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HomeMy WebLinkAbout08-10-1982 Industrial Development Corporation Board of Directors Meeting..s _ AGENDA LA PORTE INDUSTRIAL DEVELOPMENT CORPORATION WILL HOLD A MEETING TUESDAY, AUGUST 10, 1982, IN THE SECRETARY'S CONFERENCE ROOM AT CITY HALL, 604 WEST FAIRMONT PARKWAY, LA PORTE, TEXAS, BEGINNING AT 7:00 P.M. 1. CALL TO ORDER 2. CONSIDER APPLICATIONS RECEIVED FOR INDUSTRIAL DEVELOPMENT BONDS 3. ADJOURNMENT • ~ MI23UTE:i OH' SPECIAL riEETING OF T13E L~QARD OF DIRECTORS OF THE CITY OF LA PORTS INDUSTRIAL DEVELOPA'IENT CORPORATION The Board of Directors of the City of La Porte Industrial Development Corporation convened in special meeting at 7:00 P.M. on the 10th day of August, 1982, at La Porte, Texas, said meeting having been duly ca11E~r]. Present at the meeting were the following members of the Board of Directors; tr7. t;. Sf'RII~;CALL L il~ Ci~ttPTOII ~L`Z:~r;CF, S. D?;AklIP3G T1^i'~LAS F. LAZ'Trt R, JR. JOF:~1 .C.'. LO a4LI~:I with J. H. LONGNECKER and VIRGINIA CLINE absent, thus constitut- ing a majority and a quorum of the initial Board of Directors. Upon motion duly made, seconde~~ and carried by unanimous vote, the minutes of the Org<~nizational Meeting of the Bo~a~d of Directors of August 3, 1982, were approved as preselnted. ~\ Upon motion duly made, seconded and carried by unanimous vote, a form of Application for Financing, with related Industrial Development Bond Financing Questionnaire, as prepared by T~2r. Dan Lyons of the Houston law frim of Vinson & Elkins, in form as attached to these minutes, was duly approved. Upon motion duly made, seconded and carried by unanimous vote,., the fee .schedule, as set forth on Page 1 of the Application. for Financing, was duly approved. The Board of Directors next considered the application of Bayshore National Bank of La Porte, for financing. A .copy of said application is attached to these minutes and made a part hereof. A motion to table. the application, by .Lois Compton, failed for want of a second. .. ~ ~e Mr. John E. Courville, Vice Chairman and Chief Executive Officer of Bayshore National Bank of La Porte, was present at the meet- ing, to present the application for financing of Bayshore National Bank of La Porte. After extensive discussion, upon motion by .Douglas F. Latimer, Jr., seconded by John C. Longley, the. Agreement to Issue Bonds, in form attached hereto, was approved by a majority vote., with Diana S. Dearing, Douglas F. Latimer, Jr., and John C. Longley voting in favor, and W. R. Springall and Lois Compton voting against. Upon motion duly made, seconded and carried by unanimous vote, the Board of Directors designated- First City Bank of La Porte as the, Depository for corporate funds, with the stipulation that checks be signed by any two (2) of the three (3) officers of the Corporation. Ms. Bernice Youells was present, and advised the Board of her intentions to file an application for financing for Shangri-La Restaurant, to be located on New State Highway 146. Mrs. Youells was given an application form to complete and file, but no action was taken. The next. meeting of the Board of Directors a~as called for Tuesday, August 17, 1982, at which time rules and procedures of the Board are to be discussed. Upon motion duly made, seconded and carried by unanimous vote, the meeting was duly adjourned. Secretary APPROVED: President ~ ~ AGREEPIENT TO ISSUE BONDS THIS AGREEPiENT TO ISSUE BONDS, entered into as of the 10th day of August, 1982, by and between the City of La Porte Industrial Development Corporation (the "Corporation"), created pursuant to the authority of the Development Corporation Act of 1979, Article 5190.6, Vernon's Anno- tated Texas Civil Statutes, as amended (the "Act"), and Bayshore National Bank of La Porte, a national banking association (the "User"), for the purpose of carrying out the public purpose set forth in the Act, includ- ing the promotion and development of industrial, manufacturing and commercial enterprises to promote and encourage employment and the public welfare; WITNESSETH: WHEREAS, the City of La Porte, Texas (the "Unit"), has authorized and approved the creation of the Corporation to act on behalf of the Unit for the public purpose of furthering on behalf of the Unit the promotion and development of industrial, manufacturing and commercial enterprises to promote and encourage employment and the public welfare; and k'HEREAS, the Corporation is authorized by the Act to acquire, construct, improve, maintain, equip and furnish and to lease or sell "projects," as such term is defined in the Act, or to make loans for the purpose of providing financing for all or part of the costs of a project, and the Corporation is further authorized to issue its bonds for the purpose of paying all or part of the costs of a project; and k'HEREAS, the User desires to acquire and construct a facility, more particularly described in Exhibit "A" attached hereto, within the Unit (the "Project"), which Project is suitable for the promotion of commer- cial development and expansion, the promotion of employment in the Unit and for use by commercial enterprises; and k'HEREAS, pursuant to the Act, the Corporation is authorized to issue the bonds hereinafter described, which bonds shall never consti- tute an indebtedness or pledge of the faith and credit of the State of Texas (the "State"), of the Unit, or of any other political corporation, subdivision or agency of the State within the meaning of any State constitutional or statutory provision, shall never be paid in whole or in part out of any funds raised or to be raised by taxation or any other finds of the Unit, and shall never be paid in whole or in part out of any funds of the Corporation except those derived from or in connection with the sale or lease of the Project or the loan