NEW ISSUE – BOOK-ENTRY-ONLY FORM S&P Rating: “BBB-” In the opinion of Climaco, Wilcox, Peca, Tarantino & Garofoli Co., L.P.A., Bond Counsel, and Wilkerson & Associates Co., LPA, as Co-Bond Counsel, under existing law, assuming continuing compliance with certain covenants and the accuracy of certain representations, interest on the Series 2010B Bonds is excluded from gross income for federal income tax purposes, except for interest on any Series 2010B Bond for any period during which it is held by a “substantial user” of the facilities financed with the proceeds of such Series 2010B Bonds or a “related person” of such “substantial user,” as such quoted terms are defined for purposes of Section 147(a) of the Internal Revenue Code of 1986, as amended (the Code), and is not treated as an item of tax preference for purposes of the alternative minimum tax imposed on individuals and corporations under the Code. The Series 2010B Bonds are “private activity bonds” and constitute Recovery Zone Facility Bonds within the meaning of the Code. Interest on, any transfer of and any profit made on the sale, exchange, transfer, or other disposition of the Series 2010B Bonds are exempt from the Ohio personal income tax, the Ohio Commercial Activity Tax, the net income base of the Ohio corporation franchise tax and municipal and school district income taxes in Ohio. See “TAX MATTERS” herein. OFFICIAL STATEMENT $8,800,000 CLEVELAND-CUYAHOGA COUNTY PORT AUTHORITY Development Revenue Bonds (Port of Cleveland Bond Fund) Series 2010B (City of Cleveland – Flats East Development Project) (Tax-Exempt Recovery Zone Facility Bonds) Dated: Date of Delivery Interest Rate: 7.000% Per Annum Yield: 7.000% Price: 100% CUSIP: 186103 FV4 Due: May 15, 2040 The bonds offered hereby (the “Series 2010B Bonds”) are being issued by the Cleveland-Cuyahoga County Port Authority (the “Authority”) to provide funds to pay a portion of the costs of constructing, installing, improving, and equipping an approximately 476,000 square foot, 18-story office tower (the “Series 2010B Project”) situated on an approximately 3-acre site (the “Series 2010B Project Site”) to be owned in part by the Authority, and located on the banks of the Cuyahoga River in the downtown area of the City of Cleveland, Ohio (the “City” and the “Series 2010B Contracting Party”). Pursuant to a Cooperative Agreement (as defined herein), a Lease (as defined herein), and a Construction Agency Agreement (as defined herein), Flats East Development LLC, an Ohio limited liability company (“Flats East”), and FED/Main Street LLC, an Ohio limited liability company (“FED/Main Street,” and together with Flats East, the “Developer”) and Flats East Office LLC (“Lessee”) will construct, install, improve, and equip the Series 2010B Project, including private and related improvements thereto. In order to provide a portion of the funds necessary to finance the Series 2010B Project, (i) the Summit County Port Authority will issue $4,700,000 in aggregate principal amount of its Bond Fund Program Tax-Exempt Recovery Zone Facility Revenue Bonds, Series 2010B (City of Cleveland – Flats East Development Project) (the “Summit Port Bonds”), and (ii) the Director of Development of the State of Ohio (the “Director”) will, on behalf of the State of Ohio (the “State”) make a loan to the Authority in the principal amount of $15,000,000 from the proceeds of $15,000,000 in aggregate principal amount of State Economic Development Revenue Bonds (Ohio Enterprise Bond Fund) Series 2010-12 (Flats East Development LLC Project) (Tax-Exempt Recovery Zone Facility Bonds) (the “OEBF Bonds”). Debt service charges and administrative amounts due on the Series 2010B Bonds, the Summit Port Bonds, and the OEBF Bonds will be secured on a parity basis by service payments in lieu of taxes (“Service Payments”) and certain Minimum Payments (as defined herein) paid by the Developer, as initial owner of the Series 2010B Project Site and certain real property in the vicinity of the Series 2010B Project Site (collectively, the “TIF District”). The Developer will (i) execute, deliver, and record a Mortgage and Declaration of Covenants and Conditions Relative to Service Payments In Lieu of Taxes (the “Declaration”) on the TIF District to secure its obligations to pay Service Payments and Minimum Payments on the TIF District, and (ii) execute and deliver