations
and certifications made by the Issuer and the City described herein, interest on the Series 2011B Subordinate Tax Exempt Bonds is excluded from gross income for federal
income tax purposes under Section 103 of the Internal Revenue Code of 1986, as amended (the "Code"). Co-Bond Counsel is also of the opinion that such interest on the Series
2011B Subordinate Tax Exempt Bonds is not treated as a preference item in calculating the alternative minimum tax imposed under the Code with respect to individuals and
corporations. Co-Bond Counsel is further of the opinion that interest on the Series 2011 Taxable Bonds is not excluded from gross income for federal income tax purposes.
Co-Bond Counsel is further of the opinion that under Tennessee law the Series 2011 Bonds and interest thereon are not subject to income taxation in the State of Tennessee,
except for Tennessee franchise taxes. See "TAX MATTERS" herein regarding certain other tax considerations.
MEMPHIS CENTER CITY REVENUE FINANCE CORPORATION
$40,540,000
FEDERALLY TAXABLE SENIOR
REVENUE BONDS, SERIES 2011A
(PYRAMID AND PINCH DISTRICT
REDEVELOPMENT PROJECT)
$100,245,000
TAX EXEMPT SUBORDINATE
REVENUE BONDS, SERIES 2011B
(PYRAMID AND PINCH DISTRICT
REDEVELOPMENT PROJECT)
Dated: Date of Delivery
$56,150,000
FEDERALLY TAXABLE SUBORDINATE
REVENUE BONDS, SERIES 2011C
(PYRAMID AND PINCH DISTRICT
REDEVELOPMENT PROJECT)
Due: November 1, as shown on inside cover
This Official Statement relates to the issuance by the Memphis Center City Revenue Finance Corporation (the "Issuer") of $40,540,000 in aggregate principal amount of its
Federally Taxable Senior Revenue Bonds, Series 2011A (Pyramid and Pinch District Redevelopment Project) (the "Series 2011A Senior Taxable Bonds"), $100,245,000 in aggregate
principal amount of its Tax Exempt Subordinate Revenue Bonds, Series 2011B (Pyramid and Pinch District Redevelopment Project) (the "Series 2011B Subordinate Tax Exempt
Bonds") and $56,150,000 in aggregate principal amount of its Federally Taxable Subordinate Revenue Bonds, Series 2011C (Pyramid and Pinch District Redevelopment Project)
(the "Series 2011C Subordinate Taxable Bonds" and together with the Series 2011A Senior Taxable Bonds and the Series 2011B Subordinate Tax Exempt Bonds are referred to as
the "Series 2011 Bonds") pursuant to and in accordance with a Trust Indenture dated as of September 1, 2011 (the "Indenture") between the Issuer and Regions Bank, as trustee (the
"Trustee") and provisions of Tennessee law as more particularly described herein. The Series 2011B Subordinate Tax Exempt Bonds and the Series 2011C Subordinate Taxable
Bonds are hereinafter referred to as the "Series 2011 Subordinate Bonds." The Series 2011A Senior Taxable Bonds and the Series 2011C Subordinate Taxable Bonds are hereinafter
referred to as the "Series 2011 Taxable Bonds." The Series 2011 Bonds are being issued as fully registered bonds, initially registered in the name of Cede & Co., as nominee of The
Depository Trust Company, New York, New York ("DTC"). Purchases of beneficial interests in the Series 2011 Bonds will be made in book‑entry form only, in denominations of
$5,000 or any integral multiple thereof, as described herein. Purchasers of beneficial interests in the Series 2011 Bonds will not receive physical delivery of certificates. Transfers
of beneficial interests in the Series 2011 Bonds will be effected through the DTC book‑entry system as described herein. See "THE SERIES 2011 BONDS ‑ Book‑Entry Only" herein.
All capitalized terms used herein and not otherwise defined are used with the meanings assigned thereto in "APPENDIX A ‑ DEFINITIONS OF CERTAIN TERMS AND SUMMARY
OF CERTAIN PROVISIONS OF THE INDENTURE, LOAN AGREEMENT AND REPLENISHMENT AGREEMENT" attached hereto.
The Series 2011 Bonds will bear interest at the rates set forth on the inside cover of this Official Statement payable semiannually on May 1 and November 1 of each year,
commencing on November 1, 2011, until maturity or earlier redemption of the Series 2011 Bonds. Interest on the Series 2011 Bonds will be payable by the Trustee, in its capacity
as paying agent to Cede & Co., as nominee of DTC, on each Interest Payment Date. Payments of principal of, redemption premium, if any, and interest on, the Series 2011 Bonds
will be made at the designated corporate trust office of the Trustee. See "THE SERIES 2011 BONDS" herein.
Pursuant to the Indenture, the proceeds of the Series 2011 Bonds will be used to, among other things, provide funds to make a loan (the "Series 2011 Loan") to the City of
Memphis, Tennessee (the "City") pursuant to a Loan Agreement dated as of September 1, 2011 (the "Loan Agreement") between the Issuer and the City. The City will use the
proceeds of the Series 2011 Loan to: (a) finance or reimburse the City for a portion of the costs associated with the acquisition, construction, development, renovation and equipping
of the Series 2011 Project (as defined herein), (b) fund capitalized interest on the Series 2011 Bonds, (c) fund a deposit to the Senior Debt Service Reserve Account in an amount
equal to the Senior Debt Service Reserve Requirement applicable to the Series 2011A Senior Taxable Bonds, (d) fund a deposit to the Subordinate Debt Service Reserve Account in
an amount equal to the Subordinate Debt Service Reserve Requirement applicable to the Series 2011 Subordinate Bonds and (e) pay the costs of issuance with respect to the Series
2011 Bonds, including the premium for the Policy (as herein defined). See "THE PROJECT" and "PLAN OF FINANCE" herein. The particular uses of each series of the Series 2011
Bonds are set forth herein under "PLAN OF FINANCE ‑ Estimated Sources and Uses of Funds" herein.
The Series 2011 Bonds are limited obligations of the Issuer secured by an assignment and pledge of the Trust Estate, which consists primarily of the payments and prepayments
required to be made by the City under and pursuant to the Loan Agreement which are to be made from the TDZ Revenues (as defined herein). Pursuant to the Indenture, all of the
payments and prepayments by the City under the Loan Agreement have been pledged to the payment of the principal of, premium, if any, and interest on the Series 2011 Bonds.
However, the Series 2011A Senior Taxable Bonds and all Additional Bonds of the same Priority with the Series 2011A Senior Taxable Bonds (the "Senior Bonds") rank and have a
right of payment from the TDZ Revenues superior to the Series 2011 Subordinate Bonds and all Additional Bonds of the same Priority with the Series 2011 Subordinate Bonds (the
"Subordinate Bonds") and the Subordinate Bonds rank and have a right of payment from the TDZ Revenues equal to each other. See "SECURITY AND SOURCES OF PAYMENT
FOR THE SERIES 2011 BONDS" herein.
In order to further secure the Subordinate Bonds, the City and the Issuer will enter into a Debt Service Reserve Replenishment Agreement dated as of September 1, 2011
(the "Replenishment Agreement"), pursuant to which the City will agree to appropriate and pay, from Non-Tax Revenues following receipt of a Deficiency Notice (as defined
herein), money sufficient to restore the Subordinate Debt Service Reserve Account to the Subordinate Debt Service Reserve Requirement as described in more detail herein. See
"SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2011 BONDS ‑ Replenishment Agreement and ‑ Non-Tax Revenues" herein and "APPENDIX A ‑ DEFINITIONS OF
CERTAIN TERMS AND SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE, LOAN AGREEMENT AND REPLENISHMENT AGREEMENT" attached hereto.
The scheduled payment of principal of and interest on the Series 2011 Bonds when due will be guaranteed under an insurance policy to be issued concurrently with the
delivery of the Series 2011 Bonds by Assured Guaranty Municipal Corp. See "APPENDIX E ‑ SPECIMEN MUNICIPAL BOND INSURANCE POLICY" attached hereto.
The Series 2011 Bonds are subject to optional redemption, mandatory sinking fund redemption and extraordinary redemption prior to maturity, all as more fully described
herein. See "THE SERIES 2011 BONDS" herein.
THE SERIES 2011 BONDS, AND THE INTEREST THEREON, DO NOT NOW AND SHALL NEVER CONSTITUTE A CHARGE AGAINST THE GENERAL
CREDIT OR TAXING POWER OF THE CITY, THE STATE OF TENNESSEE (THE "STATE") OR ANY POLITICAL SUBDIVISION THEREOF INCLUDING, WITHOUT
LIMITATION, THE CITY AND THE COUNTY OF SHELBY, TENNESSEE (THE "COUNTY") AND SUCH SERIES 2011 BONDS AND THE INTEREST PAYABLE
THEREON DO NOT NOW AND SHALL NEVER CONSTITUTE A DEBT OF THE STATE OR ANY POLITICAL SUBDIVISION THEREOF, INCLUDING, WITHOUT
LIMITATION, THE CITY AND THE COUNTY, WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY PROVISION WHATSOEVER. NEITHER
THE STATE NOR ANY POLITICAL SUBDIVISION THEREOF (OTHER THAN THE CITY) SHALL IN ANY EVENT BE LIABLE FOR THE PAYMENT OF THE
PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON THE SERIES 2011 BONDS OR FOR THE PERFORMANCE OF ANY PLEDGE, MORTGAGE, OBLIGATION
OR AGREEMENT OF ANY KIND WHATSOEVER WHICH MAY BE UNDERTAKEN BY THE ISSUER. NO BREACH BY THE ISSUER OF ANY SUCH PLEDGE,
MORTGAGE, OBLIGATION OR AGREEMENT MAY IMPOSE ANY LIABILITY, PECUNIARY OR OTHERWISE, UPON THE CITY, THE STATE OR ANY POLITICAL
SUBDIVISION THEREOF INCLUDING, WITHOUT LIMITATION, THE CITY AND THE COUNTY, OR ANY CHARGE UPON THEIR GENERAL CREDIT OR TAXING
POWER. THE ISSUER HAS NO TAXING POWER.
This cover page contains limited information for quick reference only. It is not a summary of the matters relating to the Series 2011 Bonds. Potential investors must read the
entire Official Statement (including the cover page and all Appendices attached hereto) to obtain information essential to the making of an informed investment decision.
The Series 2011 Bonds are being offered when, as and if issued by the Issuer, subject to prior sale and to withdrawal or modification of the offer without notice and subject
to the approval of their validity by Nixon Peabody LLP, New York, New York, and Brittenum Bruce, PLLC, Memphis, Tennessee, Co-Bond Counsel. Certain legal matters will
be passed upon by Adams and Reese LLP, Memphis, Tennessee, in its capacity as Counsel to the Issuer. Certain legal matters will be passed upon for the City by Hawkins
Delafield & Wood LLP, New York, New York, in its capacity as Counsel to the City. Certain legal matters will be passed upon for the Underwriters by their counsel, Greenberg
Traurig, P.A., Orlando, Florida. First Southwest Company, Dallas, Texas and ComCap Advisors, a division of Community Capital, Memphis, Tennessee are serving as
Co-Financial Advisors to the Issuer. It is expected that the Series 2011 Bonds will be available for delivery through the facilities of DTC in New York, New York on or about
September 30, 2011.
MORGAN KEEGAN
CITIGROUP
DUNCAN-WILLIAMS
HARVESTONS SECURITIES, INC.
SUNTRUST ROBINSON HUMPHREY
September 21, 2011
MATURITIES, PRINCIPAL AMOUNTS, INTEREST RATES,
PRICES OR YIELDS AND CUSIPS†
$40,540,000
FEDERALLY TAXABLE SENIOR REVENUE BONDS, SERIES 2011A
(PYRAMID AND PINCH DISTRICT REDEVELOPMENT PROJECT)
Maturity
(November 1)
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
Principal
Amount
$ 790,000
840,000
885,000
935,000
1,000,000
1,480,000
1,565,000
1,650,000
2,735,000
2,890,000
3,055,000
3,240,000
3,435,000
3,645,000
Interest
Rate
2.040%
2.540
2.890
3.190
3.320
3.570
3.870
4.230
4.480
4.630
4.730
4.880
5.030
5.180
Price
100%
100
100
100
100
100
100
100
100
100
100
100
100
100
Yield
2.040%
2.540
2.890
3.190
3.320
3.570
3.870
4.230
4.480
4.630
4.730
4.880
5.030
5.180
Initial
†
CUSIP No.
58607EBP8
58607EBQ6
58607EBR4
58607EBS2
58607EBT0
58607EBU7
58607EBV5
58607EBW3
58607EBX1
58607EBY9
58607EBZ6
58607ECA0
58607ECB8
58607ECC6
$12,395,000 5.530% Term Bond, Due November 1, 2030, Yield 5.530%,
Initial CUSIP No.: 58607ECD4,† Price: 100%
†
CUSIP numbers have been assigned by an organization not affiliated with the Issuer or the City and are
included for the convenience of the holders of the Series 2011 Bonds. Neither the Issuer nor the City is
responsible for the selection or uses of these CUSIP numbers, nor is any representation made as to their
accuracy on the Series 2011 Bonds, or as indicated above.
MATURITIES, PRINCIPAL AMOUNTS, INTEREST RATES,
PRICES OR YIELDS AND CUSIPS†
$100,245,000
TAX EXEMPT SUBORDINATE REVENUE BONDS, SERIES 2011B
(PYRAMID AND PINCH DISTRICT REDEVELOPMENT PROJECT
$29,560,000 4.000% Term Bond, Due November 1, 2025, Yield 4.180%,
Initial CUSIP No.: 58607EBM5,† Price: 98.095%
$9,500,000 5.250% Term Bond, Due November 1, 2025, Yield 4.060%,
Initial CUSIP No.: 58607EBK9,† Price: 109.764%C
$21,185,000 4.500% Term Bond, Due November 1, 2030, Yield 4.640%,
Initial CUSIP No.: 58607EBN3,† Price: 98.236%
$40,000,000 5.250% Term Bond, Due November 1, 2030, Yield 4.590%,
Initial CUSIP No.: 58607EBL7,† Price: 105.276%C
†
C
CUSIP numbers have been assigned by an organization not affiliated with the Issuer or the City and are
included for the convenience of the holders of the Series 2011 Bonds. Neither the Issuer nor the City is
responsible for the selection or uses of these CUSIP numbers, nor is any representation made as to their
accuracy on the Series 2011 Bonds, or as indicated above.
Priced to the call date of November 1, 2021 at par.
MATURITIES, PRINCIPAL AMOUNTS, INTEREST RATES,
PRICES OR YIELDS AND CUSIPS†
$56,150,000
FEDERALLY TAXABLE SUBORDINATE REVENUE BONDS, SERIES 2011C
(PYRAMID AND PINCH DISTRICT REDEVELOPMENT PROJECT)
Maturity
(November 1)
2014
2015
2016
2017
2018
2019
2020
2021
†
Principal
Amount
$6,180,000
6,385,000
6,635,000
6,915,000
7,215,000
7,550,000
7,920,000
7,350,000
Interest
Rate
1.890%
2.390
2.790
3.090
3.220
3.520
3.870
4.180
Price
100%
100
100
100
100
100
100
100
Yield
1.890%
2.390
2.790
3.090
3.220
3.520
3.870
4.180
Initial
CUSIP No.†
58607ECE2
58607ECF9
58607ECG7
58607ECH5
58607ECJ1
58607ECK8
58607ECL6
58607ECM4
CUSIP numbers have been assigned by an organization not affiliated with the Issuer or the City and are
included for the convenience of the holders of the Series 2011 Bonds. Neither the Issuer nor the City is
responsible for the selection or uses of these CUSIP numbers, nor is any representation made as to their
accuracy on the Series 2011 Bonds, or as indicated above.
MEMPHIS CENTER CITY REVENUE FINANCE CORPORATION
Board Members
Robert Spence Jr., Chairman
Luke Yancy, IV, Vice Chairman
Carla Peach-Ryan, Secretary
Martin Truitt, Treasurer
Dana Burkett.
Lucy Shaw
Brandy Johnson-Ward
Wesley Grace
Walter Person
President
Paul Morris
CITY OF MEMPHIS ELECTED OFFICIALS
Mayor
A C Wharton, Jr.
City Council
Myron Lowery, Chairman
Berlin Boyd
William C. Boyd
Joe W. Brown
Harold B. Collins
Kemp Conrad
Shea Flinn
Edmund Ford, Jr.
Janis Fullilove
Wanda Halbert
Reid Hedgepeth
Bill Morrison
Jim Strickland
CONSULTANTS TO THE ISSUER, THE CITY AND THE UNDERWRITERS
Co-Financial Advisors
First Southwest Company
Dallas, Texas
ComCap Advisors, a division of Community Capital
Memphis, Tennessee
Economic Planning and Real Estate Consultants
RKG Associates, Inc.
Dover, New Hampshire.
Co-Bond Counsel
Nixon Peabody LLP
New York, New York
Brittenum Bruce, PLLC
Memphis, Tennessee
Issuer's Counsel
Adams and Reese LLP
Memphis, Tennessee
Counsel to the City
Hawkins Delafield & Wood LLP
New York, New York
Underwriters' Counsel
Greenberg Traurig, P.A.
Orlando, Florida
THIS OFFICIAL STATEMENT DOES NOT CONSTITUTE A CONTRACT AMONG THE ISSUER,
THE CITY, OR THE UNDERWRITERS AND ANY ONE OR MORE OWNERS OF THE SERIES 2011 BONDS
NOR DOES IT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY THE
SERIES 2011 BONDS IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE
SUCH AN OFFER IN SUCH JURISDICTION. INVESTORS SHOULD CONSULT THEIR FINANCIAL
ADVISORS AND LEGAL COUNSEL WITH QUESTIONS ABOUT THIS OFFICIAL STATEMENT AND THE
SERIES 2011 BONDS BEING OFFERED, OR ANYTHING ELSE RELATED TO THE SERIES 2011 BONDS.
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED BY THE ISSUER,
THE CITY, OR THE UNDERWRITERS TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE CONTAINED HEREIN, IN CONNECTION WITH THE
OFFERING OF THE SERIES 2011 BONDS, AND IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE ISSUER,
THE CITY OR ANY OTHER PERSON. THE INFORMATION AND EXPRESSIONS OF OPINION HEREIN
ARE SUBJECT TO CHANGE WITHOUT NOTICE, AND NEITHER THE DELIVERY OF THIS OFFICIAL
STATEMENT NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
THE IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE MATTERS DESCRIBED HEREIN
SINCE THE DATE HEREOF. THE INFORMATION CONTAINED IN THIS OFFICIAL STATEMENT,
INCLUDING IN THE APPENDICES, HAS BEEN OBTAINED FROM REPRESENTATIVES OF THE ISSUER,
THE CITY, PUBLIC DOCUMENTS, RECORDS AND OTHER SOURCES CONSIDERED TO BE RELIABLE.
INFORMATION AND EXPRESSIONS OF OPINION ARE SUBJECT TO CHANGE WITHOUT
NOTICE, AND IT SHOULD NOT BE INFERRED THAT THERE HAVE BEEN NO CHANGES SINCE THE
DATE OF THIS DOCUMENT. NEITHER THE DELIVERY OF, NOR ANY SALE MADE UNDER, THIS
OFFICIAL STATEMENT SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE ISSUER'S OR THE CITY'S AFFAIRS OR IN ANY OTHER
MATTERS DESCRIBED HEREIN.
MANY STATEMENTS CONTAINED IN THIS OFFICIAL STATEMENT, INCLUDING THE
DOCUMENTS INCLUDED BY SPECIFIC CROSS REFERENCE, THAT ARE NOT HISTORICAL FACTS ARE
FORWARD-LOOKING STATEMENTS, WHICH ARE BASED ON THE CITY'S BELIEFS, AS WELL AS
ASSUMPTIONS MADE BY, AND INFORMATION CURRENTLY AVAILABLE TO, THE MANAGEMENT
AND STAFF OF THE CITY. BECAUSE THE STATEMENTS ARE BASED ON EXPECTATIONS ABOUT
FUTURE EVENTS AND ECONOMIC PERFORMANCE AND ARE NOT STATEMENTS OF FACT, ACTUAL
RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED. THE WORDS "ANTICIPATE,"
"ASSUME," "ESTIMATE," "EXPECT," "OBJECTIVE," "PROJECTION," "PLAN," "FORECAST," "GOAL,"
"BUDGET" OR SIMILAR WORDS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS.
THE WORDS OR PHRASES "TO DATE," "NOW," "CURRENTLY," AND THE LIKE ARE INTENDED TO
MEAN AS OF THE DATE OF THIS OFFICIAL STATEMENT.
THE PROJECTIONS SET FORTH IN THIS OFFICIAL STATEMENT WERE NOT PREPARED WITH
A VIEW TOWARD COMPLYING WITH THE GUIDELINES ESTABLISHED BY THE AMERICAN
INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS WITH RESPECT TO PROSPECTIVE FINANCIAL
INFORMATION, BUT, IN THE VIEW OF THE CITY'S MANAGEMENT, WERE PREPARED ON A
REASONABLE BASIS, REFLECT THE BEST CURRENTLY AVAILABLE ESTIMATES AND JUDGMENTS,
AND PRESENT, TO THE BEST OF MANAGEMENT'S KNOWLEDGE AND BELIEF, THE EXPECTED
COURSE OF ACTION AND THE EXPECTED FUTURE RECEIPT OF THE TDZ REVENUES BY THE CITY.
HOWEVER, THIS INFORMATION IS NOT FACT AND SHOULD NOT BE RELIED UPON AS BEING
NECESSARILY INDICATIVE OF FUTURE RESULTS, AND READERS OF THIS OFFICIAL STATEMENT
ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THE PROSPECTIVE FINANCIAL
INFORMATION. NEITHER THE CITY'S INDEPENDENT AUDITORS, NOR ANY OTHER INDEPENDENT
ACCOUNTANTS, HAVE COMPILED, EXAMINED, OR PERFORMED ANY PROCEDURES WITH RESPECT
TO THE PROSPECTIVE FINANCIAL INFORMATION CONTAINED HEREIN, NOR HAVE THEY
EXPRESSED ANY OPINION OR ANY OTHER FORM OF ASSURANCE ON SUCH INFORMATION OR ITS
ACHIEVABILITY, AND ASSUME NO RESPONSIBILITY FOR, AND DISCLAIM ANY ASSOCIATION
WITH, THE PROSPECTIVE FINANCIAL INFORMATION.
THE UNDERWRITERS HAVE PROVIDED THE FOLLOWING SENTENCE FOR INCLUSION IN
THIS OFFICIAL STATEMENT: THE UNDERWRITERS HAVE REVIEWED THE INFORMATION IN THIS
OFFICIAL STATEMENT IN ACCORDANCE WITH, AND AS PART OF, ITS RESPONSIBILITY TO
INVESTORS UNDER THE FEDERAL SECURITIES LAWS AS APPLIED TO THE FACTS AND
CIRCUMSTANCES OF THIS TRANSACTION, BUT THE UNDERWRITERS DO NOT GUARANTEE THE
ACCURACY OR COMPLETENESS OF SUCH INFORMATION.
IN CONNECTION WITH THE OFFERING OF THE SERIES 2011 BONDS, THE UNDERWRITERS
MAY OVERALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET
PRICE OF THE SERIES 2011 BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL
IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY
TIME.
THE SERIES 2011 BONDS HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR HAS THE
INDENTURE BEEN QUALIFIED UNDER THE TRUST INDENTURE ACT OF 1939, AS AMENDED, IN
RELIANCE UPON EXEMPTIONS CONTAINED IN SUCH ACTS.
THE REGISTRATION OR
QUALIFICATION OF THE SERIES 2011 BONDS IN ACCORDANCE WITH APPLICABLE PROVISIONS OF
THE SECURITIES LAWS OF THE STATES, IF ANY, IN WHICH THE SERIES 2011 BONDS HAVE BEEN
REGISTERED OR QUALIFIED AND THE EXEMPTION FROM REGISTRATION OR QUALIFICATION IN
CERTAIN OTHER STATES CANNOT BE REGARDED AS A RECOMMENDATION THEREOF. NEITHER
THESE STATES NOR ANY OF THEIR AGENCIES HAVE PASSED UPON THE MERITS OF THE SERIES
2011 BONDS OR THE ACCURACY OR COMPLETENESS OF THIS OFFICIAL STATEMENT. ANY
REPRESENTATION TO THE CONTRARY MAY BE A CRIMINAL OFFENSE.
ASSURED GUARANTY MUNICIPAL CORP. ("AGM") MAKES NO REPRESENTATION
REGARDING THE SERIES 2011 BONDS OR THE ADVISABILITY OF INVESTING IN THE SERIES 2011
BONDS. IN ADDITION, AGM HAS NOT INDEPENDENTLY VERIFIED, MAKES NO REPRESENTATION
REGARDING, AND DOES NOT ACCEPT ANY RESPONSIBILITY FOR THE ACCURACY OR
COMPLETENESS OF THIS OFFICIAL STATEMENT OR ANY INFORMATION OR DISCLOSURE
CONTAINED HEREIN, OR OMITTED HEREFROM, OTHER THAN WITH RESPECT TO THE ACCURACY
OF THE INFORMATION REGARDING AGM SUPPLIED BY AGM AND PRESENTED UNDER THE
HEADING "MUNICIPAL BOND INSURANCE" AND "APPENDIX E - SPECIMEN MUNICIPAL BOND
INSURANCE POLICY."
THIS OFFICIAL STATEMENT IS BEING PROVIDED TO PROSPECTIVE PURCHASERS IN EITHER
BOUND OR PRINTED FORMAT ("ORIGINAL BOUND FORMAT"), OR IN ELECTRONIC FORMAT ON
THE FOLLOWING WEBSITE: WWW.MUNIOS.COM.
TABLE OF CONTENTS
Page
INTRODUCTION .......................................................................................................................... 1
General........................................................................................................................................ 1
The Issuer and the City ............................................................................................................... 2
Authority for Issuance................................................................................................................. 2
The Project .................................................................................................................................. 2
Purpose of the Series 2011 Bonds .............................................................................................. 2
Description of the Series 2011 Bonds......................................................................................... 3
Trustee, Paying Agent and Bond Registrar................................................................................. 3
Market Study............................................................................................................................... 3
Sources of Payment for the Series 2011 Bonds .......................................................................... 4
Bond Insurance ........................................................................................................................... 5
Continuing Disclosure ................................................................................................................ 6
Other Information ....................................................................................................................... 6
THE ISSUER .................................................................................................................................. 7
THE CITY ...................................................................................................................................... 8
THE PROJECT............................................................................................................................... 9
PLAN OF FINANCE.................................................................................................................... 10
General...................................................................................................................................... 10
Estimated Sources and Uses of Funds ...................................................................................... 11
THE SERIES 2011 BONDS......................................................................................................... 11
General...................................................................................................................................... 11
Book-Entry Only System.......................................................................................................... 12
Discontinuance of Book-Entry Only System............................................................................ 14
Optional Redemption ................................................................................................................ 14
Mandatory Sinking Fund Redemption...................................................................................... 15
Extraordinary Redemption........................................................................................................ 17
Selection of Bonds to be Redeemed ......................................................................................... 18
Notice of Redemption ............................................................................................................... 19
Transfer and Exchange of Series 2011 Bonds .......................................................................... 19
DEBT SERVICE REQUIREMENTS FOR THE SERIES 2011 BONDS ................................... 21
MUNICIPAL BOND INSURANCE ............................................................................................ 21
Bond Insurance Policy .............................................................................................................. 21
Assured Guaranty Municipal Corp. .......................................................................................... 22
SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2011 BONDS .................... 24
Limited Obligations .................................................................................................................. 24
Trust Estate ............................................................................................................................... 25
TDZ Revenues .......................................................................................................................... 25
Historical and Projected Debt Service Coverage...................................................................... 27
Replenishment Agreement........................................................................................................ 29
Non-Tax Revenues.................................................................................................................... 29
Additional Obligations Payable from Non-Tax Revenues ....................................................... 30
Flow of Funds ........................................................................................................................... 31
Debt Service Fund..................................................................................................................... 32
(i)
Debt Service Reserve Fund....................................................................................................... 34
Expense Fund............................................................................................................................ 35
Surplus Fund ............................................................................................................................. 35
Construction Fund..................................................................................................................... 36
Optional Redemption Fund....................................................................................................... 37
Additional Bonds ...................................................................................................................... 37
Refunding Bonds ...................................................................................................................... 38
MARKET STUDY ....................................................................................................................... 39
RKG .......................................................................................................................................... 39
Executive Summary of the Market Study................................................................................. 39
INVESTMENT CONSIDERATIONS ......................................................................................... 41
General...................................................................................................................................... 41
Enforceability of Remedies....................................................................................................... 41
Early Payment Prior to Maturity............................................................................................... 41
Non-Recourse Obligation ......................................................................................................... 42
Achievement of Projections...................................................................................................... 42
Considerations Relating To TDZ Revenues ............................................................................. 42
Considerations Relating To Non-Tax Revenues....................................................................... 43
Ratings ...................................................................................................................................... 44
Limitations On Remedies ......................................................................................................... 44
Secondary Market Prices .......................................................................................................... 44
Forward-Looking Statements.................................................................................................... 45
LEGAL MATTERS...................................................................................................................... 45
TAX MATTERS........................................................................................................................... 46
Series 2011B Subordinate Tax Exempt Bonds......................................................................... 46
Series 2011 Taxable Bonds....................................................................................................... 49
LITIGATION................................................................................................................................ 53
The Issuer.................................................................................................................................. 53
The City .................................................................................................................................... 53
FINANCIAL ADVISORS ............................................................................................................ 53
UNDERWRITING ....................................................................................................................... 54
RATINGS ..................................................................................................................................... 55
CONTINUING DISCLOSURE.................................................................................................... 55
CERTAIN REFERENCES ........................................................................................................... 56
MISCELLANEOUS ..................................................................................................................... 56
APPENDIX A -
APPENDIX B
APPENDIX C
APPENDIX D
APPENDIX E
-
DEFINITIONS OF CERTAIN TERMS AND SUMMARY OF CERTAIN
PROVISIONS OF THE INDENTURE, LOAN AGREEMENT AND
REPLENISHMENT AGREEMENT
MARKET STUDY AND IMPACT ANALYSIS
FORM OF CONTINUING DISCLOSURE AGREEMENT
FORM OF OPINIONS OF CO-BOND COUNSEL
SPECIMEN MUNICIPAL BOND INSURANCE POLICY
(ii)
OFFICIAL STATEMENT
relating to
MEMPHIS CENTER CITY REVENUE FINANCE CORPORATION
$40,540,000
FEDERALLY
TAXABLE SENIOR
REVENUE BONDS,
SERIES 2011A
(PYRAMID AND
PINCH DISTRICT
REDEVELOPMENT
PROJECT)
$100,245,000
TAX EXEMPT SUBORDINATE
REVENUE BONDS,
SERIES 2011B (PYRAMID AND
PINCH DISTRICT
REDEVELOPMENT PROJECT)
$56,150,000
FEDERALLY TAXABLE
SUBORDINATE
REVENUE BONDS,
SERIES 2011C
(PYRAMID AND PINCH
DISTRICT
REDEVELOPMENT
PROJECT)
INTRODUCTION
General
The purpose of this Official Statement, which includes the cover page and the
Appendices hereto, is to furnish certain information in connection with the sale by the Memphis
Center City Revenue Finance Corporation (the "Issuer") of $40,540,000 in aggregate principal
amount of its Federally Taxable Senior Revenue Bonds, Series 2011A (Pyramid and Pinch
District Redevelopment Project) (the "Series 2011A Senior Taxable Bonds"), $100,245,000 in
aggregate principal amount of its Tax Exempt Subordinate Revenue Bonds, Series 2011B
(Pyramid and Pinch District Redevelopment Project) (the "Series 2011B Subordinate Tax
Exempt Bonds") and $56,150,000 in aggregate principal amount of its Federally Taxable
Subordinate Revenue Bonds, Series 2011C (Pyramid and Pinch District Redevelopment Project)
(the "Series 2011C Subordinate Taxable Bonds" and together with the Series 2011A Senior
Taxable Bonds and the Series 2011B Subordinate Tax Exempt Bonds are referred to as the
"Series 2011 Bonds") pursuant to and in accordance with a Trust Indenture dated as of
September 1, 2011 (the "Indenture") between the Issuer and Regions Bank, as trustee (the
"Trustee") and provisions of Tennessee law as more particularly described herein. The Series
2011B Subordinate Tax Exempt Bonds and the Series 2011C Subordinate Taxable Bonds are
collectively hereinafter referred to as the "Series 2011 Subordinate Bonds." The Series 2011A
Senior Taxable Bonds and the Series 2011C Subordinate Taxable Bonds are collectively
hereinafter referred to as the "Series 2011 Taxable Bonds."
This introduction is not a summary of this Official Statement and is intended only for
quick reference. It is only a brief description of and guide to, and is qualified in its entirety by
reference to, more complete and detailed information contained in the entire Official Statement,
including the cover page and the Appendices hereto, and the documents summarized or
described herein. A full review should be made of the entire Official Statement and of the
documents summarized or described herein, if necessary. The offering of the Series 2011 Bonds
to potential investors is made only by means of the entire Official Statement, including the
Appendices hereto. No person is authorized to detach this Introduction from the Official
Statement or to otherwise use it without the entire Official Statement including the Appendices
hereto. All capitalized terms used in this Official Statement and not otherwise defined herein
shall have the meanings set forth under "APPENDIX A - DEFINITIONS OF CERTAIN TERMS
AND SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE, LOAN AGREEMENT
AND REPLENISHMENT AGREEMENT" attached hereto.
The Issuer and the City
The Issuer, is a public nonprofit corporation organized pursuant to the laws of the State of
Tennessee (the "State"), specifically the provisions of Part 101 et seq. of Chapter 53 of Title 7,
Tennessee Code Annotated, as amended (the "Act"). The Issuer is authorized by the Act to
finance the acquisition, construction and equipping of manufacturing, industrial, commercial,
financial and recreational facilities. See "THE ISSUER" herein. The City of Memphis,
Tennessee (the "City") is a municipal corporation organized under the laws of the State. See
"THE CITY" herein.
Authority for Issuance
The Series 2011 Bonds are being issued in accordance with the provisions of the Act, the
Indenture and resolutions adopted and approved by the Issuer and the City authorizing, among
other things, the execution and delivery of the Indenture, the hereinafter described Loan
Agreement and Replenishment Agreement and the issuance and sale of the Series 2011 Bonds.
The Project
The City proposes to redevelop the public arena and related properties located in the
center city area of the City comprising approximately 41 acres of land commonly known as the
"Pyramid Arena" as a world-class commercial and retail amenity (the "Pyramid Arena Project").
In connection with the Pyramid Arena Project, the City proposes to acquire, for future
redevelopment and renovation, (a) certain properties in the vicinity of the Pyramid Arena and
located in the center city area of the City commonly known as the "Pinch District" comprising a
34 parcels of land aggregating to approximately 11 acres of land (collectively, the "Pinch District
Project") and (b) an approximately 7 acre property located immediately west and adjacent to the
Pyramid Arena commonly known as the Lonestar Industries site (the "Lonestar Site"). In order
for the City to obtain sole and unfettered access and control of the TDZ Revenues (as defined
herein) and pledge the same to the repayment of the Series 2011 Loan (as defined herein), the
City also proposes to acquire the interest of Shelby County, Tennessee (the "County") in the
Memphis Cook Convention Center (the "Convention Center"). The Pyramid Arena Project, the
acquisition of the Pinch District Project and the Lonestar Site together with acquisition of the
County's interest in the Convention Center are hereinafter collectively referred to as the
"Project." See "PLAN OF FINANCE - Estimated Sources and Uses of Funds" and "THE
PROJECT" herein.
Purpose of the Series 2011 Bonds
Pursuant to the Indenture, the proceeds of the Series 2011 Bonds will be used to, among
other things, provide funds to make a loan (the "Series 2011 Loan") to the City pursuant to that
2
certain Loan Agreement dated as of September 1, 2011 (the "Loan Agreement") between the
Issuer and the City. The City will use the proceeds of the Series 2011 Loan to: (a) finance or
reimburse the City for the costs associated with the Series 2011 Project (as defined herein),
(b) fund capitalized interest on the Series 2011 Bonds, (c) fund a deposit to the Senior Debt
Service Reserve Account in an amount equal to the Senior Debt Service Reserve Requirement
applicable to the Series 2011A Senior Taxable Bonds, (d) fund a deposit to the Subordinate Debt
Service Reserve Account in an amount equal to the Subordinate Debt Service Reserve
Requirement applicable to the Series 2011 Subordinate Bonds and (e) pay the costs of issuance
with respect to the Series 2011 Bonds, including the premium for the Policy (as herein defined).
See "THE PROJECT" and "PLAN OF FINANCE" herein. The particular uses of each series of
the Series 2011 Bonds are set forth herein under "PLAN OF FINANCE - Estimated Sources and
Uses of Funds" herein.
For a more detailed discussion of the Project and the elements of the Project included
within the Series 2011 Project, see "THE PROJECT" herein.
Description of the Series 2011 Bonds
The Series 2011 Bonds are being issued in book-entry only form as fully registered bonds
in denominations of $5,000 or any integral multiple thereof, and when issued, shall, as described
herein, be registered in the name of Cede & Co., as Owner and securities depository nominee of
The Depository Trust Company, New York, New York. Individual purchases of beneficial
interests in the Series 2011 Bonds will be made in book-entry form only through Direct
Participants, as described herein. See "THE SERIES 2011 BONDS - Book-Entry Only" herein.
Interest on the Series 2011 Bonds is payable semiannually on each May 1 and November 1,
commencing on November 1, 2011. The Series 2011 Bonds are subject to optional redemption,
mandatory sinking fund redemption and extraordinary redemption prior to maturity, all as more
fully described herein.
For a more complete description of the Series 2011 Bonds, see "THE SERIES
2011 BONDS" herein.
Trustee, Paying Agent and Bond Registrar
Regions Bank, a state banking association duly organized under the laws of the State of
Alabama, will act as trustee, paying agent and bond registrar for the Series 2011 Bonds.
Market Study
In connection with the issuance of the Series 2011 Bonds, RKG Associates, Inc. ("RKG")
was retained by the City to prepare the Market Study and Impact Analysis dated July 13, 2011
attached hereto as Appendix B (the "Market Study") with respect to the development of the
Pyramid Arena Project in downtown Memphis to review the City's capacity to absorb additional
retail/restaurant/hotel development, resulting in the creation of jobs, wages and net new sales tax
within the City's existing Central Business Improvement District and to provide an estimate of
the retail sales taxes from new consumer activity at the Pyramid Arena Project resulting in new
TDZ Revenues. The boundaries of the Central Business Improvement District are identical to
the boundaries of the existing Memphis Cook Convention Center Tourism Development Zone
3
(the "TDZ"). The Market Study describes the development plans associated with the Pyramid
Arena Project and the Pinch District Project, presents an overview of selected baseline
socioeconomic and retail related indicators utilized in estimating retail sales which in turn form
the basis for estimating net new sales tax revenues to be generated by the Pyramid Arena Project,
presents an analysis of the economic impacts and the estimated net new TDZ Revenues
associated with the proposed components of the Pyramid Arena Project and sets forth
assumptions on which such estimates are based. The Pinch District Project is a future phase of
redevelopment and an analysis of new TDZ Revenues to be generated within the Pinch District
Project is not included in the Market Study. See "APPENDIX B - MARKET STUDY AND
IMPACT ANALYSIS" herein.
There is no assurance that actual events will correspond with the assumptions on which
such estimates are based. Consequently, no guarantee can be made that the estimated net new
TDZ Revenues will correspond with the results actually achieved in the future. The Market
Study should be read in its entirety for an understanding of the estimated net new TDZ Revenues
and
the
underlying
assumptions
and
inputs.
See
"INVESTMENT
CONSIDERATIONS - Forward-Looking Statements" herein.
Sources of Payment for the Series 2011 Bonds
The Series 2011 Bonds are limited obligations of the Issuer secured by an assignment and
pledge of the Trust Estate, which consists primarily of the payments and prepayments required to
be made by the City under and pursuant to the Loan Agreement which are to be made from the
TDZ Revenues. Pursuant to the Indenture, all of the payments and prepayments by the City
under the Loan Agreement have been pledged to the payment of the principal of, premium, if
any, and interest on the Series 2011 Bonds. However, the Series 2011A Senior Taxable Bonds
and all Additional Bonds of the same Priority with the Series 2011A Senior Taxable Bonds (the
"Senior Bonds") rank and have a right of payment from the TDZ Revenues superior to the Series
2011 Subordinate Bonds and all Additional Bonds of the same Priority with the Series 2011
Subordinate Bonds (the "Subordinate Bonds") and the Subordinate Bonds rank and have a right
of payment from the TDZ Revenues equal to each other. See "SECURITY AND SOURCES OF
PAYMENT FOR THE SERIES 2011 BONDS" herein.
The Series 2011 Bonds will also be secured by the applicable account within the Debt
Service Reserve Fund to be held in trust for the owners of all of the applicable Series 2011
Bonds under the terms of the Indenture. Each account within the Debt Service Reserve Fund
will be fully funded to the applicable Debt Service Reserve Requirement upon the issuance of
the Series 2011 Bonds from the proceeds of the Series 2011 Bonds. See "SECURITY AND
SOURCES OF PAYMENT FOR THE SERIES 2011 BONDS - Debt Service Reserve Fund"
herein and "APPENDIX A - DEFINITIONS OF CERTAIN TERMS AND SUMMARY OF
CERTAIN PROVISIONS OF THE INDENTURE, LOAN AGREEMENT AND
REPLENISHMENT AGREEMENT" attached hereto.
In order to further secure the Subordinate Bonds, the City and the Issuer will enter into a
Debt Service Reserve Replenishment Agreement, dated as of September 1, 2011 (the
"Replenishment Agreement") pursuant to which the City has agreed to appropriate and pay, from
Non-Tax Revenues (as defined therein) following receipt of a Deficiency Notice, money
4
sufficient to restore the Subordinate Debt Service Reserve Account to the Subordinate Debt
Service Reserve Requirement (collectively, "Replenishment Obligation"). The Replenishment
Obligation is not a general obligation of the City but rather is required to be paid solely from the
Non-Tax Revenues appropriated by the City for such payments. The Replenishment Agreement
runs in favor of the holders of the Subordinate Bonds only and the holders of the Senior Bonds
will have no right of payment from, or a lien upon, the payments made from such appropriated
Non-Tax Revenues. See "SECURITY AND SOURCES OF PAYMENT FOR THE SERIES
2011 BONDS - Replenishment Agreement" and "-Non-Tax Revenues" herein and
"APPENDIX A - DEFINITIONS OF CERTAIN TERMS AND SUMMARY OF CERTAIN
PROVISIONS OF THE INDENTURE, LOAN AGREEMENT AND REPLENISHMENT
AGREEMENT" attached hereto.
Pursuant to the Indenture, the Issuer may, from time to time, issue Additional Bonds
which will have the rank or right of payment from the TDZ Revenues as provided in the
Supplemental Indenture authorizing their issuance. See "APPENDIX A - DEFINITIONS OF
CERTAIN TERMS AND SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE,
LOAN AGREEMENT AND REPLENISHMENT AGREEMENT" attached hereto.
For a more detailed discussion of such pledge, see "SECURITY AND SOURCES OF
PAYMENT FOR THE SERIES 2011 BONDS" herein.
THE SERIES 2011 BONDS, AND THE INTEREST THEREON, DO NOT NOW
AND SHALL NEVER CONSTITUTE A CHARGE AGAINST THE GENERAL CREDIT
OR TAXING POWER OF THE CITY, THE STATE OR ANY POLITICAL
SUBDIVISION THEREOF INCLUDING, WITHOUT LIMITATION, THE CITY AND
THE COUNTY AND SUCH SERIES 2011 BONDS AND THE INTEREST PAYABLE
THEREON DO NOT NOW AND SHALL NEVER CONSTITUTE A DEBT OF THE
STATE OR ANY POLITICAL SUBDIVISION THEREOF, INCLUDING, WITHOUT
LIMITATION, THE CITY AND THE COUNTY, WITHIN THE MEANING OF ANY
CONSTITUTIONAL OR STATUTORY PROVISION WHATSOEVER. NEITHER THE
STATE NOR ANY POLITICAL SUBDIVISION THEREOF (OTHER THAN THE CITY)
SHALL IN ANY EVENT BE LIABLE FOR THE PAYMENT OF THE PRINCIPAL OF,
PREMIUM, IF ANY, OR INTEREST ON THE SERIES 2011 BONDS OR FOR THE
PERFORMANCE OF ANY PLEDGE, MORTGAGE, OBLIGATION OR AGREEMENT
OF ANY KIND WHATSOEVER WHICH MAY BE UNDERTAKEN BY THE ISSUER.
NO BREACH BY THE ISSUER OF ANY SUCH PLEDGE, MORTGAGE, OBLIGATION
OR AGREEMENT MAY IMPOSE ANY LIABILITY, PECUNIARY OR OTHERWISE,
UPON THE CITY, THE STATE OR ANY POLITICAL SUBDIVISION THEREOF
INCLUDING, WITHOUT LIMITATION, THE CITY AND THE COUNTY, OR ANY
CHARGE UPON THEIR GENERAL CREDIT OR TAXING POWER. THE ISSUER
HAS NO TAXING POWER.
Bond Insurance
The scheduled payment of principal of and interest on the Series 2011 Bonds when due
will be guaranteed under an insurance policy to be issued concurrently with the delivery of the
Series 2011 Bonds by Assured Guaranty Municipal Corp. See "MUNICIPAL BOND
5
INSURANCE" and "APPENDIX E - SPECIMEN MUNICIPAL BOND INSURANCE
POLICY." As a condition to the issuance of the Policy (as defined herein), the Indenture and the
Loan Agreement grants to Assured Guaranty Municipal Corp., under certain circumstances,
certain rights which may include, among others, (i) the right to exercise any right or power, to
consent to amendments, modifications or waivers, or to request or direct the Trustee to take any
actions, which rights it may exercise as if it were, and in stead of, the holders of the Series 2011
Bonds, (ii) a right, upon payment made by it under the Policy, of subrogation to the rights of the
holders of the Series 2011 Bonds for which such payment was made, and (iii) rights as a thirdparty beneficiary under the Indenture and the Loan Agreement. For a description of certain of
such rights, see "APPENDIX A - DEFINITIONS OF CERTAIN TERMS AND SUMMARY OF
CERTAIN PROVISIONS OF THE INDENTURE, LOAN AGREEMENT AND
REPLENISHMENT AGREEMENT" attached hereto.
Continuing Disclosure
The Issuer has determined that no financial or operating data concerning the Issuer is
material to any decision to purchase, hold, or sell the Series 2011 Bonds, and the Issuer will not
provide any such information. The City has undertaken all responsibility for any continuing
disclosure to Beneficial Owners (as defined herein) of the Series 2011 Bonds, as described
below, and the Issuer will have no liability to such Beneficial Owners of the Series 2011 Bonds
or any other person with respect to such disclosures.
In order to provide continuing disclosure with respect to the Series 2011 Bonds in
accordance with Rule 15c2-12 (the "Rule") promulgated by the Securities and Exchange
Commission (the "SEC") and as in effect on the date hereof, the City and the Trustee have
entered into a Continuing Disclosure Agreement dated as of September 1, 2011 (the "Disclosure
Agreement") for the benefit of the Beneficial Owners of the Series 2011 Bonds. See
"CONTINUING DISCLOSURE" herein and "APPENDIX C – FORM OF CONTINUING
DISCLOSURE AGREEMENT" attached hereto. These covenants have been made in order to
assist the Underwriters (as defined herein) in complying with the Rule.
The Issuer has not undertaken any responsibility with respect to any reports, notices or
disclosures provided or required under the Indenture, the Loan Agreement or the Continuing
Disclosure Agreement and has no liability to any person with respect to such reports, notices or
disclosures by the City.
Other Information
This Official Statement speaks only as of its date, and the information contained herein is
subject to change.
This Official Statement and the Appendices hereto contain brief descriptions of, among
other matters, the Issuer, the City, the Project, the Series 2011 Bonds and the security and
sources of payment for the Series 2011 Bonds, the Indenture, the Loan Agreement, the
Replenishment Agreement and the Disclosure Agreement. Such descriptions and information do
not purport to be comprehensive or definitive. The summaries of various constitutional
provisions, statutes, the Indenture, the Loan Agreement, the Replenishment Agreement and other
6
documents are intended as summaries only, do not purport to be complete, comprehensive or
definitive, and are qualified in their entirety by reference to such documents and references to the
Series 2011 Bonds are qualified in their entirety by reference to the forms of the Series 2011
Bonds included in the Indenture. After the date of issuance of the Series 2011 Bonds, copies of
the Indenture, the Loan Agreement, the Replenishment Agreement, the Disclosure Agreement
and other relevant documents and information are available upon written request and upon
payment to the City of a charge for copying, mailing and handling, from the City, Deputy
Director of Finance and Administration, 125 North Main Street, Room 368, Memphis, Tennessee
38103. During the period of the offering of the Series 2011 Bonds, copies of such documents are
available, upon request and upon payment to Morgan Keegan & Company, Inc. of a charge for
copying, mailing and handling, from Morgan Keegan & Company, Inc., 50 North Front Street,
Suite 1600, Memphis, Tennessee, 38103.
There are risks associated with an investment in the Series 2011 Bonds. For information
concerning certain risks relating to future TDZ Revenues of the City, possible limitations on the
enforceability of the Indenture, the Loan Agreement or the Replenishment Agreement and other
investment risks, see "INVESTMENT CONSIDERATIONS" herein.
THE ISSUER
The Issuer is an affiliate of the Downtown Memphis Commission (the "DMC"), a
partnership among the City, the County and the private business community created by separate
ordinances of the City and the County. The purpose of the DMC is to manage and coordinate the
redevelopment of the City's center city area, a central business improvement district, as the
economic, cultural and government heart of the City and the County. The properties included
within the Pyramid Arena Project and the Pinch District Project are located in the City's center
city area.
The Issuer was incorporated on March 17, 1978, pursuant to authorization of the
governing bodies of the City and the County, and is governed by a board of directors, not to
exceed nine members, nominated by the City and County mayors and approved by the City
Council and County Commission, respectively. Pursuant to the Act, directors serve without
compensation, except that they shall be reimbursed for their actual expenses in and about the
performance of their duties.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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The present members of the board of directors of the Issuer and their respective offices
are as follows:
Name
Robert Spence Jr.
Luke Yancy, IV
Carla Peacher-Ryan
Martin Truitt
Dana Burkett
Lucy Shaw
Brandy Johnson-Ward
Wesley Grace
Walter Person
Office
Chairman
Vice-Chairman
Secretary
Treasurer
Board Member
Board Member
Board Member
Board Member
Board Member
Except for the information contained under the caption "THE ISSUER" and
"LITIGATION-The Issuer," the Issuer has not provided any of the information contained in this
Official Statement. The Issuer is not responsible for and does not certify as to the accuracy or
sufficiency of the disclosures made herein or any other information provided by the City or any
other person. While the Issuer has no reason to believe that such information is incomplete or
inaccurate, the Issuer has not independently investigated or confirmed the accuracy or
completeness thereof. The Issuer makes no representation or warranty whatsoever concerning
the economic feasibility of the Project or the creditworthiness of the City and no such
representation or warranty is to be inferred from the issuance of the Series 2011 Bonds or the
other transactions described or contemplated herein. The Issuer's role is limited to the issuance
of the Series 2011 Bonds.
Neither the members of the board of directors of the Issuer nor any person executing the
Series 2011 Bonds are liable personally on the Series 2011 Bonds by reason of the issuance
thereof.
The Issuer has no taxing power, nor does it have the power to pledge the general
credit or taxing power of the City, the County, the State or any political subdivision
thereof.
THE CITY
The City is located on the east bank of the Mississippi River in the southwest corner of
Tennessee. The City is the State's largest city and the county seat of Shelby County. The
corporate limits contain 324.5 square miles, representing 40.9 percent of the total land area of the
County. The City ranks as the 18th largest city in the nation. According to the U.S. Bureau of
the Census, the 2000 population was 650,100.
The City was incorporated as a city in 1826. Memphis operated under a commission
form of government from 1909 until January 1, 1968. At that time, a Mayor-Council form of
government was established. The City Council is composed of thirteen representative citizens
who are elected for four-year terms. Six council members are elected at large in multi-member
districts, which territorial boundaries are determined by dividing the City in half with each multi-
8
member district consisting of three council member numbered positions. Single member
districts, numbered 1–7, elect the remaining seven council members. The City Council elects its
own chairperson, exercises legislative powers, approves budgets and establishes the tax rate.
The Mayor is elected to a four-year term. The Mayor carries out the policies of the City and
appoints City board members, officers and division directors, with City Council approval. The
City's operating and service departments are organized under the Chief Administrative Officer
who is appointed by and serves at the pleasure of the Mayor. The Mayor may veto action of the
City Council, but a simple majority can override any veto.
The Chief Administrative Officer, under the direction of the Mayor, coordinates the
activities of all administrative divisions of City Government. The Chief Administrative Officer
acts as liaison officer between the Mayor and all divisions, bureaus, boards, commissions and
authorities. The directors of all divisions, excluding the City Attorney, report to the Chief
Administrative Officer on administrative procedures.
The major administrative divisions of the City include: Engineering, Executive, Finance,
Fire Services, General Services, Housing and Community Development, Human Resources,
Information Systems, Legal, Park Services, Office of Planning and Development, Police
Services, Public Works/Sanitation, Community Enhancement and Public Services and
Neighborhoods.
The Mayor is responsible for all City appointments to boards which serve the City.
These include the boards of the Memphis Light, Gas and Water Division; Memphis Area Transit
Authority; Memphis Housing Authority; the DMC; Memphis & Shelby County Convention
Center Complex; Memphis Brooks Museum of Art; Mid-South Coliseum; Memphis & Shelby
County Building Code Advisory Board; and Memphis & Shelby County Public Library Board.
The Mayor appoints five of the seven members of the Board of the Memphis-Shelby County
Airport Authority. Many of these boards also have members appointed by the Mayor of the
County. Most of the members of these boards are private citizens giving their time to the City
without compensation.
THE PROJECT
As part of the Pyramid Arena Project, the City proposes to redevelop the public arena and
related properties located in the center city area of the City commonly known as the "Pyramid
Arena" as a world-class commercial and retail amenity. The Pyramid Arena Project, upon
completion, will be a retail tourism destination featuring a proposed 300,000 square foot "Bass
Pro Shops Outdoor World" facility which will include retail space, exhibit/entertainment space
and an on-site (interior) restaurant along with an approximate 80-room, 41,600 square foot hotel.
Potential future development at the Pyramid Arena may also include a parking garage, and outparcel (along North Front Street) development of assorted retail, service and commercial
development. In August 2010, the City entered into a Lease and Development Agreement, dated
August 10, 2010 with Bass Pro Memphis Development Company, LLC ("Bass Pro") pursuant to
which Bass Pro will lease the "Pyramid Arena" and develop thereon a "Bass Pro Shops Outdoor
World" facility as described above. The lease provides for an initial 20-year term with seven
five-year renewal periods, for a possible total lease term of 55 years.
9
In connection with the Pyramid Arena Project, the City has or will acquire and renovate
certain properties in the vicinity of the Pyramid Arena and located in the center city area of the
City commonly known as the "Pinch District" as part of the Pinch District Project. In order to
facilitate the development of the Pyramid Arena Project and the Pinch District Project, the City
has agreed to make certain improvements to the Pyramid Arena and the Pinch District. The
conceptual plan for the Pinch District Project involves the City acting as master developer and
engaging a nationally recognized firm to develop certain Pinch District property adjacent to the
Pyramid Arena Project as a value-oriented lifestyle center.
The properties included within the Pyramid Arena Project and the Pinch District Project
are located in the City's Central Business Improvement District and are within walking distance
and also accessible by the existing downtown trolley service of many downtown attractions and
notable locations.
The Pyramid Arena Project and the Pinch District Project are part of the existing TDZ
created pursuant to Tennessee Code Annotated, Title 7, Chapter 88, commonly known as the
Convention Center and Tourism Development Financing Act of 1998 (the "TDZ Statute"), which
permits the incremental new sales tax generated in the TDZ to form the basis of a revenue stream
and a "financing mechanism" utilized to retire bonding debt for public infrastructure investment
in the economic development projects located within the TDZ. In order for the City to obtain
sole and unfettered access to and control of the TDZ Revenues and pledge the same to the
repayment of the Series 2011 Loan, the City also will acquire the interest of the County in the
Convention Center.
The City has determined that the development of the Pyramid Arena Project and the
Pinch District Project will result in increased economic benefits to the City, including additional
TDZ Revenues, employment opportunities and economic activity.
PLAN OF FINANCE
General
Pursuant to the Indenture, the proceeds of the Series 2011 Bonds will be used to, among
other things, provide funds to make the Series 2011 Loan to the City pursuant to the Loan
Agreement. The City will use the proceeds of the Series 2011 Loan to: (a) finance or reimburse
the City for all or a portion of the costs associated with the acquisition, construction,
development, renovation and equipping, as applicable, of the Pyramid Arena Project, the
Convention Center Acquisition and the Lone Star Acquisition (collectively, the "Series 2011
Project"), (b) fund capitalized interest on a portion of the Series 2011 Bonds through August 1,
2013, (c) fund a deposit to the Senior Debt Service Reserve Account in an amount equal to the
Senior Debt Service Reserve Requirement applicable to the Series 2011A Senior Taxable Bonds,
(d) fund a deposit to the Subordinate Debt Service Reserve Account in an amount equal to the
Subordinate Debt Service Reserve Requirement applicable to the Series 2011 Subordinate Bonds
and (e) pay the costs of issuance with respect to the Series 2011 Bonds, including the premium
for the Policy. The particular uses of each series of the Series 2011 Bonds are set forth below
under "PLAN OF FINANCE - Estimated Sources and Uses of Funds" herein.