o= funds to finance the Project ; and • . WHEREAS, to promote and encourage employment and the public welfare, the Corporation agrees to issue, at the request of the User, one or more series of the Corporation's industrial development revenue bonds (the "Bonds") for the purpose of paying all or part of the cost of constructing and acquiring the Project, or for the purpose of loaning the proceeds to the User in order to provide temporary or permanent financing of all or part of the cost of constructing and acquiring the Project, and the Corporation and the User deem it desirable and proper that this Agreement to Issue Bonds constitute a formal record of such agreement and understanding in order that the User may proceed with or provide for the acquisition and construction of the Project; and WHEREAS, the User has evidenced a desire to cooperate with the Corporation in the acquisition and construction of the Project and for the Corporation to authorize and issue the Bonds in the aggregate prin- cipal amount now estimated not to exceed $2,750,000, to provide the funds to defray all or part of the cost of the acquisition and construc- tion of the Project; and k'HEREAS, the Corporation and the User contemplate that the Project will be sold on an installment payment basis or leased to the User or that proceeds of the Bonds will be loaned to the User in order to provide temporary or permanent financing of all or part of the costs of the Project and that the installment purchase, rental or loan payments. therefor will be sufficient to pay the principal of and any premium and interest on the Bonds; and WHEREAS, it is the desire of the Corporation that the acquisition and construction of the Project occur at the earliest possible time so as to promote and encourage employment and the public welfare within the Unit; and WHEREAS, it is intended that this Agreement to Issue Bonds shall constitute "some other similar official action" toward the issuance of the Bonds within the meaning of Section 1.103-8(a)(5) of the Treasury regulations issued pursuant to Section 103 (b) of the Internal Revenue Code of 1954, as amended (the "Code"); NOW, THEREFORE, in consideration of the premises and other good and valuable consideration and of the mutual benefits, covenants and agree- ments herein expressed, the Corporation and the User agree as follows: 1. The User shall commence with the acquisition and construction of_the Project, which Project will be in furtherance of the public purposes of the Corporation and the Unit as aforesaid, and the User will provide, or cause to be provided, at its expense, the necessary interim w -2- ~ ~ financing to expedite the commencement of the acquisition and construc- tion of the Project. On or prior to the issuance of the Bonds, the User will enter into a purchase, lease or loan agreement on an installment payment basis (herein called the."Agreement") with the Corporation under which the Corporation will sell or lease the Project to the User or make a loan to the User for the purpose of providing temporary or permanent financing of all or part of the costs of the Project and the User will make installment payments sufficient to pay the principal of and any premium and interest on such series of Bonds. The Bonds shall never constitute an indebtedness or pledge of the faith and credit of the State, of the Unit, or of any other political corporation, subdivision or agency of the State within the meaning of any State constitutional or statutory provision, and the Bonds shall never be paid in whole or in part out of any funds raised or to be raised by taxation or any other funds of the Unit, and shall be payable from the funds of the Corpor- ation derived from or in connection with the sale or lease of the Project or the loan of the proceeds of the Bonds. 2. On receipt of a ruling from the Internal Revenue Service (or the opinion of nationally recognized bond counsel) that interest paid on the Bonds is exempt from federal income taxation, the Corporation hereby agrees to issue, pursuant to the terms of the Act, the Bonds, or from time to time the portion thereof as may be the subject of such a ruling or opinion as aforesaid, in an appropriate principal amount not exceeding that which is the subject of a ruling or opinion as aforesaid, maturing in such amount and times, bearing interest at the rates, payable on the dates and having such optional and mandatory redemption features and prices as are approved in writing by the User. The Corporation will deliver the Bonds to the purchaser designated by the User and will cooperate to the fullest extent in facilitating delivery of the Bonds. 3. The Corporation and the User .agree that the Bonds may be issued either at one time or in several series from time to time as the User shall request in writing; provided, however, that the parties agree that the Bonds will be issued in an aggregate principal amount as will not exceed the amount which is the subject of a ruling or rulings or opinion or opinions as aforesaid. A request in writing for issuance of one or more series of Bonds shall not affect the obligation hereunder of the Corporation to issue the remaining Bonds as written requests therefor are received. It is further agreed that the proceeds of the Bonds or portions thereof whether or not issued in a series, shall not be invested so as to constitute the Bonds or a portion thereof as arbitrage bonds within the meaning of Section 103(c) of the Code and applicable regula- tions promulgated pursuant thereto. -3- • ~ 4. The payment of the principal of and any premium and interest on the Bonds shall be made solely from moneys realized from the sale or lease of the Project or from moneys realized from the loan of the proceeds of the Bonds to finance all or part of the costs of the Project. 