an unconditional cognovit guaranty (the “Guaranty”) to the Authority and the Trustee (as defined herein) to guarantee its obligations to complete construction of the Series 2010B Project. Scott A. Wolstein, Iris S. Wolstein, and the Iris S. Wolstein Trust (collectively, the “Individual Guarantors”) will execute and deliver a guaranty (the “Individual Guaranty”) guaranteeing the obligations of the Developer to, among other things, (i) complete environmental remediation of the TIF District, and (ii) make scheduled escrow payments to the Trustee each month to be applied toward the payment of Service Payments and Minimum Payments due on the TIF District, subject to certain release provisions described herein. Gilbane Building Company (the “Contractor”), a Rhode Island corporation, as construction manager for the Developer for the construction of the Series 2010B Project, will execute and deliver a design build guaranteed maximum price contract (the “Construction Contract”) requiring the Contractor to complete construction on the Series 2010B Project in accordance with the construction plans and specifications for the Series 2010B Project at a specified cost. See “THE FINANCED PROJECT” herein. The Series 2010B Bonds are not general obligations and are not secured by the full faith and credit or taxing power nor are they payable from any of the general funds or the assets of the Authority, the Series 2010B Contracting Party, the County of Cuyahoga or any other governmental authority or political subdivision, and are payable solely from funds pledged to secure the Series 2010B Bonds pursuant to the Indenture identified herein, including amounts available under the Program Reserve Letter of Credit identified herein, the Authority’s interest in the Collateral, as identified herein, or its interest in or obligations under the Agreements described herein. The Series 2010B Bonds are authorized under a supplemental indenture, which supplements the Basic Indenture described herein between the Authority and The Huntington National Bank, a national banking association with its principal corporate trust office in Cleveland, Ohio (together with its successors, the “Trustee”). The Basic Indenture, as supplemented and amended from time to time (the “Indenture”), secures the payment of principal, premium and interest (“Bond Service Charges”) with respect to the Series 2010B Bonds and all other Common Fund Bonds. See “ISSUANCE OF ADDITIONAL COMMON FUND BONDS” herein. Proceeds of Common Fund Bonds may be used by the Authority for its own purposes or made available to others (Contracting Parties) pursuant to agreements (Agreements) for authorized purposes, including industry, commerce, distribution, research, and economic development. As used herein, unless the context otherwise requires, the term Contracting Parties includes the Authority, and the term Agreements includes the applicable supplemental indentures for those series of Common Fund Bonds the proceeds of which are used by the Authority for its own purposes or under which the Authority is obligated to make Financing Payments. See “THE FINANCING PROGRAM” herein. The Series 2010B Bonds are payable on an equal and parity basis with all other common fund bonds heretofore and hereafter issued by the Authority pursuant to the Indenture, as defined below (collectively, the Series 2010B Bonds and all such other bonds being referred to as “Common Fund Bonds”), from amounts held under the Indenture for the payment of all Common Fund Bonds, including (1) payments under Agreements from Contracting Parties pledged to the payment of all Common Fund Bonds, (2) amounts deposited in the Primary Reserve Fund in connection with the issuance of the Series 2010B Bonds, (3) amounts on deposit in the Program Development Fund, (4) amounts on deposit in the Program Reserve Fund including amounts available under the Program Reserve Letter of Credit, as hereinafter described, currently expiring on March 1, 2020 (and subject to possible two-year extensions) issued by Fifth Third Bank, (5) proceeds of any collateral (“Collateral”) pledged to secure payments required under any Agreement for payment of all Common Fund Bonds, (6) amounts deposited in the Primary Reserve Fund in connection with the issuance of each remaining series of Common Fund Bonds (on a pro rata basis), (7) certain earnings on the