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For a more detailed discussion of the Project and the elements of the Project included
within the Series 2011 Project, see "THE PROJECT" herein.
Estimated Sources and Uses of Funds
The table below sets forth the estimated sources and uses of funds to finance the costs
associated with the Series 2011 Project and to fund certain other requirements related to the
Series 2011 Project and the Series 2011 Bonds.
Estimated Sources and Uses of Funds
Series 2011A
Senior Taxable
Bonds
Series 2011B
Subordinate Tax
Exempt Bonds
Series 2011C
Subordinate
Taxable Bonds
Total
SOURCES
Par Amount
Net Original Issue Premium/Discount
$40,540,000.00
-
$100,245,000.00
2,101,158.60
$56,150,000.00
-
$196,935,000.00
2,101,158.60
Total Sources
$40,540,000.00
$102,346,158.60
$56,150,000.00
$199,036,158.60
Underwriters' Discount
Bond Insurance Premium
Deposit to Capitalized Interest Account
Deposit to Construction Fund
Deposit to Debt Service Reserve Account
Deposit to Costs of Issuance Fund(1)
$
$
$
479,665.50
172,637.23
1,634,148.54
48,200,000.00
5,177,857.38
485,691.35
$ 1,903,913.20
1,002,253.01
7,738,951.76
167,690,000.00
19,005,956.00
1,695,084.63
Total Uses
$40,540,000.00
$102,346,158.60
$56,150,000.00
$199,036,158.60
USES
399,743.80
394,797.80
1,758,292.14
33,000,000.00
4,638,043.50
349,122.76
1,024,503.90
434,817.98
4,346,511.08
86,490,000.00
9,190,055.12
860,270.52
_______________________________
(1)
Includes legal and accounting fees, financial advisor fees, rating agency fees, initial Trustee fees, printing costs,
and other miscellaneous costs of issuance and other miscellaneous expenses.
THE SERIES 2011 BONDS
General
The Series 2011 Bonds will be dated as of their date of delivery. The Series 2011 Bonds
will bear interest at the rates specified on the inside cover page, payable semiannually on May 1
and November 1 in each year beginning November 1, 2011, and will be in denominations of
$5,000 or any integral multiple thereof, the Series 2011 Bonds will mature on November 1 in
each of the years and in the amounts as specified on the inside cover page. The principal of and
redemption premium, if any, and interest on all Series 2011 Bonds is payable at the office of the
Trustee, upon the presentation and surrender of the Series 2011 Bonds as the same become due
and payable. Payment of the interest on any Series 2011 Bond due on any Interest Payment Date
will be made to the Person appearing on the Bond Register as the registered owner thereof as of
the close of business of the Trustee on the Record Date for such interest payment and will be
paid (a) by check or draft of the Trustee mailed on the Interest Payment Date to such registered
owner at such owner's address as it appears on the Bond Register or at such other address as is
11
furnished to the Trustee in writing by such owner or (b) in the case of an interest payment on the
Series 2011 Bonds to any such registered owner of $1,000,000 or more in aggregate principal
amount of Series 2011 Bonds of such series as of the close of business of the Trustee on the
Record Date for a particular Interest Payment Date, by wire transfer to such registered owner
upon written request from such registered owner.
Book-Entry Only System
The information in this section concerning The Depository Trust Company ("DTC"),
New York, New York and DTC's book-entry system has been obtained from sources that the
Issuer believes to be reliable, but the Issuer takes no responsibility for the accuracy thereof.
DTC will act as securities depository for the Series 2011 Bonds. The Series
2011A Bonds will be issued as fully-registered securities registered in the name of Cede & Co.
(DTC's partnership nominee) or such other name as may be requested by an authorized
representative of DTC. One fully-registered Series 2011 Bond certificate will be issued for each
maturity of the Series 2011 Bonds, as set forth on the inside cover of this Official Statement,
each in the aggregate principal amount of such maturity, and will be deposited with DTC.
DTC, the world's largest securities depository, is a limited-purpose trust company
organized under the New York Banking Law, a "banking organization" within the meaning of
the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934.
DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity
issues, corporate and municipal debt issues, and money market instruments (from over 100
countries) that DTC's participants ("Direct Participants") deposit with DTC. DTC also facilitates
the post-trade settlement among Direct Participants of sales and other securities transactions in
deposited securities through electronic computerized book-entry transfers and pledges between
Direct Participants' accounts. This eliminates the need for physical movement of securities
certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers,
banks, trust companies, clearing corporations, and certain other organizations. DTC is a
wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC is
the holding company for DTC, National Securities Clearing Corporation and Fixed Income
Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by
members of its regulated subsidiaries. Access to the DTC system is also available to others such
as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing
corporations that clear through or maintain a custodial relationship with a Direct Participant,
either directly or indirectly ("Indirect Participants"). DTC has Standard & Poor's highest rating:
AAA. The DTC Rules applicable to its DTC Participants are on file with the Securities and
Exchange Commission. More information about DTC can be found at http://www.dtcc.com and
www.dtc.org.
Purchases of Series 2011 Bonds under the DTC system must be made by or through
Direct Participants, which will receive a credit for the Series 2011 Bonds on DTC's records. The
ownership interest of each actual purchaser of each Series 2011 Bond ("Beneficial Owner") is in
turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not
12
receive written confirmation from DTC of their purchase. Beneficial Owners are, however,
expected to receive written confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the Direct or Indirect Participant through which the Beneficial
Owner entered into the transaction. Transfers of ownership interests in the Series 2011 Bonds
are to be accomplished by entries made on the books of Direct and Indirect Participants acting on
behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their
ownership interests in the Series 2011 Bonds, except in the event that use of the book-entry
system for the Series 2011 Bonds is discontinued.
To facilitate subsequent transfers, all Series 2011 Bonds deposited by Direct Participants
with DTC are registered in the name of DTC's partnership nominee, Cede & Co., or such other
name as may be requested by an authorized representative of DTC. The deposit of the Series
2011 Bonds with DTC and their registration in the name of Cede & Co. or such other DTC
nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual
Beneficial Owners of the Series 2011 Bonds; DTC's records reflect only the identity of the Direct
Participants to whose accounts such Series 2011 Bonds are credited, which may or may not be
the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping
account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants, by
Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to
Beneficial Owners will be governed by arrangements among them, subject to any statutory or
regulatory requirements as may be in effect from time to time. Beneficial Owners of Series
2011 Bonds may wish to take certain steps to augment the transmission to them of notices of
significant events with respect to the Series 2011 Bonds, such as redemptions, tenders, defaults,
and proposed amendments to the Series 2011 Bond documents. For example, Beneficial Owners
of Series 2011 Bonds may wish to ascertain that the nominee holding the Series 2011 Bonds for
their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative,
Beneficial Owners may wish to provide their names and addresses to the Trustee, in its capacity
as registrar and request that copies of notices be provided directly to them.
Redemption notices shall be sent to DTC. If less than all of the Series 2011 Bonds within
a series or maturity of a series are being redeemed, DTC's practice is to determine by lot the
amount of the interest of each Direct Participant in such series or maturity to be redeemed.
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with
respect to the Series 2011 Bonds unless authorized by a Direct Participant in accordance with
DTC's MMI procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Issuer
as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting
or voting rights to those Direct Participants to whose accounts Series 2011 Bonds are credited on
the record date (identified in a listing attached to the Omnibus Proxy).
Principal, premium, if any, and interest payments on the Series 2011 Bonds will be made
to Cede & Co., or such other nominee as may be requested by an authorized representative of
DTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and
corresponding detail information from the Issuer or the Trustee on payable date in accordance
with their respective holdings shown on DTC's records. Payments by Participants to Beneficial
13
Owners will be governed by standing instructions and customary practices, as is the case with
securities held for the accounts of customers in bearer form or registered in "street name," and
will be the responsibility of such Participant and not of DTC, the Trustee, as trustee, registrar and
paying agent, or the Issuer, subject to any statutory or regulatory requirements as may be in
effect from time to time. Payment of principal, premium, if any, and interest on the Series
2011 Bonds, to Cede & Co. (or such other nominee as may be requested by an authorized
representative of DTC) is the responsibility of the Issuer and/or the Trustee, disbursement of
such payments to Direct Participants will be the responsibility of DTC, and disbursement of such
payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.
The Issuer and the Trustee, as trustee, registrar and paying agent, do not have any
responsibility or obligation to the Direct Participants, Indirect Participants or the
Beneficial Owners with respect to (1) the accuracy of any records maintained by DTC or
any Direct Participant or Indirect Participant, (2) the payment by DTC or any Direct
Participant or Indirect Participant of any amount due to any Beneficial Owner in respect
of the principal of and interest on the Series 2011 Bonds, (3) the delivery or timeliness of
delivery by DTC or any Direct Participant or Indirect Participant of any notice to any
Beneficial Owner which is required or permitted under the terms of the Indenture to be
given to Bondholders, or (4) any consent given or other action taken by DTC, or its
nominee, Cede & Co., as Bondholders.
Discontinuance of Book-Entry Only System
DTC may discontinue providing its services as securities depository with respect to the
Series 2011 Bonds at any time by giving reasonable notice to the Issuer. Under such
circumstances, in the event that a successor securities depository is not obtained, Series 2011
Bond certificates are required to be printed and delivered directly to the Beneficial Owners of the
Series 2011 Bonds or their nominees.
The Issuer may decide to discontinue use of the system of book-entry transfers through
DTC (or a successor securities depository). In that event, Series 2011 Bond certificates will be
printed and delivered.
So long as Cede & Co. is the registered owner of the Series 2011 Bonds, as nominee of
DTC, references in this Official Statement to the Bondholders of Series 2011 Bonds or registered
owners of the Series 2011 Bonds means Cede & Co., and does not mean the Beneficial Owners
of the Series 2011 Bonds.
Optional Redemption
Series 2011A Senior Taxable Bonds and Series 2011B Subordinate Tax Exempt
Bonds. The Series 2011A Senior Taxable Bonds and the Series 2011B Subordinate Tax Exempt
Bonds maturing on or after November 1, 2022 are subject to optional redemption prior to
maturity upon written direction of the City on or after November 1, 2021, out of amounts
deposited in the Optional Redemption Fund, in whole or in part from time to time, on any date,
at a redemption price equal to 100% of the principal amount of Series 2011A Senior Taxable
14
Bonds or Series 2011B Subordinate Tax Exempt Bonds to be redeemed, plus accrued interest
thereon to the date of redemption.
Series 2011C Subordinate Taxable Bonds. The Series 2011C Subordinate Taxable Bonds
are not subject to optional redemption prior to maturity, other than as described under "THE
SERIES 2011 BONDS - Extraordinary Redemption" below.
Purchase in Lieu of Optional Redemption of Series 2011 Bonds. In lieu of redeeming
Series 2011 Bonds as set forth above, the City may use such money otherwise available under
the Indenture for redemption of Series 2011 Bonds to purchase Series 2011 Bonds in the open
market at a price not exceeding the redemption price then applicable hereunder, plus accrued
interest thereon to the date of purchase, and direct the Trustee to apply such money to the
payment of the purchase price of the Series 2011 Bonds so purchased. The Series 2011 Bonds so
purchased shall be delivered to the Trustee for cancelation and the Issuer shall receive credit for
any such Series 2011 Bonds so purchased in the same manner as if such Series 2011 Bonds had
been redeemed.
Mandatory Sinking Fund Redemption
Series 2011A Senior Taxable Bonds. The Series 2011A Senior Taxable Bonds maturing
on November 1, 2030 are subject to mandatory Sinking Fund Redemption prior to maturity, in
part, on November 1 of the respective years and in the respective principal amounts set forth in
the table below at a redemption price equal to 100% of the principal amount of such Series
2011A Senior Taxable Bonds to be redeemed, plus accrued interest thereon to the date of
redemption:
Series 2011A Senior Taxable Term Bond Maturing November 1, 2030
Year
2028
2029
2030*
Principal
Amount
$3,875,000
4,125,000
4,395,000
____________
*Final Maturity
Series 2011B Subordinate Tax Exempt Bonds. The Series 2011B Subordinate Tax
Exempt Bonds maturing on November 1, 2025 and November 1, 2030 are subject to mandatory
Sinking Fund Redemption prior to maturity, in part, on November 1 of the respective years and
in the respective principal amounts set forth in the table below at a redemption price equal to
100% of the principal amount of such Series 2011B Subordinate Tax Exempt Bonds to be
redeemed, plus accrued interest thereon to the date of redemption:
15
Series 2011B Subordinate Tax Exempt Term Bond Maturing November 1, 2025 bearing a
4% coupon
Year
2021
2022
2023
2024
2025*
Principal
Amount
$ 745,000
6,645,000
7,010,000
7,385,000
7,775,000
____________
*Final Maturity
Series 2011B Subordinate Tax Exempt Term Bond Maturing November 1, 2025 bearing a
5.25% coupon
Year
2021
2022
2023
2024
2025*
Principal
Amount
$ 240,000
2,135,000
2,250,000
2,375,000
2,500,000
____________
*Final Maturity
Series 2011B Subordinate Tax Exempt Term Bond Maturing November 1, 2030 bearing a
4.50% coupon
Year
2026
2027
2028
2029
2030*
Principal
Amount
$3,760,000
3,985,000
4,225,000
4,475,000
4,740,000
____________
*Final Maturity
16
Series 2011B Subordinate Tax Exempt Term Bond Maturing November 1, 2030 bearing a
5.25% coupon
Year
2026
2027
2028
2029
2030*
Principal
Amount
$7,100,000
7,530,000
7,975,000
8,450,000
8,945,000
____________
*Final Maturity
Series 2011C Subordinate Taxable Bonds. The Series 2011C Subordinate Taxable Bonds
are not subject to mandatory Sinking Fund Redemption prior to maturity.
In the event the Series 2011 Bonds of a series that mature on a specific date have been
fully paid and sufficient money is on deposit in the Debt Service Fund to redeem Series 2011
Bonds of such series that mature on that specific maturity date, then such money will be applied
to payment of Series 2011 Bonds of the same series that mature on the next succeeding maturity
date in the order above set forth. The Series 2011 Bonds will be redeemed by the Trustee
pursuant to this provision without any notice from or direction by the Issuer or the City.
The principal amount of any Series 2011 Bonds of a series and maturity entitled to
mandatory Sinking Fund Redemption purchased with money in the Debt Service Fund in
accordance with the provisions of the Indenture, as applicable, will be credited against and in
satisfaction of the mandatory Sinking Fund Redemption of the Series 2011 Bonds of such series
and maturity payable on the November 1 next succeeding the date such Series 2011 Bond were
so purchased. In addition, the principal amount of Series 2011 Bonds of a series and maturity
entitled to mandatory Sinking Fund Redemption that are (a) redeemed at the option of the Issuer,
(b) purchased by the City or the Issuer and delivered to the Trustee for cancellation or (c)
defeased in accordance with the Indenture will be applied in satisfaction, in whole or in part, of
one or more mandatory Sinking Fund Redemptions as the City, in its discretion, may direct, in
writing, to the Trustee.
Extraordinary Redemption
The Series 2011 Bonds are subject to extraordinary redemption prior to maturity upon
written direction of the City at a redemption price equal to 100% of the principal amount of
Series 2011 Bonds to be redeemed, plus accrued interest thereon to the date of redemption:
(a)
in whole at any time if, as a result of any changes in the Constitution of the State
or the Constitution of the United States of America or of legislative or administrative action
(whether state or federal) or by final direction, judgment or order of any court or administrative
body (whether state or federal) entered after the contest thereof by the City in good faith, the
Loan Agreement or the Indenture becomes void or unenforceable or impossible of performance
in accordance with the intent and purposes of the parties as expressed in the Loan Agreement or
the Indenture; or
17
(b)
in whole or in part at any time, in any order determined by the City, upon any
damage, destruction or condemnation of the Project or part thereof or a taking of the title to, or
the temporary use of the Project or part thereof, under the power of eminent domain, in each case
from the proceeds of any property insurance, condemnation award or award for such taking that
are not applied to the restoration of the Project.
The Series 2011 Bonds are also subject to extraordinary redemption prior to maturity
upon written direction of the City, in any order determined by the City, at a redemption price
equal to 100% of the principal amount of the Series 2011 Bonds to be redeemed, plus accrued
interest thereon to the date of redemption, in whole at any time, if either the Convention Center
ceases to qualify as a "qualified public use facility," as defined under the TDZ Statute, or it is no
longer used as a convention and exposition facility.
Selection of Bonds to be Redeemed
Series 2011 Taxable Bonds. If less than all of the Outstanding Series 2011 Taxable
Bonds of a maturity are to be redeemed pursuant to the Indenture, the Series 2011 Taxable
Bonds of such maturity to be redeemed will be selected as follows: subject to the following
paragraph, any redemption of less than all of a maturity of Series 2011 Taxable Bonds will be
allocated among the Holders of such Series 2011 Taxable Bonds as nearly as practicable pro rata
in proportion to the principal amounts of Series 2011 Taxable Bonds owned by each Holder,
subject to the authorized denominations applicable to the Series 2011 Taxable Bonds. The
calculation of such proportion will be based on the following formula:
(principal to be redeemed) x (principal owned by a Holder)
(principal amount Outstanding)
If the Series 2011 Taxable Bonds to be redeemed are registered in book–entry form and
so long as DTC is the sole registered Holder of the Series 2011 Taxable Bonds of the maturity to
be redeemed, it is the Issuer's intent that the Series 2011 Taxable Bonds of such maturity or
portions thereof to be redeemed will be selected on a pro rata pass–through distribution of
principal basis in accordance with DTC procedures then in effect with respect to redemptions of
less than all of the Outstanding Series 2011 Taxable Bonds of maturity. However, neither the
Issuer nor the City can provide any assurance that DTC, DTC's direct and indirect participants or
any other intermediary will allocate the redemption of Series 2011 Taxable Bonds on such basis.
If the DTC operational arrangements do not allow for the redemption of the Series 2011 Taxable
Bonds on a pro rata pass–through distribution of principal basis, then the Series Taxable Bonds
of a maturity to be redeemed will be selected, in accordance with DTC procedures, by lot. If, at
the time of redemption of the Series 2011 Taxable Bonds on a pro rata pass–through distribution
of principal basis, the Trustee has failed to notify DTC that the Series 2011 Taxable Bonds to be
redeemed are to be redeemed pursuant to DTC's pro rata pass–through distribution of principal
procedures, or has failed to furnish to DTC the factor to be applied by it in determining the pro
rata allocation of the principal to be redeemed, then the Series 2011 Taxable Bonds of a maturity
to be redeemed may be selected, in accordance with DTC procedures, by lot.
Series 2011B Subordinate Tax Exempt Bonds. If less than all of the Outstanding Series
2011B Subordinate Tax Exempt Bonds of a maturity are to be redeemed pursuant to the
18
Indenture, the Series 2011B Subordinate Tax Exempt Bonds of such maturity to be redeemed
will be selected by the Trustee at random in such manner as the Trustee, in its discretion, may
deem fair and appropriate.
Notice of Redemption
Series 2011 Bonds will be called for redemption or purchased by the Trustee pursuant to
the Indenture upon receipt by the Trustee at least 60 days prior to the redemption or purchase
date of a Written Request of the City requesting such redemption or purchase; provided,
however, that the City may give such Written Request at such later time as may be approved by
the Trustee, in its sole discretion, but in no event may such Written Request be given less than 30
days prior to the redemption date. Such Written Request is to specify the series, maturity and
principal amount of the Series 2011 Bonds so to be called for redemption or of the Series 2011B
Bonds so to be purchased, the applicable redemption price or prices and the provision or
provisions above specified pursuant to which such Series 2011 Bonds are to be called for
redemption.
Notice of the call for any redemption is to state, among other things, that on the
redemption date for such Series 2011 Bonds there will become due and payable upon each Series
2011 Bond to be redeemed the redemption price thereof, or the redemption price of the specified
portion of the principal amount thereof in the case of a Series 2011 Bond to be redeemed in part
only, with interest accrued and unpaid to such date, and that from and after such date, interest
thereon will cease to accrue and be payable. The redemption notice will be given by mailing a
copy of such notice of redemption by first class mail, postage prepaid, to the registered owners of
the Series 2011 Bonds to be redeemed to the address shown on the Bond Register not less than
thirty or more than 60 days prior to the redemption date; provided, however, that failure to give
such notice by mailing or a defect in the notice or the mailing as to any Series 2011 Bond will
not affect the validity of any proceedings for redemption as to any other Series 2011 Bond with
respect to which notice was properly given. Except for a mandatory Sinking Fund Redemption
pursuant to the Indenture, prior to the date that the redemption notice is first mailed as required,
funds will be placed with the Trustee to pay the principal of such Series 2011 Bonds, the accrued
interest thereon to the redemption date and the premium, if any, thereon. If a notice of
redemption is mailed in accordance with the provisions of the Indenture, the Series 2011 Bonds,
or portions thereof, thus called will not bear interest after the applicable Redemption Date, will
no longer be protected by the Indenture and will not be deemed to be Outstanding under the
provisions of the Indenture. The Trustee will redeem, in the manner provided in the Indenture,
such an aggregate principal amount of such Series 2011 Bonds at the principal amount thereof
plus accrued interest thereon to the redemption date and premium, if any, as will exhaust as
nearly as practicable such funds placed on deposit with the Trustee to pay principal, premium, if
any, and interest on such Series 2011 Bonds. At the direction of the City, such funds may be
invested in United States Government Obligations until needed for payment of the redemption
price.
Transfer and Exchange of Series 2011 Bonds
Upon surrender for transfer of any Series 2011 Bond at the designated corporate trust
office of the Trustee, the Issuer will execute and the Trustee will authenticate and deliver in the
19
name of the transferee or transferees a new fully registered Series 2011 Bond or Series 2011
Bonds of the same series and maturity and of authorized denomination for the aggregate
principal amount which the registered owner is entitled to receive. Any Series 2011 Bond or
Series 2011 Bonds may be exchanged at the designated corporate trust office of the Trustee for a
like aggregate principal amount of Series 2011 Bond or Series 2011 Bonds of the same series
and maturity of other authorized denominations. No service charge will be imposed for any
exchange or transfer of Series 2011 Bonds. The Issuer and the Trustee may, however, require
payment by the person requesting an exchange or transfer of Series 2011 Bonds of a sum
sufficient to cover any tax, fee or other governmental charge that may be imposed in relation
thereto, except in the case of the issuance of a Series 2011 Bond or Series 2011 Bonds for the
unredeemed portion of a Bond surrendered for redemption. New Series 2011 Bonds delivered
upon any transfer or exchange will be valid obligations of the Issuer, evidencing the same debt as
the Series 2011 Bonds surrendered, will be secured by the Indenture and will be entitled to all of
the security and benefits thereof to the same extent as the Series 2011 Bond surrendered. The
Issuer and the Trustee may, subject to the provisions of the Indenture, treat the registered owner
of any Series 2011 Bond as the absolute owner thereof for all purposes, whether or not such
Series 2011 Bond is overdue, and will not be bound by any notice to the contrary. Any Series
2011 Bond surrendered for the purpose of payment or retirement or for exchange or transfer or
for replacement pursuant to the Indenture, will be cancelled upon surrender thereof to the Trustee
or any paying agent.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
20
DEBT SERVICE REQUIREMENTS FOR THE SERIES 2011 BONDS
The following table sets forth for each Fiscal Year the total principal and interest
payment requirements with respect to the Series 2011 Bonds and total debt service requirements
on the Series 2011 Bonds.
Fiscal
Year ending
June 30
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
Interest(1)(2)
$ 2,470,376
4,214,860
7,376,005
8,363,262
8,209,834
8,017,519
7,790,422
7,535,911
7,243,851
6,901,018
6,507,771
6,047,851
5,531,477
4,983,017
4,400,541
3,742,995
3,003,899
2,210,619
1,362,512
462,978
$106,376,716
Principal
$
6,970,000.00
7,225,000.00
7,520,000.00
7,850,000.00
8,215,000.00
9,030,000.00
9,485,000.00
9,985,000.00
11,515,000.00
12,150,000.00
12,815,000.00
13,515,000.00
14,295,000.00
15,160,000.00
16,075,000.00
17,050,000.00
18,080,000.00
$196,935,000.00
Total Debt Service
Requirements(1)(2)
$ 2,470,376
4,214,860
7,376,005
15,333,262
15,434,834
15,537,519
15,640,422
15,750,911
16,273,851
16,386,018
16,492,771
17,562,851
17,681,477
17,798,017
17,915,541
18,037,995
18,163,899
18,285,619
18,412,512
18,542,978
$303,311,716
___________________
(1)
Debt service net of capitalized interest.
Totals may not add due to rounding.
Source: Morgan Keegan & Company, Inc.
(2)
MUNICIPAL BOND INSURANCE
Bond Insurance Policy
Concurrently with the issuance of the Series 2011 Bonds, Assured Guaranty Municipal
Corp. ("AGM") will issue its Municipal Bond Insurance Policy for the Series 2011 Bonds (the
"Policy"). The Policy guarantees the scheduled payment of principal of and interest on the
Series 2011 Bonds when due as set forth in the form of the Policy included as Appendix E to this
Official Statement.
21
The Policy is not covered by any insurance security or guaranty fund established under
New York, California, Connecticut or Florida insurance law.
Assured Guaranty Municipal Corp.
AGM is a New York domiciled financial guaranty insurance company and a wholly
owned subsidiary of Assured Guaranty Municipal Holdings Inc. ("Holdings"). Holdings is an
indirect subsidiary of Assured Guaranty Ltd. ("AGL"), a Bermuda-based holding company
whose shares are publicly traded and are listed on the New York Stock Exchange under the
symbol "AGO." AGL, through its operating subsidiaries, provides credit enhancement products
to the U.S. and global public finance, infrastructure and structured finance markets. No
shareholder of AGL, Holdings or AGM is liable for the obligations of AGM.
AGM's financial strength is rated "AA+" (negative outlook) by Standard and Poor's
Ratings Services, a Standard & Poor's Financial Services LLC business ("S&P") and "Aa3"
(negative outlook) by Moody's Investors Service, Inc. ("Moody's"). An explanation of the
significance of the above ratings may be obtained from the applicable rating agency. The above
ratings are not recommendations to buy, sell or hold any security, and such ratings are subject to
revision or withdrawal at any time by the rating agencies, including withdrawal initiated at the
request of AGM in its sole discretion. In addition, the rating agencies may at any time change
AGM's long-term rating outlooks or place such ratings on a watch list for possible downgrade in
the near term. Any downward revision or withdrawal of any of the above ratings, the assignment
of a negative outlook to such ratings or the placement of such ratings on a negative watch list
may have an adverse effect on the market price of any security guaranteed by AGM. AGM does
not guarantee the market price of the securities it insures, nor does it guarantee that the ratings on
such securities will not be revised or withdrawn.
Current Financial Strength Ratings
On August 25, 2011, S&P published Bond Insurance Rating Methodology and
Assumptions, a criteria article that follows S&P's Request for Comment: Bond Insurance
Criteria, published January 24, 2011. The criteria described in the article update and supersede
S&P's previous criteria for rating bond insurers. S&P noted that the impact of new bond
insurance rating criteria could result in financial strength ratings on investment-grade bond
insurers (such as AGM) being lowered by one or more rating categories. The article states that
the criteria are effective immediately and that S&P expects any rating changes as a result of the
new methodology and assumptions would occur after its review of third quarter 2011 financial
statements, but no later than November 30, 2011. However, as noted above, a rating agency may
place a company's financial strength rating on credit watch for a downgrade at any time. For the
complete
text
of
S&P's
comments,
both
publications
are
available
at
www.standardandpoors.com.
AGM and its affiliates are currently reviewing S&P's revised bond insurance rating
criteria. The final criteria contain a number of changes from the proposals submitted in January
2011 for comment from market participants, including a new Largest Obligors Test that was not
included in the January 2011 Request for Comment. This test appears to have the effect of
22
significantly reducing AGM and its affiliates' allowed single risk limits and limiting their
financial strength rating level.
On August 8, 2011, S&P published a Research Update in which it affirmed the "AA+"
financial strength rating of AGM. At the same time, S&P revised the rating outlook on AGM to
negative from stable. Reference is made to the Research Update, a copy of which is available at
www.standardandpoors.com, for the complete text of S&P's comments.
On December 18, 2009, Moody's issued a press release stating that it had affirmed the
"Aa3" insurance financial strength rating of AGM, with a negative outlook. Reference is made
to the press release, a copy of which is available at www.moodys.com, for the complete text of
Moody's comments.
There can be no assurance as to any further ratings action that S&P or Moody's may take
with respect to AGM.
For more information regarding AGM's financial strength ratings and the risks relating
thereto, see AGL's Annual Report on Form 10-K for the fiscal year ended December 31, 2010,
which was filed by AGL with the Securities and Exchange Commission (the "SEC") on March 1,
2011, AGL's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2011,
which was filed by AGL with the SEC on May 10, 2011, and AGL's Quarterly Report on
Form 10-Q for the quarterly period ended June 30, 2011, which was filed by AGL with the SEC
on August 9, 2011.
Capitalization of AGM
At June 30, 2011, AGM's consolidated policyholders' surplus and contingency reserves
were approximately $3,050,613,849 and its total net unearned premium reserve was
approximately $2,254,726,646, in each case, in accordance with statutory accounting principles.
Incorporation of Certain Documents by Reference
Portions of the following documents filed by AGL with the SEC that relate to AGM are
incorporated by reference into this Official Statement and shall be deemed to be a part hereof:
(i)
the Annual Report on Form 10-K for the fiscal year ended December 31, 2010
(which was filed by AGL with the SEC on March 1, 2011);
(ii)
the Quarterly Report on Form 10-Q for the quarterly period ended March 31,
2011 (which was filed by AGL with the SEC on May 10, 2011); and
(iii) the Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2011
(which was filed by AGL with the SEC on August 9, 2011).
All information relating to AGM included in, or as exhibits to, documents filed by AGL
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, after the
filing of the last document referred to above and before the termination of the offering of the
Series 2011 Bonds shall be deemed incorporated by reference into this Official Statement and to
23
be a part hereof from the respective dates of filing such documents. Copies of materials
incorporated by reference are available over the internet at the SEC's website at
http://www.sec.gov, at AGL's website at http://www.assuredguaranty.com, or will be provided
upon request to Assured Guaranty Municipal Corp.: 31 West 52nd Street, New York, New York
10019, Attention: Communications Department (telephone (212) 826-0100).
Any information regarding AGM included herein under the caption "MUNICIPAL
BOND INSURANCE - Assured Guaranty Municipal Corp." or included in a document
incorporated by reference herein (collectively, the "AGM Information") shall be modified or
superseded to the extent that any subsequently included AGM Information (either directly or
through incorporation by reference) modifies or supersedes such previously included AGM
Information. Any AGM Information so modified or superseded shall not constitute a part of this
Official Statement, except as so modified or superseded.
AGM makes no representation regarding the Series 2011 Bonds or the advisability of
investing in the Series 2011 Bonds. In addition, AGM has not independently verified, makes no
representation regarding, and does not accept any responsibility for the accuracy or completeness
of this Official Statement or any information or disclosure contained herein, or omitted herefrom,
other than with respect to the accuracy of the information regarding AGM supplied by AGM and
presented under the heading "MUNICIPAL BOND INSURANCE."
SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2011 BONDS
Limited Obligations
The Series 2011 Bonds are limited special obligations of the Issuer. In accordance with
the Indenture, the Series 2011 Bonds are payable solely from the Trust Estate.
THE SERIES 2011 BONDS, AND THE INTEREST THEREON, DO NOT NOW
AND SHALL NEVER CONSTITUTE A CHARGE AGAINST THE GENERAL CREDIT
OR TAXING POWER OF THE CITY, THE STATE OR ANY POLITICAL
SUBDIVISION THEREOF INCLUDING, WITHOUT LIMITATION, THE CITY AND
THE AND SUCH SERIES 2011 BONDS AND THE INTEREST PAYABLE THEREON
DO NOT NOW AND SHALL NEVER CONSTITUTE A DEBT OF THE STATE OR ANY
POLITICAL SUBDIVISION THEREOF, INCLUDING, WITHOUT LIMITATION, THE
CITY AND THE COUNTY, WITHIN THE MEANING OF ANY CONSTITUTIONAL
OR STATUTORY PROVISION WHATSOEVER. NEITHER THE STATE NOR ANY
POLITICAL SUBDIVISION THEREOF (OTHER THAN THE CITY) SHALL IN ANY
EVENT BE LIABLE FOR THE PAYMENT OF THE PRINCIPAL OF, PREMIUM, IF
ANY, OR INTEREST ON THE SERIES 2011 BONDS OR FOR THE PERFORMANCE
OF ANY PLEDGE, MORTGAGE, OBLIGATION OR AGREEMENT OF ANY KIND
WHATSOEVER WHICH MAY BE UNDERTAKEN BY THE ISSUER. NO BREACH
BY THE ISSUER OF ANY SUCH PLEDGE, MORTGAGE, OBLIGATION OR
AGREEMENT MAY IMPOSE ANY LIABILITY, PECUNIARY OR OTHERWISE,
UPON THE CITY, THE STATE OR ANY POLITICAL SUBDIVISION THEREOF
INCLUDING, WITHOUT LIMITATION, THE CITY AND THE COUNTY, OR ANY
24
CHARGE UPON THEIR GENERAL CREDIT OR TAXING POWER. THE ISSUER
HAS NO TAXING POWER.
Trust Estate
Pursuant to the Indenture, the Issuer will pledge, transfer and assign to the Trustee all of
its right, title and interest in and to the Trust Estate to secure the Series 2011 Bonds. The Trust
Estate, as described in the Indenture, consists primarily of the following (including, without
limitation, the right to enforce any of the terms thereof):
(a)
All right, title and interest of the Issuer in and to the Loan Agreement and all
amounts payable to the Issuer under the Loan Agreement and all security therefor
(excluding Unassigned Rights);
(b)
All right, title and interest of the Issuer in and to the funds, accounts and
subaccounts established pursuant to the Indenture and the assets thereof and
income and earnings thereon, except that the Senior Debt Service Reserve
Account of the Debt Service Reserve Fund, each subaccount therein, the assets
thereof and the income and earnings thereon shall be for the sole benefit of the
Holders of Outstanding Senior Bonds and that the Subordinate Debt Service
Reserve Account of the Debt Service Reserve Fund, each subaccount therein, the
assets thereof and the income and earnings thereon shall be for the sole benefit of
the Holders of Outstanding Subordinate Bonds;
(c)
All right, title and interest in and to the Replenishment Agreement and all
amounts payable to the Issuer under the Indenture, solely for the benefit of the
Holders of Outstanding Subordinate Bonds, including the Series 2011
Subordinate Bonds;
(d)
Any and all other property of every kind and nature from time to time hereafter,
by delivery or by writing of any kind, conveyed, pledged, assigned or transferred
as and for additional security under the Indenture by the Issuer or the City or by
anyone on their behalf to the Trustee, including without limitation funds of the
City held by the Trustee as security for the Bonds.
The Series 2011A Senior Taxable Bonds and any other Outstanding Senior Bonds rank
and have a right of payment from the Trust Estate, superior to the Series 2011 Subordinate
Bonds and any other Outstanding Subordinate Bonds and the Series 2011 Subordinate Bonds and
any other Outstanding Subordinate Bonds rank and have a right of payment from the Trust Estate
equal to each other.
TDZ Revenues
Pursuant to the TDZ Statute, the City is entitled to receive a distribution of state and local
sales and use taxes, authorized pursuant to the TDZ Statute, resulting from sales made in the
TDZ to support indebtedness with respect to the Convention Center (and any qualified ancillary
structures and facilities and associated developments) for a period equal to the earlier of: (a)
30 years from the anniversary of the commencement of operations of the Convention Center as a
25
"qualified public use facility" (as defined in the TDZ Statute); (b) the date the cumulative
amount apportioned and distributed to the City equals the cost of the Convention Center or any
other "qualified public use facility" financed with indebtedness secured by such state and local
sales and use taxes plus any interest on such indebtedness; or (c) the Convention Center or any
such other "qualified public use facility" ceases to be a "qualified public use facility" in
accordance with the provisions of the TDZ Statute ("TDZ Revenues"). The purpose of the TDZ
Statute is to allocate from the State to local governments the revenues resulting from sales tax
growth within tourism development zones as a result of the construction of major, tourist-related
public works projects, but only to the extent that the growth in the tourism development zone
exceeds that of the sales tax growth in the broader boundaries of the local governments.
The amount of TDZ Revenues allocated to the City as a result of the Convention Center
and its ancillary facilities is calculated on an annual basis in the following manner. The State
allocates to the City an amount equal to the incremental increase in (a) state and local sales tax
collections in the TDZ in the then-current fiscal year of the State over (b) state and local sales tax
collections in the TDZ (the "Base Year TDZ Collections") in the State's fiscal year preceding the
opening of the Convention Center (the "Base Year"); provided, however, Base Year TDZ
Collections will, each year, be adjusted up or down in proportion to the percentage increase or
decrease in state and local sales tax collections from the Base Year within the County as a whole.
Increases in the State rate are not taken into account for these purposes. The State's fiscal year
currently ends on June 30 and the TDZ Statute requires the State to allocate TDZ Revenues to
the City within 90 days of the end of the State's fiscal year.
The TDZ was approved by the State in 2001 and includes all of the area within the City's
Central Business Improvement Districts which include the areas which encompass the Pyramid
Arena Project and the Pinch District Project. Pursuant to the TDZ Statute, the City has qualified
the Convention Center as a "qualified public use facility" and the Pyramid Arena Project and the
Pinch District Project as qualified ancillary facilities. The Convention Center commenced
operations as a public use facility during the Fiscal Year ended June 30, 2001; accordingly,
under the TDZ Statute, the City received its first distribution of TDZ Revenues in September
2001 and may be entitled to receive TDZ Revenues until September 2030. See "INVESTMENT
CONSIDERATIONS - Considerations Relating to TDZ Revenues" herein.
In connection with the issuance of the Series 2011 Bonds, the City received approval
from the State of an application and debt service schedule which entitles the City to receive TDZ
Revenues in an amount at least equal to the amount of the debt service on the Series 2011 Bonds
and the existing Borrower's Obligations identified on a schedule to the Indenture during a 30
year period which began during the Fiscal Year ended June 30, 2002, unless earlier terminated in
accordance with the TDZ Statute. Pursuant to the TDZ Statute, the City's right to receive
continuing distributions of TDZ Revenues with respect to the Convention Center and its
ancillary facilities may be terminated by the State at any time the cumulative amount of TDZ
Revenues apportioned and distributed to the City equals the cost of the Convention Center and
any such ancillary facilities financed with indebtedness secured by TDZ Revenues plus any
interest on such indebtedness, all as reflected in a debt service schedule provided by the City and
approved by the State. However, prior to the issuance of Additional Bonds or the use of TDZ
Revenues to pay or reimburse the City for Costs of the Project, the City is required to: (a) obtain
the approval by the State of an amended debt service schedule reflecting the additional debt
26
service associated with such Additional Bonds or Costs of the Project and (b) in the case of Costs
of the Project to be paid from TDZ Revenues deposited in the Surplus Fund, certify to the
Trustee and the Issuer that, after any such application of such money, the TDZ Revenues which
the City is legally entitled to receive are projected to be sufficient to pay the principal of and
interest on the Bonds then Outstanding and all other obligations then legally authorized to be
paid from TDZ Revenues.
Historical and Projected Debt Service Coverage
The tables below present historical receipts of TDZ Revenues for the Fiscal Years ending
June 30, 2002 through June 30, 2010, actual debt service for the Series 2011 Bonds, projected
TDZ Revenues and debt service coverage. Since all projections are based on estimates and
assumptions which are inherently subject to uncertainty and variations depending on future
events, there are likely to be differences between the projections and actual results, and the
differences may be material.
See "MARKET STUDY" and "INVESTMENT
CONSIDERATIONS - Considerations
Relating
to
TDZ
Revenues"
herein
and
APPENDIX B - MARKET STUDY AND IMPACT ANALYSIS attached hereto.
Schedule of Historical Receipts of TDZ Revenues(1)
Fiscal Year
Ended (June
30)
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
TDZ Revenues
$ 3,617,750
3,676,709
3,439,872
7,630,819
7,976,136
9,384,307
10,141,097
11,872,348
15,522,631
12,821,734
_____________________
(1)
TDZ Revenues are received by the City in one lump sum payment from the State in
September of each year based on incremental state and local sales tax collections in the
TDZ by the State as of June 30 of that same year.
Source: City of Memphis, Tennessee.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
27
Projected TDZ Revenues and Debt Service Coverage(5)
Total
Existing
Obligations
Paid from
TDZ
Revenues(3)
Fiscal
Year
Ending
June 30
Estimated
TDZ
Revenues
from Current
Sources(1)(2)
Projected TDZ
Revenues from
all Sources(1)(2)
2012
$ 11,948,423
$ 11,948,423
$1,365,930
2013
11,948,423
11,948,423
2014
11,948,423
11,948,423
2015
11,948,423
2016
2017
Series
2011A
Senior
Taxable
Bonds Debt
Service(4)
Senior Debt
Service
Coverage
Ratio from
all TDZ
Revenues(4)
Series 2011
Subordinate
Bonds Debt
Service(4)
Subordinate
Debt
Service
Coverage
Ratio from
all TDZ
Revenues(4)
561,270
$ 1,927,200
6.20x
6.20x
$ 1,909,106
3.11x
1,362,131
957,618
2,319,749
5.15x
5.15x
3,257,243
2.14x
1,360,957
1,675,831
3,036,788
3.93x
3.93x
5,700,175
1.37x
20,262,437
1,367,353
2,697,177
4,064,530
2.94x
4.99x
12,636,085
1.21x
11,948,423
20,387,147
1,365,752
2,728,451
4,094,203
2.92x
4.98x
12,706,383
1.21x
11,948,423
20,513,728
1,366,517
2,749,995
4,116,512
2.90x
4.98x
12,787,524
1.21x
2018
11,948,423
20,642,208
1,369,310
2,772,293
4,141,603
2.88x
4.98x
12,868,129
1.21x
2019
11,948,423
20,772,614
1,368,883
2,805,780
4,174,663
2.86x
4.98x
12,945,131
1.21x
2020
11,948,423
20,904,977
955,232
3,242,762
4,197,994
2.85x
4.98x
13,031,089
1.21x
2021
11,948,423
21,039,326
951,866
3,271,061
4,222,927
2.83x
4.98x
13,114,957
1.21x
2022
11,948,423
21,175,689
956,796
3,290,881
4,247,677
2.81x
4.99x
13,201,890
1.21x
2023
11,948,423
21,314,098
–
4,279,720
4,279,720
2.79x
4.98x
13,283,131
1.21x
2024
11,948,423
21,454,583
–
4,306,552
4,306,552
2.77x
4.98x
13,374,925
1.21x
2025
11,948,423
21,597,176
–
4,332,398
4,332,398
2.76x
4.99x
13,465,619
1.21x
2026
11,948,423
21,741,907
–
4,366,091
4,366,091
2.74x
4.98x
13,549,450
1.21x
2027
11,948,423
21,888,809
–
4,395,645
4,395,645
2.72x
4.98x
13,642,350
1.21x
2028
11,948,423
22,037,915
–
4,424,849
4,424,849
2.70x
4.98x
13,739,050
1.21x
2029
11,948,423
22,189,260
–
4,453,300
4,453,300
2.68x
4.98x
13,832,319
1.21x
2030
11,948,423
22,342,870
–
4,482,100
4,482,100
2.67x
4.98x
13,930,413
1.21x
2.65x
4.98x
14,026,456
1.21x
2031
Totals
$
Total Senior
Debt
Service(3)(4)
Senior Debt
Service
Coverage
Ratio from
Current
TDZ
Revenues
Only(4)
11,948,423
22,498,787
–
4,516,522
4,516,522
$238,968,465
$398,608,805
$13,790,727
$66,310,294
$80,101,021
$237,001,422
____________________________
(1)
TDZ Revenues are received by the City in one lump sum payment from the State in September of each year based on incremental state
and local sales tax collections in the TDZ by the State as of June 30 of that same year. Estimated TDZ Revenues from current sources
are as estimated by the City based on actual previous receipts of TDZ Revenues and is held constant throughout the forecast period.
Projected TDZ Revenues from all sources are as projected by RKG in the Market Study attached hereto as Appendix B based on the
estimated TDZ Revenues from current sources for the Fiscal Years ending 2012 through 2014 and incremental new TDZ Revenues to
be generated solely by the Pyramid Arena Project for the Fiscal Years ending 2015 through 2031 which is inflated annually at a rate of
1.5%. See "APPENDIX B - MARKET STUDY AND FINANCIAL ANALYSIS" herein.
(2)
Pursuant to the TDZ Statute, the last Fiscal Year in which TDZ Revenues may be received is the Fiscal Year ending June 30, 2031,
which last distribution is anticipated to be received from the State in September 2030.
(3)
Total existing obligations paid from TDZ Revenues consists of current existing obligations of the City related to the expansion of the
Convention Center, including an annual payment to the Convention and Visitors Bureau, all of which are included on the list of the
Borrower's Obligations identified on a schedule to the Indenture and will be paid from amounts on deposit in the Revenue Fund on a
pari passu basis with the Senior Bonds. See "SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2011 BONDS - Flow
of Funds" herein.
(4)
Debt service net of capitalized interest.
(5)
Totals may not add due to rounding.
Source: City of Memphis, Tennessee, RKG Associates, Inc. and Morgan Keegan & Company, Inc.
28
Replenishment Agreement
Not later than by May 15 of each Fiscal Year the Trustee is required by the Indenture to
give notice to the City setting forth the amount, if any, by which the amount on deposit in the
Subordinate Debt Service Reserve Account on the preceding April 30 is less than the then
Subordinate Debt Service Reserve Requirement (a "Deficiency Notice"). Upon receipt of a
Deficiency Notice the City, by the later of October 15 of any year in which it receives a
Deficiency Notice and the 60th day after such Deficiency Notice is received, is required, in
accordance with the Replenishment Agreement, to pay to the Trustee for deposit in the
Subordinate Debt Service Reserve Account, the amount set forth in such Deficiency Notice as
the amount by which the amount on deposit in the Subordinate Debt Service Reserve Account on
the preceding April 30 was less than the Subordinate Debt Service Reserve Requirement on such
April 30. The Replenishment Obligation is not a general obligation of the City but rather is
required to be paid solely from the Non-Tax Revenues appropriated by the City for such
payments. In accordance with the Replenishment Agreement, the City has agreed that, by the
later of October 5 of any year in which it is receives a Deficiency Notice and the 45th day after
such notice is received, it will, in its budget for the Fiscal Year during which such October 5
occurs, appropriate for payment to the Trustee Non-Tax Revenues in an amount sufficient to pay
any Replenishment Obligation due thereunder. The failure of the Trustee to give timely notice to
the City of a deficiency in the Subordinate Debt Service Reserve Account in accordance with the
terms of the Indenture will not excuse the City's obligation to make the payment required by the
Replenishment Agreement. See "SECURITY AND SOURCES OF PAYMENT FOR THE
SERIES 2011 BONDS - Non-Tax Revenues and - Subordinate Debt Service Reserve Account"
herein and "APPENDIX A -- DEFINITIONS OF CERTAIN TERMS AND SUMMARY OF
CERTAIN PROVISIONS OF THE INDENTURE, LOAN AGREEMENT AND
REPLENISHMENT AGREEMENT" attached hereto.
The Replenishment Agreement runs in favor of the holders of the Subordinate Bonds
only and the holders of the Senior Bonds will have no right of payment from, or a lien upon, the
payments made from such appropriated Non-Tax Revenues.
Non-Tax Revenues
In accordance with the Replenishment Agreement, the City has agreed to timely budget
and appropriate from its Non-Tax Revenues sufficient money to pay to the Trustee the amount
set forth in any Deficiency Notice received from the Trustee for deposit to the credit of the
Subordinate Debt Service Reserve Account. Any such Replenishment Obligation will be paid by
the City solely from legally available revenues of the City derived from any source, other than
TDZ Revenues and ad valorem property taxes, appropriated by the City (the "Non-Tax
Revenues"). The Non-Tax Revenues include the following: Local Taxes, State Taxes, Licenses
and Permits; Fines and Forfeitures; Charges for Services; and Use of Money and Property. The
table below presents historical collection by the City of Non-Tax Revenues for the Fiscal Years
ending June 30, 2006 through June 30, 2010.
29
Schedule of Historic Collection of Non-Tax Revenues(1)
Local Taxes
State Taxes
Licenses and Permits
Fines and Forfeitures
Charges for Services
Use of Money and Property
2010
$155,958,362
54,713,105
11,118,672
12,161,982
31,815,232
876,828
TOTAL NON-TAX
$266,644,181
REVENUES
________________________
(1)
Totals may not add due to rounding.
Source: City of Memphis, Tennessee.
2009
$157,008,904
59,035,786
11,427,648
10,236,681
27,280,309
3,064,197
2008
$158,873,455
67,383,830
11,933,999
10,040,036
28,395,067
4,072,227
2007
$158,869,010
64,545,225
11,917,964
8,838,058
23,644,440
4,481,357
2006
$156,771,216
57,352,533
11,995,579
9,223,529
20,718,607
1,4202818
$268,053,525
$280,698,614
$272,296,054
$257,421,745
Local Taxes. Local taxes consist of all locally collected taxes and fees with the exception
of ad valorem revenues, other payments in lieu of taxes, licenses and permits, franchise fees,
fines and forfeitures, charges for services and use of money and property. Local taxes include,
among other things, the local sales tax, alcoholic beverage inspection fee, gross receipts business
tax and beer sales tax.
State Taxes. State taxes consist of the City's share of the State income tax, sales tax,
telecommunication sales tax, state-shared beer tax, alcoholic beverage tax and special petroleum
product tax.
Licenses and Permits. Licenses and permits consist of revenues from businesses and
occupations which must be licensed before doing business within the jurisdiction of the City or
that benefit from an activity licensed by the City. Major license sources are motor vehicle
licenses and liquor licenses. Major permits are those related to construction and security alarms.
Fines and Forfeitures. Fines and forfeitures consist of money derived from the
imposition of penalties for the commission of statutory offenses or violation of rules or
regulations, or money derived from the confiscation of deposits held as performance guarantees.
Charges for Services. Charges for services consist of fees charged by various
departments and agencies of the City to the user of the service. These fees cover a wide range of
services from vehicle emission testing fees to parking fees, emergency ambulance fees and
admission fees at the pool and golf courses.
Use of Money and Property. Revenues from the use of money and property consist of
interest on investments and money earned from the lease or rental of government property.
Additional Obligations Payable from Non-Tax Revenues
Pursuant to an interlocal agreement by and among The Memphis and Shelby County
Sports Authority, Inc. (the "Sports Authority"), the City and the County, in the event the
revenues pledged to the support of certain senior lien bonds issued by the Sports Authority (the
"Sports Authority Bonds") prove to be insufficient to pay debt service on such Senior Lien
Bonds in any bond year (ending on October 31), the County and the City have covenanted to
30
timely appropriate from legally available non-ad valorem revenues, not later than October 31 of
the fiscal year ending June 30 following the date of such deficit, sufficient money to replenish
draws from the debt service reserve fund used to make scheduled debt service on the Sports
Authority Bonds in the prior year. As of June 30, 2011, the Sports Authority Bonds were
outstanding in an aggregate principal amount of $207,260,000. The obligation of the County and
the City to replenish draws on the debt service reserve fund relating to the Sports Authority
Bonds is apportioned on the following basis: 50% from the County and 50% from the City, but is
not a joint obligation. The maximum amount of the County's or City's debt service reserve fund
replenishment obligation, respectively, under the interlocal agreement relating to the Sports
Authority Bonds, is the debt service payments on not to exceed $115,000,000 of the Sports
Authority Bonds, which is approximately one-half of the authorized Sports Authority Bonds.
The obligation to replenish the debt service reserve fund relating to the Sports Authority Bonds
is not a general obligation of the City.
The Memphis and Shelby County Port Commission (the "Port Commission") issued its
$40,795,000 Development Revenue Bonds, Series 2011 (the "2011 Port Commission Bonds") on
September 7, 2011. Pursuant to an interlocal agreement by and among the Port Commission, the
County and the City, the 2011 Port Commission Bonds are secured by, among other things, a
covenant on the part of the City and the County to appropriate from legally available non-ad
valorem revenues sufficient amounts to pay debt service on the 2011 Port Commission Bonds.
Other than the Sports Authority Bonds and the 2011 Port Commission Bonds, the City
has not committed to pay any other debt obligations from the Non-Tax Revenues. However, the
City regularly pays various operating expenses of the City from the Non-Tax Revenues and is
not prohibited from paying or agreeing to pay other obligations of the City from the Non-Tax
Revenues.
Flow of Funds
All payments made by the City pursuant to the Loan Agreement pledged under the
Indenture, as and when received by the Trustee, are to be deposited in the Revenue Fund and
held therein until disbursed as provided in the Indenture. Pursuant to the assignment and pledge
of payments under the Loan Agreement set forth in the Indenture, the Issuer will direct the City
to make such payments directly to the Trustee when and as the same become due and payable by
the City under the Loan Agreement.
On or prior to the second Business Day next preceding each November 1 of a Bond Year,
the Trustee, from amounts on deposit in the Revenue Fund, is to make the deposits and payments
set forth below on the dates and in the order of priority set forth below:
(a)
Pro rata based upon the ratio each of the amounts required to be paid pursuant to
(i) and (ii) of this subparagraph (a) bears to the sum of the amounts to be paid pursuant to (i) and
(ii):
(i)
To the Senior Bond Account, an amount which, together with the amount
then on deposit in the Senior Bond Capitalized Interest Account, equals the sum of (A)
the principal of Outstanding Senior Bonds payable at maturity or through the mandatory
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Sinking Fund Redemption on the next succeeding November 1, plus (B) the interest on
the Outstanding Senior Bonds, including the Series 2011A Senior Taxable Bonds,
payable on the next succeeding two Interest Payment Dates; then
(ii)
To the City, the amount which has been certified to the Trustee by the City
as the amount required to be paid during the next succeeding 12 calendar months for the
Borrower's Obligations identified on a schedule to the Indenture; then
(b)
To the Senior Debt Service Reserve Account, an amount which, together with the
amount then on deposit in the Senior Debt Service Reserve Account, equals the Senior Debt
Service Reserve Requirement; then
(c)
To the Subordinate Bond Account, an amount which, together with the amount
then on deposit in the Subordinate Bond Account, equals the sum of (i) the principal of
Outstanding Subordinate Bonds payable at maturity or through mandatory Sinking Fund
Redemption on the next succeeding November 1, plus (ii) the interest on Outstanding
Subordinate Bonds, including the Series 2011 Subordinate Bonds, payable on the next
succeeding two Interest Payment Dates; then
(d)
To the Expense Fund, the estimated Operating Expenses for the next succeeding
12 calendar months as certified to the Trustee by the City; then
(e)
To the Subordinate Debt Service Reserve Account, an amount which, together
with the amount then on deposit in the Subordinate Debt Service Reserve Account, equals the
Subordinate Debt Service Reserve Requirement; then
(f)
To the City, the lesser of (i) the amount then remaining in Revenue Fund after the
preceding deposits and payments have been made, and (ii) the amount theretofore paid by the
City pursuant to the Replenishment Agreement for which it has not previously been reimbursed
pursuant to this clause (f); and, then,
(g)
To the Surplus Fund, any amount remaining in the Revenue Fund after the
preceding deposits and payments have been made.
Debt Service Fund
So long as any of the Series 2011 Bonds are Outstanding, the Issuer is required to
establish and maintain with the Trustee the Debt Service Fund and within the Debt Service Fund
a Senior Bond Account, a Senior Bond Capitalized Interest Account, a Subordinate Bond
Account and a Subordinate Bond Capitalized Interest Account.
An initial deposit to the credit of the Senior Bond Capitalized Interest Account and the
Subordinate Bond Capitalized Interest Account is required to be made from the proceeds of the
Series 2011 Bonds in accordance with the provisions of the Indenture.
The Trustee is required to apply the money on deposit in the Senior Bond Account, first,
together with the amounts available in the Senior Bond Capitalized Interest Account, to the
payment of interest on Outstanding Senior Bonds, when due, and, then, to the payment of the
32
principal of Outstanding Senior Bonds, when due either at maturity or through mandatory
Sinking Fund Redemption. Notwithstanding the foregoing, the Trustee will, at the request of the
City, apply the money on deposit in the Senior Bond Account, other than income earned thereon
which is to be transferred to other funds created under the Indenture, to purchase in the open
market an amount of Senior Bonds of the series and maturity to be redeemed through mandatory
Sinking Fund Redemption on the next succeeding November 1 at prices not exceeding the
principal amount of Senior Bonds being purchased plus accrued interest thereon (which interest
will be paid from amounts on deposit in the Senior Bond Account). The Senior Bonds of such
series and maturity so purchased are to be cancelled by the Trustee and the principal amount
thereof applied against and in reduction of the mandatory Sinking Fund Redemption due on
such Senior Bonds on such November 1.
Money on deposit in the Senior Bond Capitalized Interest Account are, prior to any
transfer to the Senior Bond Account pursuant to the Indenture, to be transferred to the Senior
Bond Account in an amount which, together with the amount then on deposit in the Senior Bond
Account, equals the interest on Outstanding Senior Bonds payable on the next succeeding
Interest Payment Date.