5. The costs of the Project (hereinafter the "Project Costs") may include any cost of acquiring, constructing, reconstructing, improving and expanding the Project. Without limiting the generality of the foregoing, the Project Costs shall specifically include the cost of the acquisition of all land, rights-of-way, property rights, easements and interests, the cost of all machinery and equipment, financing charges, interest prior to and during construction and for one year after comple- tion of construction whether or not capitalized, necessary reserve funds, costs of estimates and of engineering and legal services, plans, specifications, surveys, estimates of cost and of revenue, other expenses necessary or incident to determining the feasibility and practicability of acquiring, constructing, reconstructing, improving and expanding the Project, administrative expenses and such other expenses as may be necessary or incident to the acquisition, construction, reconstruction, improvement and expansion of the Project, the placing of the Project in operation and all incidental expenses, costs and charges relating to the Project not enumerated above. The parties agree, upon request, to provide or to cause to be provided to each other any data or information which may be reasonably required to verify any of the Project Costs enumerated in this paragraph. The User agrees that it will be respon- sible for and pay any Project Costs incurred prior to issuance of the Bonds and will pay all Project Costs which are not or cannot be paid or reimbursed from the proceeds of the Bonds. 6. The User agrees that it will at all times indemnify and hold harmless the Corporation, the Board of Directors of the Corporation, the Unit, the City Council of the Unit and any of the officers, directors, employees, agents, servants and any other party acting for or on behalf of the Corporation or the Unit (such parties being hereinafter referred to as the "Indemnified Parties") against any and all losses, costs, damages, expenses and liabilities (collectively herein called "Losses") of whatsoever nature (including, but not limited to, attorneys' fees, litigation and court costs, amounts paid in settlement and amounts paid to discharge judgments) directly or indirectly resulting from, arising out of or relating to one or more Claims, as hereinafter defined, even if such Losses or Claims, or both, directly or indirectly result from, arise out of or relate to, or are asserted to have resulted from, arisen '~' out of or related to, in whole or in part, one or more negligent acts or omissions of the Indemnified Parties in connection with the issuance of the Bonds or in connection with the Project. The term "Claims" as used herein shall mean all claims, lawsuits, causes of action and other legal actions and proceedings of whatsoever nature, including but not limited -4- to claims, lawsuits, causes of action and other legal actions and proceedings, involving bodily or personal injury or death of any person or damage to any property (including, but not limited to, persons employed by the Corporation, the .Unit, the User or any other person and all property owned or claimed by the Corporation, the Unit, the User, any affiliate of the User or any other person) or involving damages relating to the issuance, offering, sale or delivery of the Bonds brought against any Indemnified Party or to which any Indemnified Party is a party, even if groundless, false'or fraudulent, that directly or indirectly result from, arise out of or relate to the issuance, offering, sale or delivery of the Bonds or the design, construction, installation, operation, use, occupancy, maintenance or ownership of the Project or any part thereof. The obligations of the User shall apply to all Losses or Claims, or both, that result from, arise out of or are related to any event, occurrence, condition or relationship prior to termination of this Agreement to Issue Bonds, whether such Losses or Claims, or both, are asserted prior to termination of this Agreement to Issue Bonds or thereafter. None of the Indemnified Parties shall be liable to the User for, and the User hereby releases each of them from all liability to the User for, all injuries, damages or destruction of all or any part or parts of any property owned or claimed by the User that directly or indirectly result from, arise out of or relate to the design, construc- tion, operation, use, occupancy, maintenance or ownership of the Project or any part thereof, even if such injuries, damages or destruction directly or indirectly result from, arise out of or relate to, in whole or in part, one or more negligent acts or omissions of the Indemnified Parties in connection with the issuance of the Bonds or in connection with the Project. Each Indemnified Party, as appropriate, shall reimburse the User for payments made by the User to the extent of any proceeds, net of all expenses of collection, actually received by them from any insurance with respect to the Loss sustained. Each Indemnified Party, as appropriate, shall have the duty to claim any such insurance proceeds and the Indemnified Party, as appropriate, shall assign its respective rights to such proceeds, to the extent of such required reimbursement, to the User. In case any action shall be brought or to the knowledge of any Indemnified Party, threatened against any of them in respect of which indemnity may be sought against the User, the Indemnified Party shall promptly notify the User in writing and the User shall have the right to assume the investigation and defense thereof, including the employment of counsel and the payment of all expenses. The Indemnified Party shall have the right to employ separate counsel in any such action and participate in the investigation and defense thereof, but the fees and expenses of such counsel shall be