foregoing, and (8) any other amounts pledged under the Indenture or otherwise to secure payment of all Common Fund Bonds. See “SECURITY AND FLOW OF FUNDS” herein. The Series 2010B Bonds will be issued as fully registered bonds initially in denominations of $5,000 or any integral multiple of $5,000 in excess thereof. The Series 2010B Bonds will be issuable under a book-entry-only method and registered in the name of The Depository Trust Company (“DTC”) or its nominee. There will be no physical delivery of the Series 2010B Bonds to the ultimate purchasers thereof. See “BOOK-ENTRY-ONLY SYSTEM” herein. Principal of the Series 2010B Bonds is payable at the designated corporate trust agency office of the Trustee, in Cleveland, Ohio. Interest on the Series 2010B Bonds is payable May 15 and November 15 of each year (the “Interest Payment Dates”), commencing on May 15, 2011. Interest will be payable by check or draft of the Trustee mailed on the Interest Payment Date to persons shown as the registered owners of the Series 2010B Bonds on the first day of the month in which each Interest Payment Date occurs (or any other special record date established pursuant to the Indenture in the event of a payment default); provided that Holders of at least $1,000,000 in principal amount of Series 2010B Bonds may direct payment by wire transfer. The Series 2010B Bonds will be subject to redemption prior to maturity as more fully described under “THE OFFERED BONDS – Redemption Prior to Maturity” herein. The Series 2010B Bonds will mature on the date, will bear interest at the rate per annum, and will be sold at the offering price as set forth above. The Series 2010B Bonds are offered by the Underwriter named below and are subject to an opinion as to validity by Climaco, Wilcox, Peca, Tarantino & Garofoli Co., L.P.A., as Bond Counsel, and Wilkerson & Associates Co., LPA, as Co-Bond Counsel, the review of certain matters by Climaco, Wilcox, Peca, Tarantino & Garofoli Co., L.P.A., as counsel for the Authority, Bricker & Eckler LLP, as counsel to the Underwriter named below, Tucker Ellis & West LLP and Jones Day LLP, as counsel to the Developer, and Jones Day LLP and Schottenstein, Zox & Dunn Co., L.P.A., as counsel to the Individual Guarantors, and certain other conditions. Certain legal matters will be passed upon by the Director of Law of the Series 2010B Contracting Party. It is expected that the delivery of the Series 2010B Bonds will be made through DTC on or about December 21, 2010. BAIRD The date of this Official Statement is December 13, 2010.
[INSIDE COVER]
REGARDING THIS OFFICIAL STATEMENT
This Official Statement does not constitute an offering of any security other than the original offering of the Series 2010B Bonds specifically offered hereby. No dealer, broker, salesman or other person has been authorized by the Authority, the Underwriter, the Series 2010B Contracting Party or Flats East to give any information or to make any representations other than those in this Official Statement, and if given or made, such other information or representations must not be relied upon as having been given or authorized by any of the foregoing. This Official Statement does not constitute an offer to sell or solicitation of any offer to buy, and there shall not be any sale of, the Series 2010B Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. The information set forth herein has been obtained from the Authority, the Program Reserve Letter of Credit Bank, the Series 2010B Contracting Party, Flats East and other sources, including other Contracting Parties, which are believed to be reliable, but is not guaranteed as to accuracy or completeness and is not to be construed as a representation by the Underwriter. The delivery of this Official Statement at any time does not imply that the information herein is correct as of any time subsequent to its date. Statements contained in this Official Statement which involve estimates, forecasts, or matters of opinion, whether or not expressly described herein, are intended solely as such and are not to be construed as representations of facts.
The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information.
The information and expressions of opinions 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 any implication that there has been no change in the affairs of the Authority since the date hereof.