The Trustee is required to apply the money on deposit in the Subordinate Bond Account,
first, together with the amounts available in the Subordinate Bond Capitalized Interest Account,
to the payment of interest on Outstanding Subordinate Bonds, when due, and, then, to the
payment of the principal of Outstanding Subordinate Bonds, when due either by maturity or
mandatory Sinking Fund Redemption pursuant to the Indenture.
Notwithstanding the foregoing, the Trustee will, at the request of the City, apply the
money on deposit in the Subordinate Bond Account, other than income earned thereon which is
to be transferred to other funds created under the Indenture, to purchase in the open market an
amount of Subordinate Bonds of the series and maturity to be redeemed through mandatory
Sinking Fund Redemption on the next succeeding November 1 at prices not exceeding the
principal amount of the Subordinate Bonds being purchased plus accrued interest thereon (which
interest will be paid from amounts on deposit in the Subordinate Bond Account). The
Subordinate Bonds of such series and maturity so purchased are to be cancelled by the Trustee
and the principal amount thereof applied against and in reduction of the mandatory Sinking Fund
Redemption due on such Subordinate Bonds on such November 1.
Money on deposit in the Subordinate Bond Capitalized Interest Account will, prior to any
transfer to the Subordinate Bond Account pursuant to the Indenture, be transferred to the
Subordinate Bond Account in an amount which, together with the amount then on deposit in the
Subordinate Bond Account, equals the interest on Outstanding Subordinate Bonds payable on the
next succeeding Interest Payment Date.
If on the third Business Day immediately prior to the date on which the principal of or
interest on Outstanding Senior Bonds or Subordinate Bonds is payable, with respect to principal
either at maturity or through Mandatory Sinking Fund Redemption, there is insufficient money in
the Senior Bond Account or Subordinate Bond Account, as applicable, to make such payment,
the Trustee is required to transfer from the Surplus Fund, first, to the Senior Bond Account and,
then, to the Subordinate Bond Account, an amount equal to the respective deficiencies therein. If
33
on the third Business Day immediately prior to the date on which the principal of or interest on
Outstanding Senior Bonds or Subordinate Bonds is payable there is, after the aforementioned
transfers from the Surplus Fund, insufficient money in the Senior Bond Account or the
Subordinate Bond Account to make such payment, the Trustee is required to transfer from the
Senior Debt Service Reserve Account to the Senior Bond Account, and from the Subordinate
Debt Service Reserve Account to the Subordinate Bond Account, an amount equal to the
respective deficiencies therein.
In connection with any partial redemption or defeasance prior to maturity of the Series
2011 Bonds, the Trustee may, at the request of the City, use any amounts on deposit in the
Senior Bond Account or the Subordinate Bond Account, as applicable, in excess of the amount
needed to pay the interest on the Series 2011 Bonds remaining Outstanding on the first interest
payment date occurring on or after the date of such redemption or defeasance to pay the principal
of and interest on the Series 2011 Bonds to be redeemed or defeased.
Debt Service Reserve Fund
So long as any of the Series 2011 Bonds are Outstanding, the Issuer is required to
establish and maintain with the Trustee, pursuant to the Indenture, the Debt Service Reserve
Fund and within the Debt Service Fund, the Senior Debt Service Reserve Account and the
Subordinate Debt Service Reserve Account.
Money in the Senior Debt Service Reserve Account is required to be withdrawn by the
Trustee and deposited to the credit of the Senior Bond Account of the Debt Service Fund at the
times and in the amounts described above as required to make timely payment of the principal
of, and interest on, Outstanding Senior Bonds, when due. The income or interest earned on
investments held for the credit of the Senior Debt Service Reserve Account is, at the written
direction of the City, to be withdrawn by the Trustee and deposited in the Senior Bond Account
in accordance with such direction; provided, however, that no withdrawal of such income or
interest may be made if the amount in the Senior Debt Service Reserve Account is then, or upon
such withdrawal will be, less than the Senior Debt Service Reserve Requirement. Amounts in
the Senior Debt Service Reserve Account on April 30 of a Bond Year that are in excess of the
Senior Debt Service Reserve Requirement are required to be withdrawn by the Trustee and
deposited in the Senior Bond Account. If on April 30 of a Bond Year, the amount in the Senior
Debt Service Reserve Account is less than the Senior Debt Service Reserve Requirement, the
Trustee is required to promptly give, but in no event later than on the next succeeding May 15th,
written notice thereof to the Issuer and the City.
Money in the Subordinate Debt Service Reserve Account of the Debt Service Reserve
Fund is required to be withdrawn by the Trustee and deposited to the credit of the Subordinate
Bond Account of the Debt Service Fund at the times and in the amounts described above as
required to make timely payment of the principal of, and interest on, Outstanding Subordinate
Bonds, when due. The income or interest earned on investments held for the credit of the
Subordinate Debt Service Reserve Account shall, at the written direction of the City, be
withdrawn by the Trustee and deposited in the Subordinate Bond Account in accordance with
such direction; provided, however, that no withdrawal of such income or interest may be made if
the amount in the Subordinate Debt Service Reserve Account is then, or upon such withdrawal
34
will be, less than the Subordinate Debt Service Reserve Requirement. Amounts in the
Subordinate Debt Service Reserve Account on April 30 of a Bond Year that are in excess of the
Subordinate Debt Service Reserve Requirement are required to be withdrawn from the
Subordinate Debt Service Reserve Account by the Trustee and deposited in the Subordinate
Bond Account. If on April 30 of a Bond Year, the amount in the Subordinate Debt Service
Reserve Account is less than the Subordinate Debt Service Reserve Requirement, the Trustee is
required to promptly give, but in no event later than on the next succeeding May 15th, written
notice thereof to the Issuer and the City. All amounts paid by the City in accordance with the
Replenishment Agreement on account of a deficiency in the Subordinate Debt Service Reserve
Account are, upon receipt by the Trustee, to be deposited to the Subordinate Debt Service
Reserve Account to restore such account to the Subordinate Debt Service Reserve Requirement.
Upon the issuance of the Series 2011A Senior Taxable Bonds, there will be on deposit in
the Senior Debt Service Reserve Account an amount equal to $4,638,043.50 representing the
Senior Debt Service Reserve Requirement applicable to the Series 2011A Senior Taxable Bonds.
The Series 2011A Senior Taxable Bonds will only be delivered upon the required deposit to the
Senior Debt Service Reserve Account. Upon the delivery of the required deposit to the Senior
Debt Service Reserve Account, the Senior Debt Service Reserve Requirement will be fully
funded. Amounts deposited in the Senior Debt Service Reserve Account are pledged solely to
secure the repayment of the Series 2011A Senior Taxable Bonds.
Upon the issuance of the Series 2011 Subordinate Bonds, there will be on deposit in the
Subordinate Debt Service Reserve Account an amount equal to $14,367,912.50 representing the
Subordinate Debt Service Reserve Requirement applicable to the Series 2011 Subordinate
Bonds. The Series 2011 Bonds will only be delivered upon the required deposit to the
Subordinate Debt Service Reserve Account. Upon the delivery of the required deposit to the
Subordinate Debt Service Reserve Account, the Subordinate Debt Service Reserve Requirement
will be fully funded. Amounts deposited in the Subordinate Debt Service Reserve Account are
pledged solely to secure the repayment of the Series 2011 Subordinate Bonds.
Expense Fund
Amounts in the Expense Fund will be used only for payment of Operating Expenses or to
reimburse the City for Operating Expenses previously paid by it for which it has not previously
been reimbursed. Such money will be paid by the Trustee upon receipt of the City's written
request to or upon the order of the City at such times and in such amounts as the City considers
necessary to make such payments.
Surplus Fund
Amounts remaining in the Revenue Fund after all other deposits and payments required
under the Indenture have been made will be transferred to the Surplus Fund.
If on the Business Day immediately prior to the date on which the principal of or interest
on Outstanding Senior Bonds or Subordinate Bonds is payable, with respect to principal either at
maturity or through mandatory Sinking Fund Redemption, there is insufficient money in the
Senior Bond Account or Subordinate Bond Account, as applicable, to make such payment, the
35
Trustee is required to transfer from the Surplus Fund, first, to the Senior Bond Account and,
then, to the Subordinate Bond Account, an amount equal to the respective deficiencies therein. If
on the Business Day immediately prior to the date on which the principal of or interest on
Outstanding Senior Bonds or Subordinate Bonds is payable there is, after the transfers referenced
above from the Surplus Fund, insufficient money in the Senior Bond Account or the Subordinate
Bond Account to make such payment, the Trustee is required to transfer from the Senior Debt
Service Reserve Account to the Senior Bond Account and from the Subordinate Debt Service
Reserve Account to the Subordinate Bond Account, an amount equal to the respective
deficiencies therein.
Money remaining in the Surplus Fund on June 30 of any Fiscal Year, if not then required
for transfer to the Senior Bond Account or the Subordinate Bond Account as described above,
will be applied or paid for any one or more of the following: (a) paid by the Trustee to the City in
accordance with the City's written request to reimburse it for payments theretofore made
pursuant to the Replenishment Agreement for which it has not previously been reimbursed; (b)
applied by the Trustee in accordance with the City's written request to either or both of (i) the
optional or extraordinary redemption or purchase of Outstanding Bonds with respect to the
Series 2011 Bonds or in accordance with the Supplemental Indenture authorizing the Additional
Bonds to be purchased or redeemed and (ii) defeasance of Outstanding Bonds; and (c) applied by
the Trustee in accordance with the City's written request to pay Costs of the Project or to
reimburse the City for Costs of the Project theretofore paid by the City for which it has not
previously been reimbursed.
Notwithstanding the provisions of the foregoing paragraph, money in the Surplus Fund
may not be applied for any purpose described in (b) or (c) above unless the City has certified to
the Trustee and the Issuer that, after such application, the TDZ Revenues which the City is
legally entitled to receive are projected to be sufficient to pay the principal of and interest on the
Bonds then Outstanding or that will remain Outstanding after any application of money in
accordance with (b) or (c) above, together with all other obligations then legally authorized to be
paid from TDZ Revenues.
Construction Fund
An initial deposit to the credit of the Construction Fund will be made from the proceeds
of the Series 2011 Bonds. Any money received by the Trustee from any source for the
acquisition, construction, renovating, rehabilitating, remodeling, furnishing or equipping portions
of the Project will be deposited in the Construction Fund unless otherwise specifically excepted
under the Indenture. The money in the Construction Fund will be held in trust by the Trustee
and applied to the payment of Costs of the Project. Pending such application, the money in the
Construction Fund will be held as trust funds under the Indenture in favor of the Holders of the
Outstanding Bonds and for the further security of such Holders. Disbursements from the
Construction Fund will be made by the Trustee upon receipt of a Written Request of the City or a
requisition of the City in the form attached to the Indenture.
Upon completion of the Project, money then remaining in the Construction Fund, after
making provision for the payment of any costs of acquisition, construction, renovation,
rehabilitation, remodeling, furnishings or equipment related to the Project then unpaid, will upon
36
the Written Request of the City be (a) transferred to the Senior Bond Account and the
Subordinate Bond Account of the Debt Service Fund, in the respective amounts set forth in such
Written Request, or (b) applied to the redemption or defeasance in accordance with the Indenture
of Outstanding Bonds in accordance with such Written Request.
Optional Redemption Fund
In the event of (a) prepayment by or on behalf of the City of amounts payable under the
Loan Agreement pledged under the Indenture, including prepayment with condemnation or
insurance proceeds, or (b) deposit with the Trustee by the City or the Issuer of money from any
other source for redeeming Series 2011 Bonds, except as otherwise provided in the Indenture,
such money will be deposited in the Optional Redemption Fund. Money on deposit in the
Optional Redemption Fund is required to be used, first, to make up any deficiencies existing in
the Senior Bond Account and the Subordinate Bond Account (in the order listed), second, to
make up any deficiency in the Senior Debt Service Reserve Account, and, third, for the
redemption or purchase of Bonds in accordance with the provisions of the Indenture.
Additional Bonds
Additional Bonds may be issued by the Issuer for any one or more of the following
purposes: (a) paying Costs of the Project, including capitalized interest on such Additional
Bonds, (b) paying costs associated and incurred in connection with the issuance of such
Additional Bonds, and (c) paying or providing for the payment of Outstanding Bonds or any
portion thereof.
The principal amount of such Additional Bonds may include an amount sufficient to pay
the costs and expenses of issuance, establish a reserve fund or fund the Debt Service Reserve
Fund at its requirement after giving effect to the issuance of such Additional Bonds, provide
capitalized interest and provide for such other costs as are permitted by the Act. Additional
Bonds may be issued notwithstanding the fact that no additional security is made subject to the
lien of the Indenture. However, the Trustee and the Issuer are authorized to accept additional
security made available upon the issuance of any Additional Bonds. Prior to the delivery of any
Additional Bonds, there must be filed with the Trustee, among other items, the following:
(a)
A written statement by an Authorized Officer of the City approving (i) the
issuance and delivery of such Additional Bonds and acknowledging that payments are required
to be made under the Loan Agreement in amounts sufficient to pay the principal and interest on
such Additional Bonds, when due, to the same extent as if such Additional Bonds were included
in the issuance of the Series 2011 Bonds and (ii) any other matters to be approved by the City
pursuant to the Loan Agreement and the Indenture.
(b)
The original executed counterparts of the Supplemental Indenture authorizing the
issuance of such Additional Bonds.
(c)
Executed counterparts of appropriate supplements to the Loan Agreement
providing, among other things, for the City's obligation to make payments on account of the
principal of and interest on the Additional Bonds.
37
(d)
In the case of Additional Bonds to be issued as Senior Bonds, other than
Refunding Bonds: (i) an Officer's Certificate of the City setting forth the TDZ Revenues received
during the preceding Fiscal Year; (ii) an independent consultant's report setting forth the
projected TDZ Revenues for the first full Fiscal Year after projected completion of the Facilities
constructed with proceeds of the Additional Bonds; (iii) an Officer's Certificate of the City (A)
setting forth the Maximum Annual Debt Service on the Outstanding Senior Bonds after giving
effect to the issuance of such Additional Bonds and (B) establishing that the amount set forth in
(i) is at least equal to two times such Maximum Annual Debt Service set forth in (iii)(A); and
(iv) an Officer's Certificate of the City (A) setting forth the Maximum Annual Debt Service on
the Outstanding Senior Bonds after giving effect to issuance of such Additional Bonds, (B)
setting forth the Maximum Annual Debt Service on the then Outstanding Subordinate Bonds,
and (C) establishing that the amount set forth in (ii) is at least equal to the sum of the amounts set
forth in (iv)(A) and (iv)(B).
(e)
In the case of Additional Bonds to be issued as Subordinate Bonds, other than
Refunding Bonds (i) an independent consultant's report setting forth the projected TDZ
Revenues for the first full Fiscal Year after the projected completion of the Facilities constructed
with proceeds of the Additional Bonds; and (ii) an Officer's Certificate of the City (A) separately
setting forth the Maximum Annual Debt Service on the then Outstanding Senior Bonds and the
Maximum Annual Debt Service on the Subordinate Bonds Outstanding after giving effect to the
issuance of such Additional Bonds, (B) establishing that the amount set forth in (i) is at least
equal to the sum of the amounts set forth in (ii)(A) and (B), and (C) stating that the Costs of the
Project to be financed through the issuance of such Additional Bonds consist of items for which
the City may provide aid or assistance to be paid from revenues specified pursuant to Tennessee
Code Annotated Section 7–53–315, as amended.
Refunding Bonds
Refunding Bonds may be issued pursuant to the Indenture to pay or provide for the
payment of any or all Outstanding Bonds. Prior to the delivery of any Refunding Bonds, there
must be filed with the Trustee, among other items, all of the following:
(a)
the documents required for the issuance of Additional Bonds, other than those
required by paragraph (d) or (e) under the caption "SECURITY AND SOURCES OF
PAYMENT FOR THE SERIES 2011 BONDS - Additional Bonds" above; and
(b)
either: (i) if the Bonds to be refunded are Senior Bonds, an Officer's Certificate of
the City stating that (A) the Maximum Annual Debt Service on the Senior Bonds Outstanding
after giving effect to the issuance of the Refunding Bonds will not be greater than the Maximum
Annual Debt Service on the Senior Bonds Outstanding immediately preceding issuance of the
Refunding Bonds, and (B) the amount payable in any Bond Year for the principal of, including
through mandatory Sinking Fund Redemption, and interest on Senior Bonds Outstanding after
giving effect to the issuance of the Refunding Bonds will not be greater than the amount payable
during any Bond Year on the Senior Bonds Outstanding immediately preceding issuance of the
Refunding Bonds; or (ii) if the Bonds to be refunded are Subordinate Bonds, an Officer's
Certificate of the City stating that (A) the Maximum Annual Debt Service on the Subordinate
Bonds Outstanding after giving effect to the issuance of the Refunding Bonds will not be greater
38
than the Maximum Annual Debt Service on the Subordinate Bonds Outstanding immediately
preceding issuance of the Refunding Bonds, and (B) the amount payable in any Bond Year for
the principal of, including through mandatory Sinking Fund Redemption, and interest on
Subordinate Bonds Outstanding after giving effect to the issuance of the Refunding Bonds will
not be greater than the amount payable during any Bond Year on the Subordinate Bonds
Outstanding immediate preceding issuance of the Refunding Bonds.
MARKET STUDY
RKG
In connection with the issuance of the Series 2011 Bonds, RKG prepared the Market
Study, a copy of which is attached hereto as Appendix B, setting forth, among other things, a
forecast of the incremental new TDZ Revenues to be generated from the Pyramid Arena Project.
RKG is a full service economic, planning and real estate consulting firm with offices
located in Dover, NH and Alexandria, VA. RKG specializes in the application of economic and
market analysis to economic development, real estate development and financing issues, toward
the goal of attracting private sector investment and job creation. Since its' founding in 1981,
RKG has successfully completed more than 2,000 consulting projects regionally, nationally and
internationally, providing a comprehensive range of market research, economic, planning, and
financial feasibility services to governmental, business and institutional clients.
Executive Summary of the Market Study
The following executive summary of the Market Study was provided solely by RKG. The
complete Market Study is presented in "APPENDIX B - MARKET STUDY AND IMPACT
ANALYSIS." The Market Study describes key factors that affect demand for the Pyramid Arena
Project and that affect the generation of incremental new TDZ Revenues and sets forth
assumptions on which the forecasts and estimates set forth therein are based. There is no
assurance that actual events will correspond with the assumptions on which such forecasts and
estimates are based. Consequently, no guarantee can be made that forecasted operating results
will correspond with the results actually achieved in the future. See "INVESTMENT
CONSIDERATIONS - Forward-Looking Statements" herein. The Market Study should be read
in its entirety for an understanding of the estimated operating results and the underlying
assumptions.
The Market Study provides an independent assessment of the market potential of the
Pyramid Arena Project and a projection of incremental new TDZ Revenues. To prepare the
forecast, RKG performed the following tasks: (a) met with, among others, officials of the City
and Bass Pro involved in planning the Pyramid Arena Project and the Pinch District Project to
discuss their assumptions regarding the future development and operations of the Pyramid Arena
Project and the Pinch District Project, (b) inspected the properties within the Pyramid Arena
Project and the Pinch District Project and the surrounding market area, (c) analyzed relevant
economic and demographic factors in the market area, (d) reviewed concept plan drawings of the
proposed Pyramid Arena Project and the Pinch District Project, (e) reviewed legislation
authorizing the various revenue sources dedicated to repayment of the Series 2011 Bonds,
39
(f) analyzed the historical receipts and trends in the TDZ Revenues and (g) forecast the financial
operations of the Pyramid Arena Project and future TDZ Revenues.
The historical performance and assumptions underlying the forecasts for TDZ Revenues
and the assumptions and inputs are described in detail in the Market Study. See "SECURITY
AND SOURCES OF PAYMENT FOR THE SERIES 2011 BONDS - Historical and Projected
Debt Service Coverage" herein for a summary of projected TDZ Revenues, as prepared by RKG
and presented in the Market Study. Significant assumptions and inputs utilized in the Market
Study include, but are not necessarily limited to the following:
(a)
Short-term (direct) construction employment, in terms of jobs and wages,
associated with the development of the Pyramid and Pinch District were based on the
construction costs (only) provided by the City; wage data (as is all wage data in this analysis) is
provided by the Tennessee Office of Labor and Workforce Development (and expressed in 2010
dollars); and, RKG's estimates that approximately 35% of construction costs equate to labor
costs.
(b)
Ongoing direct employment and wage data for the proposed development include
retail and restaurant components. The number of employees reflects industry averages (on a per
square foot basis) as developed by the Urban Land Institute.
(c)
Estimates of indirect employment and wages as "spin-off" from the short-term
construction activities, as well as the ongoing activities, once built, reflect an estimated local
capture rate of 30% and were estimated using multipliers developed by the U.S. Department of
Commerce for the RIMS II modeling.
(d)
Economic estimates regarding employment and wages are presented as if fullybuilt out and at stabilized occupancy, net of transfer where applicable.
(e)
This analysis assumes an initial 60% occupancy rate for the hotel to be included
within the Pyramid Arena Project, reflecting the average downtown occupancy and accounting
for an estimated 2013 opening. A room rate of $130/night is used in the Market Study, reflecting
a slightly higher rate assumed for a Fiscal Year 2013 opening year of operations.
(f)
An annual inflation factor of 1.5% is utilized.
The estimates by RKG of net new and incremental TDZ Revenues resulting from the
Pyramid Arena Project reflect an estimated increase in taxable consumer sales and the resulting
applicable and adjusted sales tax from these operations. The primary components include sales
tax from consumer activity and spending at the Pyramid Arena Project. These estimates reflect
prevailing market conditions in the Memphis market area and RKG's professional estimate of
future conditions.
Since all projections are based on estimates and assumptions which are inherently subject
to uncertainty and variations depending on future events, there are likely to be differences
between the projections and actual results and the differences may be material. See "MARKET
STUDY" herein and APPENDIX B - MARKET STUDY AND IMPACT ANALYSIS and
"INVESTMENT CONSIDERATIONS - Forward-Looking Statements" herein.
40
INVESTMENT CONSIDERATIONS
General
Attention should be given to the investment considerations described below, which,
among others, could affect the ability of the Issuer to pay principal of and interest on the Series
2011 Bonds and which could also affect the marketability of, or the market price for, the Series
2011 Bonds.
The purchase of the Series 2011 Bonds involves certain investment considerations that
are discussed throughout this Official Statement. Certain of these investment considerations are
set forth below for convenience and are not intended to be a comprehensive compilation of all
possible investment considerations nor a substitute for an independent evaluation of the
information presented in this Official Statement. Each prospective purchaser of any Series 2011
Bond should read this Official Statement in its entirety and consult such prospective purchaser's
own investment and/or legal advisor for a more complete explanation of the matters that should
be considered when purchasing an investment such as the Series 2011 Bonds.
Enforceability of Remedies
The remedies available to the owners of the Series 2011 Bonds upon an event of default
under the Indenture are in many respects dependent upon judicial actions which are often subject
to discretion and delay.
The enforceability of remedies or rights with respect to the Series 2011 Bonds may be
limited by state and federal laws, rulings and decisions affecting remedies and by bankruptcy,
insolvency or other laws affecting creditors' rights or remedies heretofore or hereafter enacted.
Under existing constitutional and statutory law and judicial decisions, including specifically
Title 11 of the United States Code (federal bankruptcy code), certain remedies specified by the
Indenture or the Loan Agreement may not be readily available or may be limited. Under existing
law, municipalities must obtain the consent of state government in order to avail themselves of
federal bankruptcy protection under Title 11 of the United States Code, however, there is
currently no State law granting such consent. The various legal opinions to be delivered
concurrently with the delivery of the Series 2011 Bonds will be qualified as to the enforceability
of the various legal instruments by limitations imposed by bankruptcy, reorganization,
insolvency, moratorium, or other similar laws affecting the rights of creditors generally or as to
the availability of any particular remedy.
Early Payment Prior to Maturity
The Series 2011 Bonds are subject to optional redemption, mandatory sinking fund
redemption and extraordinary redemption prior to maturity, see "THE SERIES 2011
BONDS - Optional Redemption," "- Mandatory Sinking Fund Redemption" and "- Extraordinary
Redemption" herein. A prospective investor should consider these redemption rights when
making any investment decision. Following a redemption, the owners of the Series 2011 Bonds
may not be able to reinvest their funds at a comparable interest rate.
41
Non-Recourse Obligation
The Series 2011 Bonds are special, limited obligations of the Issuer payable solely from
TDZ Revenues and, in the case of the Series 2011 Subordinate Bonds, Non-Tax Revenues
appropriated by the City for such payments. See "SECURITY AND SOURCES OF PAYMENT
FOR THE SERIES 2011 BONDS" herein. Holders of Series 2011 Bonds will have no recourse
against the physical facilities comprising the Project or other assets of the Issuer or the City.
Holders of Series 2011 Bonds also will have no recourse against any assets of the Issuer or the
City, except in the case of the Holders of the Series 2011 Subordinate Bonds, who will have a
right to payment from Non-Tax Revenues to the extent provided in the Replenishment
Agreement and the Indenture. Neither the full faith and credit nor the taxing power of the State,
the City or any other political subdivision are available to pay debt service on the Series 2011
Bonds. The Issuer has no taxing power.
Achievement of Projections
The primary source of revenues upon which payment of the Series 2011 Bonds will depend
is the TDZ Revenues. The receipt of TDZ Revenues in the amounts projected herein (see
"MARKET STUDY" herein) is affected by and subject to conditions which may change in the
future to an extent and with effects that cannot be determined at this time, including, without
limitation:
y
the failure to complete or a delay in completion of the construction of the Pyramid
Arena Project;
y
general and local economic conditions that affect the convention industry and/or
the Memphis convention market; and
y
competition from other convention centers nationally.
Business and leisure travel is subject to a multitude of worldwide economic, political and
social events, circumstances and influences, and the future performance of the Pyramid Arena
Project in accordance with any forecasts is not assured or guaranteed and is subject to events,
circumstances and influences that are not within the Issuer's or the City's control. As noted under
the caption "INVESTMENT CONSIDERATIONS - Forward-Looking Statements," any
projection is subject to uncertainties. Although the City believes that the assumptions and
projections reflected in the "APPENDIX B - MARKET STUDY AND IMPACT ANALYSIS"
herein are reasonable, there is no assurance that those projections will be achieved. Inevitably,
some assumptions used to develop the forecasts will not be realized, and unanticipated events
and circumstances may occur. Therefore, the actual results achieved during the forecast period
will vary, and the variations may be material.
Considerations Relating To TDZ Revenues
The primary source of repayment of the Series 2011 Bonds is from the TDZ Revenues as
and to the extent distributed by the State to the City in accordance with the TDZ Statute and paid
to the Issuer pursuant to the terms of the Loan Agreement. The Series 2011 Bonds are special,
limited obligations of the Issuer payable solely from TDZ Revenues and, in the case of the Series
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2011 Subordinate Bonds, Non-Tax Revenues appropriated by the City for such payments. See
"SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2011 BONDS" herein.
The receipt of TDZ Revenues is affected by and subject to conditions which may change
in the future to an extent and with effects that cannot be determined at this time. The total
amount of TDZ Revenues received by the City is subject to increase or decrease on account of
increases or decreases in the dollar volume of taxable sales within the TDZ, which, in turn, is
subject to: (a) legislative changes which include or exclude from taxation sales of particular
goods or services or the repeal of underlying sales and use taxes and (b) changes in dollar
volume of purchases within the TDZ, which is affected by changes in population, economic
factors and other conditions which are impossible to predict, including the current economic
recession. See APPENDIX B - MARKET STUDY AND IMPACT ANALYSIS" herein for a
discussion of economic factors and other conditions which may have a bearing on the receipt of
TDZ Revenues. In addition to the Series 2011 Bonds, the TDZ Revenues also serve as a source
of payment for certain existing obligations of the City on a pari passu basis with the Senior
Bonds, all of which are included on the list of Borrower's Obligations identified on a schedule to
the Indenture. See "SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2011
BONDS - Projected TDZ Revenues and Debt Service Coverage" herein.
In accordance with the TDZ Statute, the City's right to receive continuing distributions of
TDZ Revenues with respect to the Convention Center and its ancillary facilities may be
terminated by the State under certain circumstances. However, pursuant to the State's approval
of the City's application, submitted in connection with the issuance of the Series 2011 Bonds, the
City is entitled to receive TDZ Revenues in an amount at least equal to the amount of the debt
service on the Series 2011 Bonds and the existing Borrower's Obligations identified on a
schedule to the Indenture. See "SECURITY AND SOURCES OF PAYMENT FOR THE
SERIES 2011 BONDS - TDZ Revenues" herein.
Considerations Relating To Non-Tax Revenues
The payments required to be made by the City pursuant to the Replenishment Agreement
are to be made solely from the Non-Tax Revenues to the extent the same is budgeted and
appropriated by the City for such payments. The City's obligations under Replenishment
Agreement are not general obligations of the City but rather are subject to appropriation.
Although the City has agreed to timely request that the appropriation for any Replenishment
Obligation be included in the budget submitted to the City Council, there can be no assurance
that such appropriation will be made.
The receipt of Non-Tax Revenues is affected by and subject to conditions which may
change in the future to an extent and with effects that cannot be determined at this time. The
receipt of Non-Tax Revenues is subject to economic factors and other conditions which are
impossible to predict. In addition to the Replenishment Obligation, the Non-Tax Revenues also
serve as a source of payment for various other obligations of the City, including obligations
otherwise payable from the general fund of the City. See "SECURITY AND SOURCES OF
PAYMENT FOR THE SERIES 2011 BONDS - Non-Tax Revenues" herein.
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Ratings
There is no assurance that the ratings assigned to the Series 2011 Bonds at the time of
issuance (see "RATINGS" herein) will not be lowered or withdrawn at any time, the effect of
which could adversely affect the market price for and marketability of the Series 2011 Bonds.
Due to the ongoing uncertainty regarding the economy and debt of the United States of America,
including, without limitation, the general economic conditions in the country and developments
arising from the Budget Control Act of 2011, including the deliberations and results thereof of
the Joint Select Committee on Deficit Reduction, and other political and economic
developments that may affect the financial condition of the United States government, the United
States debt limit, and the bond ratings of the United States and its instrumentalities, obligations
issued by state and local governments, such as the Series 2011 Bonds, could be subject to a
rating downgrade. Additionally, if a significant default or other financial crisis should occur in
the affairs of the United States or of any of its agencies or political subdivisions, then such event
could also adversely affect the market for and ratings, liquidity, and market value of outstanding
debt obligations, including the Series 2011 Bonds.
Limitations On Remedies
The occurrence of an event of default under the Indenture and Loan Agreement will not
permit the acceleration of the maturity of, or allow immediate payment for, the entire outstanding
principal balance of any series of the Series 2011 Bonds. Due to the fact that payment of the
Series 2011 Bonds is not secured by a mortgage lien or other security interests in the physical
facilities comprising the Pyramid Arena Project and the Pinch District Project or any other assets
of the Issuer or the City, holders of Series 2011A Senior Taxable Bonds will be limited to
seeking remedies against the TDZ Revenues, and holders of Series 2011 Subordinate Bonds will
be limited to seeking remedies against the TDZ Revenues and the Non-Tax Revenues.
Secondary Market Prices
No assurance can be given that a secondary market for any of the Series 2011 Bonds will
be available and no assurance can be given that the initial offering prices for the Series 2011
Bonds will continue for any period of time.
The Series 2011 Bonds may not constitute a liquid investment, and there is no assurance
that a liquid secondary market will exist for the Series 2011 Bonds in the event an owner thereof
determines to solicit purchasers of the Series 2011 Bonds. Even if a liquid secondary market
exists, there can be no assurance as to the price for which the Series 2011 Bonds may be sold.
Such price may be lower than that paid by the current owner of the Series 2011 Bonds,
depending on existing market conditions and other factors.
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Forward-Looking Statements
The statements contained in this Official Statement, and in any other information
provided by the Issuer and the City, that are not purely historical, are forward-looking
statements, including certain statements in "APPENDIX B - MARKET STUDY AND IMPACT
ANALYSIS" and other statements regarding the Issuer's and the City's expectations, hopes,
intentions or strategies regarding the future. Readers should not place undue reliance on forwardlooking statements. All forward-looking statements included in this Official Statement are based
on information available to the Issuer and the City on the date hereof and neither the Issuer nor
the City assumes any obligation to update any such forward-looking statements. It is important
to note that and the actual results could differ materially from those in such forward-looking
statements.
The forward-looking statements herein are necessarily based on various assumptions and
estimates and are inherently subject to various risks and uncertainties, including risks and
uncertainties relating to the possible invalidity of the underlying assumptions and estimates and
possible changes or developments in social, economic, business, industry, market, legal and
regulatory circumstances and conditions and actions taken or omitted to be taken by third parties,
including customers, suppliers, business partners and competitors, and legislative, judicial and
other governmental authorities and officials. Assumptions related to the foregoing involve
judgments with respect to, among other things, future economic, competitive and market
conditions and future business decisions, all of which are difficult or impossible to predict
accurately and many of which are beyond the control of the Issuer. Any of such assumptions
could be inaccurate and, therefore, there can be no assurance that the forward-looking statements
included in this Official Statement would prove to be accurate.
In considering the matters set forth in this Official Statement, prospective investors
should carefully review all information included herein (particularly the information under the
captions "INVESTMENT CONSIDERATIONS" and "SECURITY AND SOURCES OF
PAYMENT FOR THE SERIES 2011 BONDS") to identify any investment considerations.
Potential investors should be thoroughly familiar with this entire Official Statement and the
appendices hereto, and should have accessed whatever additional financial and other information
any such investor may deem necessary, prior to making an investment decision with respect to
the Series 2011 Bonds.
LEGAL MATTERS
Certain legal matters relating to the authorization and validity of the Series 2011 Bonds
will be subject to the approving opinions of Nixon Peabody LLP and Brittenum Bruce, PLLC,
Co-Bond Counsel, which will be furnished upon delivery of the Series 2011 Bonds, in
substantially the form set forth in Appendix D (collectively, the "Bond Opinion"). The Bond
Opinion will be limited to matters relating to authorization and validity of the Series 2011 Bonds
and to the tax status of interest thereon, as described under "TAX MATTERS" herein. Co-Bond
Counsel has not been engaged to investigate the financial resources of the Issuer or the City or
the ability of the Issuer or the City to provide for payment of the Series 2011 Bonds and the
Bond Opinion will make no statement as to such matters or as to the accuracy or completeness of
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this Official Statement or any other information that may have been relied on by anyone in
making the decision to purchase Series 2011 Bonds.
Certain legal matters will be passed upon by Adams and Reese, LLP in its capacity as
counsel to the Issuer. Certain legal matters will be passed upon for the City by Hawkins
Delafield & Wood LLP in its capacity as counsel to the City. Certain legal matters will be
passed upon for the Underwriters by their counsel, Greenberg Traurig, P.A.
All of the legal opinions to be delivered concurrently with the delivery of the Series
2011 Bonds express the professional judgment of the attorneys rendering the opinions regarding
the legal issues expressly addressed therein. By rendering a legal opinion, the attorneys
providing such opinion do not become insurers or guarantors of the result indicated by that
expression of professional judgment, of the transaction on which the opinion is rendered, or of
the future performance of parties to the transaction nor does the rendering of an opinion
guarantee the outcome of any legal dispute that may arise out of the transaction.
TAX MATTERS
Series 2011B Subordinate Tax Exempt Bonds
Federal Income Taxes. The Internal Revenue Code of 1986, as amended (the "Code"),
imposes certain requirements that must be met subsequent to the issuance and delivery of the
Series 2011B Subordinate Tax Exempt Bonds for interest thereon to be and remain excluded
from gross income for federal income tax purposes. Noncompliance with such requirements
could cause the interest on the Series 2011B Subordinate Tax Exempt Bonds to be included in
gross income for federal income tax purposes retroactive to the date of issue of the Series 2011B
Subordinate Tax Exempt Bonds. Pursuant to the Indenture, the Loan Agreement and the Tax
Certificate, the Issuer and the City have covenanted to comply with the applicable requirements
of the Code in order to maintain the exclusion of the interest on the Series 2011B Subordinate
Tax Exempt Bonds from gross income for federal income tax purposes pursuant to Section 103
of the Code. In addition, the Issuer and the City have made certain representations and
certifications in the Indenture, the Loan Agreement and the Tax Certificate.
In the opinion of Nixon Peabody LLP and Brittenum Bruce, PLLC, Memphis, Tennessee,
Co-Bond Counsel, under existing law and assuming compliance with the aforementioned
covenant, and the accuracy of certain representations and certifications made by the Issuer and
the City described above, interest on the Series 2011B Subordinate Tax Exempt Bonds is
excluded from gross income for federal income tax purposes under Section 103 of the Code.
Co-Bond Counsel is also of the opinion that such interest is not treated as a preference item in
calculating the alternative minimum tax imposed under the Code with respect to individuals and
corporations. Interest on the Series 2011B Subordinate Tax Exempt Bonds is, however, included
in the adjusted current earnings of certain corporations for purposes of computing the alternative
minimum tax imposed on such corporations.
State Taxes on the Series 2011B Subordinate Tax Exempt Bonds. Co-Bond Counsel is
further of the opinion that with respect to the Series 2011B Subordinate Tax Exempt Bonds,
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under Tennessee law the Series 2011 Subordinate Tax Exempt Bonds and interest thereon are not
subject to income taxation in the State of Tennessee, except for Tennessee franchise taxes.
Original Issue Discount. Co-Bond Counsel is further of the opinion that the difference
between the principal amount of the Series 2011B Subordinate Tax Exempt Bonds maturing on
November 1, 2025 bearing a coupon of 4.000% and on November 1, 2030 bearing a coupon of
4.500% (collectively the "Discount Tax Exempt Bonds") and the initial offering price to the
public (excluding bond houses, brokers or similar persons or organizations acting in the capacity
of underwriters or wholesalers) at which price a substantial amount of such Discount Tax
Exempt Bonds of the same maturity was sold constitutes original issue discount which is
excluded from gross income for federal income tax purposes to the same extent as interest on the
Series 2011B Subordinate Tax Exempt Bonds. Further, such original issue discount accrues
actuarially on a constant interest rate basis over the term of each Discount Tax Exempt Bond and
the basis of each Discount Tax Exempt Bond acquired at such initial offering price by an initial
purchaser thereof will be increased by the amount of such accrued original issue discount. The
accrual of original issue discount may be taken into account as an increase in the amount of tax
exempt income for purposes of determining various other tax consequences of owning the
Discount Tax Exempt Bonds, even though there will not be a corresponding cash payment.
Owners of the Discount Tax Exempt Bonds are advised that they should consult with their own
advisors with respect to the state and local tax consequences of owning such Discount Tax
Exempt Bonds.
Original Issue Premium. The Series 2011B Subordinate Tax Exempt Bonds maturing on
November 1, 2025 bearing a coupon of 5.250% and on November 1, 2030 bearing a coupon of
5.250% (collectively, the "Premium Tax Exempt Bonds") are being offered at prices in excess of
their principal amounts. An initial purchaser with an initial adjusted basis in a Premium Tax
Exempt Bond in excess of its principal amount will have amortizable bond premium which is not
deductible from gross income for federal income tax purposes. The amount of amortizable bond
premium for a taxable year is determined actuarially on a constant interest rate basis over the
term of each Premium Tax Exempt Bond based on the purchaser's yield to maturity (or, in the
case of Premium Tax Exempt Bonds callable prior to their maturity, over the period to the call
date, based on the purchaser's yield to the call date and giving effect to any call premium). For
purposes of determining gain or loss on the sale or other disposition of a Premium Tax Exempt
Bond, an initial purchaser who acquires such obligation with an amortizable bond premium is
required to decrease such purchaser's adjusted basis in such Premium Tax Exempt Bond annually
by the amount of amortizable bond premium for the taxable year. The amortization of bond
premium may be taken into account as a reduction in the amount of tax exempt income for
purposes of determining various other tax consequences of owning such Series 2011B
Subordinate Tax Exempt Bonds. Owners of the Premium Tax Exempt Bonds are advised that
they should consult with their own advisors with respect to the state and local tax consequences
of owning such Premium Tax Exempt Bonds.
Ancillary Tax Matters. Ownership of the Series 2011B Subordinate Tax Exempt Bonds
may result in other federal tax consequences to certain taxpayers, including, without limitation,
certain S corporations, foreign corporations with branches in the United States, property and
casualty insurance companies, individuals receiving Social Security or Railroad Retirement
benefits, and individuals seeking to claim the earned income credit. Ownership of the Series
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2011B Subordinate Tax Exempt Bonds may also result in other federal tax consequences to
taxpayers who may be deemed to have incurred or continued indebtedness to purchase or to
carry the Series 2011B Subordinate Tax Exempt Bonds. Prospective investors are advised to
consult their own tax advisors regarding these rules.
Commencing with interest paid in 2006, interest paid on tax exempt obligations such as
the Series 2011B Subordinate Tax Exempt Bonds is subject to information reporting to the
Internal Revenue Service (the "IRS") in a manner similar to interest paid on taxable obligations.
In addition, interest on the Series 2011B Subordinate Tax Exempt Bonds may be subject to
backup withholding if such interest is paid to a registered owner that (a) fails to provide certain
identifying information (such as the registered owner's taxpayer identification number) in the
manner required by the IRS, or (b) has been identified by the IRS as being subject to backup
withholding.
Co-Bond Counsel is not rendering any opinion as to any federal tax matters other than
those described in the opinions attached as Appendix D. Prospective investors, particularly those
who may be subject to special rules described above, are advised to consult their own tax
advisors regarding the federal tax consequences of owning and disposing of the Series 2011B
Subordinate Tax Exempt Bonds, as well as any tax consequences arising under the laws of any
state or other taxing jurisdiction.
Changes in Law and Post Issuance Events. On September 12, 2011, the President
released a legislative proposal that would, among other things, subject interest on tax-exempt
bonds (including the Series 2011B Subordinate Tax Exempt Bonds) to a federal income tax for
taxpayers with incomes above certain thresholds for tax years beginning after 2012. The
proposal has not yet passed either of the two Houses of Congress and it is not possible to predict
whether this proposal will be enacted into law. If enacted into law, such a proposal could affect
the value or marketability of tax-exempt bonds (including the Series 2011B Subordinate Tax
Exempt Bonds).
More generally, legislative or administrative actions and court decisions, at either the
federal or state level, could have an adverse impact on the potential benefits of the exclusion
from gross income of the interest on the Series 2011B Subordinate Tax Exempt Bonds for
federal or state income tax purposes, and thus on the value or marketability of the Series 2011B
Subordinate Tax Exempt Bonds. This could result from changes to federal or state income tax
rates, changes in the structure of federal or state income taxes (including replacement with
another type of tax), repeal of the exclusion of the interest on the Series 2011B Subordinate Tax
Exempt Bonds from gross income for federal or state income tax purposes, or otherwise. It is
not possible to predict whether any legislative or administrative actions or court decisions having
an adverse impact on the federal or state income tax treatment of holders of the Series 2011B
Subordinate Tax Exempt Bonds may occur.
Prospective purchasers of the Series 2011B Subordinate Tax Exempt Bonds should
consult their own tax advisers regarding the impact of any change in law on the Series 2011B
Subordinate Tax Exempt Bonds.
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Co-Bond Counsel has not undertaken to advise in the future whether any events after the
date of issuance and delivery of the Series 2011B Subordinate Tax Exempt Bonds may affect the
tax status of interest on the Series 2011B Subordinate Tax Exempt Bonds. Co-Bond Counsel
expresses no opinion as to any federal, state or local tax law consequences with respect to the
Series 2011B Subordinate Tax Exempt Bonds, or the interest thereon, if any action is taken with
respect to the Series 2011B Subordinate Tax Exempt Bonds or the proceeds thereof upon the
advice or approval of other counsel.
Series 2011 Taxable Bonds
The following is a summary of certain anticipated United States federal income tax
consequences of the purchase, ownership and disposition of the Series 2011 Taxable Bonds. The
summary is based upon the provisions of the Code, the regulations promulgated thereunder and
the judicial and administrative rulings and decisions now in effect, all of which are subject to
change. The summary generally addresses Series 2011 Taxable Bonds held as capital assets and
does not purport to address all aspects of federal income taxation that may affect particular
investors in light of their individual circumstances or certain types of investors subject to special
treatment under the federal income tax laws, including but not limited to financial institutions,
insurance companies, dealers in securities or currencies, persons holding such Series 2011
Taxable Bonds as a hedge against currency risks or as a position in a "straddle" for tax purposes,
or persons whose functional currency is not the United States dollar. Potential purchasers of the
Series 2011 Taxable Bonds should consult their own tax advisors in determining the federal,
state or local tax consequences to them of the purchase, holding and disposition of the Series
2011 Taxable Bonds.
The advice set forth in this section was not intended or written by Co-Bond Counsel to be
used and cannot be used by an owner of the Series 2011 Taxable Bonds for the purpose of
avoiding penalties that may be imposed on the owner of the Series 2011 Taxable Bonds. The
advice set forth herein is written to support the promotion or marketing of the Series 2011
Taxable Bonds. Each owner of the Series 2011 Taxable Bonds should seek advice based on its
particular circumstances from an independent tax advisor.
Generally. In the opinion of Co-Bond Counsel, interest on the Series 2011 Taxable
Bonds is not excluded from gross income for federal income tax purposes and so will be fully
subject to federal income taxation. Purchasers other than those who purchase Series 2011
Taxable Bonds in the initial offering at their principal amounts will be subject to federal income
tax accounting rules affecting the timing and/or characterization of payments received with
respect to such bonds. In general, interest paid on the Series 2011 Taxable Bonds and recovery
of accrued original issue and market discount, if any, will be treated as ordinary income to a
bondholder and, after adjustment for the foregoing, principal payments will be treated as a return
of capital.
Original Issue Discount. The following summary is a general discussion of certain
federal income tax consequences of the purchase, ownership and disposition of Series 2011
Taxable Bonds issued with original issue discount ("Discount Taxable Bonds"). A Series 2011
Taxable Bond will be treated as having been issued at an original issue discount if the excess of
its "stated redemption price at maturity" (defined below) over its issue price (defined as the
49
initial offering price to the public at which a substantial amount of the Series 2011 Taxable
Bonds of the same maturity have first been sold to the public, excluding bond houses and
brokers) equals or exceeds one quarter of one percent of such Series 2011 Taxable Bond's stated
redemption price at maturity multiplied by the number of complete years to its maturity.
A Series 2011 Taxable Bond's "stated redemption price at maturity" is the total of all
payments provided by the Series 2011 Taxable Bond that are not payments of "qualified stated
interest." Generally, the term "qualified stated interest" includes stated interest that is
unconditionally payable in cash or property (other than debt instruments of the issuer) at least
annually at a single fixed rate.
In general, the amount of original issue discount includible in income by the initial holder
of a Discount Taxable Bond is the sum of the "daily portions" of original issue discount with
respect to such Series 2011 Taxable Bond for each day during the taxable year in which such
holder held such Series 2011 Taxable Bond. The daily portion of original issue discount on any
Discount Taxable Bond is determined by allocating to each day in any "accrual period" a ratable
portion of the original issue discount allocable to that accrual period.
An accrual period may be of any length, and may vary in length over the term of a Series
2011 Taxable Bond, provided that each accrual period is not longer than one year and each
scheduled payment of principal or interest occurs at the end of an accrual period. The amount of
original issue discount allocable to each accrual period is equal to the difference between (i) the
product of the Series 2011 Taxable Bond's adjusted issue price at the beginning of such accrual
period and its yield to maturity (determined on the basis of compounding at the close of each
accrual period and appropriately adjusted to take into account the length of the particular accrual
period) and (ii) the amount of any qualified stated interest payments allocable to such accrual
period. The "adjusted issue price" of a Discount Taxable Bond at the beginning of any accrual
period is the sum of the issue price of the Discount Taxable Bond plus the amount of original
issue discount allocable to all prior accrual periods minus the amount of any prior payments on
the Series 2011 Taxable Bond that were not qualified stated interest payments. Under these
rules, holders will have to include in income increasingly greater amounts of original issue
discount in successive accrual periods.
Holders utilizing the accrual method of accounting may generally, upon election, include
all interest (including stated interest, acquisition discount, original issue discount, de minimis
original issue discount, market discount, de minimis market discount, and unstated interest, as
adjusted by any amortizable bond premium or acquisition premium) on the Series 2011 Taxable
Bond by using the constant yield method applicable to original issue discount, subject to certain
limitations and exceptions.
Market Discount. Any owner who purchases a Series 2011 Taxable Bond at a price
which includes market discount in excess of a prescribed de minimis amount (i.e., at a purchase
price that is less than its adjusted issue price in the hands of an original owner) will be required
to recharacterize all or a portion of the gain as ordinary income upon receipt of each scheduled or
unscheduled principal payment or upon other disposition. In particular, such owner will
generally be required either (a) to allocate each such principal payment to accrued market
discount not previously included in income and to recognize ordinary income to that extent and
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to treat any gain upon sale or other disposition of such a Series 2011 Taxable Bond as ordinary
income to the extent of any remaining accrued market discount (under this caption) or (b) to elect
to include such market discount in income currently as it accrues on all market discount
instruments acquired by such owner on or after the first day of the taxable year to which such
election applies.
The Code authorizes the United States Department of the Treasury (the "Treasury
Department") to issue regulations providing for the method for accruing market discount on debt
instruments the principal of which is payable in more than one installment. Until such time as
regulations are issued by the Treasury Department, certain rules described in the legislative
history of the Tax Reform Act of 1986 will apply. Under those rules, market discount will be
included in income either (a) on a constant interest basis or (b) in proportion to the accrual of
stated interest.
An owner of a Series 2011 Taxable Bond who acquires such Series 2011 Taxable Bond
at a market discount also may be required to defer, until the maturity date of such Series 2011
Taxable Bonds or the earlier disposition in a taxable transaction, the deduction of a portion of the
amount of interest that the owner paid or accrued during the taxable year on indebtedness
incurred or maintained to purchase or carry a Series 2011 Taxable Bond in excess of the
aggregate amount of interest (including original issue discount) includable in such owner's gross
income for the taxable year with respect to such Series 2011 Taxable Bond. The amount of such
net interest expense deferred in a taxable year may not exceed the amount of market discount
accrued on the Series 2011 Taxable Bond for the days during the taxable year on which the
owner held the Series 2011 Taxable Bond and, in general, would be deductible when such
market discount is includable in income. The amount of any remaining deferred deduction is to
be taken into account in the taxable year in which the Series 2011 Taxable Bond matures or is
disposed of in a taxable transaction. In the case of a disposition in which gain or loss is not
recognized in whole or in part, any remaining deferred deduction will be allowed to the extent
gain is recognized on the disposition. This deferral rule does not apply if the bondowner elects
to include such market discount in income currently as described above.
Bond Premium. A purchaser of a Series 2011 Taxable Bond who purchases such Series
2011 Taxable Bond at a cost greater than its then principal amount (or, in the case of a Series
2011 Taxable Bond issued with original issue premium, at a price in excess of its adjusted issue
price) will have amortizable bond premium. If the holder elects to amortize the premium under
Section 171 of the Code (which election will apply to all bonds held by the holder on the first
day of the taxable year to which the election applies, and to all bonds thereafter acquired by the
holder), such a purchaser must amortize the premium using constant yield principles based on
the purchaser's yield to maturity. Amortizable bond premium is generally treated as an offset to
interest income, and a reduction in basis is required for amortizable bond premium that is applied
to reduce interest payments. Different rules apply to Discount Tax Exempt Bonds that are
acquired with "acquisition premium" (that is, at a price generally in excess of the Series 2011
Bond's adjusted issue price). Purchasers of any Series 2011 Taxable Bonds who acquire such
Series 2011 Bonds at a premium (or with acquisition premium) should consult with their own tax
advisors with respect to the determination and treatment of such premium for federal income tax
purposes and with respect to state and local tax consequences of owning such Series 2011
Taxable Bonds.
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Sale or Redemption of Series 2011 Taxable Bonds. A bondowner's tax basis for a Series
2011 Taxable Bond is the price such owner pays for the Series 2011 Taxable Bond plus the
amount of any original issue discount and market discount previously included in income,
reduced on account of any payments received (other than "qualified periodic interest" payments)
and any amortized bond premium. Gain or loss recognized on a sale, exchange or redemption of
a Series 2011 Taxable Bond, measured by the difference between the amount realized and the
Series 2011 Taxable Bond basis as so adjusted, will generally give rise to capital gain or loss if
the Series 2011 Taxable Bond is held as a capital asset (except as discussed above under "Market
Discount"). The defeasance of the Series 2011 Taxable Bonds may result in a deemed sale or
exchange of such Series 2011 Taxable Bonds under certain circumstances; owners of such Series
2011 Taxable Bonds should consult their tax advisors as to the federal income tax consequences
of such an event.
Backup Withholding. A bondowner may, under certain circumstances, be subject to
"backup withholding." Currently, the rate of this withholding tax is 30% (although the rate is
scheduled to be reduced over the next few years) with respect to interest or original issue
discount on the Series 2011 Taxable Bonds. This withholding generally applies if the owner of a
Series 2011 Taxable Bond (a) fails to furnish the Trustee or other payor with its taxpayer
identification number; (b) furnishes the Trustee or other payor an incorrect taxpayer
identification number; (c) fails to report properly interest, dividends or other "reportable
payments" as defined in the Code; or (d) under certain circumstances, fails to provide the Trustee
or other payor with a certified statement, signed under penalty of perjury, that the taxpayer
identification number provided is its correct number and that the holder is not subject to backup
withholding. Backup withholding will not apply, however, with respect to certain payments
made to bondowners, including payments to certain exempt recipients (such as certain exempt
organizations) and to certain Nonresidents (as defined below). Owners of the Series 2011
Taxable Bonds should consult their tax advisors as to their qualification for exemption from
backup withholding and the procedure for obtaining the exemption.
The amount of "reportable payments" for each calendar year and the amount of tax
withheld, if any, with respect to payments on the Series 2011 Taxable Bonds will be reported to
the bondowners and to the IRS.
Nonresident Bondowners. Under the Code, interest and original issue discount income
with respect to Taxable Bonds held by nonresident alien individuals, foreign corporations or
other non-United States persons ("Nonresidents") generally will not be subject to the United
States withholding tax (or backup withholding) if the Issuer (or other person who would
otherwise be required to withhold tax from such payments) is provided with an appropriate
statement that the beneficial owner of the Series 2011 Taxable Bond is a Nonresident.
Notwithstanding the foregoing, if any such payments are effectively connected with a United
States trade or business conducted by a Nonresident bondowner, they will be subject to regular
United States income tax, but will ordinarily be exempt from United States withholding tax.
State Taxes on the Series 2011 Taxable Bonds. Co-Bond Counsel is further of the
opinion that with respect to the Series 2011 Taxable Bonds, under Tennessee law the Series 2011
Taxable Bonds and interest thereon are not subject to income taxation in the State of Tennessee,
except for Tennessee franchise taxes.
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ERISA. The Employees Retirement Income Security Act of 1974, as amended
("ERISA"), and the Code generally prohibit certain transactions between a qualified employee
benefit plan under ERISA or tax-qualified retirement plans and individual retirement accounts
under the Code (collectively, the "Plans") and persons who, with respect to a Plan, are fiduciaries
or other "parties in interest" within the meaning of ERISA or "disqualified persons" within the
meaning of the Code. All fiduciaries of Plans, in consultation with their advisors, should
carefully consider the impact of ERISA and the Code on an investment in any Series 2011
Taxable Bonds.
LITIGATION
The Issuer
There is no known pending or, to the knowledge of the Issuer, threatened litigation
against the Issuer which in any way questions or materially affects the validity of the Series 2011
Bonds, or any proceedings or transactions relating to their issuance, sale or delivery or which
may materially affect the acquisition, completion or operation of the Project.
The City
At the time of delivery of the Series 2011 Bonds, the City will deliver, or cause to be
delivered, a certificate of certain officers of the City stating that, other than as described in this
Official Statement, there is no controversy or litigation of any nature then pending or, to their
knowledge, threatened, (a) restraining or enjoining the issuance, sale, execution or delivery of
the Series 2011 Bonds, or (b) in any way contesting or affecting the validity of the Series 2011
Bonds, any proceedings of the City taken with respect to the issuance or sale thereof or the
pledge or application of any money or security provided for the payment of the Series 2011
Bonds or the corporate existence, boundaries or powers of the City, or the title of its officials to
their respective offices or (c) which may materially affect the acquisition, completion or
operation of the Project or the City's right to receive distributions of TDZ Revenues or the use
thereof to pay debt service on obligations such as the Series 2011 Bonds or the pledge thereof for
the benefit of the Holders of the Series 2011 Bonds or (d) which may materially affect the City's
right to collect the Non-Tax Revenues or the use thereof to pay the Replenishment Obligations.
Such certificate may make reference to pending litigation involving the annexation by the City of
certain territory adjacent to the City and to litigation involving the Memphis City School District
and Shelby County School District.
FINANCIAL ADVISORS
First Southwest Company and ComCap Advisors, a division of Community Capital (the
"Co-Financial Advisors") are serving as co-financial advisors to the Issuer. The Co-Financial
Advisors assisted in matters related to the planning, structuring and issuance of the Series 2011
Bonds and provided other advice. The Co-Financial Advisors did not engage in any
underwriting activities with regard to the issuance and sale of the Series 2011 Bonds.