paid by the Indem- nified Party unless (a) the employment of such counsel has been speci- fically authorized by the User, in writing, (b) the User has failed to assume the defense and to employ counsel or (c) the named parties to any such action (including any impleaded parties) include both an Indem- nified Party and the User, and said Indemnified Party shall have been -5- • • advised by such counsel that there may be one or more legal defenses available~to it which are different from or additional to those avail- able. to the User (in which case, if the Indemnified Party notifies the User in writing that it elects to employ separate counsel at the User's expense, the User shall not have the right to assume the defense of such action on behalf of such Indemnified Party, it being understood, however, that the User shall not, in connection with any one such action or separate but substantially similar or related actions in the same juris- diction arising out of the same general allegations or circumstances, be -liable for the reasonable fees and expenses of more than one separate firm of attorneys for the Indemnified Parties [provided that any Indemnified Party which has been advised by counsel that there may be one or more legal defenses available to it which are different from or additional to those available to any other Indemnified Party shall have the right to employ separate counsel whose fees and expenses shall be paid by the User], which firm shall be designated in writing by said Indemnified Party). The Indemnified Party, as a condition of such indemnity, shall use its best efforts to cooperate with the User in the defense of any such action or claim. The User. shall not be liable for any settlement of any such action without its consent but, if any such action is settled with the consent of the User or if there be final judgment for the plaintiff in such action, the User agrees to indemnify and hold harmless the Indemnified Party from and against any Loss by reason of such settlement or judgment. The provisions of this paragraph shall survive the expiration or termination of this Agreement to Issue Bonds. 7. If within three (3) years from the date hereof (or such later date as shall be mutually satisfactory to the Corporation and the User) the Corporation and the User shall not have agreed to mutually accept- able terms for the Bonds and for the sale and delivery thereof and mutually acceptable terms and conditions of the Agreement, the User agrees that it will pay the Corporation for all unpaid Project Costs which the Corporation shall have incurred and this Agreement to Issue Bonds shall thereupon terminate. In the event that the User elects, prior to any such termination, not to proceed with the issuance of the Bonds for any reason, it shall so notify the Corporation in writing and shall promptly pay to the Corporation all Project Costs incurred by the Corporation prior to such notification, and if payment is so made, the User's obligations under paragraph 5 above shall terminate from and after the date of such notification. 8. The User may, without the consent of the Corporation, transfer or_assign this Agreement to Issue Bonds or transfer or assign any or all of its rights and delegate any or all of its duties hereu_zder to any of its subsidiaries or affiliates currently existing or hereafter created, -6- but no such transfer, assignment or delegation shall, without the written consent and approval of the Corporation, relieve the User of its liabil- ity for payment of Project Costs under paragraphs 5 and 7 hereof or indemnification under paragraph 6. hereof. This Agreement to Issue Bonds and accompanying authorizing reso- lution shall be deemed and construed a resolution authorizing the issuance the Bonds and other similar official action of the Corporation, acting by and through its Board of Directors, toward the issuance of the Bonds as herein contemplated. IN WITNESS WHEREOF, the City of La Porte Industrial Development Corporation, acting pursuant to a resolution of its Board of Directors, and Bayshore National Bank of La Porte, have caused this Agreement to Issue Bonds to be executed and attested by their duly authorized officers as of the year and date first above written. CITY OF LA PORTS INDUSTRIAL DEVELOPPIENT CORPORATION By ATTEST Secretary (SEAL) ATTEST: Cashier (SEAL) President BAYSHORE NATIONAL BANK OF LA PORTS By -7- President _~'~ ~ i ~ EXHIBIT "A" The project to be financed with the proceeds of the Bonds (the "Project") is a new 24,000 square foot main banking quarters for Bayshore National Bank of La Porte, together with a 2,700 square foot drive-in facility with fifteen (15) pneu- matic drive-in lanes and one (1) drive-up automated teller position. The main banking house will be located at the intersection of State Highway 146 and West Fairmont Parkway, and the drive-in facility and automated teller position will be located at the intersection of South 8th Street and West Fairmont Parkway, all in the City of La Porte, Harris County, Texas. The Project will include associated driveways and parking facilities at both installations, security devices, vault and teller equipment, data communications equipment, data records facilities, telephone equipment, signs, landscaping, and var- ious other items of equipment, furnishings and improvements that are functionally related to and subordinate to the foregoing described banking facilities. -a,.,..- •, •- • INDUSTRIAL DEVELOPMENT BOND FINANCING - QUESTIONNAIRE 1. A. Name, address and employer identification number of the entity _~ the ~~rriiicipal user" ) that will purchase or lease the Project to be. acquired or constructed with the proceeds of the bonds. B. Form of organization of Principal User (check one): - C corporation partnership sole proprietorship 2. List the name and address of any entity which, actually or constructively, is owned more than 50% by the Princi- pal User. In addition, list the name and address o-f-~any person and entity which, actually or constructively, owns more than 50% of the Principal User. List all Pther entities in which such "more than 50%" owner actually or constructively has a greater than 50% interest and all family members (i.e., brothers and sisters, husband and wife, ancestors and lineal - descendants) of such."more than 50%" owner. If the Principal User is not a partnership, list any partner- ship in which such "more than 50%" owner has any actual or constructive interest. If the Principal User is a partnership, list the name and address of all the part- ners. List all .other entities in which any partner in the Principal User has a greater than 50% actual or constructive interest and all family members (as des- cribed above) of any partner. (The person and entities required to be lasted should be considered "Related Persons" to the Principal''User for purposes of this questionnaire.) - • 3. Location of project: Incorporated Address Municipality Township if any County The Incorporated Municipality or the County (if the Project is in an unicorporated area) in which the Project is located will be referred to as the "Politi- - cal Jurisdiction." Please indicate whether the Project site is, (a) entirely within an incorporated municipality, (b) entirely within the unicorporate-d area_of the county or (c) partially in each. If there is any _ question-as to the location of the.-Project site, please so indicate. _ 4. Provide the following information regarding previous - tax-exempt financing used to finance the Project or any other facilities used by the Prr~.cipal User or Related Persons wholly or partly within=the Political Jurisdiction. ~- - Amount Outstanding - Amount-of _ as of Estimated Date Date of Issue Issue `~ of Issue of the Bonds 4a. Please list all tax-exempt financings in the past year and all tax-exempt financings currently being considered in which the Comp any has or will be a user of the facili- ties being financed with bond proceeds. 5. Is the Project Site part of an industrial park that has been financed with tax exempt bonds? T 6. Were or will any of the utilities for the Project site (gas, electricity, water, sewage, telephone) be provided by a public utility or a State or local government unit?- Aow will they be paid for by the Principal User? J ~ ~ 7. Is the Project site owned or leased by the Principal User? A. If owned: hate of option contract Amount of option payment _ • Date of purchase (i.e., closing date) Purchased from Purchase price Amount of mortgage Mortgagee - - B. If leased: _ - _ Lessor . Date of lease - - ~ Terms - _ Is there an option to purchase? - C. If Principal User does not now own the Project Site, but has an option to purchase the site, please state: ~'- -- ~ Date option agreement signed _ with owner ~ -.-r.- Amount of downpayment or option payment Purchase price Estimated purchase date (i.e., closing date) D. Will all of the property purchased or leased be used for the project? If not, give number of acres that will be used for Project Is there any relationship legally or by virtue of common control - between the Principal User and the seller of the Project Site? 7 - 8. Describe the Project. (Number and size of buildings, equipment, expected use, etc.) -3- ~ ~ 9. What is the expected date of issuance of the bonds? 10. Expected use of bond proceeds: Paid or incurred Paid or incurz prior to expected after expectec -_ issue Sate cf issue date of Item Bonds Bonds Engineering $ $ Architecture Building(s) Machinery and Equipment Land Acquisition (including legal and title fees) Site Improvement - Capitalizeable interest and taxes _ _ Issuance expenses Underwriter's discount or placement agent's fees - TOTAL - _ _ 11. Will any of the bond proceeds be used for other than the acquisition, construction, reconstruction or imp=ovement of land or depreciable property? [Acquisi- tion, construction, reconstruction or improvement of land or depreciable property includes, among others, the following: (a) modifying and installing equipment moved from another location and (b} the acquisition of stock of a corporation if the corporation is liquidated and the tax basis of the corporation's assets is stepped up to the acquirer's basis in the stock under IRC § 334(b)(2). Representative examples of the use of bond proceeds for other than the acquisition, con- struction, reconstruction or improvement of land or depreciable property include, among others, the following: (a) financing working capital or inventory; (b) refinancing an existing mortgage ar outstanding loan; or (c) moving of existing equipment from one of the Principal User's (or Related Person's) other facilities to the Project.] _ _a_ 12. Items List actual and reasonably tures (not including those the bond proceeds) paid or respect to the Project. (~ whether or not made by the Person, must be included.) expected capital expendi- expenditures funded out of incurred by anyone with X11 capital expenditures, Principal User or a Related Paid or Incurred in Three Years Prior to Date of Issue of Bonds Organizational Expenditures Engineering Architecture Research and _ Development - Building(s) Machinery and Equipment Land (including legal and title fees) Site Improvement Capitalizeable Interest and _ Taxes _ Bond Issuance Expenses Underwriter's Discount or Placement Agent's Fee Other Total Paid or Incurred in Three Years After and Including Date of Issue of Bonds Expenditures are capital expenditures if they are properly chargeable to the capital account or may be capitalized under any provision of the Internal Revenue Code. Attached as Exhibit "A" is a memorandum which sets out examples of capital and non-capital expendi- tures. 