53
UNDERWRITING
The Series 2011 Bonds are being purchased for reoffering by Morgan Keegan &
Company, Inc. (the "Representative"), on behalf of itself and the other underwriters listed in the
front cover page of this Official Statement (collectively, the "Underwriters") at an aggregate
purchase price of $197,132,245.40 which represents the par amount of the Series 2011 Bonds of
$196,935,000.00, plus a net original issue premium in the amount of $2,101,158.60 and less an
underwriting discount of $1,903,913.20, pursuant to a Bond Purchase Agreement among the
Representative, the Issuer and the City (the "Bond Purchase Agreement"). The Bond Purchase
Agreement provides that the obligations of the Underwriters to accept delivery of the Series 2011
Bonds are subject to various conditions of the Bond Purchase Agreement, but the Underwriters
will be obligated to purchase all of the Series 2011 Bonds, if any are purchased. The
Underwriters reserve the right to join with dealers and other underwriters in offering the Series
2011 Bonds to the public.
The prices and other terms with respect to the offering and sale of the Series 2011 Bonds
may be changed from time to time by the Underwriters after such Series 2011 Bonds are released
for sale, and the Series 2011 Bonds may be offered and sold at prices other than the initial
offering prices, including sales to dealers who may sell the Series 2011 Bonds into investment
accounts.
The Underwriters intend to offer the Series 2011 Bonds initially at the offering prices
shown on the inside cover page hereof, which prices may subsequently change without any
requirement of prior notice. The Underwriters reserve the right to join with other dealers and
underwriters in offering the Series 2011 Bonds to the public. The Underwriters may offer and
sell the Series 2011 Bonds to certain dealers (including dealer banks and dealers depositing the
Series 2011 Bonds into investment trusts) and others at prices other than the public offering
prices stated on the inside cover of this Official Statement.
The Representative and its affiliates are full service financial institutions engaged in
various activities, which may include securities trading, commercial and investment banking,
financial advisory, investment management, principal investment, hedging, financing and
brokerage activities. The Representative and its affiliates have, from time to time, performed,
and may in the future perform, various investment banking services for the Issuer, the City and
other parties to this transaction, for which they received or will receive customary fees and
expenses.
Regions Bank, an affiliate of the Representative, is serving as trustee, paying agent, bond
registrar and authenticating agent with respect to the Series 2011 Bonds and will receive an
annual fee for providing such services pursuant to the Indenture.
Citigroup Inc., parent company of Citigroup Global Markets Inc., an underwriter of the
Series 2011 Bonds, has entered into a retail brokerage joint venture with Morgan Stanley. As
part of the joint venture, Citigroup Global Markets Inc. will distribute municipal securities to
retail investors through the financial advisor network of a new broker-dealer, Morgan Stanley
Smith Barney LLC. This distribution arrangement became effective on June 1, 2009. As part of
54
this arrangement, Citigroup Global Markets Inc. will compensate Morgan Stanley Smith Barney
LLC for its selling efforts with respect to the Series 2011 Bonds.
RATINGS
Moody's Investors Service, Inc. ("Moody's") and Standard & Poor's Financial Services
LLC, a division of The McGraw-Hill Companies, Inc. ("S&P") have assigned ratings of "A1"
and "A/Stable," respectively, to the Series 2011A Senior Taxable Bonds. Moody's and S&P
(collectively, the "Rating Agencies") have also assigned ratings of "Aa3" and "AA-/Stable,"
respectively, to the Series 2011 Subordinate Bonds in each case without regard to the Policy.
Moody's and S&P have assigned the Series 2011 Bonds the ratings of "Aa3" (negative outlook)
and "AA+" (negative outlook), respectively, based upon the issuance of the Policy by AGM.
Such ratings express only the views of the Rating Agencies. An explanation of the
significance of such ratings may be obtained from the Rating Agencies furnishing the same.
There is no assurance that either or all of such ratings will be maintained for any given period of
time or that it will not be revised downward or withdrawn entirely by the Rating Agencies if, in
their judgment, circumstances so warrant. Any such downward revision or withdrawal of such
ratings or other actions by the Rating Agencies or any of them, may have an adverse effect on
the liquidity and/or market price of the affected Series 2011 Bonds. Neither the City nor the
Issuer undertake any responsibility to oppose any such revision or withdrawal.
CONTINUING DISCLOSURE
The Issuer has determined that no financial or operating data concerning the Issuer is
material to any decision to purchase, hold or sell the Series 2011 Bonds and the Issuer has no
responsibility to provide any such information either now or in the future.
The City will agree and undertake, for the benefit of the holders of the Series
2011 Bonds, to provide certain financial information and operating data relating to the TDZ
Revenues, the Non-Tax Revenues and the Series 2011 Bonds in each year (the "Annual Report")
and to provide notices of the occurrence of certain enumerated events, if material, pursuant to the
Disclosure Agreement. The Annual Report will be filed annually by the Trustee, on behalf of the
City, with the centralized information repository developed and operated by the Municipal
Securities Rulemaking Board (the "MSRB") through the Electronic Municipal Market Access
system ("EMMA"), in an electronic format prescribed by the MSRB. The notices of material
events will also be filed by the Trustee, on behalf of the City, with EMMA. The specific nature
of the information to be contained in the City Annual Report and the notices of material events is
described in "APPENDIX C - FORM OF CONTINUING DISCLOSURE AGREEMENT"
attached hereto. These undertakings have been made in order to assist the Underwriters in
complying with the Rule, and such undertaking shall only apply so long as the Series 2011
Bonds remain Outstanding; provided, however, that the undertaking shall terminate upon the
termination of the continuing disclosure requirements of the Rule by legislative, judicial or
administrative action and may be amended as provided in the Disclosure Agreement.
55
There have been several instances in the previous five years in which the City has failed
to comply in all material respects with previous undertakings entered into pursuant to the Rule.
With the exception of the filings for the Fiscal Year 2008 with respect to its Sanitary Sewerage
System Bonds, the City is now in substantial compliance with all of its required filings set forth
in the related undertakings. In addition, the City is implementing certain measures and
procedures which it believes will minimize any further instances of non compliance.
CERTAIN REFERENCES
Summaries of certain provisions of the Indenture, the Loan Agreement and the
Replenishment Agreement as well as certain definitions used therein can be found in Appendix
A attached hereto and incorporated herein by reference. Reference is made to the Indenture, the
Loan Agreement and the Replenishment Agreement for a complete recital of their terms.
References herein to the Act and any of the bond documents are brief descriptions of
certain portions thereof. Such descriptions do not purport to be complete and reference is hereby
made to such statute and documents for full and complete statements of the provisions thereof.
MISCELLANEOUS
The references, excerpts and summaries of all documents referred to herein do not
purport to be complete statements of the provisions of such documents and reference is directed
to all such documents for full and complete statements of all matters of fact relating to the Series
2011 Bonds, the security for and the source for repayment for the Series 2011 Bonds and the
rights and obligations of the Bondholders. Copies of such documents may be obtained as
specified under the caption "INTRODUCTION" herein.
The information contained in this Official Statement has been compiled from official and
other sources deemed to be reliable, and is believed to be correct as of this date.
Use of the words "shall" or "will" in this Official Statement or in summaries of
documents to describe future events or continuing obligations is not intended as a representation
that such event or obligation will occur but only that the document contemplates or requires such
event to occur or obligation to be fulfilled.
Any statements made in this Official Statement involving estimates or matters of opinion,
whether or not so expressly stated, are set forth as such and not as representations of fact, and no
representation is made that any of the estimates or matters of opinion will be realized. Neither
this Official Statement nor any statement which may have been made orally or in writing is to be
construed as a contract with the owners of the Series 2011 Bonds.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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The Issuer and City have reviewed the information contained herein which relates to
them and have approved all such information for use in this Official Statement. The execution,
delivery and circulation of this Official Statement has been duly authorized by the Issuer and the
City and this Official Statement has been duly approved by the Issuer and the City.
MEMPHIS CENTER CITY REVENUE
FINANCE CORPORATION
By: /s/ Paul Morris
Paul Morris, President
CITY OF MEMPHIS, TENNESSEE
By: /s/ A C Wharton, Jr.
A C Wharton, Jr., Mayor
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[THIS PAGE INTENTIONALLY LEFT BLANK]
APPENDIX A
DEFINITIONS OF CERTAIN TERMS AND SUMMARY OF CERTAIN PROVISIONS
OF THE INDENTURE, LOAN AGREEMENT AND REPLENISHMENT AGREEMENT
[THIS PAGE INTENTIONALLY LEFT BLANK]
APPENDIX A
DEFINITIONS OF CERTAIN TERMS AND SUMMARY OF CERTAIN PROVISIONS
OF THE INDENTURE,
LOAN AGREEMENT AND REPLENISHMENT AGREEMENT
Definitions
The terms set forth below have the following meanings, as defined in the Indenture, the
Loan Agreement and the Replenishment Agreement.
“Additional Bonds” means the additional bonds issued by the Issuer pursuant to the
terms and conditions of the Indenture.
“Additional Subordinate Bonds” means any Additional Bonds having the same Priority
as the Series 2011B Bonds and the Series 2011C Bonds.
“Authorized Officer” means, when used in connection with the City, the Mayor,
Comptroller and Director of Finance and Administration of the City of Memphis, Tennessee or
any other officer of the City designated in writing by the Mayor of the City of Memphis,
Tennessee, to execute an Officer’s Certificate on behalf of the City, and when used in connection
with the Issuer, any officer of the Issuer authorized by its bylaws or by or pursuant to a
resolution of the Issuer to act on behalf of the Issuer.
“Bond” means one or more of the Series 2011 Bonds and any Additional Bonds.
“Bond Year” means any twelve month period beginning on November 1 in one calendar
year and ending on, but including, October 31 of the next calendar year. For the purpose of
calculating debt service payable on the Bonds in any Bond Year, principal and interest payable
on the Bonds on November 1 of any Bond Year shall be deemed to be payable on October 31 of
the preceding Bond Year.
“Bondholder,” “Holder” and “owner of the Bonds” means any Person in whose name a
Bond is registered on the Bond Register.
“Bond Register” means the registration books of the Issuer kept by the Trustee to
evidence the registration and transfer of Bonds.
“Borrower’s Obligations” means, during any Fiscal Year, the amount certified by the
City pursuant to the Indenture as required to be paid by it during such Fiscal Year for or on
account of the obligations identified in a schedule attached to the Indenture.
“Business Day” means any day of the year on which banks located in Memphis,
Tennessee, or in the city in which the principal corporate trust office of the Trustee is located, are
not required or authorized by law or executive order to remain closed.
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“City” means the City of Memphis, Tennessee, a municipal corporation organized under
the laws of the State of Tennessee, and the City’s successors and assigns.
“Closing” or “Closing Date” means, with respect to any series of Bonds issued pursuant
to the Indenture, the date of original issuance of such series of Bonds.
“Code” means the Internal Revenue Code of 1986, as amended from time to time and the
regulations promulgated thereunder.
“Construction Fund” means the Construction Fund created by the Indenture.
“Convention Center Act” means Tennessee Code Annotated, Title 7, Chapter 88,
commonly known as the Convention Center and Tourism Development Financing Act of 1988.
“Costs of Issuance Fund” means the Costs of Issuance Fund created by the Indenture.
“Costs of the Project” means “costs”, as defined by the Act, with respect to the Project.
“Debt Service Fund” means the Debt Service Fund created by the Indenture.
“Debt Service Reserve Fund” means the fund by that name established by the Indenture.
“Deficiency Notice” means a notice given to the City by the Trustee pursuant to the
Indenture which sets forth the amount by which the amount on deposit in the Subordinate Debt
Service Reserve Account on April 30 of a year is less than the then Subordinate Debt Service
Reserve Requirement.
“Escrow Obligations” means
(i) noncallable Government Obligations; or
(ii) if an opinion of Bond Counsel is delivered to the Trustee to the effect that the
applicable law and documents permit the use of such obligations for such advance
refunding and if satisfactory evidence is delivered to the Trustee that after such advance
refunding the indebtedness so advance refunded will be rated in the highest category by
either Moody’s or S&P, or, upon the discontinuance of either or both such services, any
other nationally recognized rating service, (a) evidences of a direct ownership in future
interest or principal payments on obligations issued or guaranteed by the United States of
America, which obligations are held in a custody account by a custodian satisfactory to
the Trustee, pursuant to the terms of a custody agreement or (b) bonds or notes of any
state of the United States of America or any political subdivision thereof which bonds
and notes, when issued, were secured by the full faith and credit of such issuer and at the
time of acquisition and at all times thereafter are secured by money or noncallable
Escrow Obligations (which may be applied only to the payment of the principal of,
interest and premium on such bonds or notes and which are held in an irrevocable escrow
by an escrow agent or trustee in trust solely for the benefit of the owners of such bonds or
notes) and which bonds or notes are rated “AAA” by S&P or “Aaa” by Moody’s if:
A-2
(1) such bonds or notes are not subject to redemption prior to maturity or
the Trustee has received irrevocable notice as to the date of their call and
redemption prior to maturity,
(2) such money and noncallable Escrow Obligations are sufficient at all
times to pay in full all principal of, interest, and premium, if any, on such bonds
and notes which sufficiency has been verified by the report of an independent
certified public accountant (a “Verification of Sufficiency”) and no replacement
of a United States Government Obligation in such escrow shall be permitted
except with another United States Government Obligation or money and then
only upon delivery of a new Verification of Sufficiency,
(3) the Trustee has received an opinion of Independent Counsel (which
counsel and opinion, including without limitation the form, scope substance and
other aspects thereof are acceptable to the Trustee and not objected to by the
Issuer) to the effect that such money and Escrow Obligations are not available to
satisfy any other claims, including those by or against the trustee or escrow agent
for such bonds and notes, and
(4) the Trustee has received an unqualified opinion of nationally
recognized bankruptcy counsel (which counsel and opinion, including without
limitation the form, scope, substance and other aspects thereof are acceptable to
the Trustee and not objected to by the Issuer) to the effect that payments made on
such bonds or notes from such escrow would not be avoidable as preferential
payments and recoverable under the United States Bankruptcy Code should the
issuer or any other person liable on the bonds or notes become a debtor in a
proceeding commenced under the United States Bankruptcy Code.
“Expense Fund” means the Expense Fund created by the Indenture.
“Fiscal Year” means any twelve month period beginning on July l of any calendar year
and ending on and including June 30 of the next succeeding calendar year, or such other twelve
month period selected by the City, from time to time, as its fiscal year.
“General Revenues” means all revenues of the City, other than the TDZ Revenues or ad
valorem property tax revenues, that may legally be applied to the payments required by the
Replenishment Agreement to be made by the City.
“Government Obligations” means (i) direct obligations of the United States of America
for the full and timely payment of which the full faith and credit of the United States of America
is pledged, or (ii) obligations issued by a person controlled or supervised by and acting as an
instrumentality of the United States of America, the full and timely payment of the principal of
and the interest on which is fully and unconditionally guaranteed as a full faith and credit
obligation of the United States of America (including any securities described in (i) or (ii) issued
or held in book–entry form on the books of the Department of the Treasury of the United States
of America), which obligations, in either case, (y) are not subject to redemption or prepayment
A-3
prior to maturity except at the option of the holder of such obligations and (z) may include U.S.
Treasury Trust Receipts.
“Independent Architect” means an architect, engineer or firm of architects or engineers
selected by the City, not objected to the Trustee and licensed by, or permitted to practice in, the
state where the construction involved is located, which architect, engineer or firm of architects or
engineers shall have no interest, direct or indirect, in the City and, in the case of an individual,
shall not be a member, director, officer or employee of the City and, in the case of a firm, shall
not have a partner, member, director, officer or employee who is a member, director, officer or
employee of the City; it being understood that an arm’s–length contract with the City for the
performance of architectural or engineering services shall not in and of itself be regarded as
creating an interest in or an employee relationship with such entity and that the term Independent
Architect may include an architect or engineer or firm of architects or engineers who otherwise
meet the requirements of this definition and who also are under contract to construct the facilities
which they have designed.
“Insurance Policy” means each Insurance Policy issued at the request of the Issuer or the
City by the Insurer guaranteeing the schedule payment, when due, of the principal of, whether at
maturity or through mandatory Sinking Fund Redemptions, and interest on the Insured Bonds.
“Insured Bonds” means the Series 2011 Bonds.
“Insurer” means Assured Guaranty Municipal Corp., a New York stock insurance
company, or any successor thereto or assigns thereof.
“Insurer Default” means with respect to any Insurer, any of the following:
(i)
there shall occur a failure by the Insurer to make payment under
the Insurance Policy; or
(ii)
the Insurance Policy shall have been declared null and void or
unenforceable in a final determination by a court of law.
“Interest Payment Date” means, with respect to the Series 2011 Bonds, each May 1 and
November 1, commencing (i) with respect to any Series 2011 Bonds of a series, on the dates set
forth in the Indenture for the Series 2011 Bonds of such series, and (ii) with respect to any
Additional Bonds, on the date set forth in the Supplemental Indenture authorizing the issuance of
such Additional Bonds.
“Issuer” means Memphis Center City Revenue Finance Corporation, a public nonprofit
corporation organized under the laws of the State of Tennessee, and the Issuer’s successors and
assigns.
“Maximum Annual Debt Service” means, as of any particular date of calculation and with
respect to any Outstanding Bonds, an amount equal to the greatest amount required in the then
current or any future Bond Year to pay the principal of and interest on such Bonds payable
during such Bond Year; provided, however, that for purposes of this definition it shall be
assumed that:
A-4
(i)
principal and interest payable on November 1 of a Bond Year is payable
on October 31 of the immediately preceding Bond Year; and
(ii)
a Bond bearing interest at a variable rate, prior to its conversion to bear
interest at a fixed rate to its maturity, bears interest during any Bond Year at the lesser of:
(1)
a fixed rate of interest equal to that rate, as determined by an
Authorized Officer of the City on a Business Day not more than twenty (20) days
prior to the date of initial issuance of such variable rate Bond, which the Bond
would have had to bear to be marketed at par on such date as a fixed rate
obligation maturing on the maturity date of such variable rate Bond; and
(2)
if the Issuer has, at the direction of the City, in connection with
such variable rate Bond entered into (A) an interest rate exchange agreement
which provides that the Issuer is to pay another person an amount determined
based upon a fixed rate of interest on the Outstanding principal amount of the
variable rate Bond to which such agreement relates and the counterparty to such
agreement pays with respect to a like principal amount a variable rate expected to
be reasonably equivalent to the variable rate of interest on such Bonds, or (B) a
hedge agreement in the nature of an interest rate cap or collar, then either the
fixed interest rate set forth in or determined in accordance with such interest rate
exchange agreement or the maximum rate set forth in such hedge agreement, as
applicable.
“Officer’s Certificate” means a certificate signed (i) in the case of a certificate delivered
on behalf of the City, by an Authorized Officer of the City or, (ii) in case of a certificate
delivered on behalf of any corporation, by the President or any authorized Vice–President of
such corporation or any other officer duly authorized by such corporation or, (iii) on behalf of
any other Person, by the chief executive officer, the chief financial officer or any other
authorized officer of such other Person, in each case whose authority to execute such Certificate
shall be evidenced to the satisfaction of the Trustee.
“Operating Expenses” means all costs, fees and expenses of any kind arising out of or
incurred by the Issuer, the Trustee, a tender agent, a remarketing agent or any other person in
connection with the administration of the trust estate, or the performance or exercise by such
person of any duties, powers and rights under the Indenture or under the Bonds, including but not
limited to the fees and expenses of the Trustee, bond insurance premiums not paid from proceeds
of Bonds, and fees and expenses in connection with the tender and remarketing of the Bonds, but
shall not include the principal or redemption price of or redemption premium or interest on
Bonds, in each case to the extent constituting a Cost of the Project. Such costs, fees and
expenses may, at the option of the City, include a reserve for the aforementioned costs, fees and
expenses not to exceed ten percent (10%) of the amount certified by the City from time to time
as being the estimated Operating Expenses for the next succeeding twelve calendar months.
“Outstanding” means when used in connection with any Bond, a Bond which has been
duly authenticated and delivered by the Trustee under the Indenture, other than:
A-5
(a)
A Bond cancelled after purchase in the open market or because of
payment at or redemption prior to maturity;
(b)
A Bond for the payment or redemption of which money or Escrow
Obligations shall have been theretofore deposited with the Trustee pursuant to the
provisions of the Indenture (whether upon or prior to the maturity or redemption date of
any such Bonds); provided, however, that if such Bond is to be redeemed prior to the
maturity thereof, notice of such redemption shall have been given or arrangements
satisfactory to the Trustee shall have been made therefor, or waiver of such notice
satisfactory in form to the Trustee shall have been filed with the Trustee;
(c)
A Bond in lieu of which another Bond has been authenticated under the
Indenture; and
(d)
For the purpose of any waivers, consents, notices or other actions required
or permitted by the Indenture to be given or taken, a Bond owned by or on behalf of the
Issuer or the City or by or on behalf of any affiliate or subsidiary of, or any other entity
controlled by, either the Issuer or the City.
“Person” means any natural person, firm, joint venture, association, partnership,
business trust, corporation, limited liability company, public body, agency or political
subdivision thereof or any other similar entity.
“Plans and Specifications” means all available plans and specifications for any portion
of the Project with respect to which an Independent Architect has been retained.
“Priority” means, when used in connection with any Bond, the relative rank or right of
payment of such Bond out of the Trust Estate; provided, however, that (i) the Series 2011A
Bonds shall rank and have a right of payment superior to the Series 2011B Bonds and the Series
2011C Bonds, and (ii) Additional Bonds shall have the rank or right of payment provided in the
Supplemental Indenture authorizing their issuance.
“Project” means and consists of:
(a)
redevelopment of the public arena and related properties located in the
center city area of the City comprising approximately 41 acres of land commonly known
as the “Pyramid Arena” for retail and commercial uses;
(b)
acquisition for future redevelopment and renovation, certain properties in
the vicinity of the Pyramid Arena and located in the center city area of the City
commonly known as the “Pinch District” comprising 34 parcels of land aggregating
approximately 11 acres of land; and
(c)
acquisition by the City of all of the interest of Shelby County, Tennessee,
in and to the Memphis Cook Convention Center.
“Redemption Date” means any date on which Bonds are to be redeemed in accordance
with the provisions of the Indenture.
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“Revenue Fund” means the Revenue Fund created by the Indenture.
“Senior Bond” means any Series 2011A Senior Taxable Bond or any Additional Bond of
the same Priority with the Series 2011A Senior Taxable Bonds.
“Senior Bond Account” means the Senior Bond Account within the Debt Service Fund
created by the Indenture.
“Senior Bond Capitalized Interest Account” means the Senior Bond Capitalized Interest
Account within the Debt Service Fund created by the Indenture.
“Senior Debt Service Reserve Account” means the Senior Debt Service Reserve Account
within the Debt Service Reserve Fund created pursuant to the Indenture.
“Senior Debt Service Reserve Requirement” means, initially at the Closing Date,
$4,638,043.50, and, as of any particular date of calculation thereafter, (i) if no Senior Bonds
other than the Series 2011A Senior Taxable Bonds are then Outstanding, the lesser of such
amount and the Maximum Annual Debt Service on the then Outstanding Series 2011A Senior
Taxable Bonds, or (ii) such greater amount as shall be set forth in the Supplemental Indenture
authorizing the issuance of any additional Senior Bonds theretofore issued.
“Sinking Fund Redemption” means, when used in connection with Series 2011 Bonds of
a series and maturity, the mandatory redemption thereof required to be made in accordance with
the Indenture, and, when used in connection with any particular series and maturity of Additional
Bonds, the mandatory redemption thereof required to be made in accordance with the
Supplemental Indenture authorizing the issuance thereof.
“Subordinate Bond” means any Series 2011B Subordinate Tax-Exempt Bond, Series
2011C Subordinate Taxable Bond or Additional Bond of the same Priority with the Series 2011B
Subordinate Tax-Exempt Bonds and Series 2011C Subordinate Taxable Bonds.
“Subordinate Bond Account” means the Subordinate Bond Account within the Debt
Service Fund created by the Indenture.
“Subordinate Bond Capitalized Interest Account” means the Subordinate Bond
Capitalized Interest Account within the Debt Service Fund created by the Indenture.
“Subordinate Debt Service Reserve Account” means the account within the Debt Service
Reserve Fund so designated and established by the Indenture.
“Subordinate Debt Service Reserve Requirement” means, initially at the Closing Date,
$14,367,912.50, and, as of any particular date of calculation thereafter, (i) if no Subordinate
Bonds other than the Series 2011B Subordinate Tax-Exempt Bonds or Series 2011C Subordinate
Taxable Bonds are then Outstanding, the lesser of such amount and the Maximum Annual Debt
Service on the then Outstanding Series 2011B Subordinate Tax-Exempt Bonds and Series 2011C
Subordinate Taxable Bonds, or (ii) such greater amount as shall be set forth in the Supplemental
Indenture authorizing the issuance of any additional Subordinate Bonds theretofore issued.
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“Supplemental Indenture” means any indenture authorizing the issuance of Additional
Bonds in accordance with the Indenture or amending or supplementing the Indenture or any prior
Supplemental Indenture executed and becoming effective in accordance with the terms and
provisions of the Indenture.
“Surplus Fund” means the Surplus Fund created by the Indenture.
“Swap Agreement” means any interest rate exchange agreement entered into by the
Issuer shall meet certain conditions and requirements outlined in the Indenture.
“Tax Certificate” means a certificate or certificates of an Authorized Officer of the Issuer
and the City, including the appendices, schedules and exhibits thereto, executed in connection
with the issuance of the federally tax exempt Series 2011 Bonds in which the Issuer and City
make representations and agreements as to arbitrage compliance with the provisions of Section
141 through 150, inclusive, of the Code, or any similar certificate, agreement or other instrument
made, executed and delivered in lieu of said certificate, in each case as the same may be
amended or supplemented.
“Tax Exempt” means, when used in connection with any particular Bond, a Bond the
interest on which is, in the opinion of Bond Counsel delivered at the time of issuance of such
Bond, excluded from the gross income of the Holder thereof for purposes of federal income
taxation.
“TDZ Revenues” means a distribution of state and local sales and use taxes, authorized
and allocated pursuant to the Convention Center Act, relating to sales made in the downtown
tourism development zone approved by the City and the State with respect to the “qualified
public use facility” (as defined in the Convention Center Act) known as the Cook Convention
Center (including ancillary structures and facilities and associated developments) during a period
which began during the Fiscal Year ended June 30, 2002, the time when such “qualified public
use facility” commenced operations as a “qualified public use facility, and which will continue
for up to thirty (30) years thereafter, until the Fiscal Year ending June 30, 2030, unless earlier
terminated in accordance with the Convention Center Act.
“Trust Estate” means (a) all right, title and interest of the Issuer in and to the Loan
Agreement and all amounts payable to the Issuer under the Loan Agreement and all security
therefor (excluding Unassigned Rights as defined in the Indenture); (b) all right, title and interest
of the Issuer in and to the funds, accounts and subaccounts established pursuant to the Indenture
and the assets thereof and income and earnings thereon, except that the Senior Debt Service
Reserve Account of the Debt Service Reserve Fund, each subaccount therein, the assets thereof
and the income and earnings thereon shall be for the sole benefit of the Holders of Outstanding
Senior Bonds and the Subordinate Debt Service Reserve Account of the Debt Service Reserve
Fund, each subaccount therein, the assets thereof and the income and earnings thereon shall be
for the sole benefit of the Holders of Outstanding Subordinate Bonds; (c) solely for the benefit of
the Holders of Outstanding Subordinate Bonds, all right, title and interest in and to the
Replenishment Agreement and all amounts payable to the Issuer thereunder; (d) any and all other
property of every kind and nature from time to time, by delivery or by writing of any kind,
conveyed, pledged, assigned or transferred as and for additional security under the Indenture by
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the Issuer or the City or by anyone in their behalf to the Trustee, including without limitation
funds of the City held by the Trustee as security for the Bonds; to have and to hold, all and
singular, the properties and the rights and privileges conveyed, assigned and pledged by the
Indenture by the Issuer or intended so to be, unto the Trustee and its successors and assigns
forever, in trust, nevertheless, with power of sale for the equal and pro rata benefit and security
of each and every Holder of the Bonds of a Priority (as defined in the Indenture) issued and to be
issued under the Indenture, without preference, priority or distinction as to participation in the
benefit and protection of one Bond of a Priority over or from the other Bonds of such Priority, by
reason of priority in the issue or negotiation or maturity thereof, or for any other reason
whatsoever, except as otherwise expressly provided in the Indenture, so that each and all of the
Bonds of a Priority shall have the same right, lien and privilege under the Indenture and shall be
equally secured with the same effect as if the same had all been made, issued and negotiated
simultaneously with the delivery of the Indenture and were expressed to mature on one and the
same date; provided, nevertheless, and these presents are upon the express condition that if the
Issuer or its successors or assigns shall well and truly pay or cause to be paid the principal of
such Bonds with interest according to the provisions set forth in the Bonds and each of them or
shall provide for the payment or redemption of such Bonds by depositing or causing to be
deposited with the Trustee the entire amount of funds or securities requisite for payment or
redemption thereof when and as authorized by the provisions of the Indenture, and shall also pay
or cause to be paid all other sums payable under the Indenture by the Issuer, then these presents
and the estate and rights granted by the Indenture shall cease, determine and become void, and
thereupon the Trustee, on payment of its lawful charges and disbursements then unpaid, on
demand of the Issuer and upon the payment of the cost and expenses thereof, shall duly execute,
acknowledge and deliver to the Issuer such instruments of satisfaction or release as may be
necessary or proper to discharge the Indenture, including if appropriate any required discharge of
record, and if necessary shall grant, reassign and deliver to the Issuer, its successors or assigns,
all and singular the property, rights, privileges and interests by it granted, conveyed and assigned
by the Indenture, and all substitutes therefor, or any part thereof, not previously disposed of or
released as provided in the Indenture; otherwise the Indenture shall be and remain in full force.
“Written Request” means with reference to the Issuer, a request in writing signed by the
President, Chairman, Vice–Chairman, Treasurer, Secretary or Assistant Secretary of the Issuer,
and, with reference to the City, means a request in writing signed by any officer of the City
authorized to execute an Officer’s Certificate on its behalf, as the case may be.
SUMMARY OF THE INDENTURE
The following is a brief summary of certain provisions of the Indenture. Such summary
does not purport to be complete and reference is made to the Indenture for full and complete
statements of such and all provisions. Defined terms used herein shall have the meanings set
forth above.
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Granting Clause
That the Issuer in consideration of the premises and of the purchase of the Bonds and of
other good and lawful consideration, the receipt of which is acknowledged, and to secure the
payment of the principal of, premium, if any, and interest on the Bonds and the performance and
observance of all of the covenants and conditions in the Indenture or therein contained, has
executed and delivered the Indenture and has conveyed, granted, assigned, transferred, pledged,
set over and confirmed and granted a security interest and by these presents does convey, grant,
assign, transfer, pledge, set over and confirm and grant a security interest, unto the Trustee, its
successor or successors and its or their assigns forever, in the property described (said property
being sometimes referred to as the “Trust Estate”) to wit:
(i)
All right, title and interest of the Issuer in and to the Loan Agreement and all
amounts payable to the Issuer under the Loan Agreement and all security therefor
(excluding Unassigned Rights as defined in the Indenture);
(ii)
All right, title and interest of the Issuer in and to the funds, accounts and
subaccounts established pursuant to the Indenture and the assets thereof and
income and earnings thereon, except that the Subordinate Debt Service Reserve
Account of the Debt Service Reserve Fund, each subaccount therein, the assets
thereof and the income and earnings thereon shall be for the sole benefit of the
Holders of Outstanding Subordinate Bonds;
(iii)
Solely for the benefit of the Holders of Outstanding Subordinate Bonds, all right,
title and interest in and to the Replenishment Agreement and all amounts payable
to the Issuer thereunder;
(iv)
Any and all other property of every kind and nature from time to time hereafter,
by delivery or by writing of any kind, conveyed, pledged, assigned or transferred
as and for additional security under the Indenture by the Issuer or the City or by
anyone in their behalf to the Trustee, including without limitation funds of the
City held by the Trustee as security for the Bonds;
to have and to hold, all and singular, the properties and the rights and privileges conveyed
by the Indenture, assigned and pledged by the Issuer or intended so to be, unto the Trustee and its
successors and assigns forever, in trust, nevertheless, with power of sale for the equal and pro
rata benefit and security of each and every Holder of the Bonds of a Priority (as defined in the
Indenture) issued and to be issued under the Indenture, without preference, priority or distinction
as to participation in the benefit and protection of one Bond of a Priority over or from the other
Bonds of such Priority, by reason of priority in the issue or negotiation or maturity thereof, or for
any other reason whatsoever, except as otherwise expressly provided in the Indenture, so that
each and all of the Bonds of a Priority shall have the same right, lien and privilege under the
Indenture and shall be equally secured by the Indenture with the same effect as if the same had
all been made, issued and negotiated simultaneously with the delivery of the Indenture and were
expressed to mature on one and the same date;
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provided, nevertheless, and these presents are upon the express condition that if the Issuer
or its successors or assigns shall well and truly pay or cause to be paid the principal of such
Bonds with interest according to the provisions set forth in the Bonds and each of them or shall
provide for the payment or redemption of such Bonds by depositing or causing to be deposited
with the Trustee the entire amount of funds or securities requisite for payment or redemption
thereof when and as authorized by the provisions of the Indenture, and shall also pay or cause to
be paid all other sums payable under the Indenture by the Issuer, then these presents and the
estate and rights granted by the Indenture shall cease, determine and become void, and thereupon
the Trustee, on payment of its lawful charges and disbursements then unpaid, on demand of the
Issuer and upon the payment of the cost and expenses thereof, shall duly execute, acknowledge
and deliver to the Issuer such instruments of satisfaction or release as may be necessary or proper
to discharge the Indenture, including if appropriate any required discharge of record, and if
necessary shall grant, reassign and deliver to the Issuer, its successors or assigns, all and singular
the property, rights, privileges and interests by it granted by the Indenture, conveyed and
assigned, and all substitutes therefor, or any part thereof, not previously disposed of or released
as provided in the Indenture; otherwise the Indenture shall be and remain in full force.
and it is covenanted, declared and agreed by and between the parties to the Indenture that
all Bonds are to be issued, authenticated and delivered, and that all the Trust Estate is to be held
and applied, subject to the further covenants, conditions, releases, uses and trusts set forth in the
Indenture, and the Issuer, for itself and its successors, does covenant and agree to and with the
Trustee and its respective successors in said trust, for the benefit of those who shall hold the
Bonds, or any of them, as follows.
Issuance of Additional Bonds
Additional Bonds may be issued by the Issuer for any one or more of the following
purposes: (i) paying Costs of the Project, including capitalized interest on such Additional
Bonds, (ii) paying costs associated and incurred in connection with the issuance of such
Additional Bonds, and (iii) paying or providing for the payment of Outstanding Bonds or any
portion thereof.
The principal amount of such Additional Bonds may include an amount sufficient to pay
the costs and expenses of issuance, establish a reserve fund or fund the Debt Service Reserve
Fund at its requirement after giving effect to the issuance of such Additional Bonds, provide
capitalized interest and provide for such other costs as are permitted by the Act. Additional
Bonds may be issued notwithstanding the fact that no additional security is made subject to the
lien of the Indenture; provided, however, that the Trustee and the Issuer are authorized to accept
additional security upon the issuance of any Additional Bonds.
Prior to the delivery of any Additional Bonds, there shall be filed with the Trustee,
among other items, all of the following:
(a)
A written statement by an Authorized Officer of the City approving (a) the
issuance and delivery of such Additional Bonds and acknowledging that
payments are required to be made under the Loan Agreement in an amount
sufficient to pay the principal and interest on such Additional Bonds, when
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due, to the same extent as if such Additional Bonds were included in the
issuance of the Series 2011 Bonds and (b) any other matters to be approved by
the City pursuant to the Loan Agreement and the Indenture.
(b)
A copy, duly certified by the President, Chairman or Vice Chairman or
other Authorized Officer of the Issuer, of the resolution theretofore adopted
and approved authorizing the execution and delivery of such supplements to
the Indenture and to the Loan Agreement as may be necessary and authorizing
the issuance of such Additional Bonds.
(c)
A copy, duly certified by an Authorized Officer of the City, of the
resolutions theretofore adopted and approved authorizing the issuance of the
Additional Bonds and a supplement to the Loan Agreement and further
approving such Supplemental Indenture and the issuance and sale of such
Additional Bonds.
(d)
The original executed counterparts of the Supplemental Indenture
authorizing the issuance of such Additional Bonds.
(e)
A Written Request and authorization to the Trustee on behalf of the Issuer,
signed by its President, Chairman or Vice Chairman or other Authorized
Officer, to authenticate and deliver such Additional Bonds (specifically stating
the principal amount to be issued and delivered to the purchasers therein
identified) upon payment to the Trustee, but for the account of the Issuer, of a
sum specified in such request and authorization plus accrued interest, if any,
thereon to the date of delivery. The Trustee shall out of such proceeds deposit
to the credit of the Senior Bond Capitalized Interest Account or the
Subordinate Bond Capitalized Interest Account, as applicable, the amounts, if
any, set forth in the Supplemental Indenture with respect to such Additional
Bonds, and deposit to the credit of the Costs of Issuance Fund the amount, if
any, set forth in said Supplemental Indenture. If the proceeds received by the
Trustee are from the issuance of Additional Bonds for the purpose of
acquiring or constructing additional “projects” as defined in the Act, then the
Supplemental Indenture shall provide that after making the deposits set forth
above the balance of such proceeds shall be deposited in the Construction
Fund maintained under the Indenture having such terms and provisions as are
acceptable to the Issuer and shall be paid out against such showings as are
acceptable to the Issuer.
(f)
Executed counterparts of appropriate supplements to the Loan Agreement
providing, among other things, for the City’s obligation to make payments on
account of the principal of and interest on such Additional Bonds.
(g)
In the case of Additional Bonds to be issued as Senior Bonds, other than
Refunding Bonds issued pursuant to the Indenture:
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(h)
(1)
an Officer’s Certificate of the City setting forth the TDZ Revenues
collected during the preceding Fiscal Year;
(2)
an independent consultant’s report setting forth the projected TDZ
Revenues for the first full Fiscal Year after projected completion of
the Facilities constructed with proceeds of the Additional Bonds;
(3)
an Officer’s Certificate of the City (A) setting forth the Maximum
Annual Debt Service on the Outstanding Senior Bonds after giving
effect to issuance of such Additional Bonds and (B) establishing
that the amount set forth in (1) is at least equal to two times such
Maximum Annual Debt Service set forth in (3)(A); and
(4)
an Officer’s Certificate of the City (A) setting forth the Maximum
Annual Debt Service on the Outstanding Senior Bonds after giving
effect to issuance of such Additional Bonds, (B) setting forth the
Maximum Annual Debt Service on the then Outstanding
Subordinate Bonds, and (C) establishing that the amount set forth
in (2) is at least equal to the sum of the amounts set forth in (4)(A)
and (4)(B).
In the case of Additional Bonds to be issued as Subordinate Bonds, other
than Refunding Bonds issued pursuant to the Indenture, (A) an independent
consultant’s report setting forth the projected TDZ Revenues for the first full
fiscal year after projected completion of the Facilities constructed with
proceeds of the Additional Bonds; and (B) an Officer’s Certificate of the City:
(x) separately setting forth the Maximum Annual Debt Service on the then
Outstanding Senior Bonds and the Maximum Annual Debt Service on the
Subordinate Bonds Outstanding after giving effect to the issuance of such
Additional Bonds; (y) establishing that the amount set forth in (A) is at least
equal to the sum of the amounts set forth in (B)(x) and (y); and (z) stating that
the Costs of the Project to be financed through the issuance of Additional
Bonds consists of items for which the City may provide aid or assistance to be
paid from revenues specified pursuant to Tennessee Code Annotated Section
7-53-315, as amended.
(i) Such other closing documents and opinions of counsel as the Issuer and the
Trustee may reasonably specify.
(Section 208)
Source of Payment of Bonds
The Bonds authorized by the Indenture and all payments to be made by the Issuer thereon
and into the various funds established under the Indenture are not general obligations of the
Issuer but are limited obligations payable solely from the sources described in the Indenture.
(Section 401)
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Revenue Fund
(a) The Issuer shall establish with the Trustee and maintain so long as any of the Bonds
are Outstanding a separate fund to be known as the “Revenue Fund – The City of Memphis,
Tennessee (Pyramid and Pinch District Redevelopment Project)” (called the “Revenue Fund”).
All payments made by the City pursuant to the Loan Agreement pledged under the Indenture, as
and when received by the Trustee, shall be deposited in the Revenue Fund and shall be held
therein until disbursed as provided in the Indenture. Pursuant to the assignment and pledge of
payments under the Loan Agreement set forth in the granting clauses contained in the Indenture,
the Issuer will direct the City to make such payments directly to the Trustee when and as the
same become due and payable by the City under the Loan Agreement.
(b)
The Trustee, from money on deposit in the Revenue Fund, shall, on or prior to the
second Business Day next preceding each November 1 of a Bond Year, make the deposits and
payments set forth below in the order of priority set forth below:
(i)
Pro rata based upon the ratio each of the amounts required to be paid pursuant to
(A) and (B) of this subparagraph (i) bears to the sum of the amounts to be paid
pursuant to (A) and (B):
(A)
To the Senior Bond Account, an amount which, together with the
amount then on deposit in the Senior Bond Account, equals the
sum of (1) the principal of Outstanding Senior Bonds payable at
maturity or through mandatory Sinking Fund Redemption on the
next succeeding November 1, plus (2) the interest on Outstanding
Senior Bonds payable on the next succeeding November 1 and
May 1; and
(B)
To the City, the amount which has been certified to the Trustee by
the City as the amount required to be paid during the next
succeeding twelve (12) calendar months for the Borrower’s
Obligations; then
(ii)
To the Senior Debt Service Reserve Account, an amount which, together with the
amount then on deposit in the Senior Debt Service Reserve Account, equals the
Senior Debt Service Reserve Requirement; then
(iii)
To the Subordinate Bond Account, an amount which, together with the amount
then on deposit in the Subordinate Bond Account, equals the sum of (1) the
principal of Outstanding Subordinate Bonds payable at maturity or through
mandatory Sinking Fund Redemption on the next succeeding November 1, plus
(2) the interest on Outstanding Subordinate Bonds payable on the next succeeding
November 1 and May 1; then
(iv)
To the Expense Fund the estimated Operating Expenses for the next succeeding
twelve calendar months as certified to the Trustee by the City; then
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(v)
To the Subordinate Debt Service Reserve Account, an amount which, together
with the amount then on deposit in the Subordinate Debt Service Reserve
Account, equals the Subordinate Debt Service Reserve Requirement; then
(vi)
To the City, the lesser of (A) the amount then remaining in the Revenue Fund
after the preceding deposits and payments have been made, and (B) the amount
theretofore paid by the City pursuant to the Replenishment Agreement for which
it has not previously been reimbursed pursuant to this clause (vi); and, then,
(vii)
To the Surplus Fund, any amount remaining in the Revenue Fund after the
preceding deposits and payments have been made.
(Section 402)
Debt Service Fund
(a) Establishment of Accounts. The Issuer shall establish with the Trustee and maintain
so long as any of the Bonds are Outstanding a separate fund to be known as the “Debt Service
Fund - The City of Memphis, Tennessee (Pyramid and Pinch District Redevelopment Project)”
(called the “Debt Service Fund”). Within the Debt Service Fund there shall be four accounts
designated as:
1.
Senior Bond Account;
2.
Senior Bond Capitalized Interest Account;
3.
Subordinate Bond Account; and
4.
Subordinate Bond Capitalized Interest Account.
An initial deposit to the credit of the Senior Bond Capitalized Interest Account and the
Subordinate Bond Capitalized Interest Account shall be made in accordance with the provisions
of the Indenture.
(b)
Senior Bond Account. The Trustee shall apply the money on deposit in the Senior
Bond Account, first, together with the amounts available in the Senior Bond Capitalized Interest
Account, to the payment of interest on Outstanding Senior Bonds, when due, and, then, to the
payment of the principal of Outstanding Senior Bonds, when due either at maturity or through
mandatory Sinking Fund Redemption.
Notwithstanding the foregoing, the Trustee shall, at the request of the City, apply the
money on deposit in the Senior Bond Account, other than income earned thereon which is to be
transferred to other funds created under the Indenture, to purchase in the open market an amount
of Tax Exempt Senior Bonds of the series and maturity to be redeemed through mandatory
Sinking Fund Redemption on the next succeeding November 1 at prices not exceeding the
principal amount of Tax Exempt Senior Bonds being purchased plus accrued interest (which
interest shall be paid from amounts on deposit in the Senior Bond Account). The Tax Exempt
Senior Bonds of such series and maturity so purchased shall be cancelled by the Trustee and the
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principal amount thereof shall be applied against and in reduction of the mandatory Sinking Fund
Redemption due on such Tax Exempt Senior Bonds on such November 1.
(c)
Senior Bond Capitalized Interest Account. Money on deposit in the Senior Bond
Capitalized Interest Account shall, prior to any transfer to the Senior Bond Account pursuant to
subparagraph (f) under the heading “Debt Service Fund”, be transferred to the Senior Bond
Account in the amounts and on the dates set forth in Schedule II-A attached to the Indenture.
(d)
Subordinate Bond Account. The Trustee shall apply the money on deposit in the
Subordinate Bond Account, first, together with the amounts available in the Subordinate Bond
Capitalized Interest Account, to the payment of interest on Outstanding Subordinate Bonds,
when due, and, then, to the payment of the principal of Outstanding Subordinate Bonds, when
due either by maturity or mandatory Sinking Fund Redemption pursuant to the paragraph under
the heading “Mandatory Sinking Fund Redemption”.
Notwithstanding the foregoing, the Trustee shall, at the request of the City, apply the
money on deposit in the Subordinate Bond Account, other than income earned thereon which is
to be transferred to other funds created under the Indenture, to purchase in the open market an
amount of Tax Exempt Subordinate Bonds of the series and maturity to be redeemed through
mandatory Sinking Fund Redemption on the next succeeding November 1 at prices not
exceeding the principal amount of the Tax Exempt Subordinate Bonds being purchased plus
accrued interest (which interest shall be paid from amounts on deposit in the Subordinate Bond
Account). The Tax Exempt Subordinate Bonds of such series and maturity so purchased shall be
cancelled by the Trustee and the principal amount thereof shall be applied against and in
reduction of the mandatory Sinking Fund Redemption due on such Tax Exempt Subordinate
Bonds on such November 1.
(e)
Subordinate Bond Capitalized Interest Account. Money on deposit in the
Subordinate Bond Capitalized Interest Account shall, prior to any transfer to the Subordinate
Bond Account pursuant to subparagraph (f) under the heading “Debt Service Fund”, be
transferred to the Subordinate Bond Account in the amounts and on the dates set forth on
Schedule II-B attached to the Indenture.
(f)
Surplus Fund and Debt Service Reserve Fund Transfers. If on the Business Day
immediately prior to the date on which the principal of or interest on Outstanding Senior Bonds
or Subordinate Bonds is payable, with respect to principal either at maturity or through
mandatory Sinking Fund Redemption, there is insufficient money in the Senior Bond Account or
Subordinate Bond Account, as applicable, to make such payment, the Trustee shall transfer from
the Surplus Fund, first, to the Senior Bond Account and, then, to the Subordinate Bond Account,
an amount equal to the respective deficiencies therein. If on the Business Day immediately prior
to the date on which the principal of or interest on Outstanding Senior Bonds or Subordinate
Bonds is payable there is, after the aforementioned transfers from the Surplus Fund, insufficient
money in the Senior Bond Account or the Subordinate Bond Account to make such payment, the
Trustee shall transfer from the Senior Debt Service Reserve Account to the Senior Bond
Account, and from the Subordinate Debt Service Reserve Account to the Subordinate Bond
Account, an amount equal to the respective deficiencies therein.
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(g)
Partial Redemption or Defeasance. In connection with any partial redemption or
defeasance prior to maturity of the Bonds, the Trustee may, at the request of the City, use any
amounts on deposit in the Senior Bond Account or the Subordinate Bond Account, as applicable,
in excess of the amount needed to pay the interest on the Bonds remaining Outstanding on the
first interest payment date occurring on or after the date of such redemption or defeasance to pay
the principal of and interest on the Bonds to be redeemed or defeased.
(Section 403)
Debt Service Reserve Fund
(a) Establishment of Fund and Accounts. The Issuer shall establish with the Trustee and
maintain so long as any of the Bonds are Outstanding a separate fund to be known as the “Debt
Service Reserve Fund – The City of Memphis, Tennessee (Pyramid and Pinch District
Redevelopment Project)” (called the “Debt Service Reserve Fund”). Within the Debt Service
Fund there shall be two accounts designated as:
1.
Senior Debt Service Reserve Account; and
2.
Subordinate Debt Service Reserve Account;
(b)
Senior Debt Service Reserve Account. If on April 30 of a Bond Year, after taking
into account any transfer made from the Senior Debt Service Reserve Account to the Senior
Bond Account pursuant to subparagraph (f) under the heading “Debt Service Fund” above, the
amount in the Senior Debt Service Reserve Account is less than the Senior Debt Service Reserve
Requirement, the Trustee shall promptly give, but in no event later than on the next succeeding
May 15th, written notice thereof to the Issuer and the City.
Money in the Senior Debt Service Reserve Account of the Debt Service Reserve Fund
shall be withdrawn by the Trustee and deposited to the credit of the Senior Bond Account of the
Debt Service Fund at the times and in the amounts required by the provisions of the paragraphs
under the heading “Debt Service Fund” above.
The income or interest earned on investments held for the credit of the Senior Debt
Service Reserve Account shall, at the written direction of the City, be withdrawn by the Trustee
and deposited in the Senior Bond Account in accordance with such direction; provided, however,
that no withdrawal of such income or interest shall be made if the amount in the Senior Debt
Service Reserve Account is then or upon such withdrawal will be less than the Senior Debt
Service Reserve Requirement. Amounts in the Senior Debt Service Reserve Account on April
30 of a Bond Year that are in excess of the Senior Debt Service Reserve Requirement shall be
withdrawn therefrom by the Trustee and deposited in the Senior Bond Account.
(c)
Subordinate Debt Service Reserve Account. If on April 30 of a Bond Year, after
taking into account any transfer made from the Subordinate Debt Service Reserve Account to the
Subordinate Bond Account pursuant to subparagraph (f) under the heading “Debt Service Fund”
above, the amount in the Subordinate Debt Service Reserve Account is less than the Subordinate
Debt Service Reserve Requirement, the Trustee shall promptly give, but in no event later than on
the next succeeding May 15th, written notice thereof to the Issuer and the City. All amounts paid
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by the City in accordance with the Replenishment Agreement on account of a deficiency in the
Subordinate Debt Service Reserve Account shall, upon receipt by the Trustee, be deposited to the
Subordinate Debt Service Reserve Account to restore such account to the Subordinate Debt
Service Reserve Requirement.
Money in the Subordinate Debt Service Reserve Account of the Debt Service Reserve
Fund shall be withdrawn by the Trustee and deposited to the credit of the Subordinate Bond
Account of the Debt Service Fund at the times and in the amounts required by the provisions of
the paragraphs under the heading “Debt Service Fund” above.
The income or interest earned on investments held for the credit of the Subordinate Debt
Service Reserve Account shall, at the written direction of the City, be withdrawn by the Trustee
and deposited in the Subordinate Bond Account in accordance with such direction; provided,
however, that no withdrawal of such income or interest shall be made if the amount in the
Subordinate Debt Service Reserve Account is then or upon such withdrawal will be less than the
Subordinate Debt Service Reserve Requirement. Amounts in the Subordinate Debt Service
Reserve Account on April 30 of a Bond Year that are in excess of the Subordinate Debt Service
Reserve Requirement shall be withdrawn therefrom by the Trustee and deposited in the
Subordinate Bond Account.
(d)
Whenever by the paragraphs under the heading “Debt Service Reserve Fund”, the
amount in the Senior Debt Service Reserve Account or the Subordinate Debt Service Reserve
Account is to be determined, such determination shall be made by the Trustee. Permitted
Investments held in either account shall be valued at the lesser of amortized cost or par, plus
accrued and unpaid interest thereon.
(Section 404)
Expense Fund
The Issuer shall establish with the Trustee and maintain so long as any Bonds are
Outstanding a separate account to be known as the “Expense Fund – The City of Memphis,
Tennessee (Pyramid and Pinch District Redevelopment Project).” Money in the Expense Fund
shall be used only for payment of the Operating Expenses or to reimburse the City for Operating
Expenses theretofore paid by it for which it has not previously been reimbursed. Such money
shall be paid by the Trustee upon receipt of the Written Request of the City to or upon the order
of the City at such times and in such amounts as the City considers necessary to make such
payments.
(Section 405)
Surplus Fund
The Issuer shall establish with the Trustee and maintain so long as any Subordinate
Bonds are Outstanding a separate account to be known as the “Surplus Fund – The City of
Memphis, Tennessee (Pyramid and Pinch District Redevelopment Project)” (called the “Surplus
Fund”). Money shall be deposited in the Surplus Fund in accordance with subparagraph (b)
under the heading “Revenue Fund” above. The income or interest earned on investments held
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for the credit of the Surplus Fund shall be retained therein until applied in accordance with this
Section.
Money in the Surplus Fund shall be withdrawn by the Trustee and deposited to the credit
of the Senior Bond Account and the Subordinate Bond Account of the Debt Service Fund at the
times and in the amounts required by the provisions of subparagraph (f) under the heading “Debt
Service Fund” above. Money remaining in the Surplus Fund on June 30 of any Fiscal Year, if
not then required for transfer to the Debt Service Fund pursuant to the preceding sentence, shall
be applied or paid for any one or more of the following: (a) paid by the Trustee to the City in
accordance with the Written Request of the City to reimburse it for payments theretofore made
pursuant to the Replenishment Agreement for which it has not previously been reimbursed; or
(b) applied by the Trustee in accordance with the Written Request of the City to either or both of
(i) the optional or extraordinary redemption or purchase of Outstanding Bonds in accordance
with the paragraphs under the heading “Optional Redemption Dates and Prices; Purchases”
below with respect to the Series 2011 Bonds or in accordance with the Supplemental Indenture
authorizing the Additional Bonds to be purchased or redeemed and (ii) defeasance of
Outstanding Bonds in accordance with the paragraphs under the heading “Defeasance” below;
and (c) applied by the Trustee in accordance with the Written Request of the City to pay Costs of
the Project or to reimburse the City for Costs of the Project theretofore paid by the City for
which it has not previously been reimbursed.
Notwithstanding the provisions of the foregoing paragraph, money in the Surplus Fund
shall not be applied for any purpose described in clauses (b) or (c) in the foregoing paragraph
unless the City has certified to the Trustee and the Issuer that, after application of money, the
TDZ Revenues which the City is legally entitled to receive are projected to be sufficient to pay
the principal of and interest on the Bonds then Outstanding or that will remain Outstanding after
any application of money in accordance with the aforementioned clauses (b) or (c), together with
all obligations then legally authorized to be paid from TDZ Revenues.
(Section 406)
Optional Redemption Fund
The Issuer shall establish with the Trustee and maintain so long as any of the Bonds are
Outstanding a separate fund to be known as the “Optional Redemption Fund - The City of
Memphis, Tennessee (Pyramid and Pinch District Redevelopment Project)” (called the
“Optional Redemption Fund”). In the event of (i) prepayment by or on behalf of the City of
amounts payable under the Loan Agreement pledged under the Indenture, including prepayment
with condemnation or insurance proceeds, or (ii) deposit with the Trustee by the City or the
Issuer of money from any other source for redeeming Bonds, except as otherwise provided in the
Indenture, such money shall be deposited in the Optional Redemption Fund. Money on deposit
in the Optional Redemption Fund shall be used, first, to make up any deficiencies existing in the
Senior Bond Account and the Subordinate Bond Account (in the order listed), second, to make
up any deficiency in the Senior Debt Service Reserve Account and, third, for the redemption or
purchase of Bonds in accordance with the provisions of the Indenture.
(Section 407)
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Investment of Funds
(a) Upon a Written Request of the City filed with the Trustee, money in the Revenue
Fund, Debt Service Fund, Costs of Issuance Fund, Expense Fund, Construction Fund, Debt
Service Reserve Fund, Surplus Fund and Optional Redemption Fund shall be invested in
Permitted Investments. Such investments shall be made so as to mature on or prior to the date or
dates that money therefrom is anticipated to be required. The Trustee, when authorized by the
City, may trade with itself in the purchase and sale of securities for such investment. The
Trustee shall not be liable or responsible for any loss resulting from any such investments.
(b) Except as otherwise provided in the Indenture, all income in excess of the
requirements of the funds specified in paragraph (a) above derived from the investment of money
on deposit in any such funds shall be deposited in the following funds, in the order listed:
(i)
The Senior Bond Account and the Subordinate Bond Account (in that
order) to the extent of the amounts required to be deposited in each to provide for the
payments due on the next required payment date on the Senior Bonds and Subordinate
Bonds, respectively, occurring within thirteen months of the date of such deposit;
(ii)
The Senior Debt Service Reserve Account and the Subordinate Debt
Service Reserve Account (in that order) to the extent the amounts therein are then less
than the Senior Debt Service Reserve Requirement or the Subordinate Debt Service
Reserve Requirement, respectively; and
(iii) The balance, if any, in the Optional Redemption Fund or the Surplus
Fund, in accordance with the Written Request of the City.
(c) The Trustee will not make any investment of any money in any fund or account held
by it under the Indenture, or sell any investment held in any such fund or account, except on the
following terms and conditions:
(i)
Each such investment shall be made in the name of the Trustee (in its
capacity as such) or in the name of a nominee for the Trustee under its complete and
exclusive control;
(ii)
The Trustee shall have sole control over such investment, the income
thereon, and the proceeds thereof;
(iii) Any certificate or instrument evidencing such investment shall be
delivered to the Trustee or its agent or securities depository; and
(iv)
The proceeds of each sale of such an investment shall be remitted by the
purchaser thereof directly to the Trustee for deposit in the fund or account to which such
investment was credited.