13. What capital expenditures (other than those for the Project as listed in Paragraph 10 and 12 or those financed with bonds listed in Question 4) have been or -~- will be paid or incurred within the 6 year period described in Question 12 within the Political - - Jurisdiction for property used in connection with other facilities to be used by the Principal User or a ...Related Person? [All capital expenditures, whether or not made by the .Principal User or a Related Person, _ must be included (e.g., if the Principal User or a - related person leases space in another building within the Political Jurisdiction, any capital expenditures by the lessor for the leased property made or to be made within the 6-year period must be included).] 14. A. If any equipment or other facilities to be used in - - connection with tY3e Project will be leased, please describe such items. Also, describe the lease _ terms and include a copy of the existing or proposed lease if available. _" B. If any equipment will be moved from another _ location, please describe. ~- 15. Type of _ work - Date Begun - ., Site Clearance Foundation Buildings 16. On what date was official action taken by the Develop- . ment Corporation that will issue the bonds? 17. What costs have been paid or incurred on the Project prior to the date in 16. above? Please state to whom such expenditures where made and the purpose of such expenditures. _ 18. On what date were contracts entered into for fabrica- tion of major-components of the Project or for con- struction of the building(s) for the Project? -F- On what date did fabrication, manufacturing or construc-. tion begin? 19. If any part of the Project will be leased to other than the Principal User, please indicate: (a) total square footage of Project: (b) Amount to be leased to each tenant (if more than 10% in space or in value). 20. A. On what date will the development and construction _ work with respect to the real property in connec- tion with the Project be completed? - - - B. On what date will the personal property in connec- tion with the Project be installed or .first put into use by the Principal _User, whichever is - 1 ater . - 4/81 7 Exhibit A Treas. Reg. §1.103-10(b)(2)(ii)(e) Capital Expenditures "Section 103(b)(6)(D) capital expenditures" are defined in Treas. Reg. §1.103-10{b)(2)(ii). That regulation. states for an expenditure to be a "Section 103(b}(6)(D) capi- tal expenditure', inter alia, it must be properly chargeable to the capital account wz hout regard to any rule of the Internal Revenue Code which permits the expenditure to be treated as a current expense or it must be able to be capi- talized under any rule or ele tlon under the Code. The following are representative examples of ex- penditures which, within the meaning of Treas. Reg. §1.103- 10(b)(2)(ii)(e), are properly chargeable to the capital account or may be capitalized under the Code: 1. Costs allocable-to the acquisition, construction, or erection of buildings, machinery and equipment, furni- ture and fixtures, and similar property having a useful life substantially beyond the taxable year. See Treas. Reg. §1.263(a)-2(a). See also Addressogra~h-Multigraph Corp., 4 T.C.M. 147 (1945) (legal fees paid to acquire assets in a reorganization must be capitalized); Missis- sippi Valley Trust Co. v. U.S., 61 F.Supp. 451 (E.D. Mo. 19x5), rev'd on other issues sub nom. Bueltermarn v. U.S., 155 F.2d 597 (8th Cir. 1946) (appraisal costs paid for possession of premises must be capitalized); Southeastern Express Co., 19 B.T.A. 490 (1930), acQ. as to issue 1, X-1 C.B. 61 (1931) (one-half of corporate general coun- sel's salary representing time spent in connection with organization of a corporation must. be capitalized}. 2. Interest on a construction loan, interest on a loan to purchase real property, interest on a loan to purchase, transport, or install personal property, and interest on a mortgage of unimproved and unproductive real pro- perty and other items (including certain taxes and insurance payments) permitted to be capitalized under Section 266 of the Code:and the regulations thereunder, even though deducted as expenses on principal user's tax return. Rev: Rut. 75-185, 1975-1 C.B. 43; Rev. Rul. 77-262, 1977-2 C.B. 41 (amount of capital expendi- tares not offset by income from investing proceeds during the temporary period). See also Treas. Reg. §1.266-1(b)(1)(iv) (taxpayer permitted to capitalize "any other taxes and carrying charges with respect -to property, which in the opinion of the Commissioner, are, under sound accounting principles, chargeable to capital account"). 3. Issuance costs (underwriting fees, legal fees, printing costs, etc.); but, of course, only if paid other than out of~the bond proceeds. Rev. Rul. 77-234, 1977-2 C.B. 39.~ 4. Asnounts~ expended for securing a copyright and plates that remain the property of the person making the pay- ments. See Treas. Reg. §1.263(x)-2_(b). 5. Cost of defending or-perfecting title to property. See Treas. Reg. §1-263(x)-2(c). 6. Amounts expended for architect's services. See Treas. . Reg. §1.263(x)-2(d). ~ - 7. A corporation's cash acquisitiog of stock of another corporation followed by a liqu3 elation of the acquired corporation to which Section 334(b)(2) of the Code ap- plies is in substance an .acquisition of underlying as- sets, and, therefore is a capi~i expenditure with re- spect to the acquired corporation's facilities to--th~ extent of the percentage of the corporation's fixed assets located in the county (or incorporated munici- pality). The capital expenditure, however, is reduced by the amount expended by the acquired corporation from proceeds of xn outstanding prior small issue for depre- ciable tangible assets located in the county (or incor- porated municipality). LTR 7916021. 