(Section 408)
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Optional Redemption Dates and Prices; Purchase
(a) Optional Redemption of Series 2011 Bonds. The Series 2011A Bonds and Series
2011B Bonds maturing on or after November 1, 2022 are subject to redemption prior to maturity
upon the Written Request of the City on or after November, 2021, out of amounts deposited in
the Optional Redemption Fund, in whole or in part from time to time, on any date, at a
redemption price equal to hone hundred percent (100%) of the principal amount of Series 2011A
Bonds or Series 2011B Bonds to be redeemed. plus accrued interest thereon to the date of
redemption.
The Series 2011C Bonds are not subject to redemption prior to maturity at the option of
the City other than pursuant to the paragraphs under the heading “Extraordinary Redemption”
below.
(b)
Purchase in Lieu of Optional Redemption. In lieu of redeeming Series 2011
Bonds pursuant to subparagraph (a) above, the City may use such money otherwise available
under the Indenture for redemption of Series 2011 Bonds to purchase Series 2011 Bonds in the
open market at a price not exceeding the redemption price then applicable under the Indenture,
plus accrued interest to the date of purchase, and direct the Trustee to apply such money to the
payment of the purchase price of the Series 2011 Bonds so purchased. The Series 2011 Bonds so
purchased shall be delivered to the Trustee for cancelation and the Issuer shall receive credit for
any such Series 2011 Bonds so purchased in the same manner as if such Series 2011 Bonds had
been redeemed.
(Section 501)
Mandatory Sinking Fund Redemption
The Series 2011 Bonds of the series and maturities set forth on the inside cover of the
Offering Statement shall be subject to mandatory Sinking Fund Redemption prior to maturity, in
part, on November 1 of the respective years and in the respective principal amounts set forth on
the inside cover of the Offering Statement, at a redemption price equal to the principal amount of
Series 2011 Bonds of such series and maturity to be redeemed, plus accrued interest to the date
of redemption.
Payment or redemption of the Series 2011 Bonds through mandatory Sinking Fund
Redemption shall be without premium. In the event the Series 2011 Bonds maturing on a
specific date as aforesaid have been fully paid and sufficient money is on deposit in the Debt
Service Fund to redeem Series 2011 Bonds maturing on that specific maturity date, then such
money on deposit in the Debt Service Fund shall be applied to payment of Series 2011 Bonds
maturing on the next succeeding maturity date in the order set forth on the inside cover of the
Offering Statement. The Series 2011 Bonds shall be redeemed by the Trustee pursuant to the
provisions of this paragraph without any notice from or direction by the Issuer or the City.
The principal amount of any Series 2011 Bonds of a series and maturity entitled to
mandatory Sinking Fund Redemption purchased with money in the Debt Service Fund in
accordance with subparagraph (b) or (d) under the heading “Debt Service Fund” above, as
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applicable, will be credited against and in satisfaction of the mandatory Sinking Fund
Redemption of the Series 2011 Bonds of such series and maturity payable on the November 1
next succeeding the date such Series 2011 Bond were so purchased. In addition, the principal
amount of Series 2011 Bonds of a series and maturity entitled to mandatory Sinking Fund
Redemption that are (A) redeemed at the option of the Issuer, (B) purchased by the City or the
Issuer and delivered to the Trustee for cancellation or (C) defeased in accordance the Indenture
shall be applied in satisfaction, in whole or in part, of one or more Sinking Fund Redemptions as
the City, in its discretion, may direct in a Written Request to the Trustee.
(Section 502)
Extraordinary Redemption
(a)
The Series 2011 Bonds are subject to redemption prior to maturity upon the
Written Request of the City at a redemption price equal to one hundred percent (100%) of the
principal amount of Series 2011 Bonds to be redeemed, plus accrued interest to the date of
redemption:
(i) in whole at any time if, as a result of any changes in the Constitution of the
State of Tennessee or the Constitution of the United States of America or of legislative or
administrative action (whether state or federal) or by final direction, judgment or order of
any court or administrative body (whether state or federal) entered after the contest
thereof by the City in good faith, the Loan Agreement or the Indenture shall have become
void or unenforceable or impossible of performance in accordance with the intent and
purposes of the parties as expressed in the Loan Agreement or the Indenture; or
(ii) in whole or in part at any time, in any order determined by the City, upon any
damage, destruction or condemnation of the Project or part thereof or a taking of the title
to, or the temporary use of the Project or part thereof, under the power of eminent
domain, in each case from the proceeds of any property insurance, condemnation award
or award for such taking that are not applied to the restoration of the Project.
(b)
The Series 2011 Bonds are also subject to redemption prior to maturity upon the
Written Request of the City, in any order determined by the City, at a redemption price equal to
one hundred percent (100%) of the principal amount of the Series 2011 Bonds to be redeemed,
plus accrued interest to the date of redemption, in whole at any time, if either the Memphis Cook
Convention Center ceases to qualify as a “qualified public use facility,” as defined under the
Convention Center Act, or it is no longer used as a convention and exposition facility.
(Section 503)
Selection of Bonds to be Redeemed
If less than all of the Outstanding Series 2011B Bonds of a maturity are to be redeemed
pursuant to the Indenture, the Series 2011B Bonds of such maturity to be redeemed shall be
selected by the Trustee at random in such manner as the Trustee, in its discretion, may deem fair
and appropriate.
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If less than all of the Outstanding Series 2011A Bonds or Series 2011C Bonds of a
maturity are to be redeemed pursuant to the paragraphs under the headings “Optional
Redemption Dates and Prices; Purchase,” “Mandatory Sinking Fund Redemption” and
“Extraordinary Redemption” above, the Series 2011A Bonds or Series 2011C Bonds of such
maturity to be redeemed shall be selected as provided below in these paragraphs under the
heading “Selection of Bonds to be Redeemed”.
Subject to the following paragraph, any redemption of less than all of a maturity
of Series 2011A Bonds or Series 2011C Bonds shall be allocated among the Holders of
such Series 2011A Bonds or Series 2011C Bonds as nearly as practicable pro rata in
proportion to the principal amounts of Series 2011A Bonds or Series 2011C Bonds
owned by each Holder, subject to the authorized denominations applicable to the Series
2011A Bonds and Series 2011C Bonds. The calculation of such proportion shall be
based on the following formula:
(principal to be redeemed) x (principal owned by a Holder)
(principal amount Outstanding)
If the Series 2011A Bonds or Series 2011C Bonds to be redeemed are registered in book–entry
form and so long as DTC is the sole registered Holder of the Series 2011A Bonds or Series
2011C Bonds of the maturity to be redeemed, it is the Issuer’s intent that the Series 2011A
Bonds or Series 2011C Bonds of such maturity or portions thereof to be redeemed shall be
selected on a pro rata pass–through distribution of principal basis in accordance with DTC
procedures then in effect with respect to redemptions of less than all of the Outstanding Bonds of
maturity. However, neither the Issuer nor the City can provide any assurance that DTC, DTC’s
direct and indirect participants or any other intermediary will allocate the redemption of Series
2011A Bonds or Series 2011C Bonds on such basis. If the DTC operational arrangements do not
allow for the redemption of the Series 2011A Bonds or Series 2011C Bonds on a pro rata pass–
through distribution of principal basis, then the Series 2011A Bonds and Series 2011C Bonds of
a maturity to be redeemed shall be selected, in accordance with DTC procedures, by lot. If, at
the time of redemption of the Series 2011A Bonds or Series 2011C Bonds on a pro rata pass–
through distribution of principal basis, the Trustee has failed to notify DTC that the Series 2011A
or Series 2011C Bonds to be redeemed are to be redeemed pursuant to DTC’s pro rata pass–
through distribution of principal procedures, or has failed to furnish to DTC the factor to be
applied by it in determining the pro rata allocation of the principal to be redeemed, then the
Series 2011A Bonds and Series 2011C Bonds of a maturity to be redeemed may be selected, in
accordance with DTC procedures, by lot.
(Section 504)
Notices of Redemption
(a)
Notice to Trustee of Intent to Redeem or Purchase. Series 2011 Bonds shall be
called for redemption or purchased by the Trustee pursuant to the paragraphs under the headings
“Optional Redemption Dates and Prices; Purchase” or “Extraordinary Redemption” above, upon
receipt by the Trustee at least sixty days prior to the redemption or purchase date of a Written
Request of the City requesting such redemption or purchase; provided, however, that the City
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may give such Written Request at such later time as may be approved by the Trustee, in its sole
discretion, but in no event shall such Written Request for the redemption of Series 2011 Bonds
be given less than thirty days prior to the redemption date. Such Written Request shall specify
the series, maturity and principal amount of the Series 2011 Bonds so to be called for redemption
or of the Series 2011B Bonds so to be purchased, the applicable redemption price or prices and
the provision or provisions above specified pursuant to which such Series 2011 Bonds are to be
called for redemption.
(b)
Notice to Bondholders of Redemption. Notice of the call for any redemption shall
state the following: (a) the name of the Bonds, (b) the CUSIP number and bond certificate
number (if less than all the Bonds of a particular series are to be redeemed) of the Bonds to be
redeemed, (c) the original date of the Bonds, (d) the interest rate and maturity date of the Bonds
to be redeemed, (e) the date of the redemption notice, (f) the Redemption Date, (g) the
redemption price and (h) the address and telephone number of the principal office of the Trustee.
Such notice shall further state that on the Redemption Date for such Bonds there shall become
due and payable upon each Bond to be redeemed the redemption price thereof, or the redemption
price of the specified portion of the principal amount thereof in the case of a Bond to be
redeemed in part only, with interest accrued and unpaid to such date, and that from and after
such date, interest thereon shall cease to accrue and be payable. The redemption notice shall be
given by mailing a copy of such notice of redemption by first class mail, postage prepaid, to the
registered owners of the Bonds to be redeemed to the address shown on the Bond Register not
less than thirty or more than sixty days prior to the redemption date; provided, however, that
failure to give such notice by mailing or a defect in the notice or the mailing as to any Bond will
not affect the validity of any proceedings for redemption as to any other Bond with respect to
which notice was properly given. Except for a mandatory Sinking Fund Redemption pursuant to
the paragraph under the heading “Mandatory Sinking Fund Redemption” above, prior to the date
that the redemption notice is first mailed as aforesaid, funds shall be placed with the Trustee to
pay the principal of such Bonds, the accrued interest thereon to the redemption date and the
premium, if any, thereon. If a notice of redemption is mailed in accordance with the provisions
of this paragraph, the Bonds, or portions thereof, thus called shall not bear interest after the
applicable Redemption Date, shall no longer be protected by the Indenture and shall not be
deemed to be Outstanding under the provisions of the Indenture. The Trustee shall redeem, in
the manner provided in the Indenture, such an aggregate principal amount of such Bonds at the
principal amount thereof plus accrued interest to the redemption date and premium, if any, as
will exhaust as nearly as practicable such funds placed on deposit with the Trustee to pay
principal, premium, if any, and interest on such Bonds. At the direction of the City, such funds
may be invested in United States Government Obligations until needed for redemption payout.
(Section 505)
Payment of Principal, Premium, if any, and Interest
Subject to the limited source of payment referred to in the Indenture, the Issuer covenants
that it will promptly pay the principal of, premium, if any, and interest on every Bond issued
under the Indenture at the place, on the dates and in the manner provided in the Indenture and in
said Bonds according to the true intent and meaning thereof. Nothing in the Bonds or in the
Indenture shall be considered as assigning or pledging any funds or assets of the Issuer (except
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the money and the Loan Agreement (other than Unassigned Rights)) pledged under the
Indenture.
(Section 601)
Legal Authorization
The Issuer represents that it is duly authorized under the Constitution and laws of the
State to issue the Bonds authorized by the Indenture and to execute the Indenture and to assign
the Loan Agreement and to pledge the payments thereunder and the other rights and assets
pledged in the Indenture in the manner and to the extent set forth in the Indenture; that all action
on its part required for the issuance of the Bonds and the execution and delivery of the Indenture
has been duly and effectively taken (or, if Additional Bonds are issued pursuant to the Indenture,
will be duly taken as provided therein); and that the Bonds in the hands of the owners thereof are
and will be valid and enforceable obligations of the Issuer according to the import thereof. The
Issuer covenants that it will faithfully perform at all times any and all covenants, undertakings,
stipulations and provisions contained in the Indenture, in any and every Bond executed,
authenticated and delivered under the Indenture and in all proceedings of its members pertaining
thereto. However, the Issuer shall not be required to take any action not expressly provided for
in the Indenture.
(Section 602)
Rights Under the Loan Agreement
The Issuer agrees that the Trustee in its own name or in the name of the Issuer may
enforce all rights of the Issuer and all obligations of the City under and pursuant to the Loan
Agreement for and on behalf of the Bondholders (other than the rights of the Issuer to decline to
make additional loans and to issue Additional Bonds and Unassigned Rights), whether or not the
Issuer is in default under the Indenture.
(Section 605)
Tax Exemption; Rebates
In order to maintain the exclusion from gross income for purposes of federal income
taxation of interest on the Tax Exempt Bonds, the Issuer shall comply with the provisions of the
Code applicable to the Tax Exempt Bonds, including without limitation the provisions of the
Code relating to the computation of the yield on investments of the “gross proceeds” of Tax
Exempt Bonds, as such term is defined in the Code, and reporting of the earnings on such gross
proceeds and rebates of earnings on such gross proceeds to the United States Department of the
Treasury. All necessary computations of the yield on investments and of the amount required to
be rebated to the United States Department Treasury shall be made by the City at times and in
amounts required by the Code. In furtherance of the foregoing, the Issuer shall comply with the
provisions of the Tax Certificate applicable to each series of Tax Exempt Bonds and with such
written instructions as may be provided by Bond Counsel or a special tax counsel.
The Issuer shall not take any action or fail to take any action which would cause any Tax
Exempt Bond to be an “arbitrage bond” within the meaning of Section 148(a) of the Code; nor
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shall any part of the proceeds of any Tax Exempt Bonds or any other funds of the Issuer be used
directly or indirectly to acquire any securities or obligations the acquisition of which would
cause any Tax Exempt Bond to be an “arbitrage bond” within the meaning of Section 148(a) of
the Code.
The Issuer shall make any and all payments required to be made to the United States
Department of the Treasury in connection with the Tax Exempt Bonds pursuant to Section 148(f)
of the Code to the extent that funds are made available therefor by the City, pursuant to the Loan
Agreement.The Issuer shall make any and all payments required by Section 148(f) of the Code to
be made to the United States Department of the Treasury in connection with the Tax Exempt
Bonds to the extent that money is made available therefor by the City pursuant to the Loan
Agreement. The obligation of the Issuer to comply with the provisions of this paragraph with
respect to the rebate to the Department of the Treasury of the United States of America relating
to Tax Exempt Bonds shall remain in full force and effect so long as the Issuer shall be required
by the Code to rebate such earnings on the gross proceeds of Tax Exempt Bonds notwithstanding
that the Tax Exempt Bonds are no longer Outstanding.
(Section 607)
Events of Default
Each of the following events is declared an “event of default”, that is to say, if:
(a)
payment of any installment of interest payable on any of the Bonds shall not be
made when the same shall become due and payable; or
(b)
payment of the principal of or the premium, if any, payable on any of the Bonds
shall not be made when the same shall become due and payable, either at maturity, by
proceedings for redemption, through failure to make any payment to any fund under the
Indenture or otherwise; or
(c)
any event of default as defined in the Loan Agreement shall occur and be
continuing from and after the date the Issuer is entitled under the Loan Agreement to declare the
amount due thereunder to be immediately due and payable; or
(d)
the Issuer shall default in the due and punctual performance of any other of the
covenants, conditions, agreements and provisions contained in the Bonds or in the Indenture or
any agreement supplemental thereto to be performed on the part of the Issuer, and such default
shall continue for the period of thirty days after written notice specifying such default and
requiring the same to be remedied shall have been given to the Issuer and the City by the Trustee
(or if such default cannot with due diligence and dispatch be wholly cured within thirty days but
can be wholly cured, the Issuer or the City shall fail immediately upon receipt of such notice to
commence with due diligence and dispatch the curing of such default or, having so commenced
the curing of such default, shall thereafter fail to prosecute and complete the same with due
diligence and dispatch); the Trustee may give such notice in its discretion and shall give such
notice at the written request of the Holders of not less than twenty–five percent (25%) in
aggregate principal amount of the Bonds then Outstanding under the Indenture; provided,
however, that if such default cannot with due diligence and dispatch be wholly cured within
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thirty days but can be wholly cured, the failure of the Issuer to remedy such default within such
thirty day period shall not constitute a default under the Indenture if the Issuer shall immediately
upon receipt of such notice commence with due diligence and dispatch the curing of such default
and, having so commenced the curing of such default, shall thereafter prosecute and complete the
same with due diligence and dispatch; or
(e)
the default by the City in the performance of its covenant in the Loan Agreement
relating to the discharge, vacating, bonding or stay of any order, writ or warrant of attachment,
garnishment, execution, replevin or similar process filed against any part of the funds or accounts
held by the Trustee under the Indenture, such default being an event of default specified in the
Loan Agreement.
(Section 701)
Remedies; Rights of Bondholders
Upon the occurrence of any event of default, the Trustee may, subject to its right to
indemnification as provided in the Indenture, pursue any available remedy including a suit at law
or in equity to enforce the payment of the principal of, premium, if any, and interest on the
Bonds then Outstanding under the Indenture or to compel performance under the Indenture or the
Loan Agreement or the Replenishment Agreement, or to seek to enjoin any violation under the
Indenture or under the Loan Agreement or the Replenishment Agreement, provided, however,
that in no event may the principal of any Bonds be declared immediately due and payable upon
the occurrence of an Event of Default under the Indenture.
If an event of default shall have occurred, and if it shall have been requested so to do by
the Holders of not less than twenty–five percent (25%) in aggregate principal amount of Bonds
of each Priority then Outstanding and the Trustee shall have been indemnified as provided in the
Indenture, the Trustee shall be obligated to exercise such one or more of the rights and powers
conferred by this paragraph as the Trustee shall deem most expedient in the interests of the
Holders of Bonds; provided, however, that the Trustee shall have the right to decline to comply
with any such request if the Trustee shall be advised by counsel (who may be its own counsel)
that the action so requested may not lawfully be taken or the Trustee in good faith shall
determine that such action would be unjustly prejudicial to the Holders of Bonds not parties to
such request.
No remedy by the terms of the Indenture conferred upon or reserved to the Trustee (or to
the Holders of Bonds) is intended to be exclusive of any other remedy, but each and every such
remedy shall be cumulative and shall be in addition to any other remedy given to the Trustee or
to the Holders of Bonds under the Indenture now or hereafter existing at law or in equity or by
statute.
No delay or omission to exercise any right or power accruing upon any default or event
of default shall impair any such right or power or shall be construed to be a waiver of any such
default or event of default, or acquiescence therein; and every such right and power may be
exercised from time to time and as often as may be deemed expedient.
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No waiver of any default or event of default, under the Indenture, whether by the Trustee
or by the Holders of Bonds, shall extend to or shall affect any subsequent default or event of
default or shall impair any rights or remedies consequent thereon.
(Section 702)
Direction of Proceedings by Bondholders
Upon compliance with the provisions in the Indenture, the Holders of a majority in
aggregate principal amount of Bonds of each Priority then Outstanding shall have the right, at
any time, by an instrument or instruments in writing executed and delivered to the Trustee, to
direct the method and place of conducting all proceedings to be taken in connection with the
enforcement of the terms and conditions of the Indenture, including the enforcement of the rights
of the Issuer under the Loan Agreement or the appointment of a receiver or any other
proceedings under the Indenture; provided, however, that such direction shall not be otherwise
than in accordance with the provisions of law and of the Indenture.
(Section 703)
Application of Money
All money received by the Trustee pursuant to any right given or action taken under the
provisions of Indenture shall, after payment of the cost and expenses of the proceedings resulting
in the collection of such money and of the fees, expenses, liabilities and advances incurred or
made by the Trustee, be deposited in the Revenue Fund and together with all money in the funds
maintained by the Trustee under the Indenture (except money held for the payment of Bonds
called for prepayment or redemption which have become due and payable) shall be applied as
follows:
(a)
Unless the principal of all the Outstanding Bonds shall have become or shall have
been declared due and payable, all such money shall be applied:
First:
To the payment to the Persons entitled thereto of all
installments of interest then due, first, on the Outstanding Series 2011A Bonds,
and, then, on the Outstanding Subordinate Bonds, in the order of the maturity of
the installments of such interest, and, if the amount available shall not be
sufficient to pay in full any particular installment, then to the payment in order of
Priority and ratably within a Priority, according to the amounts due on such
installment, to the Persons entitled thereto without any discrimination or
privilege; and
Second: To the payment to the Persons entitled thereto of the unpaid
principal of, first, any of the Outstanding Series 2011A Bonds, and, then, any of
the Outstanding Subordinate Bonds, which shall have become due (other than
Bonds called for redemption for the payment of which money is held pursuant to
the provisions of the Indenture), in the order of their due dates, and, if the amount
available shall not be sufficient to pay in full Bonds due on any particular date,
then to the payment in order of Priority and ratably within a Priority, according to
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the amount of principal due on such date, to the Persons entitled thereto without
any discrimination or privilege.
(b)
If the principal of all the Outstanding Bonds shall have become due or shall have
been declared due and payable, all such money shall be applied to the payment of the principal
and interest then due and unpaid upon the Bonds, which payment shall, except as otherwise
provided pursuant to the paragraph under the heading “Extension of Payment; Penalty” below
and other than with respect to Bonds called for redemption for which money is held pursuant to
the provisions of the Indenture, be without preference or priority of principal or interest over the
other, or of any installment of interest over any other installment of interest, or of any Bond of a
Priority over any other Bond of such Priority, ratably among and within Priorities, according to
the amounts due respectively for principal and interest, to the Persons entitled thereto without
any discrimination or privilege.
(c)
If the principal of all the Outstanding Bonds shall have been declared due and
payable, and if such declaration shall thereafter have been rescinded and annulled under the
provisions of the Indenture, then, subject to the provisions of subparagraph (b) under this
heading “Application of Money” in the event that the principal of all the Bonds shall later
become due or be declared due and payable, the money shall be applied in accordance with the
provisions of subparagraph (a) of this heading “Application of Money”.
Notwithstanding the foregoing provisions, any money held in the Senior Bond Account
shall be applied solely to the payment of the principal of and interest on the Series 2011A Bonds
and money held in the Subordinate Bond Account, the Debt Service Reserve Fund and the
Surplus Fund shall be applied solely to the payment of the principal of and interest on the
Subordinate Bonds.
Whenever money is to be applied by the Trustee pursuant to the provisions of these
paragraphs under the heading “Application of Money”, such money shall be applied by it at such
times, and from time to time, as the Trustee shall determine, having due regard for the amount of
such money available for application and the likelihood of additional money becoming available
for such application in the future. Whenever the Trustee shall apply such money, it shall fix the
date (which shall be an interest payment date unless it shall deem another date more suitable, or,
with respect to payments of Defaulted Interest, shall be such date as is required by the Indenture)
upon which such application is to be made and upon such date interest on the amounts of
principal to be paid on such dates shall cease to accrue. The Trustee shall give such notice as it
may deem appropriate of the deposit with it of any such money and of the fixing of any such date
and of the Special Record Date by mailing a copy of such notice by first class mail to the
registered owners of the Bonds, at least ten days prior to the Special Record Date. The Trustee
shall not be required to make payment to the Holder of any Bond until such Bond shall be
presented to the Trustee for appropriate endorsement or for cancellation if fully paid.
Whenever all Bonds and interest thereon have been paid under the provisions of these
paragraphs under the heading “Application of Money” and all expenses and charges of the
Trustee have been paid, any balance remaining shall be paid to the Persons entitled to receive the
same; if no other Person shall be entitled thereto, then the balance shall be paid to the City.
(Section 705)
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Remedies Vested in Trustee
All rights of action including the right to file proof of claims under the Indenture or under
any of the Bonds may be enforced by the Trustee without the possession of any of the Bonds or
the production thereof in any trial or other proceedings relating thereto and any such suit or
proceeding instituted by the Trustee shall be brought in its name as Trustee without the necessity
of joining as plaintiffs or defendants any Holders of the Bonds, and any recovery of judgment
shall be, except as otherwise provided under the paragraph under the heading “Extension of
Payment; Penalty”, for the equal benefit of the Holders of the Outstanding Bonds.
(Section 706)
Rights and Remedies of Bondholders
No Holder of any Bond shall have any right to institute any suit, action or proceeding in
equity or at law for the enforcement of the Indenture or for the execution of any trust or for the
appointment of a receiver or any other remedy under the Indenture, unless a default shall have
become an event of default and the Holders of twenty–five percent (25%) in aggregate principal
amount of Bonds of each Priority then Outstanding shall have made written request to the
Trustee and shall have offered it reasonable opportunity either to proceed to exercise the powers
granted or to institute such action, suit or proceeding in its own name, and unless also they have
offered to the Trustee indemnity as provided in the Indenture, and unless the Trustee shall
thereafter fail or refuse to exercise the power granted, or to institute such action, suit or
proceeding in its own name; and such notification, request and offer of indemnity are declared in
every case at the option of the Trustee to be conditions precedent to the execution of the powers
and trusts of the Indenture and to any action or cause of action for the enforcement of the
Indenture, or for the appointment of a receiver or for any other remedy under the Indenture; it
being understood and intended that no one or more Holders of the Bonds shall have any right in
any manner whatsoever to affect, disturb or prejudice the lien of the Indenture by any action or to
enforce any right under the Indenture except in the manner provided in the Indenture, and that all
proceedings at law or in equity shall be instituted, had and maintained in the manner in the
Indenture provided and for the equal benefit of the Holders of all Bonds Outstanding. Nothing in
the Indenture contained shall, however, affect or impair the right of any Holder to enforce the
payment of the principal of and interest on any Bond at and after the maturity thereof, or the
obligation of the Issuer to pay the principal of and interest on each of the Bonds issued under the
Indenture to the respective Holders thereof at the time and place, from the source and in the
manner in said Bonds expressed.
(Section 707)
Waiver of Events of Default
The Trustee may in its discretion waive any event of default under the Indenture and its
consequences and may rescind any declaration of maturity of principal, and shall do so upon
written request of the Holders of (1) at least a majority in aggregate principal amount of all the
Outstanding Bonds of each Priority in respect of which default in the payment of principal and/or
interest exists, or (2) at least a majority in aggregate principal amount of all the Outstanding
Bonds of each Priority in the case of any other event of default; provided, however, that there
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shall not be waived (a) any event of default in the payment of the principal of any Outstanding
Bonds when due whether by mandatory Sinking Fund Redemption or at the dates of maturity
specified therein or (b) any default in the payment when due of the interest on any such Bonds,
unless prior to such waiver or rescission all arrears of interest, with interest thereon (to the extent
permitted by law) at the rate borne by the Bonds in respect of which such default shall have
occurred on overdue installments of interest or all arrears of payments of principal when due, as
the case may be, and all expenses of the Trustee and any Paying Agent in connection with such
default shall have been paid or provided for, and in case of any such waiver or rescission or in
case any proceeding taken by the Trustee on account of any such default shall have been
discontinued or abandoned or determined adversely, then and in every such case the Issuer, the
Trustee and the Bondholders shall, subject to any determination in such proceeding, be restored
to their former positions and rights under the Indenture respectively, but no such waiver or
rescission shall extend to any subsequent or other default, or impair any right consequent
thereon.
(Section 709)
Extension of Payment; Penalty
In case the time for the payment of principal of or the interest on any Bonds shall be
extended, whether or not such extension be by or with the consent of the Issuer, such principal or
such interest so extended shall not be entitled in case of default under the Indenture to the benefit
or security of the Indenture except subject to the prior payment in full of the principal of all
Bonds then Outstanding and of all interest thereon, the time for the payment of which shall not
have been extended.
(Section 712)
Supplemental Indentures Not Requiring Consent of Bondholders
The Issuer and the Trustee may, without the consent of, or notice to, any of the
Bondholders, enter into a Supplemental Indenture or Supplemental Indentures, as shall not be
inconsistent with the terms and provisions of the Indenture, for any one or more of the following
purposes:
(a)
to cure any ambiguity or formal defect or omission in the Indenture;
(b)
to grant to or confer upon the Trustee for the benefit of the Bondholders any
additional rights, remedies, powers or authority that may lawfully be granted to or conferred
upon the Bondholders and the Trustee, or either of them;
(c)
collateral;
to assign and pledge under the Indenture additional revenues, properties or
(d)
to evidence the appointment of a separate co–trustee or the succession of a new
trustee under the Indenture;
(e)
to modify, amend or supplement the Indenture or any indenture supplemental in
such manner as to permit the qualification of the Indenture under the Indenture Act of 1939, as
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then amended, or any similar federal statute hereafter in effect or to permit the qualification of
the Bonds for sale under the securities laws of any state of the United States of America;
(f)
to modify, amend or supplement the Indenture or any indenture supplemental in
such manner as to permit the issuance of coupon bonds of any series under the Indenture and to
permit the exchange of Bonds from registered form to coupon form and vice versa;
(g)
to provide for the refunding or advance refunding of any Bonds including the
right to establish and administer an escrow fund and take related action in connection therewith,
but solely in the manner and upon satisfaction of the conditions contained in the Indenture;
(h)
to provide for the issuance of Additional Bonds to the extent permitted by the
Indenture; and
(i)
to make any other change that, in the judgment of the Trustee, does not materially
adversely affect the rights of any Bondholders.
The Issuer and the Trustee may not enter into an Supplemental Indenture pursuant to
subparagraph (f) of the preceeding paragraph unless they shall have received an opinion of Bond
Counsel to the effect that the issuance of coupon Bonds will not adversely affect the validity of
such Bonds or the exclusion, if any, of the interest thereon from gross income for purposes of
federal income taxation.
(Section 901)
Supplemental Indentures Requiring Consent of Bondholders
In addition to Supplemental Indentures covered by the paragraph under the heading
“Supplemental Indentures Not Requiring Consent of Bondholders” above and subject to the
terms and provisions contained in this paragraph, and not otherwise, the Holders of not less than
a majority in aggregate principal amount of the Bonds which are Outstanding under the
Indenture at the time of the execution of such Supplemental Indenture, or, in the case that less
than all of the several series of Bonds Outstanding are affected thereby, the Holders of not less
than a majority in aggregate principal amount of the Bonds of each series so affected which are
Outstanding at the time of such execution, shall have the right, from time to time, anything
contained in the Indenture to the contrary notwithstanding, to consent to and approve the
execution by the Issuer and the Trustee of such Supplemental Indenture or Supplemental
Indentures as shall be deemed necessary and desirable by the Issuer for the purpose of
modifying, altering, amending, adding to or rescinding, in any particular, any of the terms or
provisions contained in the Indenture or in any Supplemental Indenture; provided, however, that
if such modification, alteration, amendment or addition will, by its terms, not take effect so long
as any Bonds of a specified series remain Outstanding, the consent of the Holders of such Bonds
shall not be required; provided, further, that nothing in this paragraph contained shall permit, or
be construed as permitting, a Supplemental Indenture to effect: (a) an extension of the stated
maturity or reduction in the principal amount of, or reduction in the rate or extension of the time
of paying of interest on, or reduction of any premium payable on the redemption of, any Bonds,
without the consent of the Holders of such Bonds; (b) a reduction in the amount or extension of
the time of any payment required to be made to or from the Debt Service Fund or any interest or
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Sinking Fund Redemption applicable to any Additional Bonds without consent of the Holders of
such Bonds; (c) the creation of any Lien prior to or on a parity with the lien of the Indenture,
without the consent of the Holders of all the Bonds at the time Outstanding; (d) a reduction in the
aforesaid aggregate principal amount of Bonds the Holders of which are required to consent to
any such Supplemental Indenture or any action permitted by the paragraph under the heading
“Waiver of Events of Default” above, without the consent of the Holders of all the Bonds at the
time Outstanding which would be affected by the action to be taken; or (e) a modification of the
rights, duties or immunities of the Trustee, without the written consent of the Trustee.
If at any time the Issuer shall request the Trustee to enter into any such Supplemental
Indenture for any of the purposes of this paragraph, the Trustee shall, upon being satisfactorily
indemnified with respect to expenses, cause notice of the proposed execution of such
Supplemental Indenture to be sent to each Holder of Bonds affected thereby as shown on the
Bond Register. Such notice shall briefly set forth the nature of the proposed Supplemental
Indenture and shall state that copies thereof are on file at the principal corporate trust office of
the Trustee for inspection by all Bondholders. The Trustee shall not, however, be subject to any
liability to any Bondholder by reason of its failure to give such notice to such Bondholder or a
defect in the notice given to such Bondholder, and any such failure or defect as to any
Bondholder shall not affect the validity of such Supplemental Indenture when consented to and
approved as provided in this paragraph. If the Holders of the requisite principal amount of
Bonds which are Outstanding under the Indenture at the time of the execution of any such
Supplemental Indenture shall have consented to and approved the execution thereof as provided
in the Indenture, no Holder of any Bond shall have any right to object to any of the terms and
provisions contained therein, or the operation thereof, or in any manner to question the propriety
of the execution thereof, or to enjoin or restrain the Trustee or the Issuer from executing the same
or from taking any action pursuant to the provisions thereof. Upon the execution of any such
Supplemental Indenture as in permitted and provided in this paragraph, the Indenture shall be
and be deemed to be modified and amended in accordance therewith.
(Section 902)
Supplemental Indentures Generally
Anything in the Indenture to the contrary notwithstanding, so long as the City is not in
default under the Loan Agreement, a Supplemental Indenture under the Indenture which
adversely affects the rights of the City under the Loan Agreement shall not become effective
unless and until the City shall have consented in writing to the execution and delivery of such
Supplemental Indenture. In this regard, the Trustee shall cause notice of the proposed execution
and delivery of any such Supplemental Indenture to which the City has not already consented,
together with a copy of the proposed Supplemental Indenture and a written consent form to be
signed by the City, to be mailed by certified or registered mail to the City at least thirty days
prior to the proposed date of execution and delivery of any such Supplemental Indenture.
Before the Issuer and the Trustee enter into any supplement to the Indenture, the Issuer or
the Trustee may request that the City deliver to the Trustee and the Issuer an Opinion of Bond
Counsel to the effect that (i) such supplement is authorized or permitted by the Act and is
authorized under the Indenture, (ii) such supplement to the Indenture will, upon the execution
and delivery thereof, be valid, binding and enforceable in accordance with its terms, and (iii)
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such supplement will not adversely affect the exclusion from gross income of the interest on any
Tax Exempt Bond for purposes of federal income taxation of the Holder of any Tax Exempt
Bond.
(Section 903)
Amendments, Etc. Not Requiring Consent
The Issuer, the City and the Trustee may, without the consent of or notice to the Holders
of the Bonds, consent to any amendment, change or modification of the Loan Agreement or the
Replenishment Agreement as may be required or permitted (i) by the provisions of the Indenture,
the Loan Agreement or the Replenishment Agreement, (ii) for the purpose of curing any
ambiguity or formal defect or omission, (iii) to provide for the issuance of Additional Bonds as
provided in the Indenture, or (iv) in connection with any other change therein which, in the
judgment of the Trustee, is not to the prejudice of the Trustee or, in the case of an amendment to
the Loan Agreement, the Holders of the Outstanding Bonds, or, in the case of an amendment to
the Replenishment Agreement, the Holders of the Outstanding Subordinate Bonds.
(Section 1001)
Amendments, Etc. Requiring Consent of Bondholders
Except for the amendments, changes or modifications as provided in the paragraph above
under the heading “Amendments, Etc. Not Requiring Consent”, neither the Issuer nor the Trustee
shall consent to any other amendment, change or modification of the Loan Agreement or the
Replenishment Agreement without the written approval or consent, given and procured as in the
Indenture provided, of (i) in the case of the Loan Agreement, the Holders of not less than a
majority in aggregate principal amount of the Bonds of each Priority which are Outstanding
under the Indenture at the time of execution of any such amendment, change or modification, or
(ii) in the case of the Replenishment Agreement, the Holders of not less than a majority in
aggregate principal amount of the Subordinate Bonds which are Outstanding under the Indenture
at the time of execution of any such amendment, change or modification, or (iii) in case less than
all of the several series of Bonds then Outstanding are affected thereby, the Holders of not less
than a majority in aggregate principal amount of the Bonds of each series so affected which are
Outstanding under the Indenture at the time of execution of any such amendment, change or
modification; provided, however, that if such amendment, change or modification will, by its
terms, not take effect so long as any Bonds of a specified series remain Outstanding, the consent
of the Holders of such Bonds shall not be required. If at any time the Issuer and the City shall
request the consent of the Trustee to any such proposed amendment, change or modification of
the Loan Agreement or the Replenishment Agreement, the Trustee shall, upon being
satisfactorily indemnified with respect to expenses, cause notice of such proposed amendment,
change or modification to be given in the same manner as provided in the paragraph under the
heading “Supplemental Indentures Requiring Consent of Bondholders” above with respect to
Supplemental Indentures. Such notice shall briefly set forth the nature of such proposed
amendment, change or modification and shall state that copies of the instrument embodying the
same are on file at the principal corporate trust office of the Trustee for inspection by all
Bondholders. The Trustee shall not, however, be subject to any liability to any Bondholder by
reason of its failure to give such notice to such Bondholder or a defect in the notice given to such
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Bondholder, and any such failure or defect as to any Bondholder shall not affect the validity of
such amendment, change or modification when consented to and approved as provided in this
paragraph. If the Holders of not less than a majority in aggregate principal amount of, in the case
the Loan Agreement, the Bonds of each Priority Outstanding under the Indenture at the time of
the execution of any such amendment, change or modification, or, in the case of the
Replenishment Agreement, the Bonds of each Priority Outstanding under the Indenture at the
time of the execution of any such amendment, change or modification (or, in either case, the
Holders of not less than a majority in aggregate principal amount of the Bonds of each series so
affected then Outstanding, as the case may be) shall have consented to and approved the
execution thereof as provided in the Indenture, no Holder of any Bond shall have any right to
object to any of the terms and provisions contained therein, or the operation thereof, or in any
manner to question the propriety of the execution thereof, or to enjoin or restrain the City, the
Trustee or the Issuer from executing the same or from taking any action pursuant to the
provisions thereof.
(Section 1002)
No Amendments May Alter City Payments
Under no circumstances shall any amendment to the Loan Agreement alter the amount or
delay the time of payments required to be made by the City thereunder on account of the
principal, premium, if any, and interest on the Bonds without the consent of the Holders of all the
Outstanding Bonds. Under no circumstances shall any amendment to the Replenishment
Agreement alter the amount or delay the time of payments required to be made by the City
thereunder on account of a deficiency in the Subordinate Debt Service Reserve Account without
the consent of the Holders of all of the Outstanding Subordinate Bonds.
(Section 1003)
Defeasance
If the Issuer shall pay or provide for the payment of the entire indebtedness on all Bonds
Outstanding in any one or more of the following ways:
(a)
by paying or causing to be paid the principal of (including redemption premium,
if any) and interest on all Bonds Outstanding, as and when the same become due and payable;
(b)
by depositing with the Trustee, in trust, at or before maturity, money in an amount
sufficient to pay or redeem (when redeemable) all Bonds Outstanding (including the payment of
premium, if any, and interest payable on such Bonds to the maturity or redemption date thereof),
provided that such money, if invested, shall be invested in Escrow Obligations in an amount,
without consideration of any income or increment to accrue thereon, sufficient to pay or redeem
(when redeemable) and discharge the indebtedness on all Bonds Outstanding at or before their
respective maturity dates; it being understood that the investment income on such Escrow
Obligations may be used by or for the benefit of the City for any other purpose under the Act
provided that the Trustee shall be permitted to rely upon an accountant’s verification report
acceptable to the Trustee and the Issuer as conclusive evidence of the sufficiency of the amount
of such deposit;
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(c)
by delivering to the Trustee, for cancellation by it, all Bonds Outstanding; or
(d)
by depositing with the Trustee, in trust, Escrow Obligations in such amount as the
Trustee shall determine will, together with the income or increment to accrue thereon, without
consideration of any reinvestment thereof, and with any money so deposited which is to remain
uninvested, be fully sufficient to pay or redeem (when redeemable) and discharge the
indebtedness on all Bonds Outstanding at or before their respective maturity dates, provided that
the Trustee shall be permitted to rely upon an accountant’s verification report acceptable to the
Trustee and the Issuer as conclusive evidence of the sufficiency of the amount of such deposit;
and if the Issuer shall pay or cause to be paid all other sums payable under the Indenture by the
Issuer, the Indenture and the estate and rights granted under the Indenture shall cease, determine,
and become null and void, and thereupon the Trustee shall, upon Written Request of the Issuer,
and upon receipt by the Trustee of a City Officer’s Certificate and an Opinion of Counsel, each
stating that in the opinion of the signers all conditions precedent to the satisfaction and discharge
of the Indenture have been complied with, forthwith execute proper instruments acknowledging
satisfaction of and discharging the Indenture and the lien. The satisfaction and discharge of the
Indenture shall be without prejudice to the rights of the Trustee to charge and be reimbursed by
the Issuer and the City for any expenditures which it may thereafter incur in connection with the
Indenture.
Any money, funds, securities, or other property remaining on deposit in the Revenue
Fund, Debt Service Fund, Debt Service Reserve Fund, Optional Redemption Fund, Construction
Fund, Surplus Fund, Costs of Issuance Fund, Expense Fund or in any other fund or investment
under the Indenture (other than said Escrow Obligations or other money deposited in trust as
above provided) shall, upon the full satisfaction of the Indenture, forthwith be transferred, paid
over and distributed to the Issuer and the City, as their respective interests may appear.
The Issuer or the City may at any time surrender to the Trustee for cancellation by it any
Bonds previously authenticated and delivered, which the Issuer or the City may have acquired in
any manner whatsoever, and such Bonds, upon such surrender and cancellation, shall be deemed
to be paid and retired.
(Section 1101)
Subrogation
Notwithstanding anything in the Indenture to the contrary, in the event that the principal
of or interest on an Insured Bond shall be paid by the Insurer pursuant to the Insurance Policy,
such Insured Bond shall remain Outstanding for all purposes, not be deemed paid pursuant to the
Indenture or otherwise satisfied and the assignments and pledges made by or pursuant to the
Indenture and all covenants, agreements and other obligations of the Issuer to the Holders of
such Insured Bond shall continue to exist and shall run to the benefit of the Insurer, and the
Insurer shall be subrogated to the rights of such registered owners including, without limitation,
any rights that such registered owners may have in respect of securities law violations arising
from the offer and sale of the Series 2011 Bonds. To evidence such subrogation (i) in the case of
subrogation as to claims for past due interest, the Trustee shall note the Insurer’s rights as
subrogee on the registration books of the Issuer maintained by the Trustee, upon receipt from the
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Insurer of proof of the payment of interest thereon to the registered owner of the Insured Bond;
and (ii) in the case of subrogation as to claims for past due principal, the Trustee shall note the
Insurer’s rights as subrogee on the registration books of the Issuer maintained by the Trustee, if
any, upon surrender of the Insured Bond by the registered owner thereof together with proof of
the payment of principal thereof.
(Section 1303)
Insurer as Bondholder
Whenever by the terms of the Indenture the Holders of any percentage in principal
amount of Outstanding Series 2011 Bonds may exercise any right or power, consent to an
amendment, modification or waiver, or request or direct Trustee to take any action, the Insurer
shall be deemed to be the Holder of the Outstanding Insured Bond for purposes of:
(i)
exercising all remedies and directing the Trustee to take actions or for any
other purposes following an event of default under the Indenture; and
(ii)
granting any consents or approvals, giving any directions or taking any
action permitted by or required under the Indenture that the Holders of Outstanding
Bonds are otherwise entitled to grant, give or take; provided, however, that,
notwithstanding the consent given by the Insurer of an Insured Bond, no amendment or
modification may effect:
(a)
an extension of the stated maturity or reduction in the principal
amount of, or reduction in the rate or extension of the time of paying of interest
on, or reduction of any premium payable on the redemption of, any Bonds,
without the consent of the Holders of such Bonds and the Insurer;
(b)
a reduction in the amount or extension of the time of any interest
or Sinking Fund Redemption applicable to any Series 2011 Bonds without
consent of the Holders of such Bonds and the Insurer; or
(c)
a modification of the rights, duties or immunities of the Trustee,
without the written consent of the Trustee and the Insurer.
Notwithstanding any other provision of the Indenture, whenever the Indenture requires that it be
determined whether an act will adversely affect the Holders of Series 2011 Bonds such
determination shall be made as if there were no Insurance Policy for the Series 2011 Bonds.
(Section 1304)
Amendment of Documents; No Contracts that Impair Rights
Any other provision of the Indenture notwithstanding, no amendment, modification or
supplement to, or waiver of any provision of, the Indenture, the Loan Agreement or the
Replenishment Agreement that requires the consent of the Holders of any percentage of
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Outstanding Bonds or that adversely affects the rights or interests of the Insurer shall be made
without the written consent thereto of the Insurer.
Unless consented to in writing by the Insurer, no contract shall be entered into or any
action taken by which the rights of the Insurer or the security or sources of payment for the
Insured Bonds would be impaired or prejudiced in any material respect.
(Section 1305)
Contractual Rights of Insurer
The Issuer and the Trustee acknowledge and agree that:
(a)
the rights granted to the Insurer under the Indenture, the Loan Agreement
or the Replenishment Agreement to request, consent to or direct any action are rights
granted to the Insurer in consideration of its issuance of the Insurance Policies;
(b)
any exercise by the Insurer of such rights is merely an exercise of the
Insurer’s contractual rights and shall not be construed or deemed to be taken for the
benefit, or on behalf, of the Bondholders; and
(c)
such action does not evidence any position of the Insurer, affirmative or
negative, as to whether the consent of the Holders of the Insured Bonds or any other
person is required in addition to the consent of the Insurer.
(Section 1309)
Insurer as Third Party Beneficiary
To the extent that the Indenture confers upon or gives or grants to the Insurer any right,
remedy or claim under the Indenture, the Insurer is intended to be and is explicitly recognized as
being a third–party beneficiary of such right, remedy or claim and may enforce any such right,
remedy or claim conferred, given or granted under the Indenture.
(Section 1310)
Termination of Insurer’s Rights, Etc.
Whenever by the terms of the Indenture any consent, approval, request or direction of the
Insurer is required or permitted to be given, alone or together with the Issuer, the City or the
Holders of Outstanding Bonds, including consents, approvals, requests or directions required of
the Holder of Outstanding Bonds that are permitted to be given by the Insurer in accordance with
the Indenture, such consent, approval, request or direction shall not be required or permitted to
be given by the Insurer if an Insurer Default has occurred and is then continuing, and neither the
Trustee, the Issuer nor the City shall be obligated to obtain or follow any such consent, approval,
request or direction given by the Insurer. Nothing in the foregoing sentence is intended, and
shall not be construed, to preclude the Insurer from being restored to the rights, powers and
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privileges set forth in the Indenture if an Insurer Default shall have been cured and, upon such
cure, whereupon the Insurer shall be restored to such rights, powers and privileges.
(Section 1317)
SUMMARY OF THE LOAN AGREEMENT
The following is a brief summary of certain provisions of the Loan Agreement pertaining
to the Bonds and the Project. Such summary does not purport to be complete and reference is
made to the Loan Agreement for full and complete statements of such and all provisions. Unless
otherwise defined in this Official Statement, defined terms used in this summary have the
meanings given to them above in this Appendix A. References herein to “Articles” refer to
Articles contained in the Loan Agreement.
Financing Purposes
The proceeds of the 2011 Bonds, together with certain other money, will be used to: (a)
finance or reimburse the City for a portion of the costs associated with the acquisition,
construction, development, renovation and equipping of the Project; (b) fund capitalized interest
on the Series 2011 Bonds, (c) fund a deposit to the Senior Debt Service Reserve Account in an
amount equal to the Senior Debt Service Reserve Requirement applicable to the Senior Bonds;
(d) fund a deposit to the Subordinate Debt Service Reserve Account in an amount equal to the
Subordinate Debt Service Reserve Requirement applicable to the Subordinate Bonds; and (e) pay
certain expenses incurred in connection with the issuance of the Series 2011 Bonds. To
accomplish such purposes, the City will borrow the proceeds of the 2011 Bonds from the Issuer
in accordance with the provisions of the Loan Agreement. The rights of the Issuer under the
Loan Agreement will be pledged and assigned as security for the 2011 Bonds and any Additional
Bonds issued under the Indenture. Also, pursuant to the Indenture, an amount equal to the
principal of, premiums, if any, and interest on the Series 2011 Bonds will be payable to the
Trustee, solely out of: (i) the payments to be made by the City under the Loan Agreement; and
(ii) money on deposit in any of the funds held under the Indenture.
Completion of the Project
The City has agreed to use reasonable efforts to cause the construction, renovation,
rehabilitation, remodeling, furnishing and equipping of the Project to be completed with
reasonable dispatch and in accordance with the Plans and Specifications. In this regard, the
money on deposit in the Construction Fund shall be disbursed by the Trustee only in accordance
with or as permitted by the provisions of Section 302 of the Indenture.
(Article IV)
Application of Funds Held by the Trustee
The City has agreed that the proceeds of the Series 2011 Bonds being loaned to the City
under the Loan Agreement shall be deposited with the Trustee and applied as provided in the
Indenture. By the Loan Agreement, the City has assigned to the Issuer, and granted a security
interest to the Issuer in, all right, title and interest of the City in any funds held by the Trustee
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pursuant to the Indenture, except as otherwise provided in the Indenture. The City has agreed
that the principal of, the redemption premium, if any, and the interest on the Outstanding Bonds
shall be made payable in accordance with the provisions of the Indenture and the Loan
Agreement and, further, that, except as specifically excluded therein, the Loan Agreement and
payments to be made thereunder shall be assigned and pledged to the Trustee to secure the
payment of the Bonds. As a result of such assignment, the Trustee may exercise, for and on
behalf of the Bondholders, all of the rights, interests, powers, privileges and benefits of the Issuer
accrued or vested through the Loan Agreement and the Indenture.
(Article V)
Payments and Prepayments
Under the Loan Agreement, the City is obligated to make payments sufficient to provide
for payment of the principal of, premium, if any, and the interest on the Outstanding Bonds when
due, which payments will be made in accordance with the provisions of the Indenture and the
Loan Agreement. Pursuant to the assignment of the rights of the Issuer under the Loan
Agreement, the payments will be deposited directly with the Trustee for the benefit of the
Bondholders. In order to meet its payment obligation, the City has agreed to pay to the Trustee,
immediately upon receipt, all TDZ Revenues received by the City. The City is permitted to
prepay its obligations under the Loan Agreement to the extent and in the manner provided by the
Indenture for the redemption of the 2011 Bonds and, with respect to the redemption of any
Additional Bonds, by the supplemental indenture authorizing their issuance.
(Article VI)
Covenants of the City
The City has made several covenants to the Issuer under the Loan Agreement. In this
regard, the City has agreed that the Loan Agreement, the Replenishment Agreement and any
instrument delivered to the Issuer to evidence loans made by the Issuer to the City from the
proceeds of Additional Bonds shall be assigned and pledged to secure payment of the Bonds.
The City has further covenanted that it will, among other things: (i) maintain its existence as a
municipal corporation as long as any of the Bonds remains Outstanding; (ii) take all necessary
action to maintain and preserve the Loan Agreement, the Bonds and the Indenture so long as any
portion of the indebtedness under the Loan Agreement remains unpaid; (iii) not take any action
or permit any action to be taken which would cause the Project or any other project of the City
which is a “qualified public use facility” under the Tennessee Code Annotated, Title 7, Chapter
88, as amended, or any ancillary structure or facility associated therewith, to cease to be qualified
as a “qualified public use facility” or which would otherwise result in the termination of the
eligibility of the City to receive the TDZ Revenues; and (iv) comply with the provisions of the
Code applicable to the Tax Exempt Bonds in order to maintain the exclusion from gross income
for purposes of federal income taxation on interest on the Tax Exempt Bonds.
(Article VII)
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Events of Default
The following shall constitute “an event of default” under the Loan Agreement: (a) the
failure of the City to make any payment of any installment of interest, principal or premium
under the Loan Agreement or any other obligation pledged under the Indenture when such
payment becomes due and payable, whether upon a scheduled Interest Payment Date, at
maturity, upon any date fixed for prepayment, or purchase in lieu of redemption or otherwise; (b)
the failure of the City to comply with or perform any other covenants or conditions of the Loan
Agreement and to remedy such default within thirty days after notice from the Issuer or the
Trustee to the City, unless such default is such that it is capable of being remedied but cannot be
remedied within such thirty day period and corrective action is instituted by the City within such
thirty day period and is diligently pursued until such default is remedied; (c) proof that any
representation or warrant made by the Borrower in the Loan Agreement or in any statement or
certificate provided to the Issuer or Trustee or purchaser of any Bonds in connection with the
sale of the Bonds or furnished by the Borrower is untrue in any material respect as of the date of
the issuance or making thereof and is not made good within thirty days after notice to the City by
the Issuer or Trustee; (d) insolvency or bankruptcy of the City, the inability of the City to pay its
debts as they mature, the inability of the City to pay is debts as such debts become due, an
assignment by the City for the benefit of its creditors, application for, or consent by the City to,
the appointment of a trustee, custodian or receiver for the City or for a material part of the
Property of the City; (e) appointment trustee, custodian or receiver for the City or for a material
part of the Property of the City which is not discharged within thirty days after such
appointment; (f) bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings,
proceedings under Title 11 of the United State Code, as amended, or other proceedings for relief
under any bankruptcy law or similar law for the relief of debtors instituted by or against the City
(other than bankruptcy proceedings instituted by the City against third parties) which, if
instituted against the City, is allowed, consented to or is not dismissed, stayed or otherwise
nullified within thirty days after such institution; (g) failure to pay any installment of interest,
principal or premium on any Bond when the same shall become due and payable under the
provisions of the Indenture as a result of any act or failure to act by the City which is not in
accordance with the provisions of the Loan Agreement; (h) failure of the City to comply with or
perform its obligations under the Loan Agreement relating to indemnification, as described in the
Loan Agreement; and (i) and “Event of Default” under and within the meaning of the
Replenishment Agreement has occurred and is continuing.
Remedies Upon Events of Default
Upon the occurrence of any default of the City’s obligations under the Loan Agreement
and during the continuance thereof, the Issuer shall have the following rights and remedies in
addition to any other remedies in the Loan Agreement or provided by law. The Trustee, on
behalf of the Issuer, with or without entry, personally or by attorney, may, in its discretion,
proceed to protect and enforce its rights by pursuing any available remedy, including a suit or
suits in equity or at law, whether for damages, for the specific performance of any obligation,
covenant or agreement contained in or related to the Loan Agreement or the Indenture, or in aid
of the execution of any power granted in the Loan Agreement. Furthermore, the Trustee, on
behalf of the Issuer, may enforce any other appropriate legal or equitable remedy as the Trustee
shall deem most effectual to collect the payments then due and thereafter to become due under
A-41
the Loan Agreement or any other obligation pledged under the Indenture. Anything to the
contrary in the Loan Agreement notwithstanding, in no event shall any obligation of the City
under the Loan Agreement be accelerated upon an event of default thereunder or otherwise.
(Article VIII)
Supplements and Amendments to the Loan Agreement
The City and the Issuer, with the consent of the Trustee, may from time to time enter into
such supplements and amendments to the Loan Agreement as may seem necessary or desirable
to effectuate the purposes or intent of the Loan Agreement, provided that such amendment is
adopted in accordance with the terms of the Indenture.
(Article IX)
Defeasance
If the City shall pay and discharge or provide, in a manner permitted by the Indenture, for
the payment and discharge of the whole amount of the principal of, premium, if any, and interest
on the Bonds, the Loan Agreement or any other obligation pledged under the Indenture, and shall
pay or cause to be paid all other sums payable under the Loan Agreement and the Indenture, or
shall make arrangements satisfactory to the Issuer for such payment and discharge, then: (i) all
property, rights and interest conveyed, assigned or pledged under the Loan Agreement shall
revert back to the City; (ii) the estate, right, title and interest of the Trustee and the Issuer in such
property, rights and interest shall be terminated; (iii) the Loan Agreement and the covenants of
the City contained therein, shall be discharged; (iv) on demand of the City, the Issuer shall
execute and deliver to the City a proper instrument or proper instruments acknowledging the
satisfaction and termination of the Loan Agreement; and (v) the Issuer shall convey, assign,
transfer and deliver to the City all property, including money, then held by the Issuer other than
money deposited with the Trustee for the payment of the principal of, premium, if any, or
interest on the Bonds or any other obligation pledged under the Loan Agreement or the
Indenture.
(Article X)
Insurance Provisions
The Insurer is included as a third party beneficiary to the Loan Agreement. The City and
the Issuer have authorized the Insurer to discuss the affairs, finance and accounts of the Issuer or
any information the Insurer may reasonably request regarding the security of the Insured Bonds
with appropriate officers of the Issuer. Furthermore, the City and the Issuer will use
commercially reasonable efforts to enable the Insurer to have access to the facilities, books and
records of the Issuer on any business day upon reasonable prior notice.
In addition, the City has covenanted to pay or reimburse the Insurer for any and all
charges, fees, costs and expenses the Insurer may reasonably pay or incur in connection with the
administration, enforcement, defense, preservation, amendment, waiver or other action with
regard to any rights or security in the Indenture, the Loan Agreement or the Replenishment
Agreement (collectively, the “Related Documents”).