8. Commissions paid in purchasing stock as described in "5." above. See Trexs. Reg. §1.263(x)-2(e). 9. Cost of goodwill or a covenant not to compete in con- nection with the acquisition of the assets of a going concern. Rev, Rul. 81-56, 1981-8 I.R.B. 7; Rev. Rul. 81-55, 1981-8 I.R.B. 6. See Treas. Reg. §1.263(x)-2(h) 10. Trademark and tradename expenditures even though amor- tizable under Section 177 of the Code. 11. Cost of railroad rolling stock even if amortizable under Section 184 of the Code. 12. Advertising costs which result in the acquisition of an asset having a useful life substantially beyond the taxable year. See A. V. Simonson, 5 T.C.M. 718 (19x6) (cost of a promotional film not currently deductible). 13. Cost of trucks based at a trucking terminal facility with respect to the terminal facility. Treas. Reg. § 1.103-10~(f), Example (11). Compare Rev. Rul. 80-12 (expenditures for trucks are not capital expenditures because they are not allocable to any specific facil- ity). 14. Expenditures for equipment or machinery which is moved into the county or municipality within three years of the bond-issue; however, -only if the expenditures for the equipment are made within the six-year period. Treas. Reg. §1.103-10(f), Example (l2}. 15. Cost of molds used to manufacture custom plastic pro- ducts wits respect to the manufacturing facility, re- gardless of whether the manufa~t~urer or the customers take title to the molds, if the molds have a useful life substantially beyond the end of the taxable year. Rev. Rul. 77-224, 1977-1 C.B. 25~: 16. If the principal user of a facility orders equipment for~the facility from a manufacturer, expenditures paid or incurred by the manufacturer are considered to have been incurred concurrently by the principal user. The amount which must be taken into account as a capital expenditure is determined by multiplying (a) the total purchase price payable for the equipment by the prin- cipal user times (b} the percentage of the manufactur- er's total expenditures paid within three years of the bond issue. Rev. Rul. 78-347, 1978-2 C.B. 101. See also Rev. Rul. 74-485, 1974-2 C.B. 32 (capital expendi- tures by construction contractor attributed to prospec- tive owner of building). Note that merely placing the purchase order or entering the construction contract does not incur any capital expenditure by itself. _ - 1 17. Cost of timber incurred under a pay-as-cut timber con- tract when the timber is cut. Rev. Rul. 76-132, 1976-1 C.B. 16. :.~ ,~ +~ i 18. Cost of mobile buildings for use as temporary offices even though the mobile buildings later are sold to un- - - related parties. Rev. Rul. 75-208, 1975-1 C.B. 46~. 19. Research and experimental. expenditures (including com- puter software,.Rev. Proc. 69-21, 1969-2 C.B. 303) allo- cable to facilities where mar_•.:fact•.:ring will occur even though deducted as expenses. Rev. Rul. 77-27, 1977-1 C.B. 23; LTR 8052071. See Rev. R•sl. 77-253, 1977-2 C.B. 40~._ See also IrTR 8042136 (definition of research and experimental expenditures). 20. Circulation expenditures even though deductible under Section 173 of the Code. 21. Intangible drilling costs even though deductible under Section 263(c) of the Code. 22. Cost~of property obtained under a lease which is treated as a sale for federal income tax-purposes. Treas. Reg. - §1.103-10(b)(iii); Treas. Reg. §2.103-10(f) Example 13. - -~ 23`. Assumption of liabilities in cor~necti on with the pur- chase of property. See Crane'v:- Commissioner, 331 U.S. 1 (1947). - 24. Organizatior_ expenditures of a -corporation or a p~rt_ nership, even though amortized under Sections 248 or 709, respectively, of the Code. But see LTR 8014111 (organization expenditures not papa or incurred with respect to facilities in the city in which the financed facility is located and, therefore, not Section 103(b) (6)(D) capital expenditures). 25. Interest prepayments of a cash (or accrual) basis tax- payer. See IRC §461(g). 26. In the case of an individual (including a partner), a subchapter S corporation or a personal holding company, real property and construction period interest and taxes required to be capitalized under Section 189 of the Code. 27. Cost of real property including water rights, ease- ments (see Rev. Rul. 80-100, 1980-1 C.B. 25} and the net cost of demolition of an existing building (LTR 8024079). - 28. Origination fee in connection wi~~.h a lease. - - 29. Fair market value of property given up in Section 1031 like-kind exchange. 30. Expenditures to retire a portion of a prior exempt - small issue; however, only to the extent pai d or in- - curred within the six-year period. Treas. Reg. §1.103-10(f) Example 10; Rev. Rul. 76-98, 1976-1 C.B. 31. The following are representative examples of ex- _~' penditures which are not "Section 103(b)(6)(D) capital ex- penditures": - - 1. Administrative costs, overhead, and wages-(unless allo- cable to the acc_ruisition, construction, or erection of - _ _ property riescribed in "1. ~' above) : 2. Cost of incidental repairs or mzintenance. See Treas. - Reg. §1:263(a)-1(b). ~ - - -~ 3.' Cost of property which would p_r©perly be included in - inventory if on hand at the erid~of L~he taxable year [i:e., direct inventory costs]. LTR 8015025. See IRC §§1221(1}, 1231(-b)(1)(A).- - 4. Purchase of cash, accounts receivable and prepaid expenses. LTR 8015025. 5. host of property held primarily for sale tc customers in the ordinary course of a trade or business if not used in the trade or business until sold. See IRC §§1221{1), 1231(b)(I)(B); Rev. Rul. 62-141, 1962-2 C.B. 182. 6. Cost of supplies (defined as property which does not have a useT•11 life substantially beyond the taxable year when ac ~:ired). 7. Periodic rent payments under a true lease for federal income tax purposes (Rev. Rul. 77-353, 1977-2 C.B. 44); but lessor's expenditures for the leased item are capi- tal expenditures' if made within the six-year period unless the leased-item is described in "7." below. 