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Any Swap Agreement entered by the City payable from or secured by TDZ Revenues
shall meet the following conditions: (i) the Swap Agreement will be entered into for the purpose
of managing the interest costs related to, or hedging against, (a) assets then held, (b) debt then
outstanding or (c) debt reasonably expected to be issued within the next twelve (12) months; and
(ii) the Swap Agreement will not contain any leverage element or multiplier component greater
than 1.0x unless there is a matching hedge arrangement which effectively offsets the exposure
from any such element or component. The City shall not terminate a Swap Agreement unless it
demonstrates to the satisfaction of the Insurer prior to the payment of any termination amount
that such payment will not cause the Issuer to be in default under the Indenture, the Loan
Agreement or the Replenishment Agreement.
The City has agreed to provide to the Insurer the following information: (i) annual
audited financial statements of the City within 150 days after the end of the City’s fiscal year
(together with a certification of the Issuer that it is not aware of any default under the Indenture)
and the Issuer’s annual budget within 30 days after approval thereof with such other information
as the Insurer shall reasonably request from time to time; (ii) notice of any default know to the
Trustee or the Issuer within five Business Days after knowledge thereof; (iii) prior notice of the
advance refunding or redemption of any of the Insured Bonds; (iv) notice of the commencement
of any proceeding by or against the City commenced under any applicable bankruptcy,
insolvency, receivership, rehabilitation or similar law (an “Insolvency Proceeding”); (v) notice of
the making of any claim in connection with an Insolvency Proceeding seeking the avoidance as a
preferential transfer of any payment of principal of, or interest on, the Insured Bonds; (vi) a full
original transcript of all proceedings relating to the execution of any amendment, supplement or
waiver of the Indenture, the Loan Agreement or the Replenishment Agreement; (vii) all reports,
notices and correspondence to be delivered to the Bondholders under the terms of the Indenture,
the Loan Agreement or the Replenishment Agreement; (viii) all information furnished pursuant
to the continuing disclosure agreement the City will enter with respect to the Insured Bonds; and
(iv) such additional information as the Insurer may reasonably request.
(Article XI)
SUMMARY OF THE REPLENISHMENT AGREEMENT
The following is a brief summary of certain provisions of the Replenishment Agreement.
Such summary does not purport to be complete and reference is made to the Replenishment
Agreement for full and complete statements of such and all provisions. Defined terms used
herein shall have the meanings set forth above.
Deficiency Payments
The City, on or before October 15 of any year in which it receives a Deficiency Notice,
but in no event more than sixty days after such Deficiency Notice is received, shall pay to the
Trustee for deposit in the Subordinate Debt Service Reserve Account, the amount set forth in
such Deficiency Notice as the amount by which the amount on deposit in the Subordinate Debt
Service Reserve Account on the preceding April 30, after taking into account any transfer made
A-43
from the Subordinate Debt Service Reserve Account to the Subordinate Bond Account pursuant
to subparagraph (f) under the heading “SUMMARY OF THE INDENTURE – Debt Service
Fund” above, was less than the Subordinate Debt Service Reserve Requirement on such April 30.
The City shall make such payments out of its General Revenues. The failure of the Trustee to
give timely notice of such Subordinate Debt Service Reserve Account deficiency in accordance
with the Indenture shall not excuse the City’s obligation to make the payment required by the
Replenishment Agreement. All payments by the City shall be paid in lawful money of The
United States of America.
(Section 3.1)
No Set-Off
No set-off, counterclaim, reduction or diminution of an obligation, or any defense of any
kind or nature (other than performance by the City of its obligations under the Replenishment
Agreement) which the City has or may have with respect to a claim under the Replenishment
Agreement shall be available under the Replenishment Agreement to the City against the
Corporation or the Trustee.
(Section 3.3)
Appropriations
The City, on or before October 5 of any year in which it receives a Deficiency Notice, but
in no event more than forty-five days after such Deficiency Notice is received, shall appropriate
for payment to the Trustee for deposit in the Subordinate Debt Service Reserve Account the
amount set forth in the Deficiency Notice as the amount by which the amount on deposit in the
Subordinate Debt Service Reserve Account on the preceding April 30 was less than the
Subordinate Debt Service Reserve Requirement on such April 30.
(Section 3.4)
Limitations on Facilities
The City covenants and agrees that the Series 2011B Bonds and Series 2011C Bonds are
being, and any Additional Subordinate Bonds will be, issued in connection with projects or
facilities that are public infrastructure, public improvements or other public facilities for which
the City may aid or provide assistance pursuant to TCA §7–53–315, and that it will not consent
to or acquiesce in the issuance by the Issuer of any Additional Subordinate Bonds that are not
issued in connection with any such project or facility. For purpose of this paragraph, Refunding
Bonds issued as Subordinate Bonds to pay or provide for the payment of Outstanding
Subordinate Bonds issued in accordance with the preceding sentence shall be considered to be
issued in connection with projects or facilities for which the City may aid or provide assistance
pursuant to TCA §7–53–315.
(Section 3.5)
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Events of Default
An “Event of Default” shall exist if any of the following occurs and is continuing:
(a)
The City fails to perform or observe any covenant or agreement contained
above under the heading “Deficiency Payments”;
(b)
The City fails to comply with any other provision of the Replenishment
Agreement, and such failure continues for more than thirty (30) days after written notice
of such failure has been given to the City;
(c)
Any warranty, representation or other statement by or on behalf of or with
respect to the City contained in the Replenishment Agreement was false in any material
respect as of the date made; or
(d)
The failure by the City generally to pay its debts as they become due; or
an assignment by the City for the benefit of creditors is made, a bankruptcy proceeding is
commenced by or against the City, as the debtor, or the commencement by or against the
City, as the debtor, of any proceeding under any other insolvency law; or a trustee,
receiver or agent (however named) is appointed or authorized to take control over all or
substantially all of the property of the City for the purpose of enforcing a lien against
such property or for the purpose of general administration of such property for the benefit
of creditors.
(Section 4.1)
Default Remedies
If any Event of Default exists, the Issuer may proceed to enforce the provisions of the
Replenishment Agreement and to exercise any other rights, powers and remedies available to it.
The Issuer shall have the right to proceed first and directly against the City under the
Replenishment Agreement without proceeding against or exhausting any other remedies which it
may have against the Issuer or otherwise and without resorting to any other security held by the
Issuer.
(Section 4.2)
Remedies; Waiver and Notice
(a)
No remedy conferred upon or reserved to the Issuer in the Replenishment
Agreement is intended to be exclusive of any other available remedy or remedies, but
each and every such remedy shall be cumulative and shall be in addition to every other
remedy given under the Replenishment Agreement or now or hereafter existing at law or
in equity or by statute.
(b)
No delay or omission to exercise any right or power accruing upon the
occurrence of any Event of Default under the Replenishment Agreement shall impair any
A-45
such right or power or shall be construed to be a waiver thereof; but any such right or
power may be exercised from time to time and as often as may be deemed expedient.
(c)
In order to entitle the Issuer to exercise any remedy reserved to it in the
Replenishment Agreement, it shall not be necessary to give any notice to the City or
otherwise, other than such notice as may be expressly required in the Replenishment
Agreement.
(d)
In the event any provision contained in the Replenishment Agreement
should be breached by the City and thereafter duly waived by the Issuer so empowered to
act, such waiver shall be limited to the particular breach so waived and shall not be
deemed to waive any other breach under the Replenishment Agreement or of any future
performance by the City under the Replenishment Agreement.
(e)
No waiver, amendment, release or modification of the Replenishment
Agreement shall be established by conduct, custom or course of dealing.
(Section 4.3)
A-46
APPENDIX B
MARKET STUDY AND IMPACT ANALYSIS
[THIS PAGE INTENTIONALLY LEFT BLANK]
MARKET STUDY AND IMPACT ANALYSIS
OF THE PYRAMID AND PINCH DISTRICT
DEVELOPMENT PROJECTS
MEMPHIS, TENNESSEE
JULY 13, 2011
Prepared for:
The City of Memphis
Division of Housing and Community
Development (HCD)
701 North Main Street
Memphis, TN 38107
Prepared by:
RKG Associates, Inc.
Economic, Planning and Real Estate
Consultants
634 Central Avenue
Dover, New Hampshire 03820
Tel: 603-953-0202
Web: www.rkgassociates.com
Economic
Planning
and
Real Estate
Consultants
Market Study and Impact Analysis of the Pyramid/Pinch District Project – Memphis, TN
July 13, 2011
TABLE OF CONTENTS
I. Executive Overview ................................................................................... 1
A. Introduction ...............................................................................................................1
1.
Development Plans .................................................................................................................3
B. Summary Findings ....................................................................................................4
1.
Demographic Indicators ........................................................................................................ 4
2.
Tourism Indicators ...................................................................................................................5
3.
Employee Spending ...............................................................................................................6
4.
Retail Trade Area ..................................................................................................................7
5.
Retail Demand and Sales ..................................................................................................... 8
6.
Hotel Occupancy and Sales Tax ......................................................................................... 8
7.
Financial Analysis – Pyramid Development (only) ...........................................................9
8.
Financial Analysis – Pyramid and Selected Other Downtown Development ........... 10
II. Market Indicators...................................................................................... 13
A. Socioeconomics .......................................................................................................13
1.
Population and Age ............................................................................................................ 13
2.
Households and Income ...................................................................................................... 15
3.
Tourism Trends and Spending ........................................................................................... 16
4.
Office Worker Spending ................................................................................................... 17
B. Retail Indicators ......................................................................................................18
1.
Retail Trade Area ............................................................................................................... 18
2.
Source of Sales .................................................................................................................... 19
3.
Pyramid - Retail Sales Estimates ...................................................................................... 23
4.
Pinch District .......................................................................................................................... 23
III. Economic Impacts ..................................................................................... 26
A. Inputs, Assumptions and Findings ..........................................................................26
1.
Construction and Short-Term Impacts............................................................................... 26
2.
Ongoing Impacts ................................................................................................................. 27
3.
Hotel Occupancy and Sales Tax ...................................................................................... 28
4.
Sales and Sales Tax ........................................................................................................... 29
IV.Appendix ................................................................................................. 30
RKG Associates, Inc.
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Market Study and Impact Analysis of the Pyramid/Pinch District Project – Memphis, TN
July 13, 2011
I. EXECUTIVE OVERVIEW
A. Introduction
RKG Associates, Inc. (RKG) was retained by the City of Memphis, Division of Community
Housing and Development (HCD), to complete a market study and impact analysis of the
redevelopment of the Pyramid and the Pinch District in downtown Memphis (refer to Figure
1 for an aerial view of the redevelopment area).
An independent market study is required, as a part of the City’s bond request, in order to
provide public-sector financial assistance to economic development projects. This market
study reviews the City’s capacity to absorb additional retail/restaurant/hotel development,
resulting in the creation of jobs, wages and net new sales tax within the existing Central
Business Improvement District (CBID)1. The CBID is presented in Figure 3, and referenced
in this analysis as the Downtown TDZ (tourism development zone).
This impact analysis also presents an estimate of the retail sales tax, from consumer activity
at the Pyramid2 that could be leveraged as new TDZ tax flows. This revenue stream, coupled
with the existing Downtown TDZ surplus, may be applied to the bonding debt for the project.
Figure 1 – Aerial View of the Pyramid/Pinch District Development Site – Memphis, TN
The proposed developments include the Pyramid property (abutting the Mississippi River), of
41-acres, and a portion of a six-block, 11± acre-area, with 34 parcels for the adjacent Pinch
District, which is bounded by North Front Street (west), North Third Street (east), Shadyac
Avenue (north) and Jackson Avenue (south). The City of Memphis has formally requested
1
The boundaries of the CBID are coincidental with the existing Memphis Cook Convention Center Tourism Development
Zone (or TDZ), hereinafter referenced as the Downtown TDZ.
2
The Pinch District is a future phase of development and an analysis of retail sales and sales tax is premature at this time.
RKG Associates, Inc.
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Market Study and Impact Analysis of the Pyramid/Pinch District Project – Memphis, TN
July 13, 2011
an Interchange Modification Study from the State of Tennessee for the purpose of gaining
direct northbound access into the Pinch District at Exit 1-A of Interstate-403. Figure 2
presents a conceptual rendering of the proposed Pyramid/Pinch District development, also
highlighting the St. Jude Children’s Research Hospital to the east.
Figure 2 – Conceptual Rendering of Pyramid/Pinch District Development – Memphis, TN
The Pyramid and Pinch District
projects are part of an existing
Tennessee
Downtown TDZ4.
has adopted several alternative
funding mechanisms to assist in
the
financing
of
public
investments. Included among
these is the Convention Center
and
Tourism
Development
Financing Act of 1998, which
permits the incremental new
sales tax generated in the TDZ to
form the basis of a revenue
stream and the “financing
mechanism,” utilized to retire
bonding
debt
for
public
infrastructure investment in the Figure 3 – Downtown TDZ by Census Tracts
economic development projects.
3
Information compiled by the Tennessee Department of Transportation indicate daily traffic counts averaging nearly 62,300
autos, along this exit ramp, over the 2005 to 2009 period.
4
In this analysis the census tracts delineated in Figure 3 represent the geographic boundaries used in tabulating the
demographic indicators and the retail supply and demand analysis.
RKG Associates, Inc.
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Market Study and Impact Analysis of the Pyramid/Pinch District Project – Memphis, TN
July 13, 2011
In this analysis, a portion of the City’s existing incremental sales tax stream, currently
derived from the Downtown TDZ, is combined with the estimated incremental sales tax
realized from new consumer activity at the Pyramid’s Bass Pro Outdoor World facility and
80-room hotel. Finally, selected economic and fiscal impacts are presented for several other
projects and developments underway and/or planned within the Downtown TDZ, including:
x
The move to Memphis of the Great American Steamboat Company headquarters
operations, as well as inclusion of Memphis as a port-of-call for ongoing tourism and
riverboat travel5. The estimated Downtown TDZ direct employment includes 26
positions, leasing an approximate 10,000 SF. The first year of retail spending impacts
from this additional downtown employment is assumed to be FY 2013, as are the
retail spending impacts associated with new visitors and tourists.
x
The relocation of Pinnacle Airlines Corporation headquarters to One Commerce
Square (at 40 South Main), leasing approximately 155,000 square feet (SF) with 650
employees. FY 2013 is assumed as the first full year of retail spending contributions
from this additional employment.
x
The planned expansion of the downtown Marriott hotel at an estimated construction
cost of $75.0 million6. This expansion includes the addition of 160-rooms; a parking
garage; and, 80,000 SF of meeting and convention, and an additional 82 employees.
The first year of tax base impacts from hotel guests, as well as from retail spending
among the additional employees, is assumed to be FY 2016.
x
The ongoing expansion of the St. Jude’s Children’s Research Hospital (in the Pinch
District), has an estimated cost of $190.0 million travel7. This expansion will add
approximately 340,000 SF to the facility and an additional 486 employees. The first
full year of retail spending impacts from this additional employment is assumed to be
FY 2017.
In all of these instances, the estimated downtown spending, and resulting sales tax, of the
employees, is presented. Estimates of visitor count and spending are presented for the Great
American Steamboat Co. as well as their impact in the Downtown TDZ. Unless otherwise
noted, the overall general spending of additional hotel guests and potential convention
attendees is considered as part of the sales per SF estimates for Bass Pro and the Pinch
District.
1. Development Plans
There are two major components to the proposed development, including the Pyramid with a
proposed 300,000 SF (square foot) Bass Pro Outdoor World as an anchor tenant, and with
retail space, exhibit/entertainment space and an on-site (interior) restaurant. Additionally, an
approximate 80-room, 41,600 SF hotel will be included as part of the proposed Pyramid
5
Much of the economic and fiscal impacts of the Great American Steamboat Co. have been developed by Younger
Associates (March 2011) with their report included as part of the Appendix. RKG has utilized selected economic and fiscal
impacts, from this report, for inclusion in the analysis of the Downtown TDZ, proper.
6
This is an order of magnitude estimate and as such, at this time, there is not breakdown for these costs such as construction
wages compared to construction materials or site work and a result, estimates of short-term employment impacts are not
included in this analysis.
7
Ibid.
RKG Associates, Inc.
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Market Study and Impact Analysis of the Pyramid/Pinch District Project – Memphis, TN
July 13, 2011
development.
Potential future
development on the Pyramid site may
include a parking garage, and outparcel (along North Front Street)
development of assorted retail, service
and commercial development.
Figure 4 – The Pyramid from North Front Street
In August of 2010, the Memphis City
Council approved a lease agreement
with Bass Pro for an initial 20-year
lease of the Pyramid property as a Bass
Pro Outdoor World facility. RKG
understands that terms of this lease
include a potential of seven 5-year
renewal periods, for a possible total
lease term of 55 years.
Presently site plans and interior designs for the Pyramid are being finalized. The second
component is the proposed future redevelopment of the neighboring Pinch District as a
value-oriented lifestyle center8, inclusive of retail shops, restaurants, parking garages and a
possible hotel. The conceptual plan for the Pinch District component includes the City of
Memphis, acting as Master Developer, engaging a nationally recognized firm to develop the
Pinch District. Although no plans are finalized at this point in time, with respect to the
overall market indicators, it is RKG’s opinion that the opportunity for such a value-oriented
lifestyle center at this location is strong,
given the unique retail offerings/mix
and economic synergy with the Bass
Pro Outdoor World development.
B. Summary Findings
The key findings of this market study
are presented next, and in more detail
elsewhere in the report. In summary,
the demographic, tourism, retail
supply/demand and consumer spending
potential(s) identified in this analysis
indicate that the proposed Pyramid and
future Pinch District developments are
viable for the Memphis market.
Figure 5 – Downtown from Pyramid/Pinch District
1. Demographic Indicators
x
There has been population growth in the Downtown TDZ since 2000 and this growth
is projected to continue through 2015. This is dissimilar to the entire City, where
8
Tenants for the Pinch District are unknown but will likely include national and name-brand retailers, offering quality and
value products at outlet pricing, with an estimated 240,000 SF of retail and 60,000 SF of restaurant space.
RKG Associates, Inc.
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Market Study and Impact Analysis of the Pyramid/Pinch District Project – Memphis, TN
July 13, 2011
population has been declining. There has also been population growth in a 100-mile
radius of the Pyramid and Pinch District.
x
The population of 20 to 34 year olds, those in family/household formation years and
young professionals, is projected to increase in the Downtown TDZ, between 2010
and 2015. This is dissimilar to both the City and the County, and reflects a
continuation of the growth in this cohort (in the Downtown TDZ) since 2000.
x
The population aged 35 to 54 years, those in peak earning/spending years, is
projected to decline in the Downtown TDZ however, at a projected 5.8% decline this
is less than that for the City and County.
x
The population aged 55 to 64, those with increased discretionary income, is projected
to increase 3.4% in the Downtown TDZ (2010 to 2015).
x
In 2015 the number of households in the Downtown TDZ will total nearly 12,600
units, representing an increase of nearly 15% over the 11,000 households in 2010.
x
Between 1990 and 2000, the average household income in the Downtown TDZ
increased from $17,600 to $37,000, or by 111%, by another 47% between 2000 and
2010 and is projected to grow through 2015. As a result, in 1990 the average
household income in downtown was 55.2% that of the City, but is projected to be
106.6% in 2015.
2. Tourism Indicators
x Since 1998 the average
annual impact of tourism spending
in the Memphis area economy has
exceeded $2.5 billion and the
average annual attendance at
Memphis area attractions has been
nearly 2.9 million persons9.
x There are more than 60
tourist attractions in the Memphis
area. The majority of the downtown
tourism dollars are spent at Beale
Street establishments.
x Most, but not all, visitors to
Memphis, on average, travel from
within an approximate 250-mile radius and those staying overnight spend nearly three
days in Memphis.
Figure 6 – Partial Pinch District properties
x
The average daily spending of visitors to Memphis ranges from $60/day for the “daytripper” to over $400/day for the leisure travelers (typically a party of 2 to 3 persons).
9
An attendee at a Memphis area attraction and a visitor may not necessarily be the same person, as the local population
often “attends” an attraction and visitors may not.
RKG Associates, Inc.
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Market Study and Impact Analysis of the Pyramid/Pinch District Project – Memphis, TN
x
July 13, 2011
Specifically, for the Great American Steamboat Co., Younger Associates estimated
slightly more than 21,800 visitors annually as passengers on the riverboat with
estimated retail spending totaling $1,080,000.
RKG estimates that one-half of
this visitor retail spending
occurs in the Downtown TDZ,
which
includes
numerous
restaurant and entertainment
venues, such as Beale Street,
but excludes other major
Memphis
area
visitor
destinations such as Graceland.
The estimated net incremental
sales tax applicable (refer
below) to the TDZ, is spending,
is $41,850, with FY 2013 as the
first year of full impacts.
Figure 7 – Pyramid and Pinch District partial view
a) Applicable Sales Tax Rate
The state portion of the sales tax is 6%, reflecting the baseline rate in 2001, when the
Downtown TDZ was established. This amount is adjusted by a -0.5% reduction, reflecting a
set-aside for education funding. The resulting state tax rate then is 5.5%. The sales tax rate
for the City of Memphis is 2.25%, effectively making the applicable sales tax rate to be
7.75%, (as in the preceding example $540,000 X 0.0775% = $41,850).
3. Employee Spending
x
Studies by Urban Land Institute (ULI) have indicated that the average office worker
may spend nearly $2,900 while at work over the course of a year. The following
Table 1 presents the estimated annual spending from the “new” downtown
employment, reflecting an estimated 65% capture for taxable expenditures in the
Downtown TDZ.
RKG Associates, Inc.
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Market Study and Impact Analysis of the Pyramid/Pinch District Project – Memphis, TN
July 13, 2011
Table 1 – Estimated Annual Downtown TDZ Spending from New Employment at Other Projects
OfficeWorkers
EstimatedDowntownTDZEmploymentandPurchasing
EstimatedAnnual
Pinnacle
Marriott
St.Jude's
Steamboat
SpendingDemand
PerWorker
650
82
486
26
$ 1,225
Lunch
$796,250
$99,960
$595,000
$31,850
$ 560
$364,000
$45,696
$272,000
$14,560
Apparel
$ 190
OtherShopperGoods
$123,500
$15,504
$92,286
$4,940
$ 190
Incidentals
$123,500
$15,504
$92,286
$4,940
$ 250
$162,500
$20,400
$121,429
$6,500
OtherFoodItems
$ 80
Miscellaneous
$52,000
$6,528
$38,857
$2,080
$ 110
DinnerandDrinks
$71,500
$8,976
$53,429
$2,860
$ 275
OtherNonFood
$178,750
$22,440
$133,571
$7,150
TOTAL
$2,880
$1,872,000
$235,008
$1,398,857
$74,880
Estimated"New"inTDZ
65.00%
$1,216,800
$152,755
$909,257
$48,672
AnnualSalesTaxStatePortion
$66,924
$8,402
$50,009
$2,677
CityPortion
$27,378
$3,437
$20,458
$1,095
NETSalesTaxtoTDZ
$94,302
$11,839
$70,467
$3,772
Source:InternationalCouncilofShoppingCenters,UrbanLandInstituteandRKGAssociates,Inc.
Total
1,243
$1,523,060
$696,256
$236,230
$236,230
$310,829
$99,465
$136,765
$341,911
$3,580,745
$2,327,484
$128,012
$52,368
$180,380
These new sales, of $2.3 million, are then multiplied by the applicable sales tax rate of 7.75%
to arrive at an approximate $180,400 in new sales tax increment for the Downtown TDZ.
4. Retail Trade Area
x
Representatives of Bass Pro have indicated that perhaps 40% to 45% of their
customers travel 50+ miles to shop their stores. Most retailing venues have much
smaller or tighter market area geographies, often ranging from 3 to 5-miles for many
grocery store formats to 15 to 20-miles for mass merchandisers10.
x
Presently
there
are
no
competing Bass Pro Outdoor
World facilities within an
approximate 200-mile radius of
the Pyramid11. It is also possible
that the unique design of this
venue might attract shoppers
from an even further distance, or
more so than a “typical” Bass
Pro (such as the one currently in
Memphis).
x
At one time, outlet centers
located in relatively remote
areas but the more recent
locations, as value-oriented Figure 8 – Pyramid from surface parking area
lifestyle centers, have tied them more with travel and tourism and brought them into
major metropolitan areas.
10
These vary by size of the shopping center or store, surrounding competition and other factors, but these trade area radii are
more or less typical for most such retail venues.
11
This excludes the existing, smaller Bass Pro in Memphis, which reportedly will convert to a catalogue outlet store. The
stores in Nashville, TN; Branson, MO; and, Birmingham, AL, are all 200+ miles away.
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Market Study and Impact Analysis of the Pyramid/Pinch District Project – Memphis, TN
July 13, 2011
x
Information compiled by Value Retail News (VRN), a firm specializing in tracking
the outlet industry, indicates that trade areas may range from 60 to 100-miles.
x
For this analysis, an approximate 100-mile radius about Memphis is considered a
reasonable trade area or “drawing power” for the Bass Pro and Pinch District
developments. This reflects industry average trade areas, avoids competitive overlap
with any other Bass Pro Outdoor World and is a subset of the existing 250-mile
radius “tourist drawing power” of Memphis.
5. Retail Demand and Sales
x
The estimated consumer spending demand in 2013, for the one-million plus
households within a 100-mile radius of Memphis, is $20,500 per household or more
than $21 billion spent across a broad spectrum of retail lines.
x
Within the Downtown TDZ, consumer spending demand among the approximate
12,000 households exceeds $218 million or nearly $18,300 per household.
x
More narrowly, retail sales at the Bass Pro and Pinch District retailers will likely
reflect consumer spending for sporting goods, apparel and accessories12 as well as
dining and drinking establishments. The cumulative 100-mile radius consumer
demand among these merchandise lines is estimated to be $4.7 billion in 2013.
x
The retail sales (2013) for the Bass Pro are estimated to be $350/SF resulting in an
estimated $9.7 million in new TDZ sales tax revenue (unadjusted by a factor of 8% to
account for set-asides and other reserves).
6. Hotel Occupancy and Sales Tax
This includes the proposed 80-room hotel as part of the Pyramid development (anticipated to
open in 2013) and the planned 160-room expansion of the downtown Marriott hotel, to
include a garage and 80,000 SF of conference and meeting space.
a) Hotel with the Pyramid
The 80-room hotel facility, as part of the Pyramid development, is estimated to be open and
operational in 2013, realizing a 60% occupancy rate and an average room rate of $130. The
estimated occupancy tax in 2013 is $38,700 to the City of Memphis and an additional
$113,900 to Shelby County.
The occupancy tax represents an additional source of revenue for the City and County;
however, it is not applicable to retiring the TDZ bonding debt. However, the estimated sales
tax contribution from the hotel is an applicable revenue source.
In 2013 the additional applicable sales tax revenue, from the hotel property, amounts to
$176,500.
12
The 2009 Value Retail Directory, published by VRN (http://www.valueretailnews.com/), indicated that apparel and shoe
categories dominate the outlets accounting for nearly 70% of the total outlet stores.
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Market Study and Impact Analysis of the Pyramid/Pinch District Project – Memphis, TN
July 13, 2011
b) Proposed Marriott Expansion
A proposed $75.0 million expansion of
the existing downtown Marriott hotel is
to include 160-rooms and 80,000 SF of
meeting and convention space.
Construction is likely to start after the
Pyramid development and once Bass
Pro has begun to establish this portion
of the Downtown TDZ as a consumer
destination. In this analysis then, the
completed Marriott expansion is
anticipated to occur in 2015, with FY
2016 as the first full-year of estimated
revenue contributions to the Downtown
TDZ. The estimated occupancy rate
for the Marriott is 65%, slightly above Figure 9 – Pyramid and Pinch District partial view
that for the 80-room Pyramid hotel,
reflecting the on-site meeting and convention capacity as part of the Marriott expansion, a
later opening and room demand from steamboat/riverboat passengers13. In 2016 applying an
average room rate of $130 with a 65% occupancy rate, results in estimated room revenue of
$4.9 million. This in turn amounts to an estimated occupancy tax in 2016 of $83,900 to the
City of Memphis and an additional $246,700 to Shelby County. The incremental sales tax
applicable to the Downtown TDZ is estimated to be nearly $382,500 in FY 2016.
7. Financial Analysis – Pyramid Development (only)
x
The purpose of the financial analysis is to assist the City of Memphis in identifying
potential financing that could be leveraged by the new TDZ revenue from the Bass
Pro/Hotel, coupled with any existing Downtown TDZ surplus that the City of
Memphis may pledge for the project.
x
As part of future payments, the City of Memphis is anticipated to pledge slightly
more than $11.9 million annually of the existing Downtown TDZ surplus.
x
The new TDZ revenue generated from the Bass Pro/Hotel is assumed to start soon
after the construction is completed when each element is fully operational, which is
reported to be in August 2013 at the latest. Therefore, for the financial analysis, the
first fiscal year of new TDZ revenue generated from the Bass Pro/Hotel component
would be FY 2014 (essentially less the month of July 2013, however, grand opening
sales in the early months typically exceed annual expectations). The estimated new
TDZ revenue stream from the Bass Pro/Hotel component coupled with the existing
Downtown TDZ surplus, are presented in Table 2.
13
In actuality the increased room-night demand and spending represented by the overnight steamboat and riverboat
passengers would likely be spread across numerous downtown hotels. For the ease of the spreadsheet model developed for
this analysis, this impact is estimated as part of the Marriott hotel expansion rather than incrementally across numerous
hotels.
RKG Associates, Inc.
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Market Study and Impact Analysis of the Pyramid/Pinch District Project – Memphis, TN
x
July 13, 2011
The inputs and assumptions which are the basis of the estimates in this financial
analysis are presented in greater detail throughout this report and represent the
consultants’ best professional opinions. However, there is no assurance that actual
events will correspond with the assumptions on which such estimates are based.
Consequently, no guarantee can be made that the estimated net new TDZ revenues
will correspond with the results actually achieved in the future.
Table 2 – Estimated TDZ Revenue Stream – Bass Pro/Hotel & Existing Downtown TDZ Surplus
Year
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
July
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
Total
AnnualAverage
NewTDZRevenue[1]
BassPro
Hotel
Subtotal
$0
$0
$0
$0
$0
$0
$0
$0
$0
$8,137,500
$176,514
$8,314,014
$8,259,563
$179,162
$8,438,724
$8,383,456
$181,849
$8,565,305
$8,509,208
$184,577
$8,693,785
$8,636,846
$187,346
$8,824,191
$8,766,399
$190,156
$8,956,554
$8,897,895
$193,008
$9,090,903
$9,031,363
$195,903
$9,227,266
$9,166,833
$198,842
$9,365,675
$9,304,336
$201,824
$9,506,160
$9,443,901
$204,852
$9,648,753
$9,585,559
$207,924
$9,793,484
$9,729,343
$211,043
$9,940,386
$9,875,283
$214,209
$10,089,492
$10,023,412
$217,422
$10,240,834
$10,173,763
$220,683
$10,394,447
$10,326,370
$223,994
$10,550,364
$10,481,265
$227,354
$10,708,619
$166,732,295
$3,616,662
$170,348,957
$7,939,633
$172,222
$8,111,855
ExistingTDZ
Surplus[2]
$11,948,423
$11,948,423
$11,948,423
$11,948,423
$11,948,423
$11,948,423
$11,948,423
$11,948,423
$11,948,423
$11,948,423
$11,948,423
$11,948,423
$11,948,423
$11,948,423
$11,948,423
$11,948,423
$11,948,423
$11,948,423
$11,948,423
$11,948,423
$11,948,423
$250,916,888
$11,948,423
Revenuefor
DebtService
$11,948,423
$11,948,423
$11,948,423
$20,262,437
$20,387,147
$20,513,728
$20,642,208
$20,772,615
$20,904,978
$21,039,326
$21,175,689
$21,314,098
$21,454,584
$21,597,176
$21,741,907
$21,888,809
$22,037,915
$22,189,258
$22,342,870
$22,498,787
$22,657,042
$421,265,845
$20,060,278
Note:Ana nnua linfl a ti onfa ctorof1.5%wa s a ppl i edtoNewTDZrevenues a fteri ni tia l yea r
[1]ProjectedNewTDZRevenuerefl ects neta ppli ca bl es a l es ta xra teof7.75%
[2]Exi s ti ngTDZs urpl us fi gures wereprovi dedbytheCi tyofMemphis a ndMorga nKeega n&Compa ny
Source:Ci tyofMemphi s &RKGAs s oci a tes ,Inc.
8. Financial Analysis – Pyramid and Selected Other Downtown Development
Table 3 on the following page includes the estimated annual TDZ revenues accruing to the
City of Memphis from the Bass Pro and Hotel development, along with the existing surplus
(as shown above in Table 2) and adds the estimated sales tax revenue derived from other
downtown sources, of projects completed or pending completion. These include the move to
downtown of the Great American Steamboat Company headquarters, as well as for Pinnacle
Airlines Corporation (both FY 2013 impacts); the planned expansion of the downtown
RKG Associates, Inc.
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Market Study and Impact Analysis of the Pyramid/Pinch District Project – Memphis, TN
July 13, 2011
Marriott (FY 2016 impact); and, the ongoing expansion of the St. Jude’s Children’s Research
Hospital (FY 2017 impact).
As indicated in Table 3, these other development and projects contribute an additional $11.3
million to the estimated TDZ sales tax revenues over the term. This ranges from $82,200 in
sales tax from retail spending downtown among the Great American Steamboat Co.
employees, to nearly $6.9 million from additional hotel tax from the expanded Marriott. On
average, over the term, these additional sources contribute $537,900 annually.
RKG Associates, Inc.
Page 11
Market Study and Impact Analysis of the Pyramid/Pinch District Project – Memphis, TN
July 13, 2011
Table 3 – Estimated TDZ Revenue Stream – Bass Pro/Hotel with Existing Downtown TDZ Surplus and Other Downtown Projects
Year
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
July
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
Total
AnnualAverage
NewTDZRevenue[1]
BassPro
Hotel
Subtotal
$0
$0
$0
$0
$0
$0
$0
$0
$0
$8,137,500
$176,514
$8,314,014
$8,259,563
$179,162
$8,438,724
$8,383,456
$181,849
$8,565,305
$8,509,208
$184,577
$8,693,785
$8,636,846
$187,346
$8,824,191
$8,766,399
$190,156
$8,956,554
$8,897,895
$193,008
$9,090,903
$9,031,363
$195,903
$9,227,266
$9,166,833
$198,842
$9,365,675
$9,304,336
$201,824
$9,506,160
$9,443,901
$204,852
$9,648,753
$9,585,559
$207,924
$9,793,484
$9,729,343
$211,043
$9,940,386
$9,875,283
$214,209
$10,089,492
$10,023,412
$217,422
$10,240,834
$10,173,763
$220,683
$10,394,447
$10,326,370
$223,994
$10,550,364
$10,481,265
$227,354
$10,708,619
$166,732,295
$3,616,662
$170,348,957
$7,939,633
$172,222
$8,111,855
ExistingTDZ
Surplus[2]
$11,948,423
$11,948,423
$11,948,423
$11,948,423
$11,948,423
$11,948,423
$11,948,423
$11,948,423
$11,948,423
$11,948,423
$11,948,423
$11,948,423
$11,948,423
$11,948,423
$11,948,423
$11,948,423
$11,948,423
$11,948,423
$11,948,423
$11,948,423
$11,948,423
$250,916,888
Revenuefor
DebtService
$11,948,423
$11,948,423
$11,948,423
$20,262,437
$20,387,147
$20,513,728
$20,642,208
$20,772,615
$20,904,978
$21,039,326
$21,175,689
$21,314,098
$21,454,584
$21,597,176
$21,741,907
$21,888,809
$22,037,915
$22,189,258
$22,342,870
$22,498,787
$22,657,042
$421,265,845
Steamboat
Employees
$0
$0
$3,772
$3,829
$3,886
$3,944
$4,004
$4,064
$4,125
$4,186
$4,249
$4,313
$4,378
$4,443
$4,510
$4,578
$4,646
$4,716
$4,787
$4,859
$4,931
$82,219
$11,948,423
$20,060,278
$3,915
PotentialAdditionalSalesTaxRevenuefromOtherSources
Steamboat
Pinnacle
Marriott
Marriot
St.Jude
TOTAL
Tourism Employees
Employees
Hotel Employees
forOther
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$41,850
$94,302
$0
$0
$0
$139,924
$42,478
$95,717
$0
$0
$0
$142,023
$43,115
$97,152
$0
$0
$0
$144,153
$43,762
$98,610
$11,839
$382,447
$0
$540,601
$44,418
$100,089
$12,016
$388,184
$70,467
$619,178
$45,084
$101,590
$12,196
$394,006
$71,524
$628,465
$45,761
$103,114
$12,379
$399,917
$72,597
$637,892
$46,447
$104,661
$12,565
$405,915
$73,686
$647,461
$47,144
$106,231
$12,753
$412,004
$74,792
$657,172
$47,851
$107,824
$12,945
$418,184
$75,913
$667,030
$48,569
$109,441
$13,139
$424,457
$77,052
$677,036
$49,297
$111,083
$13,336
$430,824
$78,208
$687,191
$50,037
$112,749
$13,536
$437,286
$79,381
$697,499
$50,787
$114,440
$13,739
$443,845
$80,572
$707,961
$51,549
$116,157
$13,945
$450,503
$81,780
$718,581
$52,322
$117,899
$14,154
$457,261
$83,007
$729,360
$53,107
$119,668
$14,367
$464,119
$84,252
$740,300
$53,904
$121,463
$14,582
$471,081
$85,516
$751,404
$54,712
$123,285
$14,801
$478,148
$86,799
$762,676
$912,193
$2,055,474
$212,293 $6,858,181
$1,175,547 $11,295,907
$43,438
$97,880
$10,109
$326,580
$55,978
$537,900
GRANDTOTAL
Change
Revenuefor
with
DebtService
Other
$11,948,423
$0
$11,948,423
$0
$12,088,347
$139,924
$20,404,460
$142,023
$20,531,301
$144,153
$21,054,329
$540,601
$21,261,385
$619,178
$21,401,080
$628,465
$21,542,870
$637,892
$21,686,786
$647,461
$21,832,862
$657,172
$21,981,128
$667,030
$22,131,619
$677,036
$22,284,367
$687,191
$22,439,406
$697,499
$22,596,771
$707,961
$22,756,496
$718,581
$22,918,617
$729,360
$23,083,170
$740,300
$23,250,191
$751,404
$23,419,718
$762,676
$432,561,752 $11,295,907
$20,598,179
$537,900
Note:Anannualinflationfactorof1.5%wasappliedtoNewTDZrevenuesafterinitialyear
[1]ProjectedNewTDZRevenuereflectsnetapplicablesalestaxrateof7.75%
[2]ExistingTDZsurplusfigureswereprovidedbytheCityofMemphisandMorganKeegan&Company
Source:CityofMemphis&RKGAssociates,Inc.
RKG Associates, Inc.
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Market Study and Impact Analysis of the Pyramid/Pinch District Project – Memphis, TN
II.
July 13, 2011
MARKET INDICATORS
This chapter presents an overview of selected baseline socioeconomic and retail related
indicators, utilized in estimating retail sales. These sales in turn form the basis for estimating
net new sales tax revenue that may be used in retiring the public-sector bonding debt.
A. Socioeconomics
This section presents comparative and selected socioeconomic trends and projections for
Tennessee, Shelby County, the City of Memphis and the Downtown TDZ (as well as an
approximate 100-mile radius about the Pyramid and Pinch District14). Included among these
are the more typical variables, often reviewed by retailers as part of their site and location
criteria, such as population, housing and income. A brief overview of the tourism economy
and its impacts in Memphis is also presented.
1. Population and Age
Despite some population15 decline in the Downtown TDZ, between 1990 and 2000, there has
been growth since 2000 and growth is projected for 2015 (refer to Table 4). The projected
population growth for the Downtown TDZ is dissimilar to the projected population declines
for both the City of Memphis and Shelby County. As a result, in 2000, the Downtown TDZ
population represented approximately 3.2% of the City population, but is projected to
represent 4.1% in 2015. The projected growth rate for the Downtown TDZ is similar to,
albeit slightly higher, than that projected for all of Tennessee. The population within a 100mile radius of the Pyramid/Pinch District has grown since 1990 and is projected to continue
to grow resulting in more than 2.6 million persons in 2015.
Table 4: Selected Population Trends
Comparative
PopulationTrends
TotalPopulation
1990
2000
2010
2015
%change19902000
%change20002010
%change20102015
Downtown
TDZ
Cityof
Memphis
Shelby
County
Tennessee
22,871
20,778
22,189
23,542
9.2%
6.8%
6.1%
661,838
649,485
602,458
575,658
1.9%
7.2%
4.4%
826,327
897,472
904,703
897,660
8.6%
0.8%
0.8%
4,877,187
5,689,283
6,324,825
6,691,279
16.7%
11.2%
5.8%
100Mile
Radius
2,263,386
2,491,884
2,591,562
2,646,403
10.1%
4.0%
2.1%
Source:Demogra phi cs Now a ndRKGAs s oci a tes ,Inc.
In terms of the age distribution (refer to Table 5) within the Downtown TDZ, and as
compared to the City of Memphis, several observations worth noting include:
14
As discussed elsewhere in this analysis, an approximate 100-mile radius is considered to be an appropriate retail trade area
reflecting the combined consumer drawing power for the Bass Pro and Pinch District value-oriented lifestyle center.
15
Reference for much of the population and other demographic data is DemographicsNOW, a leading and national vendor of
socioeconomic data from the US Census Bureau and inclusive of proprietary estimates and projection modeling. The firm
was founded in 1997, for additional information; please refer to their website at http://www.demographicsnow.com/.
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Market Study and Impact Analysis of the Pyramid/Pinch District Project – Memphis, TN
x
July 13, 2011
The population aged 20 to 34 years of age, often considered to be in their family and
housing formation years and young professionals, and is projected to increase in the
Downtown TDZ, between 2010 and 2015. This is dissimilar to both the City and the
County, and reflects a continuation of the growth in this cohort (in the Downtown
TDZ) since 2000. This growth is in contrast to the loss for the City and the County.
x
The population aged 35 to 54 years, typically those in their peak earning and
spending years, is projected to decline across all geographies, including the
Downtown TDZ. However, at a projected 5.8% decline, this rate of decline for the
Downtown TDZ is less than that for the City and County.
x
While the population aged 55 to 64, or that cohort often with increased discretionary
income, is projected to increase across all areas, the projected 13.4% growth in the
Downtown TDZ, for 2010 to 2015, is the highest rate.
Table 5: Selected Age Trends
Comparative
AgeDistribution
Population<5Years
1990
2000
2010
2015
%change19902000
%change20002010
%change20102015
Population5to19Years
1990
2000
2010
2015
%change19902000
%change20002010
%change20102015
Population20to34Years
1990
2000
2010
2015
%change19902000
%change20002010
%change20102015
Population35to54Years
1990
2000
2010
2015
%change19902000
%change20002010
%change20102015
Population55to64Years
1990
2000
2010
2015
%change19902000
%change20002010
%change20102015
Population65+
1990
2000
2010
2015
%change19902000
%change20002010
%change20102015
Downtown
TDZ
Cityof
Memphis
Shelby
County
Tennessee
1,844
1,128
1,458
1,799
38.8%
29.3%
23.4%
53,942
50,396
50,769
53,317
6.6%
0.7%
5.0%
66,543
68,427
74,957
82,099
2.8%
9.5%
9.5%
333,412
374,880
433,781
469,734
12.4%
15.7%
8.3%
3,964
3,202
3,256
3,342
19.2%
1.7%
2.6%
143,618
150,589
129,569
121,063
4.9%
14.0%
6.6%
188,359
210,316
196,470
191,234
11.7%
6.6%
2.7%
1,043,024
1,186,152
1,226,987
1,281,644
13.7%
3.4%
4.5%
7,570
6,684
6,182
6,504
11.7%
7.5%
5.2%
177,460
152,936
123,960
119,083
13.8%
18.9%
3.9%
214,054
197,014
173,086
173,492
8.0%
12.1%
0.2%
1,180,119
1,202,246
1,245,255
1,266,637
1.9%
3.6%
1.7%
4,581
5,804
5,976
5,631
26.7%
3.0%
5.8%
156,383
177,845
157,170
132,722
13.7%
11.6%
15.6%
207,641
264,464
252,056
220,983
27.4%
4.7%
12.3%
1,267,178
1,689,443
1,768,528
1,767,135
33.3%
4.7%
0.1%
1,565
1,691
2,858
3,242
8.1%
69.0%
13.4%
53,295
46,912
69,961
71,246
12.0%
49.1%
1.8%
63,392
67,670
109,246
115,509
6.7%
61.4%
5.7%
434,589
533,251
770,635
864,572
22.7%
44.5%
12.2%
3,349
2,269
2,459
3,024
32.2%
8.4%
23.0%
77,142
70,807
71,026
78,230
8.2%
0.3%
10.1%
86,335
89,581
98,885
114,345
3.8%
10.4%
15.6%
618,819
703,311
879,912
1,041,814
13.7%
25.1%
18.4%
Source:Demogra phi cs Now a ndRKGAs s oci a tes ,Inc.
NoteSumofcohorts ma ydi fferfromtotal duetoroundi ng.
RKG Associates, Inc.
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Market Study and Impact Analysis of the Pyramid/Pinch District Project – Memphis, TN
July 13, 2011
2. Households and Income
By 2015 the projected number of households in the Downtown TDZ will be nearly 12,600
units, representing an increase of nearly 15% over the 11,000 households in 2010 (refer to
Table 6). This represents the highest projected increase in households among all
geographies, notably above the 1% growth projected for the City as a whole. In 2000, the
number of households in the Downtown TDZ represented 3.8% of all City households, but is
projected to represent 5.2% in 2015. As also indicated in Table 6, there is continued growth
in the number households within a 100-mile radius, as well as an increase in average
household income.
Table 6: Selected Housing and Income Trends
ComparativeHH&
Downtown
Cityof
IncomeTrends
TDZ Memphis
TotalHouseholds
1990
9,897 251,480
2000
9,628 250,460
2010
10,965 239,273
2015
12,579 241,954
%change19902000
2.7%
0.4%
%change20002010
13.9%
4.5%
%change20102015
14.7%
1.1%
AverageHHIncome
1990
$17,555 $31,826
2000
$37,013 $45,353
2010
$54,397 $54,367
2015
$60,917 $57,123
%change19902000
110.8%
42.5%
%change20002010
47.0%
19.9%
%change20102015
12.0%
5.1%
HHEarning<$35,000
1990
8,738 168,955
2000
6,626 133,155
2010
6,520 118,524
2015
6,983 117,094
%change19902000
24.2%
21.2%
%change20002010
1.6%
11.0%
%change20102015
7.1%
1.2%
HHEarning$35,000to$100,000
1990
1,000
75,135
2000
2,282
98,902
2010
2,758
93,358
2015
3,298
93,862
%change19902000
128.2%
31.6%
%change20002010
20.9%
5.6%
%change20102015
19.6%
0.5%
HHEarning$100,000+
1990
150
7,339
2000
720
18,403
2010
1,687
27,390
2015
2,298
30,997
%change19902000
380.0%
150.7%
%change20002010
134.3%
48.8%
%change20102015
36.2%
13.2%
Shelby
County
Tennessee
100Mile
Radius
303,569
338,366
349,565
366,446
11.5%
3.3%
4.8%
1,853,719
2,232,905
2,490,472
2,658,282
20.5%
11.5%
6.7%
828,784
938,850
1,001,094
1,053,139
13.3%
6.6%
5.2%
$35,815
$54,522
$67,295
$71,310
52.2%
23.4%
6.0%
$31,854
$48,688
$60,511
$65,119
52.8%
24.3%
7.6%
$29,168
$45,783
$56,355
$60,162
57.0%
23.1%
6.8%
186,741
150,830
137,102
137,175
19.2%
9.1%
0.1%
1,235,746
1,074,625
1,011,743
1,015,671
13.0%
5.9%
0.4%
587,701
483,352
444,985
442,959
17.8%
7.9%
0.5%
104,527
148,378
148,588
154,254
42.0%
0.1%
3.8%
569,427
972,417
1,128,464
1,217,076
70.8%
16.0%
7.9%
221,504
385,795
425,748
451,786
74.2%
10.4%
6.1%
12,285
39,158
63,875
75,017
218.7%
63.1%
17.4%
48,449
185,863
350,265
425,535
283.6%
88.5%
21.5%
19,525
69,709
130,361
158,394
257.0%
87.0%
21.5%
Source:Demographi cs Now a ndRKGAs s ocia tes ,Inc.
Between 1900 and 2000, the average household income in the Downtown TDZ increased
from $17,600 to $37,000, or by nearly 111%. The rate of increase in the average household
income among Downtown TDZ households continued to increase, by 47% between 2000 and
2010, and is projected to increase 12% between 2010 and 2015. This unprecedented growth
RKG Associates, Inc.
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Market Study and Impact Analysis of the Pyramid/Pinch District Project – Memphis, TN
July 13, 2011
when compared with the other three (in Tennessee) areas has also resulted in the average
household income among Downtown TDZ households surpassing that of the City. In 1990,
the average household income in the Downtown TDZ was 55.2% that of the City, but is
projected to be 106.6% in 2015. Other observations regarding households and income
include the following:
x
Despite overall increases in household income in the Downtown TDZ, there is a
projected 7% increase (2010 to 2015) among households earning less than $35,000.
This may partially be explained by the increase in population among those aged 20 to
34 years.
x
The rate of growth among households in the Downtown TDZ, earning $35,000 to
$100,000, exceeds that for all other areas, in all time periods, such as 1990 to 2000;
2000 to 2010; and, projected for 2010 to 2015.
x
Similarly, the rate of growth for households earning $100,000 or more, in the
Downtown TDZ, exceeds that of all other areas. In 1990, the downtown households
earning more than $100,000 represented less than 2% of all downtown households.
This is projected to increase to more than 18% representation by 2015. This
compares with a 3% representation among all City households in 1990 to a 13%
representation in 2015.
3. Tourism Trends and Spending
Since 1998 the amount of tourism spending in the Memphis area economy has surpassed $2
billion and even $3 billion at times as indicated in Table 7. The average over the 1998 to
2008 period was slightly more than $2.5 billion annually. In addition, estimates of
visitors/attendance at area attractions have averaged nearly 2.9 million annually.
Table 7: Tourism Trends – Memphis, TN
Trends in Tourism
Tourism Spending
Memphis, TN
in $millions
1998
$2,116.26
1999
$2,202.20
2000
$2,310.70
2001
$2,244.51
2002
$2,327.80
2003
$2,370.26
2004
$2,455.99
2005
$2,639.58
2006
$2,854.13
2007
$3,064.70
2008
$3,035.30
Average
$2,511.04
Attendance at
Area Venues (mill)
3.14
2.90
2.78
3.03
3.13
2.85
2.93
2.75
2.80
2.74
2.65
2.88
Source:Memphi s Conventi on&Vi s i tors Burea ua ndRKGAs s oci a tes ,Inc.
According to information presented by the Memphis Convention & Visitors Bureau
(MCVB), more than 60 tourist attractions are in the Memphis area. Reportedly16 the majority
of the downtown tourism dollars are spent at Beale Street establishments, as it is estimated
that 4 million persons visit the Beale Street Historic District annually.
16
Downtown Memphis Retail Strategy, June 2008, prepared by Economics Research Associates (ERA), et al
RKG Associates, Inc.
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Market Study and Impact Analysis of the Pyramid/Pinch District Project – Memphis, TN
July 13, 2011
Table 8 presents a profile of Memphis tourists/visitors, indicating that the average “drawing
power” of Memphis as a tourism destination extends for a 250-mile radius and that the
average visitor spends almost three days in Memphis.
Table 8: Memphis Visitor Profile
Memphis Visitor Profile
Average Party Size
Average Stay
Average Market Draw
2.81 persons
2.94 days
250-mile radius
Average Daily Visitor Spending
Convention Delegate
Corporate Traveler
Leisure Traveler (party)
Day-Tripper
$397
$340
$427
$60
Source:Memphi s Conventi on&Vi s i tors Bureau
ERAandRKGAs s oci ates ,Inc.
a) Visitor Spending from Great American Steamboat Company Travelers
As noted previously, Younger Associates (March 2011) have prepared an economic and
fiscal analysis of impacts associated with the arrival of the Great American Steamboat Co.
and new passengers and visitors to Memphis. In that analysis Younger Associates estimated
slightly more than 21,800 visitors to Memphis (annually) as passengers on the riverboat with
estimated retail spending totaling $1,080,00017. RKG estimates that one-half of this visitor
retail spending occurs in the Downtown TDZ, which includes numerous restaurant and
entertainment venues, such as Beale Street, but excludes other major Memphis area visitor
destinations such as Graceland. As a result the estimated applicable sales tax on this retail
spending, for the Downtown TDZ is 50% X $1,080,000 X 7.75% = $41,850, with FY 2013
estimated to the first year of full impact.
4. Office Worker Spending
Economic activity in the Downtown TDZ is also influenced by the downtown workforce
reported by the Memphis City Center Commission to be some 64,000 workers. Studies
completed by Urban Land Institute and others, indicators that a typical office worker spends
slightly less than $2,900 annually for select merchandise while “at work”. While many of
these 64,000 workers may not be office workers, or may have varying lunch hours or on-site
venues (such as a company cafeteria), there is still a substantial consumer demand that is
generated. The following Table 9, presents the estimated new employment in the Downtown
TDZ as a result of selected other projects and developments either underway or planned.
These estimates are multiplies by the annual spending of among office workers and adjusted
to reflect a 65% capture rate at business in the Downtown TDZ18. These sales are then
multiplied by the applicable sales tax rate, indicating an estimated net sales tax contribution
of $180,400 to the Downtown TDZ. In the analysis and spreadsheet model, this is further
adjusted to reflect the estimated timing and phasing of the new employees into the
Downtown TDZ workforce.
17
The Younger Associates report estimated annual hotel spending among these visitors. RKG reflects this hotel spending as
part of the slightly higher occupancy rate for the proposed downtown Marriott hotel expansion.
18
Some purchases are likely to occur on the way to or from work, or otherwise outside of the Downtown TDZ.
RKG Associates, Inc.
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Market Study and Impact Analysis of the Pyramid/Pinch District Project – Memphis, TN
July 13, 2011
Table 9: “New” Office Worker Retail Spending and Applicable Sales Tax – Downtown TDZ
EstimatedDowntownTDZEmploymentandPurchasing
OfficeWorkers
EstimatedAnnual
Pinnacle
Marriott
St.Jude's
Steamboat
SpendingDemand
PerWorker
650
82
486
26
$ 1,225
Lunch
$796,250
$99,960
$595,000
$31,850
$ 560
Apparel
$364,000
$45,696
$272,000
$14,560
$ 190
OtherShopperGoods
$123,500
$15,504
$92,286
$4,940
$ 190
Incidentals
$123,500
$15,504
$92,286
$4,940
$ 250
OtherFoodItems
$162,500
$20,400
$121,429
$6,500
$ 80
Miscellaneous
$52,000
$6,528
$38,857
$2,080
$ 110
DinnerandDrinks
$71,500
$8,976
$53,429
$2,860
$ 275
OtherNonFood
$178,750
$22,440
$133,571
$7,150
TOTAL
$2,880
$1,872,000
$235,008
$1,398,857
$74,880
Estimated"New"inTDZ
65.00%
$1,216,800
$152,755
$909,257
$48,672
AnnualSalesTaxStatePortion
$66,924
$8,402
$50,009
$2,677
CityPortion
$27,378
$3,437
$20,458
$1,095
NETSalesTaxtoTDZ
$94,302
$11,839
$70,467
$3,772
Source:InternationalCouncilofShoppingCenters,UrbanLandInstituteandRKGAssociates,Inc.
Total
1,243
$1,523,060
$696,256
$236,230
$236,230
$310,829
$99,465
$136,765
$341,911
$3,580,745
$2,327,484
$128,012
$52,368
$180,380
B. Retail Indicators
This section presents an overview of retail and consumer spending indicators, including
supply and demand where applicable, and used in estimating sales for the Pyramid (Bass
Pro/Hotel) development. At the outset a brief discussion of a retail trade area is warranted.
1. Retail Trade Area
Typically, retail trade areas represent that geographic area from which a retail business draws
the majority of its customer activity and retail sales. The extent of such a trade area is
impacted by surrounding competition, road patterns and natural barriers, to mention a few.
Retail trade areas are often considered in terms of distance (in miles) or drive-times (typically
in minutes). In most instances, retail sales diminish with distance and density. Generally,
consumers prefer to shop close to home whenever possible (the distance factor) and the
further they must travel the more likely there are alternative and competitive shopping
venues (the density factor). In part for these reasons, the trade areas of grocery stores, drug
stores and even many shopping plazas or centers are somewhat limited, often with 75% or
more of the retail sales originating from within a “tight” geography.
However, the extent of a retail trade area for retail shopping and entertainment venues, such
as a Bass Pro or a value-oriented lifestyle/outlet center as is possible for the Pinch District are
much more expansive, particularly when positioned as, or as a part of, a broader tourist
destination. Representatives of Bass Pro have indicated that perhaps 40% to 45% of their
customers travel 50+ miles to shop their stores.
At one time outlet centers typically located in remote areas, removed from urban centers but
still with good highway access. However, the more recent development of outlet centers,
tied to travel and tourism, are locating closer to major metropolitan areas. Information
developed by the International Council of Shopping Centers (ICSC) indicates that outlet
centers, often without a major name anchor tenant, are experiencing trades areas extending
25 to 75 miles, perhaps further if situated with a major name anchor tenant such as Bass Pro.
Information compiled by VRN a firm specializing in tracking the outlet industry indicates
that trades areas may typically range from 60 to 100-miles.
RKG Associates, Inc.
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Market Study and Impact Analysis of the Pyramid/Pinch District Project – Memphis, TN
July 13, 2011
Figure 10 presents an overview of
Bass Pro Outdoor World locations,
as well as those of Cabela’s and
Gander Mountain stores, all three
major retailers in the hunting,
fishing, camping and outdoor
sporting
goods
sector.