8. Cost to the lessor of personal property leased under a . true lease for federal income tax purposes either from the manufacturer or from a person in the trade or'busi- ness of leasing similar property provided, pursuant to general business practice,. property of this type ordi- narily is the subject of a lease. Treas. Re.g. §1.103- 10(b) (2) (iv) (b),•- LTR 7925037. Eowever, if ,~ c rrin- cipal user of a facility purchases the personal prop- erty within three years of the bond issue, sells it to a leasing company, and re-leases it, a capital expendi- ture was incurred on the occasion of the purchase in the amount thereof regardless of the subsequent sale ~' and re-lease. Rev. Rul. 79-2x8, 1979-3x I.R.B. 5. But see Rev. Rul. 80-162, 1980-25 I.R.B. 5 (no actual pur- chase even though purchase order submitted and down payment made). In addition, expenditures by the ground lessor with respect to the facility on the leased ground are capital expenditures;-but, of course, only if made within three years of the date of the bond issue. LTR 783301x; LTR 7951067; LTR 8011062. 9. Issuance of stock or securities=for property in a tax- _ ~ free incorporation or other exchange under Section 351(x) of the Code. Treas. Reg:~§1.103-10(b)(2)(v)(c). If Section 351(x) applies to a transfer during the 6- year period surrounding the date of issue, and if, with respect to the property transferred, expenditures made within such period would have been Section 103(b)(6}(D) capital expenditures if the transferor and the trans- feree corporation had been related persons for such period, then such expenditures shall be considered to be Section 103(b)(6)(D) capital expenditures made by the transferee corporation. In addition, if a trans- feror and transferee are related persons immediately following such transfer, such transferor and transferee shall also be treated as having been related persons for the portion of such 6-year period preceding the date of such transfer. Treas. Reg. §1.103-10(b)(2) (v)(d). Furthermore, the purchase by the shareholder or security holder of such property is a capital expen- diture if made within the 6-year period. 10. Exchange of consideration for assets in a tax-free re- organization or liquidation which qualifies under Sec- tion 381(x) of the Code (relating to carryover of tax attributes); but the transferor and transferee are treated as related throughout the portion of the six- year period preceding the date of exchange. Treas. Reg. §1.103-10(b)(2)(v)(a), (b); Treas. Reg. §1.103-103- 10(f) Example 17 ("A" reorganization with boot). 11. .Exchange of stock in a tax-free "B" reorganization; but the parent and subsidiary are treated as related through- out the six-year period. Rev. Rul. 75-411, 1975-2 C.'3. 41. 12. A corporation's cash purchase of 100 percent of the stock of another corporation (which later finances a facility with tax-exempt bonds) which will not be liqui- dated within two years, but which will be operated as an autonomous subsidiary of the acquiring corporation. The corporations will, however, be_treated as related parties throughout the-six-year period at least if they are related on the date of the issue. LTR 8008136. 13. Issuance of a partnership interest .in tax-free exchange under Section 721 of the Code for property, at least where the partner purchased the: property more than 3 years before the- issuance of the bonds. Rev. Rul. 77-146, 1977-1 C.B. 24. ~_ la. If the present owner purchased the facility within the six-year period; the purchase price is a capital ex- penditure, but the prior owner'-s'capital expenditures with respec~ to the facility may be disregarded to the extent they are reflected in the purchase price. Rev. Rul: 76-427, 1976-2 C.B. 28. See LTR 8011062. 15. Cost to replace property damaged or destroyed by fire, storm, or other casualty to the extent not in excess of the fair- market value (determined immediately before the casualty) of the property replaced. Treas. Reg. §1.103-10(b)(2)(iv)(c). 16. Expenditures yv a Section 501(c)(3) charitable organiza- tion for cza_ i table activities are not Section 103 (b ) (b)(D) capital expenditures for purposes of a related person's small issue financing of an unrelated facility. Rev. Rul. 74-289, 1974-1 C.B. 32. See LTR 8011062. 17. Expenditures by ~ political sub division paid or incurred in carrying out its statutory purposes are not Section 103(b)(6)(D) capital expenditures for purposes of a small issue financing of an unrelated facility. LTR 8012090. ..:. , ! ~ 18. Expenditures by a public utility which is not the prin-. cipal user of the bond-financed facility with respect to property of such comp any or by a State or local gov- ernmental unit with respect to the property of such unit,.if the following .conditions are met: (i) Such property is used to provide gas, water, sewage disposal J~a vices, electric energy, or telephone services; (ii) such property, though installed in or connected to the facility, is not an integral part of the facility such that the cost of such property is ordinarily included . as part of the acq~.:isition, construction, or reconstruc- ._ tion cost of such facility; and (iii) such property is of a type normally paid for in the form of periodic fees based upon time or use. Treas Reg. §1.103-10(b) (2)(iv)(a). _ 19. Cost of moving ecruipment or machinery (including . removal and installation costs?) except for taxes and carrying charges which may be capitalized under Section 266 of the Code. See Eastern Shoe Manufacturing Co. 8 B.T.P.. 1169 (1927), acct., VII-ILC.B. 9; Addressograph- rlultigranh Corn. ,- 4 T.C.M. 147 _(1945) . 20. Theoretical interest of a taxpayer_ using his own funds. See Treas. Reg. -§1.266-1(b)(1)(iv). 5/81