Additionally, outlet centers are
presented, highlighting a 25, 50
and 100-mile radius about the
proposed Pyramid and Pinch
District developments in Memphis.
As indicated in Figure 10 and
Table 10, there are presently no
competing Bass Pro Outdoor
World
facilities
within
an
approximate 200-mile radius of the Figure 10 – Competing Venues within 100+ Miles
proposed Pyramid site. This specifically excludes the existing, smaller Bass Pro in Memphis,
which reportedly will convert to a catalogue outlet store, similar to a facility in Springfield,
MO. Also presented in Figure 10, there are numerous outlet centers in the broader region,
but only three within an approximate 100-mile radius of Memphis.
Table 10: Distance/Drive Times
ApproximateDistanceand
DriveTimestoMemphis
Miles
Drive
Time
BassPro
Branson,MO
Pearl,MS
Prattville,AL
Birmingham,AL
Nashville,TN
275
215
315
240
215
45hrs
34hrs
45hrs
34hrs
34hrs
GanderMountain
Jackson,TN
Sherwood,AR
90
135
12hrs
23hrs
Source:RKGAs s oci a tes ,Inc.
These three outlet centers with an approximate 100-mile radius of Memphis, include (1) The
Factory Stores at Batesville (MS) with approximately 20-outlet stores; (2) The Lakeland
Factory Outlet Mall (TN) with 17-outlet stores; and, (3) The Casino Factory Shoppes (MS)
with 28-outlet stores. Given these competitive locations and trends in the outlet industry, an
approximate 100-mile radius is considered a reasonable retail trade area for the combined
consumer drawing power of the Bass Pro and Pinch District projects.
2. Source of Sales
Typically retail sales are derived from three primary sources, including natural growth from
an increase in population and households; a re-capturing of sales leakage (whether a market
RKG Associates, Inc.
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Market Study and Impact Analysis of the Pyramid/Pinch District Project – Memphis, TN
July 13, 2011
is a net exporter or net importer of retail sales); and, transferred sales, each discussed in turn
in the context of the immediate Memphis market and the broader 100-mile radius market.
a) Natural Growth
Natural growth reflects a change in households and a change in average purchasing demand
(Table 11). The change in households in the Downtown TDZ, coupled with changes in
spending demand, result in an estimated $53 million increase in consumer spending demand
from 2010 to 2015. The estimated natural growth in spending demand for the remainder of
Memphis households is another $249 million. Within the total 100-mile driving distance, the
projected increase in households is a little more than 5% and spending demand of 3.5%,
representing a growth from $20 billion to nearly $22 billion in demand from 2010 to 2015.
Table 11: Estimated Growth in Household Spending Demand 2010 – 2015
ResidentialRetailAnalysis
EstimatedHouseholdRetailDemand
Households
AverageRetailExpenditures
MajorMerchandiseLine(NAICScode)
MotorVehicleandPartsDealers441
FurnitureandHomeFurnishingsStores442
ElectronicsandApplianceStores443
BuildingMaterial,GardenEquipStores444
FoodandBeverageStores445
HealthandPersonalCareStores446
ClothingandClothingAccessoriesStores448
Men'sClothingStores44811
Women'sClothingStores44812
Children's,InfantsClothingStores44813
FamilyClothingStores44814
ClothingAccessoriesStores44815
OtherClothingStores44819
ShoeStores4482
JewelryStores44831
LuggageandLeatherGoodsStores44832
SportingGoods,Hobby,Book,MusicStores451
SportingGoodsStores45111
Hobby,ToysandGamesStores45112
Sew/Needlework/PieceGoodsStores45113
MusicalInstrumentandSuppliesStores45114
BookStores451211
NewsDealersandNewsstands451212
PrerecordedTapes,CDs,RecordStores45122
GeneralMerchandiseStores452
MiscellaneousStoreRetailers453
FoodserviceandDrinkingPlaces722
FullServiceRestaurants7221
LimitedServiceEatingPlaces7222
SpecialFoodservices7223
DrinkingPlacesAlcoholicBeverages7224
DowntownTDZ
2010
2015
10,965
$16,981
12,579
$19,017
$186,199,998 $239,214,843
$3,469,849
$5,567,498
$6,686,548
$23,180,184
$36,885,687
$17,455,457
$13,561,288
$640,284
$2,213,272
$523,152
$5,120,648
$223,760
$620,331
$1,995,082
$2,077,326
$147,433
$5,759,006
$1,983,448
$1,257,408
$203,906
$409,859
$1,246,444
$60,892
$597,049
$37,813,146
$7,006,143
$28,815,192
$13,038,330
$11,956,540
$2,339,575
$1,480,747
$4,457,784
$7,152,675
$8,590,341
$29,780,044
$47,387,776
$22,425,373
$17,422,457
$822,586
$2,843,435
$672,104
$6,578,598
$287,469
$796,952
$2,563,122
$2,668,782
$189,410
$7,398,710
$2,548,175
$1,615,417
$261,962
$526,554
$1,601,331
$78,229
$767,041
$48,579,301
$9,000,931
$37,019,451
$16,750,602
$15,360,805
$3,005,699
$1,902,345
Change
14.7%
12.0%
RemainderofMemphis,TN
Change
2010
2015
228,308
$20,352
229,375
$21,343
0.5%
4.9%
2010
100MileRadius
2015
1,001,094
$20,021
1,053,139
$20,714
$53,014,845
$4,646,613,146 $4,895,481,368
$248,868,222
$20,042,902,974
$987,935
$1,585,177
$1,903,793
$6,599,860
$10,502,089
$4,969,916
$3,861,169
$182,302
$630,163
$148,952
$1,457,950
$63,709
$176,621
$568,040
$591,456
$41,977
$1,639,704
$564,727
$358,009
$58,056
$116,695
$354,887
$17,337
$169,992
$10,766,155
$1,994,788
$8,204,259
$3,712,272
$3,404,265
$666,124
$421,598
$81,147,677
$85,445,400
$131,596,219
$138,579,013
$150,854,185
$158,791,219
$616,078,207
$649,409,807
$953,447,384 $1,004,806,736
$450,076,246
$474,310,833
$340,340,616
$358,586,032
$14,453,811
$15,214,366
$60,127,754
$63,391,742
$15,864,679
$16,739,398
$133,145,325
$140,324,198
$5,716,826
$6,024,197
$16,429,972
$17,318,404
$51,956,797
$54,758,877
$39,143,856
$41,127,293
$3,501,596
$3,687,557
$131,056,807
$137,963,343
$47,333,655
$49,849,535
$31,483,647
$33,170,817
$6,026,051
$6,357,151
$8,376,647
$8,808,804
$24,027,068
$25,250,898
$1,430,489
$1,506,311
$12,379,250
$13,019,827
$972,581,858 $1,024,930,318
$168,975,650
$177,973,615
$650,458,297
$684,685,053
$291,096,905
$306,382,528
$272,966,045
$287,359,552
$53,507,898
$56,330,303
$32,887,449
$34,612,670
$4,297,723
$6,982,794
$7,937,034
$33,331,600
$51,359,352
$24,234,587
$18,245,416
$760,555
$3,263,988
$874,719
$7,178,873
$307,371
$888,432
$2,802,080
$1,983,437
$185,961
$6,906,536
$2,515,880
$1,687,170
$331,100
$432,157
$1,223,830
$75,822
$640,577
$52,348,460
$8,997,965
$34,226,756
$15,285,623
$14,393,507
$2,822,405
$1,725,221
$350,930,361
$568,852,755
$653,361,413
$2,651,166,831
$4,107,162,653
$1,938,972,661
$1,467,721,038
$62,599,044
$258,544,061
$67,964,495
$573,424,090
$24,637,118
$70,711,935
$223,752,139
$170,954,706
$15,133,450
$567,409,909
$204,530,546
$135,785,467
$25,837,213
$36,439,871
$104,815,670
$6,185,136
$53,816,006
$4,190,364,582
$729,841,171
$2,817,119,600
$1,261,326,028
$1,181,646,291
$231,613,648
$142,533,634
Change
5.2%
3.5%
$21,814,721,246 $1,771,818,272
$381,953,055
$619,140,067
$711,119,398
$2,885,533,371
$4,470,241,088
$2,110,380,325
$1,597,469,456
$68,132,879
$281,399,687
$73,972,644
$624,115,514
$26,815,071
$76,962,960
$243,532,114
$186,067,321
$16,471,266
$617,569,671
$222,611,308
$147,789,076
$28,121,256
$39,661,202
$114,081,510
$6,731,910
$58,573,410
$4,560,798,174
$794,360,064
$3,066,156,578
$1,372,828,863
$1,286,105,335
$252,088,591
$155,133,789
$31,022,693
$50,287,312
$57,757,985
$234,366,541
$363,078,435
$171,407,665
$129,748,418
$5,533,836
$22,855,626
$6,008,148
$50,691,423
$2,177,953
$6,251,026
$19,779,975
$15,112,615
$1,337,816
$50,159,762
$18,080,762
$12,003,609
$2,284,043
$3,221,331
$9,265,839
$546,774
$4,757,404
$370,433,592
$64,518,893
$249,036,978
$111,502,835
$104,459,044
$20,474,943
$12,600,156
Source:ClaritasandRKGAssociates,Inc.
Changes in retail spending demand are aggregated for major merchandise lines, in the
preceding Table 11, and are presented for selected component categories, such as sporting
goods, apparel and dining and drinking, to which the following is noted:
x
The combined estimated change in resident (Downtown TDZ and the remainder of
Memphis, or City of Memphis) consumer demand for sporting goods merchandise,
over the next five years, is slightly more than $3 million. Within the 100-mile radius
the change in consumer demand for sporting goods merchandise is $18 million, from
a base of almost $205 million in 2010.
RKG Associates, Inc.
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Market Study and Impact Analysis of the Pyramid/Pinch District Project – Memphis, TN
x
July 13, 2011
For apparel and accessory stores, often a primary component of outlet centers, the
combined change (City of Memphis) in consumer demand equates to slightly more
than $22 million, led by family clothes ($8.6 million), women’s clothes ($3.9 million)
and shoes ($3.4 million). Within the entire 100-mile radius the change in consumer
demand for apparel is nearly $130 million, from a base of almost $1.5 billion in 2010.
x
The combined (City of Memphis) consumer spending growth for dining and drinking
exceeds $42 million, nearly 45% of which is growth in spending for full-service
restaurants and an additional 5% for drinking establishments. Within the entire 100mile radius the change in consumer demand for dining and drinking is $249 million
with more than $111 million in full-service restaurants alone.
To the extent that there is natural growth in consumer demand suggests that future retail sales
may originate from a growing retail market as opposed to “carving” the existing market into
smaller pieces. This is the case for the proposed Bass Pro and value-oriented lifestyle center
for the Pinch District, where sales are as likely to result from new demand rather than a
transfer of existing demand. Realistically there will always be some degree of sales transfer,
retail being a consumer choice for where and when to spend their dollars. However, in a
growing market, and in one where “new” retail represents a new concept or venue, such
transfer is likely negligible over time.
b) Sales Leakage
All consumer markets experience some degree of sales leakage, or the difference between
local consumer demand and local consumer sales. The reasons for sales leakage are many
and include, but are not necessarily limited to, a lack of local stores, perceived advantages
(price or selection) or simply shopping elsewhere, perhaps via the Internet, or catalog, or
when on vacation. Sales leakage reflects how much a local economy exports or imports
retail sales. If a market is an exporter, there may be an inadequate retail supply (stores)
relative to spending demand. Conversely, if a market is importing retail sales then local sales
activity exceeds demand, indicating that the retail market is a destination for many types of
goods and services. As in Table 12, Memphis is an importer of several retail sales
categories, notably dining and drinking. This is not unexpected considering the tourism
activity Memphis realizes, as well as the impact of spending among downtown employees.
Estimates of net retail sales, either as an exporter or importer, are presented for major
merchandise lines, in the preceding Table 12, for both the Downtown TDZ and the remainder
of the City of Memphis19. In the aggregate, the Downtown TDZ is a net importer of retail
sales, with sales exceeding local demand by more than $133 million, including nearly $91
million for dining and drinking. Considering the impacts of tourism in the local economy
and the concentration of dining and drinking establishments in downtown Memphis, this is
expected. Similarly, the remainder of the City of Memphis is a net importer of dining and
drinking sales, by nearly $179.5 million in 2010.
However, for both the Downtown TDZ as well as the remainder of the City of Memphis,
there are merchandise lines where local demand is not being met, or where there is sales
19
Limitations of the software modeling and data vendor, Claritas Inc., prohibit analysis of aggregate retail sales and sales
leakage for all stores and venues in more than a 30-mile radius. As such, a sales leakage analysis for the 100-mile market
area is not available.
RKG Associates, Inc.
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Market Study and Impact Analysis of the Pyramid/Pinch District Project – Memphis, TN
July 13, 2011
leakage. For the Downtown TDZ this amounted to nearly $68 million in total in 2010, and
nearly $775 million for the remainder of the City of Memphis, with a focus to the following:
x
The combined estimated sales leakage in sporting goods merchandise for all of
Memphis is estimated to be $15.8 million in 2010.
x
In terms of apparel, the combined 2010 sales leakage is estimated to be $40.4 million
in shoe stores; $37.5 million in family apparel; and, $14.7 million in women’s
apparel.
x
As noted previously, Memphis is a net importer of dining and drinking dollars;
nonetheless, there is an unmet local demand in the City for more than $28 million in
sales at drinking establishments.
Table 12: Estimated Sales Exporter or Importer by Merchandise Line - 2010
ResidentialRetailAnalysis
EstimatedHouseholdRetailDemand
Demand
DowntownTDZ2010
Sales Export/Import
Export or Sales Leakage only
MajorMerchandiseLine(NAICScode)
MotorVehicleandPartsDealers441
FurnitureandHomeFurnishingsStores442
ElectronicsandApplianceStores443
BuildingMaterial,GardenEquipStores444
FoodandBeverageStores445
HealthandPersonalCareStores446
ClothingandClothingAccessoriesStores448
Men'sClothingStores44811
Women'sClothingStores44812
Children's,InfantsClothingStores44813
FamilyClothingStores44814
ClothingAccessoriesStores44815
OtherClothingStores44819
ShoeStores4482
JewelryStores44831
LuggageandLeatherGoodsStores44832
SportingGoods,Hobby,Book,MusicStores451
SportingGoodsStores45111
Hobby,ToysandGamesStores45112
Sew/Needlework/PieceGoodsStores45113
MusicalInstrumentandSuppliesStores45114
BookStores451211
NewsDealersandNewsstands451212
PrerecordedTapes,CDs,RecordStores45122
GeneralMerchandiseStores452
MiscellaneousStoreRetailers453
FoodserviceandDrinkingPlaces722
FullServiceRestaurants7221
LimitedServiceEatingPlaces7222
SpecialFoodservices7223
DrinkingPlacesAlcoholicBeverages7224
RemainderofMemphis,TN2010
Demand
Sales Export/Import
$67,999,514 Export or Sales Leakage only
$774,375,289
$186,199,998
$319,229,214
($133,029,216)
$4,646,613,146
$4,995,350,119
($348,736,973)
$3,469,849
$5,567,498
$6,686,548
$23,180,184
$36,885,687
$17,455,457
$13,561,288
$5,868,936
$11,728,921
$1,524,174
$40,474,255
$16,179,880
$46,269,725
$33,891,530
($2,399,087)
($6,161,423)
$5,162,374
($17,294,071)
$20,705,807
($28,814,268)
($20,330,242)
$81,147,677
$131,596,219
$150,854,185
$616,078,207
$953,447,384
$450,076,246
$340,340,616
$192,623,501
$162,199,442
$138,617,207
$598,021,789
$745,830,646
$757,061,480
$298,524,753
($111,475,824)
($30,603,223)
$12,236,978
$18,056,418
$207,616,738
($306,985,234)
$41,815,863
$640,284
$10,859,816
($10,219,532)
$14,453,811
$42,710,701
($28,256,890)
$2,213,272
$3,059,687
($846,415)
$60,127,754
$44,584,558
$15,543,196
$523,152
$1,386,444
($863,292)
$15,864,679
$9,214,159
$6,650,520
$5,120,648
$3,697,106
$1,423,542
$133,145,325
$97,073,047
$36,072,278
$223,760
$92,137
$131,623
$5,716,826
$2,652,427
$3,064,399
$620,331
$2,876,176
($2,255,845)
$16,429,972
$21,973,523
($5,543,551)
$1,995,082
$486,310
$1,508,772
$51,956,797
$13,084,877
$38,871,920
$2,077,326
$810,454
$1,266,872
$39,143,856
$47,881,348
($8,737,492)
$147,433
$10,623,400
($10,475,967)
$3,501,596
$19,350,113
($15,848,517)
$5,759,006
$12,193,671
($6,434,665)
$116,747,683
$14,309,124
$1,983,448
$681,487
$1,301,961
$47,333,655
$32,831,495
$14,502,160
$1,257,408
$514,763
$742,645
$31,483,647
$20,501,206
$10,982,441
$203,906
$510,553
($306,647)
$6,026,051
$4,256,893
$1,769,158
$409,859
$7,241,366
($6,831,507)
$8,376,647
$12,618,626
($4,241,979)
$1,246,444
$1,973,252
($726,808)
$24,027,068
$36,630,761
($12,603,693)
$60,892
$0
$60,892
$1,430,489
$104,996
$1,325,493
$597,049
$1,272,250
($675,201)
$12,379,250
$9,803,706
$2,575,544
$37,813,146
$7,006,143
$28,815,192
$10,577,889
$20,802,008
$119,718,225
$27,235,257
($13,795,865)
($90,903,033)
$984,333,510
$171,462,612
$829,927,496
($11,751,652)
($2,486,962)
($179,469,199)
$13,038,330
$55,591,137
($42,552,807)
$291,096,905
$356,582,775
($65,485,870)
$11,956,540
$57,968,993
($46,012,453)
$272,966,045
$460,729,824
($187,763,779)
$2,339,575
$4,361,916
($2,022,341)
$53,507,898
$8,620,662
$44,887,236
$1,480,747
$1,796,179
($315,432)
$32,887,449
$3,994,235
$28,893,214
$131,056,807
$972,581,858
$168,975,650
$650,458,297
Source:Claritas andRKGAs soci ates,Inc.
To the extent that sales leakage exist from a local economy, either the Downtown TDZ or the
remainder of Memphis, indicates an opportunity for re-capturing a portion of these leaked
sales either through additional stores and retail offerings for new businesses, expansions of
existing businesses or improved merchandising, marketing and operations of existing
RKG Associates, Inc.
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Market Study and Impact Analysis of the Pyramid/Pinch District Project – Memphis, TN
July 13, 2011
businesses to increase their market share. As noted with natural growth in consumer
demand, to the extent that existing sales leakage is re-captured by retailing venues may also
diminish any sales transfer impacts.
c) Sales Transfer
As identified previously, there is both natural growth and sales leakage in the Downtown
TDZ. In this analysis there is an estimated combined (Downtown TDZ and the remainder of
the City of Memphis) sales leakage of $15.8 million in sporting goods, as well as sales
leakage among many of the apparel and accessory merchandise lines. As such, the projected
transferred retail sales at the Bass Pro in these categories, is considered negligible. It is net
new sales tax, which generates the revenue stream for retiring bond debt, meaning sales tax
that exclude any potential transfer of existing sales tax. In this analysis, considering the
natural growth and unmet demand, there is no consideration given to potentially transferred
sales from within the Downtown TDZ to the Bass Pro.
3. Pyramid - Retail Sales Estimates
The Bass Pro store is estimated to be 300,000 SF, inclusive of indoor
entertainment/recreation space, exhibits (to include a man-made cypress swamp and an
aviary) and an on-site/in-store restaurant. The entertainment and recreation value of a Bass
Pro store is as important in defining its customer draw as is the merchandise. One report20
indicated that as much as 40% of the floor space of a Bass Pro may be devoted to
“experience” rather than retail goods. Estimates of the sales volume on a per SF basis for the
Bass Pro store reflect a variety of inputs, including information from Hoovers, a Dun &
Bradstreet company, and in this analysis an estimated sales volume of $350/SF is utilized.
This is applied to the entire 300,000 SF although much of this floor space may be dedicated
to non-retail goods, and as such actual retail sales per SF of retail space could be higher.
4. Pinch District
As part of this analysis RKG spoke with a variety of professionals active in the outlet center
industry, including representatives of VRN and leasing agents and brokers of other outlet
center developments and developers. These discussions are summarized as follows:
x
Value Retail News – Discussions with the editors at Value Retail News indicated
that to their knowledge no outlet centers had been built within the last 15-years that
were “spec” development.
Reportedly one outlet developer, Tanger
(http://www.tangeroutlet.com/), with 35 outlets and nearly 10 million SF of
development, requires a 50% to 60% pre-lease commitment before starting
construction. Typically outlet operators generally prefer to own the land, as opposed
to developing on leased land. In a few instances outlet centers have been developed
on leased land, but it is considered the exception as opposed to the rule.
x
20
The Shops at Grand River – This outlet center (http://www.shopsofgrandriver.com)
in Leeds, Alabama, recently opened (October 2010) one year after starting
construction. This outlet center is off of Interstate-20 (Exit 140) and adjacent to a
Bass Pro. Reportedly, the phase one development is 330,000 SF with 60± stores.
White Hutchinson Leisure & Learning Group, white paper, 2010.
RKG Associates, Inc.
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Market Study and Impact Analysis of the Pyramid/Pinch District Project – Memphis, TN
July 13, 2011
The center is predominantly leased (about 80%) although some smaller shops are
available as are some large anchor positions.
x
Opry Mills Outlet Mall – This is an 80± store outlet center, with a Bass Pro, located
in Nashville, TN. Discussions with a representative of the leasing department
indicated that the facility was perhaps 80% to 90% pre-leased as of opening and
achieved 98% stabilization with the first year of operations. However, as a
cautionary note, the center opened in 2000.
x
New England Development – RKG has a long-standing relationship with New
England Development, or NED, (http://www.nedevelopment.com) a major real estate
development and management firm in the northeast with nearly 14 million SF of
development in their portfolio, including retail and hospitality space. Discussions
with representatives of NED indicated that depending on location, tenant mix and
anchors, the desired levels of pre-leased stores could vary. Typically, a 70% to 80%
pre-leasing is desired, but that this could include 40% actual signed leases and
another 40% as committed to sign leases. In either event, it is important that outlet
centers and similar developments have a strong “junior anchor” presence and not rely
solely on an adjacent development, such as Bass Pro, for their customer activity.
Such “junior anchors” could include name-brand, nationals retailers occupying
15,000 SF to 20,000 SF themselves.
x
The Avenue ® Carriage Crossing - Cousins Properties (Carriage Crossing LLC)
purchased the 132-acre site in May 2004, and began construction on the 800,000± SF
lifestyle center in Collierville, reportedly the largest open-air specialty retail center in
Tennessee21. The center opened in October 2005 at 88% occupancy, while pre-lease
commitments were reported at 51% at the end of 2004. The center has two anchor
department stores, Dillard’s and Parisian, the latter which in 2007 became Macy’s.
Other chains include Barnes & Noble, and Bed Bath and Beyond, as well as upscale
apparel shops such as Talbot’s, Chico’s, Banana Republic, Ann Taylor, to name a
few. In 2008, a 131-room Courtyard Marriott opened as the third anchor tenant at the
center. From 2006 to 2009, the percentage of leased area at the center ranged
between 92% and 93%. According to a representative, the viability of this type of
center in today’s economy is tenuous since anchor and boutique-type tenants are
consolidating, as compared to expanding. Reportedly, the only retail sector
expanding in today’s economy is the outlet-store format.
Specific tenants for the Pinch District are unknown however Table 13 presents the typical
retail tenant/merchandise lines for outlet centers, noting that 70% are apparel shops,
suggesting that the retail (non-restaurant) stores at the Pinch District would mirror these.
21
Please refer to http://jwamalls.com/retail_properties/property/the_avenue_carriage_crossing
and http://www.cousinsproperties.com/property/retail/avenue-carriage-crossing for additional information.
RKG Associates, Inc.
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Market Study and Impact Analysis of the Pyramid/Pinch District Project – Memphis, TN
July 13, 2011
Table 13: Average Tenant/Merchandise Line(s) at Outlet Centers
Category or
Merchandise Line
# of
Chains
# of
Stores
% of
Stores
Accessories
36
1,391
10.76%
Accessories
11
464
3.59%
Jewelry
13
570
4.41%
Handbags/Luggage/Leather Good
12
357
2.76%
204
12
9,029
715
69.86%
5.53%
Apparel - Family
39
1,870
14.47%
Apparel - Men
12
292
2.26%
Apparel - Men & Women
33
1,405
10.87%
Apparel - Women
48
1,714
13.26%
Athletic Apparel/Footwear/Sportin
21
688
5.32%
8
324
2.51%
Shoes
31
2,021
15.64%
Home
38
858
6.64%
Home Decor/Furnishings
10
158
1.22%
0.30%
Apparel and Shoes
Apparel - Children
Lingerie/Underwear/Hosiery
Home Improvement/Hardware
Housewares/Tableware/Kitchenw
Electronics/Appliances
Linens/Domestics
Beauty and Health
Beauty Products/Cosmetics
Drug/Health
1
39
22
573
4.43%
3
83
0.64%
2
5
0.04%
14
12
771
596
5.97%
4.61%
1.35%
2
175
24
875
6.77%
Books/Music/Video
6
283
2.19%
1.01%
Other
Department Store
3
131
Food
7
229
1.77%
General Merchandise
4
49
0.38%
3
1
316
168
15
12,924
1.30%
0.12%
100.00%
Paper Goods/Cards/Gifts
Toys
TOTALS
Source :VRNa ndRKGAs s oci a te s ,I nc.
RKG Associates, Inc.
Page 25
Market Study and Impact Analysis of the Pyramid/Pinch District Project – Memphis, TN
July 13, 2011
III. ECONOMIC IMPACTS
This chapter presents the economic impacts associated with the Pyramid/Pinch District
projects, including the short-term direct and indirect (“spin-off”) construction employment
and wages, as well as the ongoing direct and indirect employment and wages.
A. Inputs, Assumptions and Findings
RKG has utilized several data sources and input assumptions regarding the estimated
economic impacts, including the following:
x
Short-term (direct) construction employment, in terms of jobs and wages, were based
on the construction costs (only) provided by HCD; wage data (as is all wage data in
this analysis) is provided by the Tennessee Office of Labor and Workforce
Development (and expressed in 2010 dollars); and, RKG’s estimates that
approximately 35% of construction costs equate to labor costs.
x
Ongoing direct employment and wage data for the proposed development include
retail and restaurant components. The number of employees reflects industry
averages (on a per SF basis) as developed by the Urban Land Institute.
x
Estimates of indirect employment and wages as “spin-off” from the short-term
construction activities, as well as the ongoing activities, once built, reflect an
estimated local capture rate of 30% and were estimated using multipliers developed
by the US Department of Commerce for the RIMS II modeling.
x
Economic estimates regarding employment and wages are presented as if fully-built
out and at stabilized occupancy, net of transfer where applicable.
1. Construction and Short-Term Impacts
Table 14 presents the estimated short-term economic impacts associated with the
construction activity and incorporates the following:
x
The private sector construction investment in the Pyramid development is estimated
to be $75 million and the public sector investment (for construction only) another $50
million. The proposed hotel component for the Pyramid adds another $6.5 million in
private sector construction costs. The Pinch District construction, for conceptual
purposes and considering a 300,000 SF of retail/restaurant development, is assumed
to include $60 million in private sector funds and $20 million in public sector funds.
x
This analysis estimates that 35% of construction costs are associated with labor, a
percentage not atypical of other communities and projects where RKG has worked.
The remaining construction costs are typically for materials, soft costs and other
administrative or non-construction labor related expenditures. As result, labor-related
costs total an estimated $81 million in this analysis.
RKG Associates, Inc.
Page 26
Market Study and Impact Analysis of the Pyramid/Pinch District Project – Memphis, TN
x
July 13, 2011
The labor costs are divided by the average annual wage data (construction industry
2010) to develop an estimate of employment. It is reasonable to assume that
construction work would be staggered across numerous skill sectors, such as
excavators, plumbers, electricians, carpenters and so on.
x
Standard employment and wage multipliers are applied to the estimated construction
employment and wages, in order to present an estimate of the indirect or spin-off
economic impacts. These indirect impacts are also considered short-lived, as they are
based on short-term direct impacts, and are further reduced to reflect a 30% local
impact. In RKG’s experience much of the indirect impacts are not experienced
locally, but rather statewide or regionally. As result, indirect impacts from the
construction of the Pyramid, hotel component and Pinch District are projected to
result in an additional 838 jobs and $34.8 million in wages, locally.
Table 14: Construction and Short-Term Impacts
Inputsand
Assumptions
PROPERTYUSE
SquareFeet(SF)ofDevelopment
NumberofHotelRooms
IndirectShortTermImpacts
EstimatedWages
EstimatedEmployment
Pyramid
Hotel
Pyramid
Subtotal
300,000
41,600
80
341,600
80
$75,000,000
$50,000,000
$6,500,000
$20,000,000
35.00%
$43,750,000
921
30.00%
30.00%
$18,784,500
452
SHORTTERMEMPLOYMENTandWAGEIMPACTS
ConstructionCosts(only)
EstimatedPrivateInvestment
EstimatedPublicInvestment
TotalInvestment
DirectShortTermImpacts
EstimatedWages
EstimatedEmployment
Pyramid
Anchor
Pinch
Restaurant
60,000
Pinch
Retail
Pinch
Subtotal
240,000
COMBINED
TOTAL
300,000
641,600
$81,500,000
$70,000,000
$60,000,000
$20,000,000
$141,500,000
$90,000,000
$231,500,000
$9,275,000
195
$53,025,000
1,117
$28,000,000
590
$81,025,000
1,706
$3,982,314
96
$22,766,814
548
$12,022,080
290
$34,788,894
838
SOURCE:RKGASSOCIATES,INC.
2. Ongoing Impacts
Table 15 presents the ongoing economic impacts and incorporates the following:
x
Estimates of direct employment are based on the proposed SF of build-out for the
anchor retail use as well as possible retail/restaurant components of the Pinch District.
Each of these, in turn, is divided by the average SF per employee, at 1,000 SF per
retail use22, 2,000 SF per hotel employee and 550 SF per restaurant use. This results
in an approximate 670 employment positions, before any adjustments.
x
Potential adjustments include an estimated 5% transfer of sales and employment of
restaurant activity from elsewhere in the Downtown TDZ, and, an overall allowance
of 8% vacancy for a stabilized Pinch District.
x
The resulting estimated direct and ongoing employment amounts to 637 positions,
including 300 at the Bass Pro anchor, 21 at the hotel component, 95 at the Pinch
District restaurants and an additional 221 at the Pinch District retail stores.
22
The 1,000 SF per employee calculation reflects reported industry measures and accounts for the higher than average floor
space in a Bass Pro utilized for non-retail sales and an emphasis on sales volumes and value for a value-oriented lifestyle
center, and less so on personalized service.
RKG Associates, Inc.
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Market Study and Impact Analysis of the Pyramid/Pinch District Project – Memphis, TN
x
July 13, 2011
Wages associated with the net direct employment reflect prevailing wages (2010) and
indicate direct wages of just under $11.7 million.
x
In terms of ongoing and indirect, or spin-off impacts, an additional 101 employees are
projected with an estimated annual wage of approximately $2.7 million.
Table 15: Ongoing Employment and Wage Impacts
Inputsand
Assumptions
PROPERTYUSE
SquareFeet(SF)ofDevelopment
NumberofHotelRooms
ONGOINGEMPLOYMENTandWAGEIMPACTS
EstimatedDirectEmployment
LessEstimatedTransferred
5.0%
LessVacancy(StabilizedOccupancy)
8.0%
NETDirectEmployment
IndirectEmployment@LocalCapture
30.00%
TotalEmployment
EstimatedDirectAnnualEarnings
IndirectAnnualWages@LocalCapture
TotalWages(2010)
30.00%
Pyramid
Anchor
Pyramid
Hotel
Pyramid
Subtotal
Pinch
Restaurant
Pinch
Retail
Pinch
Subtotal
COMBINED
TOTAL
300,000
41,600
80
341,600
80
60,000
240,000
300,000
641,600
300
21
321
240
300
47
347
21
4
45
321
51
393
109
(5)
(8)
95
15
111
(19)
221
35
256
349
(5)
(27)
316
50
366
670
(5)
(27)
637
101
759
$5,523,084
$1,165,647
$6,688,731
$716,415
$212,066
$928,481
$6,239,499
$1,377,713
$7,617,212
$1,393,445
$461,927
$1,855,372
$4,064,990
$857,916
$4,922,906
$5,458,435
$1,319,843
$6,778,278
$11,697,934
$2,697,556
$14,395,490
SOURCE:RKGASSOCIATES,INC.
3. Hotel Occupancy and Sales Tax
According to information developed by Smith Travel Research (STR), through mid-2010
there were approximately 4,300 hotel rooms in downtown Memphis (including Midtown and
the University of Memphis area). Reportedly occupancy among these hotels was nearly
62%, up from an approximate 58% a year earlier. During the same period the average room
rate declined marginally from $116/night to $113/night. Table 16 presents the estimated
occupancy tax and sales tax derived from the proposed new hotel at the Pyramid and the
proposed downtown Marriott hotel expansion, noting the following:
x
This analysis assumes an initial 60% occupancy rate for the Pyramid hotel, reflecting
the average downtown occupancy and accounting for an estimated August 2013
opening. A room rate of $130/night is used in this analysis, reflecting a slightly
higher rate assumed for a FY 2014 opening year of operations.
x
A slightly higher occupancy of 65% is assumed for the Marriott reflecting a later date
(FY 2016), the on-site meeting and convention space and spending impacts of
potential tourists from riverboat travel and overnight stays, resulting from the Great
American Steamboat Company.
x
The estimated occupancy taxes reflect an additional revenue stream to the City of
Memphis and to Shelby County, however, not to the revenue steam applicable to
retiring TDZ bonding debt.
The estimated room revenue from the 80-room Pyramid hotel is nearly $2.8 million,
indicating an occupancy tax of $38,700 (to the City of Memphis) and $113,900 to Shelby
County. The total applicable sales tax is estimated to be $176,500, as an additional revenue
stream applicable to retiring Downtown TDZ bonding debt.
RKG Associates, Inc.
Page 28
Market Study and Impact Analysis of the Pyramid/Pinch District Project – Memphis, TN
July 13, 2011
Similarly, the Marriott expansion results in room revenue of $4.9 million (in 2016). This in
turn amounts to an estimated occupancy tax in FY 2016 of $83,900 to the City of Memphis
and an additional $246,700 to Shelby County. The incremental sales tax revenue
(applicable) to the Downtown TDZ is estimated to be nearly $382,500 in FY 2016.
Table 16 – Selected Hotel Impacts from Pyramid Hotel and Planned Marriott Expansion
Inputsand
Assumptions
ESTIMATEDHOTELIMPACTS
EstimatedRoomNightDemand
EstimatedOccupancy
EstimatedRoomRevenue
HOTELOCCUPANCYTAX
Memphis,TN
ShelbyCounty,TN
60.00%
$130
Pyramid
Hotel
80rooms
29,200
17,520
$2,277,600
Inputsand
Assumptions
65.00%
$130
Marriott
Expansion
160rooms
58,400
37,960
$4,934,800
TOTAL
Impacts
240rooms
87,600
55,480
$7,212,400
1.70%
5.00%
$38,719
$113,880
1.70%
5.00%
$83,892
$246,740
$122,611
$360,620
5.50%
2.25%
$125,268
$51,246
$176,514
5.50%
2.25%
$271,414
$111,033
$382,447
$396,682
$162,279
$558,961
SOURCE:RKGASSOCIATES,INC.
HOTELSALESTAX
StatePortion(lesseducationandat2001taxrate)
CityPortion
NET
SOURCE:RKGASSOCIATES,INC.
4. Sales and Sales Tax
Table 17 presents the estimated retail sales and sales tax (and hotel sales tax) associated with the
economic activity at the Bass Pro/Hotel, whereby the Bass Pro/Hotel component are anticipated
to open in August 2013, with FY 2014 essentially as the first year of operations.
x
Retail sales at Bass Pro, in FY 2014 which is assumed to be the first full year of retail
activity, are estimated to total $105 million (or $350/SF). No adjustments are made
for either vacancy or transferred sales. A 1.5% inflation factor is applied thereafter
and year two sales are estimated to be $106.6 million.
x
The first year of hotel operations are projected to result in $176,500 in applicable
sales tax (from slightly less than $2.3 million in sales) and $179,200 in the second
year (from slightly more than $2.3 million in sales).
Table 17: Sales and Sales Tax Impacts for Bass Pro/Hotel (FY 2014 and FY 2015)
Inputsand
Assumption
PROPERTYUSE
SquareFeet(SF)ofDevelopment
NumberofHotelRooms
StatePortion(lesseducationandat2001taxrate)
CityPortion
EstimatedNETTotalSalesTaxYear2
Pyramid
Hotel
Pyramid
Subtotal
300,000
41,600
80
341,600
80
$105,000,000
$106,575,000
$2,277,600
$2,311,764
$107,277,600
$108,886,764
5.50%
2.25%
$5,775,000
$2,362,500
$8,137,500
$125,268
$51,246
$176,514
$5,900,268
$2,413,746
$8,314,014
5.50%
2.25%
$5,861,625
$2,397,938
$8,259,563
$127,147
$52,015
$179,162
$5,988,772
$2,449,952
$8,438,724
Year1AnnualSales(2013$)
Year2AnnualSales(inflated$)
ESTIMATEDSALESTAXREVENUE
StatePortion(lesseducationandat2001taxrate)
CityPortion
EstimatedNETTotalSalesTaxYear1
Pyramid
Anchor
SOURCE:RKGASSOCIATES,INC.
RKG Associates, Inc.
Page 29
Market Study and Impact Analysis of the Pyramid/Pinch District Project – Memphis, TN
July 13, 2011
IV. APPENDIX
Various other reports and research are included in this chapter.
RKG Associates, Inc.
Page 30
CityofMemphis,ShelbyCounty,Tennessee
GreatAmericanSteamboatCompany
EconomicImpactAnalysis
ShelbyCountySummary
AnnualEmployment
DirectAllOperations
268
IndirectAllOperations
208
IndirectVisitorSpending
111
TotalJobsSupported
587
AnnualEconomicImpact
ImpactfromAllOperations
$82,905,431
VisitorSpending(Retail&Hotel)
$6,636,846
TotalAnnualEconomicImpact
$89,542,277
AnnualLocalTaxes
LocalSalesTaxfromEmployment
$218,402
LocalSalesTaxfromOperatingExpenditures
$736,162
LocalSalesTaxfromVisitorSpending
$83,250
LocalOtherTaxesfromEmployment
$63,119
Memphis/ShelbyCountyPropertyTaxesfromEmployment
$485,275
Memphis/ShelbyCountyHotel/MotelTaxfromVisitorRoomRental
$175,540
TotalLocalTaxGeneratedAnnually
$1,761,748
OneTimeImpacts
EconomicImpact
FromRefurbishingShips
$51,208,700
LocalTaxRevenues
LocalSalesTaxfromRefurbishing&Impact
$871,649
LocalOtherTaxesfromConstruction
$128,693
TotalOneTimeLocalTaxRevenues
$1,000,342
Younger Associates, March 29, 2011
1
StateofTennessee
GreatAmericanSteamboatCompany
EconomicImpactAnalysis
TennesseeSummary
AnnualEmployment
ShelbyCountyDirectAllOperations
268
ShelbyCountyIndirectAllOperations
208
ShelbyCountyIndirectVisitorSpending
111
OutsideShelbyCountyIndirectRetailSpending
51
OutsideShelbyCountyIndirectHotelRental
16
TotalJobsSupported
654
AnnualEconomicImpact
ImpactfromAllOperations
$82,905,431
ShelbyCountyVisitorSpending(Retail&Hotel)
$6,636,846
OutsideShelbyCountyVisitorSpending(Retail&Hotel)
$2,797,864
TotalAnnualEconomicImpact
$92,340,141
AnnualStateTaxes
StateSalesTaxfromEmploymentShelbyCounty
$650,351
StateSalesTaxfromOperatingExpendituresShelbyCounty
$2,290,282
StateSalesTaxfromVisitorSpending(inMemphis)
$255,760
StateSalesTaxfromOtherTNCityVisitorSpending(Retail&Hotel)
$122,109
StateSalesTaxesGeneratedAnnually
$3,318,502
OneTimeImpacts
EconomicImpact
FromRefurbishingShips
$51,208,700
StateSalesTaxRevenue
StateSalesTaxfromRefurbishing&Impact
Younger Associates, March 29, 2011
$2,661,328
2
TheGreatAmericanSteamboatCompany
AmericanQueen&MississippiQueenDirect&IndirectJobCalculation
Jobs
TimeIn
Memphis
Count
Headquarters
26
100%
26
26
Managementof
Companies
MaintenanceOperation
10
100%
10
10
TrainingFacility
6
100%
6
OnboardMarineCrewA/Q
14
65%
9.1
OnboardHotel&GuestServicesAQ
102
65%
66.3
Subtotal
158
OperationsImpact
FTE
ReliefCrew DirectJobs MultiplierSelected1 Multiplier
TotalJobs
Indirect
Jobs
2.2290
58
32
FacilitiesServices
2.1639
22
12
6
OtherEdServices
1.6090
10
4
150%
14
WaterTransportation
3.7369
52
38
150%
99
Accommodations/Food
Services/Amusements
1.4289
141
42
283
128
155
OnboardHotel&GuestServicesMQ
102
65%
66.3
150%
99
Accommodations/Food
Services/Amusements
OnboardMarineCrewMQ
14
65%
9.1
150%
14
WaterTransportation
Total
274
192.8
1.4289
141
42
3.7369
52
38
476
208
268
AmericanQueen&MississippiQueenDirectWageCalculation
AnnualAvg.
Wage
AnnualAvg
Wage&
Benefits
American
Queen
Employees
Headquarters
$56,423
$73,331
26
$1,906,606
$1,906,606
Maintenance
$51,500
$66,950
10
$669,500
$669,500
TrainingFacility
$48,333
$62,833
6
$376,998
$376,998
OnboardMarineCrew
$28,600
$37,180
14
$520,520
14
$520,520 $1,041,040
OnboardGuestServices
$19,917
$25,893
99
$2,563,407
99
$2,563,407 $5,126,814
Total
American
Mississippi
QueenWages&
Queen
Benefits
Employees
$6,037,031
Younger Associates, March 29, 2011
MississippiQueen
Wages&Benefits
TotalWages&
Benefits
$3,083,927 $9,120,958
3
CityofMemphis,ShelbyCounty,Tennessee
GreatAmericanSteamboatCompany
EconomicImpactAnalysis
AnnualImpactofOperations
AmericanQueen&
Headquarters
MississippiQueen
Employment,Direct(Newfulltimeequivalentjobs)
155 113 268
Wages&Benefits,Direct
$6,037,031 $3,083,927 $9,120,958
EmploymentMultiplier
1
SeeTable
Total
SeeTable
TotalEmployment
283 193 476
Employment,Indirect
128 80 208
ShelbyCountyAnnualAverageWage 2
$49,297 $49,297
Wages,Indirect
$6,310,016 $3,943,760 $10,253,776
TotalWages
$12,347,047 $7,027,687 $19,374,734
LocalSalesTaxRevenue3
OtherLocalTaxRevenue
$139,182 $79,220 $218,402
4
Residential/CommercialPropertyTaxRevenue
$40,224 $22,895 $63,119
5
$280,663 $204,612 $485,275
TotalLocalTaxRevenue
$460,069 $306,727 $766,796
StateSalesTaxRevenue(Avg6.7%)6
$414,453 $235,898 $650,351
Younger Associates, March 29, 2011
4
CityofMemphis,ShelbyCounty,Tennessee
GreatAmericanSteamboatCompany
EconomicImpactAnalysis
OneTimeExpansionImpact
AmericanQueen
MississippiQueen
Total
TotalCapitalInvestment(RefurbishingSteamboats)
$6,900,000 $20,000,000 $26,900,000
ImprovementstoRealProperty
$6,500,000 $19,000,000 $25,500,000
FinalDemandOutputMultiplier
7
1.9126 1.9126
EconomicImpact
$12,431,900 $36,339,400 $48,771,300
EquipmentPurchase/SetupPersonalProperty
$400,000 $1,000,000 $1,400,000
FinalDemandOutputMultiplier 8
1.7410 1.7410
EconomicImpact
$696,400 $1,741,000 $2,437,400
TotalEconomicImpact
$13,128,300 $38,080,400 $51,208,700
LocalSalesTaxRevenuefromImprovements
$146,250 $427,500 $573,750
LocalSalesTaxRevenuefromImpact3
$76,805 $221,094 $297,899
LocalOtherTaxRevenue4
$33,180 $95,513 $128,693
TotalLocalTaxRevenue
$256,235 $744,107 $1,000,342
StateSalesTaxFromImprovements9
StateSalesTaxRevenueFromImpact
TotalStateSalesTax
Younger Associates, March 29, 2011
$455,000 $1,330,000 $1,785,000
10
$224,530 $651,798 $876,328
$679,530 $1,981,798 $2,661,328
5
CityofMemphis,ShelbyCounty,Tennessee
GreatAmericanSteamboatCompany
EconomicImpactAnalysis
ImpactfromOperations
AllOperations
TotalOperationsBudget
$49,927,000
LessHotelExpendituresforGuests
$5,519,000
TotalNonHotelExpenditures
$44,408,000
MarineOperations
FinalDemandOutputMultipier
$11,380,000
11
1.9365
EconomicImpact
$22,037,370
Hotel&GuestServices
$8,936,000
FinalDemandOutputMultiplier12
1.7985
EconomicImpact
$16,071,396
AllOtherBusinessOperations
FinalDemandOutputMultiplier
$24,092,000
13
1.8594
EconomicImpact
$44,796,665
TotalEconomicImpactFromExpenditures
$82,905,431
LocalSalesTaxRevenueonExpenditures(excludingwages)3
$736,162
StateSalesTaxRevenueonExpenditures(excludingwages)9
$2,290,282
Younger Associates, March 29, 2011
6
CityofMemphis,ShelbyCounty,Tennessee
GreatAmericanSteamboatCompany
EconomicImpactAnalysis
VisitorsToMemphis
AmericanQueen
MississippiQueen
CapacityofSteamboat
436
416
ProjectedOccupancyRate
80%
80%
348.8
332.8
33
31
VisitorsPerSailing
TripsBeginning/EndinginMemphis
MemphisVisitors
11,510 10,317
AverageSpendingPerVisitor
$86.88 $77.54
TotalVisitorSpending
$1,000,000 $800,000
Younger Associates, March 29, 2011
7
CityofMemphis,ShelbyCounty,Tennessee
GreatAmericanSteamboatCompany
EconomicImpactAnalysis
AmericanQueen
AnnualVisitorSpendingImpactMemphis
VisitorSpendingRetail
EconomicImpactMultiplier
MississippiQueen
Total
$600,000 $480,000 $1,080,000
14
1.7822 1.7822
EconomicImpact
$1,069,320 $855,456 $1,924,776
EmploymentMultiplier15
17.8278 17.8278
JobsSupported
19 15 34
LocalSalesTaxfromRetailSpending(2.25%)16
StateSalesTaxfromRetailSpending(Avg6.7%)
$13,500 $10,800 $24,300
6
$40,200 $32,160 $72,360
VisitorSpendingHotel
$400,000 $320,000 $720,000
HotelSpendingbyCompany(Memphis)
$1,000,000 $900,000 $1,900,000
TotalHotelSpending
$1,400,000 $1,220,000 $2,620,000
FinalDemandOutputMultiplier
12
1.7985 1.7985
EconomicImpact
$2,517,900 $2,194,170 $4,712,070
EmploymentMultiplier17
16.1864 16.1864
JobsSupported
41 36 77
LocalSalesTaxfromHotelRental(2.25%)16
StateSalesTaxFromHotelRoomRental(7%)
Memphis/ShelbyCountyHotelTax(6.7%)
$31,500 $27,450 $58,950
9
17
$98,000 $85,400 $183,400
$93,800 $81,740 $175,540
TotalVisitorEconomicImpact
$3,587,220 $3,049,626 $6,636,846
TotalJobsSupportedbyVisitorSpending
60 51 111
TotalLocalSalesTax
$45,000 $38,250 $83,250
TotalMemphis/ShelbyCountyHotelMotelTax
$93,800 $81,740 $175,540
TotalLocalTaxes
$138,800 $119,990 $258,790
TotalStateSalesTax
$138,200 $117,560 $255,760
Younger Associates, March 29, 2011
8
StateofTennessee
GreatAmericanSteamboatCompany
EconomicImpactAnalysis
VisitorSpendingOutsideShelbyCounty
AmericanQueen
VisitorstoMemphis
11,500
PercentageVisitingAnotherTNCity
20%
TennesseeVisitorsOutsideMemphis
2300
RetailSpending
AverageRetailSpendingPerVisitor
TotalVisitorSpending
$145.00
$333,500
FinalDemandOutputMultiplier 18
EconomicImpactofVisitorRetailSpending
2.1296
$710,222
LocalSalesTaxGenerated(2.75%)19
StateSalesTaxGenerated(Average6.7%)6
$9,171
$22,345
StateofTNEmploymentMultiplier 20
TotaljobsSupportedbyRetailSpending
26.1652
19
HotelSpending
AverageHotelSpendingPerVisitor
TotalHotelSpendingfromVisitors
105
$241,500
FinalDemandOutputMultiplierforAccomodations 21
EconomicImpactfromHotelRental
2.0089
$485,149
LocalSalesTaxGenerated(2.75%)19
StateSalesTaxGenerated(7%)9
LocalHotel/MotelTaxGenerated(5%LocalEstimate)22
$13,342
$33,960
$24,257
StateofTNEmploymentMultiplierforAccommodations 23
TotaljobsSupportedbyHotelRental
18.5267
9
Younger Associates, March 29, 2011
9
StateofTennessee
GreatAmericanSteamboatCompany
EconomicImpactAnalysis
VisitorSpendingOutsideShelbyCounty
TotalVisitorsinNashville(Embarking&Debarking)
TotalVisitorsinChattanooga(Embarking&Debarking)
TotalVisitors
MississippiQueen
3300
2000
5300
PercentageStayingOvernightinNashville/Chattanooga
25%
TotalVisitorsStayingOvernightinNashville/Chattanooga
1325
HotelSpending
AverageHotelSpendingPerOvernightVisitor
TotalHotelSpendingfromVisitors
150
$198,750
FinalDemandOutputMultiplierforAccomodations 20
EconomicImpactfromHotelRental
2.0089
$399,269
LocalSalesTaxGenerated(2.75%)18
StateSalesTaxGenerated(7%)9
LocalHotel/MotelTaxGenerated(5%)21
$10,980
$27,949
$19,963
StateofTNEmploymentMultiplierforAccommodations 22
TotaljobsSupportedbyHotelRental
18.5267
7
RetailSpending
VisitorstoNashville/Chattanooga
AverageRetailSpendingPerVisitorstoNashville/Chattanooga
TotalVisitorSpending
5,300
$50.00
$265,000
FinalDemandOutputMultiplierforRetailSales/Eating&Drinking
EconomicImpactofVisitorRetailSpending
2.1296
$564,344
LocalSalesTaxGenerated(2.75%)18
StateSalesTaxGenerated(Average6.7%)6
$7,288
$17,755
StateofTNEmploymentMultiplierforRetailSales/Eating&Drinking 19
TotaljobsSupportedbyRetailSpending
26.1652
15
DayVisitorstoDover/Savannah/Shiloh/Ashport
AverageRetailSpendingPerVisitorstoNashville/Chattanooga
TotalVisitorSpending
6,000
$50.00
$300,000
FinalDemandOutputMultiplierforRetailSales/Eating&Drinking 17
EconomicImpactofVisitorRetailSpending
2.1296
$638,880
LocalSalesTaxGenerated(2.75%)18
StateSalesTaxGenerated(Average6.7%)6
$8,250
$20,100
StateofTNEmploymentMultiplierforRetailSales/Eating&Drinking 19
TotaljobsSupportedbyRetailSpending
26.1652
17
Younger Associates, March 29, 2011
10
NotesforGreatAmericanSteamboatCompanyEconomicImpactAnalysis:
1. USBureauofEconomicAnalysis,RIMSIIfinaldemandmultiplierforShelbyCounty,Tennesseefor
thespecifiedindustryasshownbelow:
Operations
MultiplierSelected
MemphisHQ
ManagementofCompanies
Maintenance
FacilitiesServices
TrainingFacility
OtherEdServices
OnboardMarineCrew
WaterTransportation
OnboardHotel&GuestServices
Accommodations/FoodServices/Amusements
2. BasedontheStateofTennesseeDepartmentofLabor&WorkforceDevelopment
3.
4.
5.
6.
7.
8.
9.
2009AnnualAverageWageforallindustrysectorsforShelbyCountyassuminga3.5%increasefor
2010and2011.
USDepartmentofLabor,“ConsumerExpenditureSurvey,SouthernUS”2009;factorappliedto
determinetherateofindirector“downstream”expendituresonsalestaxablegoodsandservicesat
thelocal(Memphis&ShelbyCounty)optiontaxrateof.0225.
BaseduponJuly2009–June2010collectionsofBusiness,Alcohol,MotorVehicleandotherlocal
taxesascomparedtolocalsalestaxrevenuesinMemphis/ShelbyCounty.
PropertytaxesonnewpropertyvaluecreatedwithinShelbyCountypereachnewjobcreatedinthe
localworkforcebaseduponhistoricaltrend.Thenewpropertyvaluemaybenewsinglefamily
homes,newrentalproperty,expansionsorimprovementstoexistingresidentialorcommercial
property.Althoughcommercialpropertyvalueisincluded,theresidentialrateofassessmentis
usedasaconservativemeasure.Theassessmentrateof25%andacombinedCityofMemphis
($3.1957)andShelbyCounty($4.02)taxrateof$7.2157per$100ofassessedvalueisused.
TheaverageStateofTennesseesalestaxrate(foodandnonfood)assessedonfoodandnonfood
salestaxablegoodsandservicesinTennessee,aspublishedbytheTaxFoundation:2009StateSales
TaxBurden.
USBureauofEconomicAnalysis,RIMSIIaggregatefinaldemandoutputmultiplierforShelby
County,TennesseeforConstruction.
USBureauofEconomicAnalysis,RIMSIIaggregatefinaldemandoutputmultiplierforShelby
County,TennesseeforWholesaleTrade.
CalculationbasedontheStateofTennesseesalestaxrateof7%appliedtoallretailsales.
10. USDepartmentofLabor,“ConsumerExpenditureSurvey,SouthernUS”2009;factorappliedto
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
determinetherateofindirector“downstream”expendituresonsalestaxablegoodsandservicesat
theStateofTennesseesalestaxoptionof7%.
USBureauofEconomicAnalysis,RIMSIIaggregatefinaldemandoutputmultiplierforShelby
County,TennesseeforWaterTransportation.
USBureauofEconomicAnalysis,RIMSIIaggregatefinaldemandoutputmultiplierforShelby
County,TennesseeforAccommodations/FoodServices/Amusements.
USBureauofEconomicAnalysis,RIMSIIaggregatefinaldemandoutputmultiplierforShelby
County,TennesseeforAdministrativeandSupportServices.
USBureauofEconomicAnalysis,RIMSIIaggregatefinaldemandmultiplierforShelbyCounty,
TennesseeforRetailTrade.
USBureauofEconomicAnalysis,RIMSIIaggregateemploymentmultiplierforShelbyCounty,
Tennessee–numberofjobscreatedpermilliondollarsofoutputforRetailTrade.
Calculationbasedonthelocalsalestaxoptionof2.25%forMemphisShelbyCounty,Tennessee.
Calculationbasedonthecurrenthotel/moteltaxrateof6.7%forMemphisandShelbyCounty,
Tennesseeappliedtototalroomrevenuegenerated.
USBureauofEconomicAnalysis,RIMSIIaggregatefinaldemandmultiplierfortheStateof
TennesseeforRetailTrade/Eating&DrinkingEstablishments.
Calculationbasedonthemaximumorcapforlocalsalestaxoptionof2.25%formunicipalitiesin
Tennesseeassessedtoallretailsales.
USBureauofEconomicAnalysis,RIMSIIaggregateemploymentmultiplierfortheStateof
Tennessee–numberofindirectjobscreatedpermilliondollarsofoutputforRetailTrade/Eating&
DrinkingEstablishments.
USBureauofEconomicAnalysis,RIMSIIaggregatefinaldemandmultiplierfortheStateof
TennesseeforAccommodations.
Calculationbasedonanaverageoflocalhotel/moteltaxassessedbycounties/municipalitiesin
Tennessee.
USBureauofEconomicAnalysis,RIMSIIaggregateemploymentmultiplierfortheStateof
Tennessee–numberofindirectjobscreatedpermilliondollarsofoutputforAccommodations.
*Allcalculationsareinconstant2011dollars.
APPENDIX C
FORM OF CONTINUING DISCLOSURE AGREEMENT
[THIS PAGE INTENTIONALLY LEFT BLANK]
CONTINUING DISCLOSURE AGREEMENT
by and between
CITY OF MEMPHIS, TENNESSEE
and
REGIONS BANK, as trustee
and Disclosure Dissemination Agent
relating to the:
MEMPHIS CENTER CITY REVENUE FINANCE CORPORATION REVENUE BONDS
INCLUDING
$40,540,000
FEDERALLY TAXABLE SENIOR REVENUE BONDS,
SERIES 2011A (PYRAMID AND PINCH DISTRICT REDEVELOPMENT PROJECT)
$100,245,000
TAX EXEMPT SUBORDINATE REVENUE BONDS,
SERIES 2011B (PYRAMID AND PINCH DISTRICT REDEVELOPMENT PROJECT)
AND
$56,150,000
FEDERALLY TAXABLE SUBORDINATE REVENUE BONDS,
SERIES 2011C (PYRAMID AND PINCH DISTRICT REDEVELOPMENT PROJECT)
Dated as of September 1, 2011
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This CONTINUING DISCLOSURE AGREEMENT (this "Disclosure Agreement")
dated as of September 1, 2011, is executed and delivered by the CITY OF MEMPHIS, a
municipal corporation duly organized and existing under the laws of the State of Tennessee (the
"City") and REGIONS BANK, a state banking corporation duly organized and existing under
the laws of the State of Alabama, as disclosure dissemination agent and any successor disclosure
dissemination agent serving hereunder pursuant to Section 12 hereof ("Disclosure Dissemination
Agent") for the benefit of the Beneficial Owners (as defined herein).
RECITALS:
A.
Contemporaneously with the execution and delivery of this Disclosure
Agreement, the Memphis Center City Revenue Finance Corporation (the "Issuer") authorized the
issuance and delivery of those certain $40,540,000 in aggregate principal amount of its Federally
Taxable Senior Revenue Bonds, Series 2011A (Pyramid and Pinch District Redevelopment
Project) (the "Series 2011A Bonds"), $100,245,000 in aggregate principal amount of its Tax
Exempt Subordinate Revenue Bonds, Series 2011B (Pyramid and Pinch District Redevelopment
Project) (the "Series 2011B Bonds") and $56,150,000 in aggregate principal amount of its
Federally Taxable Subordinate Revenue Bonds, Series 2011C (Pyramid and Pinch District
Redevelopment Project) (the "Series 2011C Bonds" and together with the Series 2011A Bonds
and the Series 2011B Bonds are referred to as the "Bonds") pursuant to and in accordance with a
Trust Indenture dated as of September 1, 2011 (the "Indenture") between the Issuer and Regions
Bank, as trustee (the "Trustee"), provisions of Tennessee law as more particularly described in
the Indenture and resolutions adopted and approved by the Issuer authorizing the execution and
delivery of the hereinafter described Loan Agreement and the Indenture and the issuance and
sale of the Bonds. The Series 2011B Subordinate Tax Exempt Bonds and the Series 2011C
Subordinate Taxable Bonds are collectively hereinafter referred to as the "Series 2011
Subordinate Bonds."
B.
The Issuer will issue the Bonds for the purpose of, among other things, providing
funds to make a loan (the "Loan") to the City pursuant to a Loan Agreement dated as of
September 1, 2011 (the "Loan Agreement") between the Issuer and the City. The City will use
the proceeds of the Loan, together with other monies, to (a) finance or reimburse the City for a
portion of the costs associated with the acquisition, construction, development, renovation and
equipping of the Project (as defined in the Indenture), (b) fund capitalized interest on the Bonds,
(c) fund a deposit to the Senior Debt Service Reserve Account in an amount equal to the Senior
Debt Service Reserve Requirement applicable to the Series 2011A Senior Taxable Bonds;
(d) fund a deposit to the Subordinate Debt Service Reserve Account in an amount equal to the
Subordinate Debt Service Reserve Requirement applicable to the Series 2011 Subordinate
Bonds; and (e) pay certain expenses incurred in connection with the issuance of the Bonds.
C.
Pursuant to the Indenture, the Bonds are secured by an assignment and pledge of
the Trust Estate, as noted therein, which consists primarily of: (a) all right, title and interest of
the Issuer in and to the Loan Agreement and all amounts payable to the Issuer under the Loan
Agreement and all security therefor (excluding Unassigned Rights as defined in the Indenture);
(b) all right, title and interest of the Issuer in and to the funds, accounts and subaccounts
established pursuant to the Indenture and the assets thereof and income and earnings thereon,
except that the Senior Debt Service Reserve Account of the Debt Service Reserve Fund, each
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account and subaccount therein, the assets thereof and the income and earnings thereon shall be
shall be for the sole benefit of the Holders of Outstanding Senior Bonds and the Subordinate
Debt Service Reserve Account of the Debt Service Reserve Fund, each subaccount therein, the
assets thereof and the income and earnings thereon shall be for the sole benefit of the Holders of
Outstanding Subordinate Bonds; (c) solely for the benefit of the Holders of Outstanding
Subordinate Bonds, all right, title and interest in and to Debt Service Reserve Replenishment
Agreement, dated as of September 1, 2011, by and between the Issuer and the Borrower, as the
same may be amended, supplemented or restated (the "Replenishment Agreement") and all
amounts payable to the Issuer thereunder; and, (d) any and all other property of every kind and
nature from time to time thereafter, by delivery or by writing of any kind, conveyed, pledged,
assigned or transferred as and for additional security thereunder by the Issuer or the Borrower or
by anyone in their behalf to the Bond Trustee, including without limitation funds of the City held
by the Bond Trustee as security for the Bonds.
D.
The Issuer and the City have authorized the preparation and distribution of the
Preliminary Official Statement dated September 7, 2011 with respect to the Bonds (the
"Preliminary Official Statement") and, on or before the date of the Preliminary Official
Statement, the Issuer and the City deemed the Preliminary Official Statement "final" within the
meaning of the Rule (as defined herein).
E.
Upon the initial sale of the Bonds to the Participating Underwriter (as defined
herein), the Issuer and the City authorized the preparation and distribution of the Official
Statement dated September 21, 2011 with respect to the Bonds (the "Official Statement").
F.
As a condition precedent to the initial purchase of the Bonds by the Participating
Underwriter in accordance with the Bond Purchase Agreement dated September 21, 2011 by and
between the Participating Underwriter and the Issuer, and in compliance with the Participating
Underwriter's obligations under the Rule, the City has agreed to provide for the public disclosure
of certain operating data or financial information on an ongoing basis for so long as the Bonds
remain outstanding as set forth herein and in the continuing disclosure undertakings of the City.
NOW THEREFORE, in consideration of the purchase of the Bonds by the Participating
Underwriter and the mutual promises and agreements made herein, the receipt and sufficiency of
which consideration is hereby mutually acknowledged, the City and the Dissemination Agent do
hereby certify and agree as follows:
Section 1. Incorporation of Recitals. The above recitals are true and correct and are
incorporated into and made a part hereof.
Section 2. Definitions.
(a)
For the purposes of this Disclosure Agreement, all capitalized terms used, but not
otherwise defined herein shall have the meanings ascribed thereto in the Indenture and the
Official Statement, as applicable.
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(b)
In addition to the terms defined elsewhere herein, the following terms shall have
the following meanings for the purposes of this Disclosure Agreement:
"actual knowledge" as used herein, and for the purposes hereof, a party shall be deemed
to have "actual knowledge" of the occurrence of any event only if and to the extent the individual
or individuals employed by such party and directly responsible for the administration of this
Disclosure Agreement on behalf of such party have actual knowledge of or receive written notice
of the occurrence of such event; provided, however, that such individuals and parties shall have
no duty of inquiry or investigation with respect to whether any event shall have occurred.
"Annual Filing" means any annual report provided by the City, pursuant to and as
described in Sections 4 and 6 hereof.
"Annual Filing Date" means the date, set forth in Sections 4(a) and 4(e) hereof, by
which the Annual Filing is to be filed with the MSRB.
"Annual Financial Information" means annual financial information as such term is
used in paragraph (b)(5)(i) of the Rule and specified in Section 6(a) hereof.
"Audited Financial Statements" means the basic financial statements (if any) of the
City for the prior Fiscal Year, prepared in accordance with generally accepted accounting
principles, as in effect from time to time, audited by an independent certified public accountant
in conformity with generally accepted auditing standards and/or Government Auditing Principles
issued by the Comptroller General of the United States.
"Beneficial Owner" means any beneficial owner of the Bonds. Beneficial ownership is
to be determined consistent with the definition thereof contained in Rule 13d-3 of the SEC, or, in
the event such provisions do not adequately address the situation at hand (in the opinion of
nationally recognized bond counsel), beneficial ownership is to be determined based upon
ownership for federal income tax purposes.
"Disclosure Representative" means the Director of Finance and Administration or his
or her designee, or such other person as the City shall designate in writing to the Dissemination
Agent from time to time as the person responsible for providing Information to the
Dissemination Agent.
"Dissemination Agent" means Regions Bank, acting in its capacity as initial
Dissemination Agent hereunder, or any successor Dissemination Agent designated in writing by
the City pursuant to Section 12 hereof.
"Filing" means, as applicable, any Annual Filing or Notice Event Filing or any other
notice or report made public under this Disclosure Agreement.
"Fiscal Year" means the fiscal year of the City, which currently is the twelve month
period beginning July 1 and ending on June 30 of the following year or any such other twelve
month period designated by the City, from time to time, to be its fiscal year.
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"Information" means the Annual Financial Information, the Audited Financial
Statements (if any), the Notice Event Filings, and the Voluntary Reports.
"MSRB" means the Municipal Securities Rulemaking Board established pursuant to
Section 15B(b)(1) of the Securities Exchange Act of 1934, as amended. Disclosure is currently
accepted and posted through the MSRB's Electronic Municipal Market Access ("EMMA") portal
at http://emma.msrb.org.
"Notice Event Filing" shall have the meaning specified in Section 5(a) hereof.
"Notice Event" shall have the meaning specified in Section 5(a) hereof.
"Obligated Person" means the City and any person who is either generally or through
an enterprise, fund, or account of such person committed by contract or other arrangement to
support payment of all, or part of the obligations on the Bonds (other than providers of municipal
bond insurance, letters of credit, or other liquidity facilities). The City confirms that currently it
is an Obligated Person with respect to the Bonds.
"Participating Underwriter" means, collectively, Morgan Keegan & Company, Inc.
(the "Representative"), on behalf of itself, Citigroup, Duncan-Williams, Harvestons Securities,
Inc. and SunTrust Robinson Humphrey, the original purchasers of the Bonds required to comply
with the Rule in connection with the offering of the Bonds.
"Rule" means Rule 15c2-12 of the SEC promulgated pursuant to the Securities
Exchange Act of 1934, as the same may be amended from time to time.
"SEC" means the United States Securities and Exchange Commission.
"Third-Party Beneficiary" shall have the meaning specified in Section 3(b) hereof.
"Voluntary Report" means the information provided to the Dissemination Agent by the
City pursuant to Section 8 hereof.
Section 3. Scope of this Disclosure Agreement.
(a)
The City has agreed to enter into this Disclosure Agreement, undertake the
disclosure obligations hereunder and retain the Dissemination Agent to perform the disclosure
dissemination tasks set forth herein on its behalf, all at the request of the Participating
Underwriter and as a condition precedent to the Participating Underwriter's original purchase of
the Bonds in order to assist the Participating Underwriter with compliance with the Rule. The
disclosure obligations of the City under this Disclosure Agreement relate solely to the Bonds.
Such disclosure obligations are not applicable to any other securities issued or to be issued by the
Issuer, whether issued for the benefit of the City or otherwise, nor to any other securities issued
by or on behalf of the City.
(b)
Neither this Disclosure Agreement, nor the performance by the City or the
Dissemination Agent of their respective obligations hereunder, shall create any third-party
beneficiary rights, shall be directly enforceable by any third-party, or shall constitute a basis for a
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claim by any person except as expressly provided herein and except as required by law,
including, without limitation, the Rule; provided, however, each Beneficial Owner is hereby
made a third-party beneficiary hereof (collectively, and each respectively, a "Third-Party
Beneficiary") and shall have the right to enforce the obligations of the parties hereunder pursuant
to Section 9 hereof.
(c)
This Disclosure Agreement shall terminate upon: (i) the defeasance, redemption
or payment in full of all Bonds, in accordance with the Indenture, or (ii) the delivery by the
Disclosure Representative to the Dissemination Agent of an opinion of counsel expert in federal
securities laws retained by the City to the effect that continuing disclosure is no longer required
under the Rule as to the Bonds.
Section 4. Annual Filings.
(a)
The City shall provide, annually, an electronic copy of the Annual Filing to the
Dissemination Agent not later than two (2) business days prior to the Annual Filing Date.
Promptly upon receipt of an electronic copy of the Annual Filing, the Dissemination Agent shall
provide the Annual Filing to the MSRB, in an electronic format as prescribed by the MSRB, not
later than 180 days after the end of each Fiscal Year, commencing with the Fiscal Year
beginning July 1, 2011. Such date and each anniversary thereof is the Annual Filing Date. The
Annual Filing may be submitted as a single document or as separate documents comprising a
package, and may cross-reference other information as provided in Section 6 hereof.
(b)
If on the second (2nd) business day prior to the Annual Filing Date, the
Dissemination Agent has not received a copy of the Annual Filing, the Dissemination Agent
shall contact the Disclosure Representative by telephone and in writing (which may be by email)
to remind the City of its undertaking to provide the Annual Filing pursuant to
Section 4(a) hereof. Upon such reminder, the Disclosure Representative shall either (i) provide
the Dissemination Agent with an electronic copy of the Annual Filing no later than 4:00 P.M. on
the Annual Filing Date, or (ii) instruct the Dissemination Agent in writing that the City will not
be able to file the Annual Filing within the time required under this Disclosure Agreement, and
state the date by which the Annual Filing for such year is expected to be provided. If the
Dissemination Agent has not received the Annual Filing by 12:00 noon on the first Business Day
following the Annual Filing Date, the City irrevocably directs the Dissemination Agent to
immediately send a notice thereof to the MSRB.
(c)
If Audited Financial Statements are not available prior to the Annual Filing Date,
the City shall, when the Audited Financial Statements are available, provide in a timely manner
an electronic copy to the Dissemination Agent, accompanied by a certificate for the filing with
the MSRB.
(d)
The Dissemination Agent shall:
(i)
upon receipt, promptly file each Annual Filing received under
Section 4(a) hereof with the MSRB;
(ii)
upon receipt, promptly file each Audited Financial Statement received
under Section 4(c) hereof with the MSRB;
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(iii) upon receipt, promptly file the text of each disclosure to be made with the
MSRB ; and
(iv)
provide the City evidence of the filings of each of the above when made.
(e)
The City may adjust the Annual Filing Date upon change of its Fiscal Year by
providing written notice of such change and the new Annual Filing Date to the Dissemination
Agent and the MSRB, provided that the period between the existing Annual Filing Date and new
Annual Filing Date shall not exceed one year.
(f)
Each Annual Filing shall contain the information set forth in Section 6 hereof.
Section 5. Reporting of Notice Events.
(a)
To the extent applicable, the occurrence of any of the following events with
respect to the Bonds, shall constitute a Notice Event:
(1)
Principal and interest payment delinquencies;
(2)
Non-payment related defaults, if material;
(3)
Unscheduled draws on debt service reserves reflecting financial
difficulties;
(4)
Unscheduled draws on credit enhancements financial difficulties;
(5)
Substitution of credit or liquidity providers or their failure to perform;
(6)
Adverse tax opinions, the issuance by the Internal Revenue Service of
proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form
5701-TEB) or other material notices or determinations with respect to the tax status of the
Bonds, or other material events affecting the tax-exempt status of the Bonds;
(7)
Modifications to rights of holders, if material;
(8)
Bond calls (excluding calls for mandatory sinking fund redemptions) on
the Bonds, if material, and tender offers;
(9)
(10)
if material;
(11)
Defeasances;
Release, substitution or sale of property securing repayment of the Bonds,
Rating changes;
(12) Bankruptcy, insolvency, receivership or similar event of the City. This
event is considered to occur when any of the following occur: the appointment of a
receiver, fiscal agent or similar officer for an obligated person in a proceeding under the
U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a
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court or governmental authority has assumed jurisdiction over substantially all of the
assets or business of the City, or if such jurisdiction has been assumed by leaving the City
and its officials or officers in possession but subject to the supervision and orders of a
court or governmental authority, or the entry of an order confirming a plan of
reorganization, arrangement or liquidation by a court or governmental authority having
supervision or jurisdiction over substantially all of the assets or business of the City;
(13) The consummation of a merger, consolidation, or acquisition involving the
City or the sale of all or substantially all of the assets of the City, other than in the
ordinary course of business, the entry into a definitive agreement to undertake such an
action or the termination of a definitive agreement relating to any such actions, other than
pursuant to its terms, if material; or
(14) Appointment of a successor or additional trustee or the change of name of
a trustee, if material.
The City shall promptly notify the Dissemination Agent in writing upon having actual
knowledge of the occurrence of a Notice Event (and, in all cases in sufficient time for the
Dissemination Agent to file a notice of any such Notice Event not later than ten business days
after the occurrence thereof as required under Section 5(c) below); provided, however, to the
extent any such Notice Event has been previously and properly disclosed by or on behalf of the
City, the City shall not be required to provide such additional notice of such Notice Event in
accordance with this subsection. Such notice shall instruct the Dissemination Agent to report the
occurrence pursuant to Section 5(c) hereof. Such notice shall be accompanied with the text of
the disclosure that the City desires to make (each a "Notice Event Filing"), the written
authorization of the City for the Dissemination Agent to disseminate such information, and the
date the City desires for the Dissemination Agent to disseminate the information.
(b)
The Dissemination Agent is under no obligation to notify the City or the
Disclosure Representative of an event that may constitute a Notice Event. In the event the
Dissemination Agent so notifies the Disclosure Representative, the Disclosure Representative
will, within five business days of receipt of such notice, instruct the Dissemination Agent that
(i) a Notice Event has not occurred and no filing is to be made, or (ii) a Notice Event has
occurred and the Dissemination Agent is to report the occurrence pursuant to Section 5(c) hereof,
together with the text of the disclosure that the City desires to make, the written authorization of
the City for the Dissemination Agent to disseminate such information, and the date the City
desires for the Dissemination Agent to disseminate the information.
(c)
If the Dissemination Agent has been instructed by the City as prescribed in
subsection (a) or (b)(ii) of this Section 5 to report the occurrence of a Notice Event, the
Dissemination Agent shall promptly file a notice of such occurrence with the MSRB in an
electronic format as prescribed by the MSRB and in a timely manner not in excess of ten
business days after the occurrence of the Notice Event.
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Section 6. Content of Annual Filings. Each Annual Filing shall contain the following:
(a)
Operating data and financial information, consisting of, to the extent not included
in the City's Audited Financial Statements, updates of the following information contained in the
Official Statement:
(i)
the chart entitled "Schedule of Historical Collection of TDZ
Revenues" under the heading "SECURITY AND SOURCES OF PAYMENT
FOR THE SERIES 2011 BONDS – Historical and Projected Debt Service
Coverage;" and
(ii)
the chart entitled "Schedule of Historic collection of Non-Tax
Revenues" under the heading "SECURITY AND SOURCES OF PAYMENT
FOR THE SERIES 2011 BONDS – Non-Tax Revenues."
(b)
If available at the time of such filing, the Audited Financial Statements of the City
for the prior Fiscal Year. If the Audited Financial Statements are not available by the time the
Annual Filing is required to be filed pursuant to Section 4(a) hereof, the Annual Filing shall
contain unaudited financial statements of the City prepared in accordance with generally
accepted accounting principles, as in effect from time to time, and the Audited Financial
Statements shall be filed in the same manner as the Annual Filing when they become available.
The Audited Financial Statements (if any) will be provided pursuant to Section 4(c) hereof.
(c)
The City's Audited Financial Statements for the immediately preceding Fiscal
Year, to the extent available.
Any or all of the items listed above may be included by specific reference from other
documents, including official statements of debt issues with respect to which the City is an
Obligated Person, which have been previously filed with the MSRB or the SEC. The City will
clearly identify each such document so incorporated by reference.
Section 7. Responsibility for Content of Reports and Notices.
(a)
The City shall be solely responsible for the content of each Filing (or any portion
thereof) provided to the Dissemination Agent pursuant to this Disclosure Agreement. The
Dissemination Agent shall not be responsible for reviewing or verifying the accuracy or
completeness of any such Filings.
(b)
Each Filing distributed by the Dissemination Agent pursuant to Section 4 or 5
hereof shall be in a form suitable for distributing publicly and shall contain the CUSIP numbers
of the Bonds and otherwise shall be as required by the MSRB's Electronic Municipal Market
Access portal.
(c)
Any report, notice or other filing to be made public pursuant to this Disclosure
Agreement may consist of a single document or separate documents comprising a package and
may incorporate by reference other clearly identified documents or specified portions thereof
previously filed with the MSRB or the SEC, provided that any final official statement
incorporated by reference must be available from the MSRB.
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(d)
Notwithstanding any provision herein to the contrary, nothing in this Disclosure
Agreement shall be construed to require the City or the Dissemination Agent to interpret or
provide an opinion concerning information made public pursuant to this Disclosure Agreement.
(e)
Notwithstanding any provision herein to the contrary, the City shall not make
public, or direct the Dissemination Agent to make public, information which is not permitted to
be publicly disclosed under any applicable data confidentiality or privacy law or other legal
requirement.
Section 8. Voluntary Reports.
(a)
The City may instruct the Dissemination Agent to file information with the
MSRB, from time to time pursuant to a direction of the Disclosure Representative accompanying
such information (a "Voluntary Report").
(b)
Nothing in this Disclosure Agreement shall be deemed to prevent the City from
disseminating any other information through the Dissemination Agent using the means of
dissemination set forth in this Disclosure Agreement or including any other information in any
Annual Filing, Audited Financial Statements, Voluntary Report or Notice Event Filing, in
addition to that required by this Disclosure Agreement. If the City chooses to include any
information in any Annual Filing, Audited Financial Statements, Voluntary Report or Notice
Event Filing in addition to that which is specifically required by this Disclosure Agreement, the
City shall have no obligation under this Disclosure Agreement to update such information or
include it in any future Annual Filing, Audited Financial Statements, Voluntary Report or Notice
Event Filing.
(c)
Notwithstanding the foregoing provisions of this Section 8, the City is under no
obligation to provide any Voluntary Report.
Section 9. Defaults; Remedies.
(a)
A party shall be in default of its obligations hereunder if it fails or refuses to carry
out or perform its obligations hereunder for a period of five business days following notice of
default given in writing to such party by any other party hereto or by any Third Party Beneficiary
hereof, unless such default is cured within such five business day notice period. An extension of
such five business day cure period may be granted for good cause (in the reasonable judgment of
the party granting the extension) by written notice from the party who gave the default notice.
(b)
If a default occurs and continues beyond the cure period specified above, any
nondefaulting party or any Third-Party Beneficiary may seek specific performance of the
defaulting party's obligations hereunder as the sole and exclusive remedy available upon any
such default. Each of the parties hereby acknowledges that monetary damages will not be an
adequate remedy at law for any default hereunder, and therefore agrees that the exclusive remedy
of specific performance shall be available in proceedings to enforce this Disclosure Agreement.
(c)
Notwithstanding any provision of this Disclosure Agreement or the Indenture to
the contrary, no default under this Disclosure Agreement shall constitute a default or event of
default under the Indenture.
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Section 10. Amendment or Modification.
(a)
This Disclosure Agreement shall not be amended or modified except as provided
in this Section. No modification, amendment, alteration or termination of all or any part of this
Disclosure Agreement shall be construed to be, or operate as, altering or amending in any way
the provisions of the Indenture.
(b)
Notwithstanding any other provision of this Disclosure Agreement, the City may
amend this Disclosure Agreement and any provision of this Disclosure Agreement may be
waived, if: (i) such amendment or waiver is made in connection with a change in circumstances
that arises from a change in legal requirements, change in law, or change in the identity, nature,
or status of the obligor on the Bonds, or type of business conducted by such obligor; (ii) such
amendment or waiver does not materially impair the interests of the beneficial owners of the
Bonds, as determined either by an unqualified opinion of nationally recognized bond counsel
filed with the City or by the approving vote of the owners of the Bonds owning more than twothirds in aggregate principal amount of the Bonds outstanding at the time of such amendment or
waiver and (iii) such amendment or waiver is supported by an opinion of counsel expert in
federal securities laws, to the effect that such amendment or waiver would not, in and of itself,
cause the undertakings herein to violate the Rule if such amendment or waiver had been effective
on the date hereof but taking into account any subsequent change in or official interpretation of
the Rule, as well as any change in circumstances.
(c)
If any provision of Section 6 hereof is amended or waived, the first Annual Filing
containing any amended, or omitting any waived, operating data or financial information shall
explain, in narrative form, the reasons for the amendment or waiver and the impact of the change
in the type of operating data or financial information being provided.
(d)
If the provisions of this Disclosure Agreement specifying the accounting
principles to be followed in preparing the City's financial statements are amended or waived, the
Annual Filing for the year in which the change is made shall present a comparison between the
financial statements or information prepared on the basis of the new accounting principles and
those prepared on the basis of the former accounting principles. The comparison shall include a
qualitative discussion of the differences in the accounting principles and the impact of the change
in the accounting principles on the presentation of the financial information, in order to provide
information to the beneficial owners of the Bonds to enable them to evaluate the ability of the
City to meet its obligations. To the extent reasonably feasible, the comparison shall also be
quantitative. The City will file a notice of the change in the accounting principles with the
MSRB on or before the effective date of any such amendment or waiver.
(e)
Notwithstanding the foregoing, the Dissemination Agent shall not be obligated to
agree to any amendment expanding its duties or obligations hereunder without its consent
thereto.
(f)
The City shall prepare or cause to be prepared a notice of any such amendment or
modification and shall direct the Dissemination Agent to make such notice public in accordance
with Section 8 hereof.
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Section 11. Reimbursement of Dissemination Agent's Expenses. The Dissemination
Agent shall be reimbursed by the City for all out-of-pocket expenses incurred by it in
performance of its duties under this Disclosure Agreement, payable promptly upon written
request. The Dissemination Agent shall have the right to resign and terminate its agency
relationship and all of its obligations under this Disclosure Agreement upon non-payment of its
expenses by written notice to the City.
Section 12. Agency Relationship.
(a)
The Dissemination Agent agrees to perform such duties, but only such duties, as
are specifically set forth in this Disclosure Agreement, and no implied duties or obligations of
any kind shall be read into this Disclosure Agreement with respect to the Dissemination Agent.
The Dissemination Agent may conclusively rely, as to the truth, accuracy and completeness of
the statements set forth therein, upon all notices, reports, certificates or other materials furnished
to the Dissemination Agent pursuant to this Disclosure Agreement, and in the case of notices and
reports required to be furnished to the Dissemination Agent pursuant to this Disclosure
Agreement, the Dissemination Agent shall have no duty whatsoever to examine the same to
determine whether they conform to the requirements of this Disclosure Agreement.
(b)
The Dissemination Agent shall not be liable for any error of judgment made in
good faith by a responsible officer or officers of the Dissemination Agent unless it shall be
proven that the Dissemination Agent engaged in negligent conduct or willful misconduct in
ascertaining the pertinent facts related thereto.
(c)
The Dissemination Agent shall perform its rights and duties under this Disclosure
Agreement using the same standard of care as a prudent person would exercise under the
circumstances, and the Dissemination Agent shall not be liable for any action taken or failure to
act in good faith under this Disclosure Agreement unless it shall be proven that the
Dissemination Agent was negligent or engaged in willful misconduct.
(d)
The Dissemination Agent may perform any of its duties hereunder with
reasonable care, by or through attorneys or agents selected by it, and shall be entitled to the
advice of counsel concerning all matters arising hereunder, and may in all cases pay such
reasonable compensation as it may deem proper, and as approved by the City, to all such
attorneys and agents, and the Dissemination Agent shall not be responsible for the acts or
negligence of such attorneys, agents or counsel if selected with reasonable care.
(e)
None of the provisions of this Disclosure Agreement or any notice or other
document delivered in connection herewith shall require the Dissemination Agent to advance,
expend or risk its own funds or otherwise incur financial liability in the performance of any of
the Dissemination Agent's duties or rights under this Disclosure Agreement.
(f)
The Dissemination Agent shall not be required to monitor the compliance of the
City with the provisions of this Disclosure Agreement or to exercise any remedy, institute a suit
or take any action of any kind without indemnification satisfactory to the Dissemination Agent.
(g)
The Dissemination Agent may include in any dissemination correspondence
enclosing or furnishing any Notice Event Filings made public by it under this Disclosure
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Agreement the following disclaimer with respect to the source of the information contained in,
and the identity of the party responsible for compiling or preparing, such reports or notices:
"The information set forth in the attached notice has been provided by the City of Memphis (the
"City") to Regions Bank in its capacity as disclosure dissemination agent (the " Dissemination
Agent") for the City, together with written dissemination directions to the Dissemination Agent.
The Dissemination Agent has not prepared or verified, and is not responsible in any way for, the
content of this notice or the accuracy, timeliness or completeness thereof. Under no
circumstances shall the Dissemination Agent or the City have any obligation or liability to any
person or entity for (i) any loss, damage, cost, liability or expense in whole or in part caused by,
resulting from, or relating to any error (negligent or otherwise) or other circumstances involved
in processing, collecting, compiling or interpreting the data included in this notice, or (ii) for any
direct, indirect, special, consequential, incidental or punitive damages whatsoever arising from
any investment decision or otherwise. This notice has not been reviewed or approved by any
state or federal regulatory body."
(h)
The Dissemination Agent may resign at any time by giving at least ninety
(90) days prior written notice thereof to the City. The Dissemination Agent may be removed for
good cause at any time by written notice to the Dissemination Agent from the City, provided that
such removal shall not become effective until a successor dissemination agent has been
appointed by the City under this Disclosure Agreement.
(i)
In the event the Dissemination Agent shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of the Dissemination Agent for any
reason, the City shall promptly appoint a successor. Notwithstanding any provision to the
contrary in this Disclosure Agreement or elsewhere, the City may appoint itself to serve as
Dissemination Agent hereunder.
(j)
Any company or other legal entity into which the Dissemination Agent may be
merged or converted or with which it may be consolidated or any company resulting from any
merger, conversion or consolidation to which the Dissemination Agent may be a party or any
company to whom the Dissemination Agent may sell or transfer all or substantially all of its
agency business shall be the successor dissemination agent hereunder without the execution or
filing of any paper or the performance of any further act and shall be authorized to perform all
rights and duties imposed upon the Dissemination Agent by this Disclosure Agreement, anything
herein to the contrary notwithstanding.
Section 13. Miscellaneous.
(a)
Each of the parties hereto represents and warrants to each other party that it has
(i) duly authorized the execution and delivery of this Disclosure Agreement by the officers of
such party whose signatures appear on the execution pages hereto, (ii) that it has all requisite
power and authority to execute, deliver and perform this Disclosure Agreement under applicable
law and any resolutions, ordinances, or other actions of such party now in effect, (iii) that the
execution and delivery of this Disclosure Agreement, and performance of the terms hereof, does
not and will not violate any law, regulation, ruling, decision, order, indenture, decree, agreement
or instrument by which such party or its property or assets is bound, and (iv) such party is not
aware of any litigation or proceeding pending, or, to the best of such party's knowledge,
C-13
threatened, contesting or questioning its existence, or its power and authority to enter into this
Disclosure Agreement, or its due authorization, execution and delivery of this Disclosure
Agreement, or otherwise contesting or questioning the issuance of the Bonds.
(b)
This Disclosure Agreement shall be governed by and interpreted in accordance
with the laws of the State of Tennessee and applicable federal law.
(c)
If any provision hereof shall be held invalid or unenforceable by a court of
competent jurisdiction, the remaining provisions hereof shall survive and continue in full force
and effect.
(d)
This Disclosure Agreement may be executed in one or more counterparts, each
and all of which shall constitute one and the same instrument.
Section 14. Identifying Information. All documents provided to the MSRB pursuant
to this Disclosure Agreement shall be accompanied by identifying information as prescribed by
the MSRB.
Section 15. Severability. In case any part of this Disclosure Agreement is held to be
illegal or invalid, such illegality or invalidity shall not affect the remainder or any other section
of this Disclosure Agreement. This Disclosure Agreement shall be construed or enforced as if
such illegal or invalid portion were not contained therein, nor shall such illegality or invalidity of
any application of this Disclosure Agreement affect any legal and valid application.
[SIGNATURE PAGES TO FOLLOW]
C-14
SIGNATURE PAGE TO
CONTINUING DISCLOSURE AGREEMENT
MEMPHIS CENTER CITY REVENUE FINANCE CORPORATION
FEDERALLY TAXABLE SENIOR REVENUE BONDS,
SERIES 2011A (PYRAMID AND PINCH DISTRICT REDEVELOPMENT PROJECT)
TAX EXEMPT SUBORDINATE REVENUE BONDS,
SERIES 2011B (PYRAMID AND PINCH DISTRICT REDEVELOPMENT PROJECT)
AND
FEDERALLY TAXABLE SUBORDINATE REVENUE BONDS,
SERIES 2011C (PYRAMID AND PINCH DISTRICT REDEVELOPMENT PROJECT)
IN WITNESS WHEREOF, the City and the Dissemination Agent have each caused this
Disclosure Agreement to be executed, on the date first written above, by their respective officers
duly authorized.
CITY OF MEMPHIS, a municipal corporation duly
organized and existing under the laws of the State of
Tennessee
By:
Director of Finance and Administration
Date:
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
C-15
SIGNATURE PAGE TO
CONTINUING DISCLOSURE AGREEMENT
MEMPHIS CENTER CITY REVENUE FINANCE CORPORATION
FEDERALLY TAXABLE SENIOR REVENUE BONDS,
SERIES 2011A (PYRAMID AND PINCH DISTRICT REDEVELOPMENT PROJECT)
TAX EXEMPT SUBORDINATE REVENUE BONDS,
SERIES 2011B (PYRAMID AND PINCH DISTRICT REDEVELOPMENT PROJECT)
AND
FEDERALLY TAXABLE SUBORDINATE REVENUE BONDS,
SERIES 2011C (PYRAMID AND PINCH DISTRICT REDEVELOPMENT PROJECT)
IN WITNESS WHEREOF, the City and the Dissemination Agent have each caused
their duly authorized officers to execute this Continuing Disclosure Agreement to be effective as
of the day and year so specified hereinabove.
REGIONS BANK, as Dissemination Agent
By:
Name:
Title:
Date:
C-16
APPENDIX D
FORM OF OPINIONS OF CO-BOND COUNSEL
[THIS PAGE INTENTIONALLY LEFT BLANK]
[DATED THE DATE OF ISSUANCE]
Memphis Center City
Revenue Finance Corporation
Memphis, Tennessee
Ladies and Gentlemen:
We have examined a record of proceedings relating to the issuance of
$40,540,000 aggregate principal amount of Federally Taxable Senior Revenue Bonds, Series
2011A (Pyramid and Pinch District Redevelopment Project) (the “Series 2011A Senior Bonds”),
by the Memphis Center City Revenue Finance Corporation (the “Corporation”), a public,
nonprofit corporation organized under the laws of the State of Tennessee, created and existing
under and pursuant to the Constitution and statutes of the State of Tennessee, including the
Sections 7-53-101 et. seq., Tennessee Code Annotated, as amended to the date hereof (the
“Act”). We have also examined such certificates, documents, records and matters of law as we
have deemed necessary for the purpose of rendering the opinions hereinafter set forth.
The Series 2011A Senior Bonds are issued under and pursuant to the Act and the
Trust Indenture, dated as of September 1, 2011 (the “Indenture”), between the Corporation and
Regions Bank, as Bond Trustee (the “Trustee”) and authorized by a Resolution of the Board of
Directors of the Corporation, adopted August 23, 2011 (the “Authorizing Resolution”). Unless
otherwise defined herein, capitalized terms used herein have the respective meanings given to
them in the Indenture.
The Series 2011A Senior Bonds are part of an issue of senior and subordinate
bonds of the Corporation (the “Bonds”) which the Corporation has established and issued under
the terms of the Indenture and is authorized to issue from time to time for the purposes
authorized by the Act and the Indenture, as then in effect, and without limitation as to amount,
except as provided in the Indenture or as may be limited by law. The Series 2011A Senior
Bonds are being issued for the purposes set forth in the Indenture.
The Corporation is authorized to issue Senior Bonds, in addition to the Series
2011A Senior Bonds, only upon the terms and conditions set forth in the Indenture and such
Senior Bonds, when issued, will with the Series 2011A Senior Bonds be entitled to the equal
benefit, protection and security of the provisions, covenants and agreements of the Indenture.
The Series 2011A Senior Bonds are issuable in the form of fully registered Bonds
in the denomination of $5,000 or integral multiples thereof. The Series 2011A Senior Bonds are
each lettered “2011A R– ” and numbered consecutively from one upward in order of issuance.
The Series 2011A Senior Bonds are dated the date hereof and mature on
November 1 and bear interest, payable November 1, 2011 and semiannually thereafter on May 1
and November 1, in each of the years and at the respective principal amounts and rates per
annum set forth below:
D-1
Memphis Center City
Revenue Finance Corporation
Maturing
November 1
2014
2015
2016
2017
2018
2019
2020
2021
Principal
Amount
$ 790,000
840,000
885,000
935,000
1,000,000
1,480,000
1,565,000
1,650,000
September
Interest
Rate
Maturing
November 1
2.040%
2.540
2.890
3.190
3.320
3.570
3.870
4.230
2022
2023
2024
2025
2026
2027
2030
, 2011
Page 2
Principal
Amount
Interest
Rate
$ 2,735,000
2,890,000
3,055,000
3,240,000
3,435,000
3,645,000
12,395,000
4.480 %
4.630
4.730
4.880
5.030
5.180
5.530
The Series 2011A Senior Bonds are subject to redemption prior to maturity as
provided in the Indenture.
The Series 2011A Senior Bonds are being issued to finance a loan by the
Corporation to The City of Memphis, Tennessee (the “City”). The Corporation and the City
have entered into a Loan Agreement, dated as of September 1, 2011 (the “Loan Agreement”), by
which the City is required to make payments sufficient to pay, when due, the principal, premium,
if any, and interest on the Bonds, including the Series 2011A Senior Bonds. All amounts
payable under the Loan Agreement for payment of the principal, premium, if any, or interest on
the Bonds are required to be paid to the Trustee under the Indenture and have been pledged by
the Corporation for the benefit of the Holders of the Bonds, including the Series 2011A Senior
Bonds.
We are of the opinion that:
1.
The Corporation is a public, nonprofit corporation of the State of
Tennessee, with the right and lawful authority and power to adopt the Authorizing Resolution,
enter into the Indenture and to issue the Series 2011A Senior Bonds thereunder.
2.
The Authorizing Resolution has been duly and lawfully adopted by the
Corporation in accordance with the provisions of the Act.
3.
The Indenture has been duly and lawfully authorized, executed and
delivered by the Corporation, is in full force and effect and is a legal, valid and binding
obligation of the Corporation enforceable in accordance with its terms.
4.
The Series 2011A Senior Bonds have been duly and validly authorized
and issued in accordance with the Constitution and statutes of the State of Tennessee, including
the Act, and in accordance with the Authorizing Resolution and the Indenture. The Series
2011A Senior Bonds are legal, valid and binding special obligations of the Corporation payable
as provided in the Indenture, are enforceable in accordance with their terms and the terms of the
Indenture and are entitled, together with all other Senior Bonds issued under the Indenture, to the
equal benefits of the Indenture and the Act.
D-2
Memphis Center City
Revenue Finance Corporation
September
, 2011
Page 3
5.
The Corporation has the right and lawful authority and power to enter into
the Loan Agreement and the Loan Agreement has been duly authorized, executed and delivered
by the Corporation, is in full force and effect and constitutes a legal, valid and binding obligation
of the Corporation enforceable in accordance with its terms.
6.
Interest on the Series 2011A Senior Bonds is not excluded from gross
income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986
(the “Code”) and so will be fully subject to federal income taxation.
7.
Under Tennessee law, the Series 2011A Senior Bonds and the interest
thereon are exempt from income taxation in the State of Tennessee, except for Tennessee
franchise taxes.
Except as stated in paragraphs 6 and 7 above, we express no opinion as to any
other federal or state tax consequences of the ownership or disposition of the Series 2011A
Senior Bonds. Furthermore, we express no opinion as to any federal, state or local tax law
consequences with respect to the Series 2011A Senior Bonds, or the interest thereon, if any
action is taken with respect to the Series 2011A Senior Bonds or the proceeds thereof upon the
advice or approval of other counsel.
We have examined an executed Series 2011A Senior Bond and, in our opinion,
the form of said Bond and its execution are regular and proper.
The opinions contained in paragraphs 3, 4 and 5 above are qualified to the extent
that the enforceability of the Indenture, the Loan Agreement and the Series 2011A Senior Bonds
may be limited by bankruptcy, insolvency, moratorium, reorganization or other laws affecting
creditors’ rights generally or as to the availability of any particular remedy.
In connection with the delivery of this opinion, we are not passing upon the
authorization, execution and delivery of the Loan Agreement by the City. We have assumed the
due authorization, execution and delivery of the Loan Agreement by the City.
Very truly yours,
D-3
[DATED THE DATE OF ISSUANCE]
Memphis Center City
Revenue Finance Corporation
Memphis, Tennessee
Ladies and Gentlemen:
We have examined a record of proceedings relating to the issuance of
$100,245,000 aggregate principal amount of Tax Exempt Subordinate Revenue Bonds, Series
2011B (Pyramid and Pinch District Redevelopment Project) (the “Series 2011B Subordinate
Bonds”) and of $56,150,000 aggregate principal amount of Federally Taxable Subordinate
Revenue Bonds, Series 2011C (Pyramid and Pinch District Redevelopment Project) (the “Series
2011C Subordinate Bonds” and together with the Series 2011 B Subordinate Bonds, the “Series
2011 Subordinate Bonds”), by the Memphis Center City Revenue Finance Corporation (the
“Corporation”), a public, nonprofit corporation organized under the laws of the State of
Tennessee, created and existing under and pursuant to the Constitution and statutes of the State
of Tennessee, including the Sections 7-53-101 et. seq., Tennessee Code Annotated, as amended
to the date hereof (the “Act”). We have also examined such certificates, documents, records and
matters of law as we have deemed necessary for the purpose of rendering the opinions
hereinafter set forth.
The Series 2011 Subordinate Bonds are issued under and pursuant to the Act and
the Trust Indenture, dated as of September 1, 2011 (the “Indenture”), between the Corporation
and Regions Bank, as Bond Trustee (the “Trustee”) and authorized by a Resolution of the Board
of Directors of the Corporation, adopted August 23, 2011 (the “Authorizing Resolution”).
Unless otherwise defined herein, capitalized terms used herein have the respective meanings
given to them in the Indenture.
The Series 2011 Subordinate Bonds are part of an issue of senior and subordinate
bonds of the Corporation (the “Bonds”) which the Corporation has established and issued under
the terms of the Indenture and is authorized to issue from time to time for the purposes
authorized by the Act and the Indenture, as then in effect, and without limitation as to amount,
except as provided in the Indenture or as may be limited by law. The Series 2011 Subordinate
Bonds are being issued for the purposes set forth in the Indenture.
The Corporation is authorized to issue Subordinate Bonds, in addition to the
Series 2011 Subordinate Bonds, only upon the terms and conditions set forth in the Indenture and
such Subordinate Bonds, when issued, will with the Series 2011 Subordinate Bonds be entitled to
the equal benefit, protection and security of the provisions, covenants and agreements of the
Indenture.
The Series 2011 Subordinate Bonds are issuable in the form of fully registered
Bonds in the denomination of $5,000 or integral multiples thereof. The Series 2011B
Subordinate Bonds are lettered “2011B R– ” and numbered consecutively from R– upward in
D-4
Memphis Center City
Revenue Finance Corporation
September
, 2011
Page 2
order of issuance. The Series 2011C Subordinate Bonds are lettered “2011C R– ” and
numbered consecutively from R– upward in order of issuance.
The Series 2011B Subordinate Bonds are dated the date hereof and mature on
November 1 and bear interest, payable November 1, 2011 and semiannually thereafter on May 1
and November 1, in each of the years and at the respective principal amounts and rates per
annum set forth below:
Maturing
November 1
Principal
Amount
Interest
Rate
Maturing
November 1
2025
2025
$29,560,000
9,500,000
4.000 %
5.250
2030
2030
Principal
Amount
$21,185,000
40,000,000
Interest
Rate
4.500 %
5.250
The Series 2011C Subordinate Bonds are dated the date hereof and mature on
November 1 and bear interest, payable November 1, 2011 and semiannually thereafter on May 1
and November 1, in each of the years and at the respective principal amounts and rates per
annum set forth below:
Maturing
November 1
Principal
Amount
Interest
Rate
Maturing
November 1
2014
2015
2016
2017
$6,180,000
6,385,000
6,635,000
6,915,000
1.890 %
2.390
2.790
3.090
2018
2019
2020
2021
Principal
Amount
$7,215,000
7,550,000
7,920,000
7,350,000
Interest
Rate
3.220 %
3.520
3.870
4.180
The Series 2011 Subordinate Bonds are subject to redemption prior to maturity as
provided in the Indenture.
The Series 2011 Subordinate Bonds are being issued to finance a loan by the
Corporation to The City of Memphis, Tennessee (the “City”). The Corporation and the City
have entered into a Loan Agreement, dated as of September 1, 2011 (the “Loan Agreement”), by
which the City is required to make payments sufficient to pay, when due, the principal, premium,
if any, and interest on the Bonds, including the Series 2011 Subordinate Bonds. All amounts
payable under the Loan Agreement for payment of the principal, premium, if any, or interest on
the Bonds are required to be paid to the Trustee under the Indenture and have been pledged by
the Corporation for the benefit of the Holders of the Bonds, including the Series 2011
Subordinate Bonds.
We are of the opinion that:
1.
The Corporation is a public, nonprofit corporation of the State of
Tennessee, with the right and lawful authority and power to adopt the Authorizing Resolution,
enter into the Indenture and to issue the Series 2011 Subordinate Bonds thereunder.
D-5
Memphis Center City
Revenue Finance Corporation
September
, 2011
Page 3
2.
The Authorizing Resolution has been duly and lawfully adopted by the
Corporation in accordance with the provisions of the Act.
3.
The Indenture has been duly and lawfully authorized, executed and
delivered by the Corporation, is in full force and effect and is a legal, valid and binding
obligation of the Corporation enforceable in accordance with its terms.
4.
The Series 2011 Subordinate Bonds have been duly and validly authorized
and issued in accordance with the Constitution and statutes of the State of Tennessee, including
the Act, and in accordance with the Authorizing Resolution and the Indenture. The Series 2011
Subordinate Bonds are legal, valid and binding special obligations of the Corporation payable as
provided in the Indenture, are enforceable in accordance with their terms and the terms of the
Indenture and are entitled, together with all other Subordinate Bonds issued under the Indenture,
to the equal benefits of the Indenture and the Act.
5.
The Corporation has the right and lawful authority and power to enter into
the Loan Agreement and the Loan Agreement has been duly authorized, executed and delivered
by the Corporation, is in full force and effect and constitutes a legal, valid and binding obligation
of the Corporation enforceable in accordance with its terms.
6.
The Internal Revenue Code of 1986, as amended (the “Code”) sets forth
certain requirements that must be met subsequent to the issuance and delivery of the Series
2011B Subordinate Bonds for interest thereon to be and remain excluded from gross income for
federal income tax purposes. Noncompliance with such requirements could cause the interest on
the Series 2011B Subordinate Bonds to be included in gross income for federal income tax
purposes retroactive to the date of issue of the Series 2011B Subordinate Bonds. The
Corporation has covenanted in the Indenture and the Tax Certificate as to Arbitrage and the
Provisions of Sections 141–150 of the Internal Revenue Code (the “Tax Certificate”) and the
City has covenanted in the Loan Agreement and the Tax Certificate to comply with the
applicable requirements of the Code in order to maintain the exclusion of the interest on the
Series 2011B Subordinate Bonds from gross income for federal income tax purposes pursuant to
Section 103 of the Code. In addition, the Corporation and the City have made certain
representations and certifications in the Tax Certificate. We have not independently verified the
accuracy of those certifications and representations or that opinion.
Under existing law and assuming compliance with the tax covenants described
herein, and the accuracy of the aforementioned representations and certifications, interest on the
Series 2011B Subordinate Bonds is excluded from gross income for federal income tax purposes
under Section 103 of the Code. We are also of the opinion that such interest is not treated as a
preference item in calculating the alternative minimum tax imposed under the Code with respect
to individuals and corporations. Interest on the Series 2011B Subordinate Bonds is, however,
included in the adjusted current earnings of certain corporations for purposes of computing the
alternative minimum tax imposed on such corporations.
D-6
Memphis Center City
Revenue Finance Corporation
September
, 2011
Page 4
We are further of the opinion that the difference between the principal amount of
the Series 2011B Subordinate Bonds maturing on November 1, 2025 bearing a coupon of
4.000% and on November 1, 2030 bearing a coupon of 4.500% (collectively the "Discount Tax
Exempt Bonds") and the initial offering price to the public (excluding bond houses, brokers or
similar persons or organizations acting in the capacity of underwriters or wholesalers) at which
price a substantial amount of such Discount Tax Exempt Bonds of the same maturity was sold
constitutes original issue discount which is excluded from gross income for federal income tax
purposes to the same extent as interest on the Series 2011B Subordinate Bonds. Further, such
original issue discount accrues actuarially on a constant interest rate basis over the term of each
Discount Tax Exempt Bond and the basis of each Discount Tax Exempt Bond acquired at such
initial offering price by an initial purchaser thereof will be increased by the amount of such
accrued original issue discount. The accrual of original issue discount may be taken into account
as an increase in the amount of tax exempt income for purposes of determining various other tax
consequences of owning the Discount Tax Exempt Bonds, even though there will not be a
corresponding cash payment
7.
Interest on the Series 2011C Subordinate Bonds is not excluded from
gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of
1986 (the “Code”) and so will be fully subject to federal income taxation.
8.
Under Tennessee law, the Series 2011 Subordinate Bonds and the interest
thereon are not subject to income taxation in the State of Tennessee, except for Tennessee
franchise taxes.
Except as stated in paragraphs 6, 7 and 8 above, we express no opinion as to any
other federal or state tax consequences of the ownership or disposition of the Series 2011
Subordinate Bonds. Furthermore, we express no opinion as to any federal, state or local tax law
consequences with respect to the Series 2011 Subordinate Bonds, or the interest thereon, if any
action is taken with respect to the Series 2011 Subordinate Bonds or the proceeds thereof upon
the advice or approval of other counsel.
We have examined an executed Series 2011B Subordinate Bond and an executed
Series 2011C Subordinate Bond. In our opinion, the form of said bonds and their execution are
regular and proper.
The opinions contained in paragraphs 3, 4 and 5 above are qualified to the extent
that the enforceability of the Indenture, the Loan Agreement and the Series 2011 Subordinate
Bonds may be limited by bankruptcy, insolvency, moratorium, reorganization or other laws
affecting creditors’ rights generally or as to the availability of any particular remedy.
In connection with the delivery of this opinion, we are not passing upon the
authorization, execution and delivery of the Loan Agreement by the City. We have assumed the
due authorization, execution and delivery of the Loan Agreement by the City.
Very truly yours,
D-7
[THIS PAGE INTENTIONALLY LEFT BLANK]
APPENDIX E
SPECIMEN MUNICIPAL BOND INSURANCE POLICY
[THIS PAGE INTENTIONALLY LEFT BLANK]
MUNICIPAL BOND
INSURANCE POLICY
ISSUER:
BONDS:
Policy No:
-N
Effective Date:
$ in aggregate principal amount of
Premium: $
ASSURED GUARANTY MUNICIPAL CORP. ("AGM"), for consideration received, hereby
UNCONDITIONALLY AND IRREVOCABLY agrees to pay to the trustee (the "Trustee") or paying agent (the
"Paying Agent") (as set forth in the documentation providing for the issuance of and securing the Bonds) for
the Bonds, for the benefit of the Owners or, at the election of AGM, directly to each Owner, subject only to
the terms of this Policy (which includes each endorsement hereto), that portion of the principal of and
interest on the Bonds that shall become Due for Payment but shall be unpaid by reason of Nonpayment by
the Issuer.
On the later of the day on which such principal and interest becomes Due for Payment or the
Business Day next following the Business Day on which AGM shall have received Notice of Nonpayment,
AGM will disburse to or for the benefit of each Owner of a Bond the face amount of principal of and interest
on the Bond that is then Due for Payment but is then unpaid by reason of Nonpayment by the Issuer, but
only upon receipt by AGM, in a form reasonably satisfactory to it, of (a) evidence of the Owner's right to
receive payment of the principal or interest then Due for Payment and (b) evidence, including any
appropriate instruments of assignment, that all of the Owner's rights with respect to payment of such
principal or interest that is Due for Payment shall thereupon vest in AGM. A Notice of Nonpayment will be
deemed received on a given Business Day if it is received prior to 1:00 p.m. (New York time) on such
Business Day; otherwise, it will be deemed received on the next Business Day. If any Notice of
Nonpayment received by AGM is incomplete, it shall be deemed not to have been received by AGM for
purposes of the preceding sentence and AGM shall promptly so advise the Trustee, Paying Agent or
Owner, as appropriate, who may submit an amended Notice of Nonpayment. Upon disbursement in
respect of a Bond, AGM shall become the owner of the Bond, any appurtenant coupon to the Bond or right
to receipt of payment of principal of or interest on the Bond and shall be fully subrogated to the rights of the
Owner, including the Owner's right to receive payments under the Bond, to the extent of any payment by
AGM hereunder. Payment by AGM to the Trustee or Paying Agent for the benefit of the Owners shall, to
the extent thereof, discharge the obligation of AGM under this Policy.
Except to the extent expressly modified by an endorsement hereto, the following terms shall have
the meanings specified for all purposes of this Policy. "Business Day" means any day other than (a) a
Saturday or Sunday or (b) a day on which banking institutions in the State of New York or the Insurer's
Fiscal Agent are authorized or required by law or executive order to remain closed. "Due for Payment"
means (a) when referring to the principal of a Bond, payable on the stated maturity date thereof or the date
on which the same shall have been duly called for mandatory sinking fund redemption and does not refer to
any earlier date on which payment is due by reason of call for redemption (other than by mandatory sinking
fund redemption), acceleration or other advancement of maturity unless AGM shall elect, in its sole
discretion, to pay such principal due upon such acceleration together with any accrued interest to the date
of acceleration and (b) when referring to interest on a Bond, payable on the stated date for payment of
interest. "Nonpayment" means, in respect of a Bond, the failure of the Issuer to have provided sufficient
funds to the Trustee or, if there is no Trustee, to the Paying Agent for payment in full of all principal and
interest that is Due for Payment on such Bond. "Nonpayment" shall also include, in respect of a Bond, any
payment of principal or interest that is Due for Payment made to an Owner by or on behalf of the Issuer
which
has
been
recovered
from
such
Owner
pursuant
to
the
E-1
Page 2 of 2
Policy No. -N
United States Bankruptcy Code by a trustee in bankruptcy in accordance with a final, nonappealable order
of a court having competent jurisdiction. "Notice" means telephonic or telecopied notice, subsequently
confirmed in a signed writing, or written notice by registered or certified mail, from an Owner, the Trustee or
the Paying Agent to AGM which notice shall specify (a) the person or entity making the claim, (b) the Policy
Number, (c) the claimed amount and (d) the date such claimed amount became Due for Payment. "Owner"
means, in respect of a Bond, the person or entity who, at the time of Nonpayment, is entitled under the
terms of such Bond to payment thereof, except that "Owner" shall not include the Issuer or any person or
entity whose direct or indirect obligation constitutes the underlying security for the Bonds.
AGM may appoint a fiscal agent (the "Insurer's Fiscal Agent") for purposes of this Policy by
giving written notice to the Trustee and the Paying Agent specifying the name and notice address of the
Insurer's Fiscal Agent. From and after the date of receipt of such notice by the Trustee and the Paying
Agent, (a) copies of all notices required to be delivered to AGM pursuant to this Policy shall be
simultaneously delivered to the Insurer's Fiscal Agent and to AGM and shall not be deemed received until
received by both and (b) all payments required to be made by AGM under this Policy may be made directly
by AGM or by the Insurer's Fiscal Agent on behalf of AGM. The Insurer's Fiscal Agent is the agent of AGM
only and the Insurer's Fiscal Agent shall in no event be liable to any Owner for any act of the Insurer's Fiscal
Agent or any failure of AGM to deposit or cause to be deposited sufficient funds to make payments due
under this Policy.
To the fullest extent permitted by applicable law, AGM agrees not to assert, and hereby waives,
only for the benefit of each Owner, all rights (whether by counterclaim, setoff or otherwise) and defenses
(including, without limitation, the defense of fraud), whether acquired by subrogation, assignment or
otherwise, to the extent that such rights and defenses may be available to AGM to avoid payment of its
obligations under this Policy in accordance with the express provisions of this Policy.
This Policy sets forth in full the undertaking of AGM, and shall not be modified, altered or
affected by any other agreement or instrument, including any modification or amendment thereto. Except to
the extent expressly modified by an endorsement hereto, (a) any premium paid in respect of this Policy is
nonrefundable for any reason whatsoever, including payment, or provision being made for payment, of the
Bonds prior to maturity and (b) this Policy may not be canceled or revoked. THIS POLICY IS NOT
COVERED BY THE PROPERTY/CASUALTY INSURANCE SECURITY FUND SPECIFIED IN ARTICLE 76
OF THE NEW YORK INSURANCE LAW.
In witness whereof, ASSURED GUARANTY MUNICIPAL CORP. has caused this Policy to be
executed on its behalf by its Authorized Officer.
ASSURED GUARANTY MUNICIPAL CORP.
By
Authorized Officer
Form 500NY (5/90)
E-2
Memphis Center City Revenue Finance Corporation • Revenue Bonds, Series 2011A, Series 2011B and Series 2011C (Pyramid and Pinch District Redevelopment Project)