The Authority and the Underwriter will make available, during the offering and prior to any sale of Series 2010B Bonds to any person who receives this Official Statement and such person’s representative(s), if any, the opportunity to ask questions of, and receive answers from Timothy P. Long of Robert W. Baird & Co. Incorporated, the Underwriter, who may be contacted by calling (614) 629-6951 concerning the terms and conditions of the offering, to inspect any documents summarized in this Official Statement, and to obtain any additional information necessary to verify the accuracy of the information presented, to the extent that the Authority or the Underwriter possess such information or can acquire it without unreasonable effort or expense.
Upon issuance, the Series 2010B Bonds will not be registered by the Authority under the Securities Act of 1933, as amended, or the securities law of any state, and will not be listed on any stock or other securities exchange. The Series 2010B Bonds have not been approved or disproved by the Securities and Exchange Commission, nor has any other federal, state, municipal or other governmental entity or agency, except the board of directors of the Authority, passed upon the accuracy or adequacy of this Official Statement or approved the Series 2010B Bonds for sale.
CUSIP data on the cover page hereof has been provided by Standard & Poor’s CUSIP Service Bureau, a division of the McGraw-Hill Companies, Inc. The CUSIP data is being provided solely for the convenience of the owners of the Series 2010B Bonds only at the time of issuance of the Series 2010B Bonds, and the Authority does not make any representation with respect to such data or undertake any responsibility for its accuracy now or at any time in the future. The CUSIP data for a specific maturity is subject to being changed after the issuance of the Series 2010B Bonds as a result of procurement of secondary market portfolio insurance or other similar enhancement by investors that is applicable to all or a portion of certain maturities of the Series 2010B Bonds.
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The Series 2010B Contracting Party has reviewed only the Section of this Official Statement entitled the ªSeries 2010B Contracting Partyº and takes no responsibility for the accuracy or completeness of any information in this Official Statement except for the information contained in that Section.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT TRANSACTIONS, WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES 2010B 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 UNDERWRITER MAY OFFER AND SELL THE SERIES 2010B BONDS TO CERTAIN DEALERS AND DEALER BANKS AND BANKS ACTING AS AGENT AT PRICES LOWER THAN THE PUBLIC OFFERING PRICE STATED ON THE COVER PAGE HEREOF AND SAID PUBLIC OFFERING PRICE MAY BE CHANGED FROM TIME TO TIME BY THE UNDERWRITER.
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TABLE OF CONTENTS
Page
REGARDING THIS OFFICIAL STATEMENT ...... i OFFICIAL STATEMENT SUMMARY...... v SIMPLIFIED FLOW OF FUNDS CHART ...... vii DESCRIPTION OF COMMON FUND BOND RESERVES...... viii INTRODUCTORY STATEMENT...... 1 INVESTMENT CONSIDERATIONS ...... 4 THE FINANCING PROGRAM...... 7 THE OFFERED BONDS ...... 7 BOOK-ENTRY-ONLY SYSTEM...... 10 SECURITY AND FLOW OF FUNDS ...... 13 ISSUANCE OF ADDITIONAL COMMON FUND BONDS...... 20 THE FINANCED PROJECT ...... 20 SOURCES AND USES OF FUNDS...... 27 THE AUTHORITY...... 27 THE SERIES 2010B CONTRACTING PARTY...... 28 THE INDENTURE ...... 28 THE PROGRAM RESERVE LETTER OF CREDIT...... 41 THE AGREEMENT...... 42 LEGAL REPRESENTATION; ENFORCEABILITY OF OBLIGATIONS ...... 43 ELIGIBILITY UNDER OHIO LAW FOR INVESTMENT AND AS SECURITY FOR THE DEPOSIT OF PUBLIC FUNDS...... 43 TAX MATTERS ...... 44 UNDERWRITING ...... 45 RATING...... 45 LITIGATION ...... 46 CONTINUING DISCLOSURE ...... 47 MISCELLANEOUS...... 49 CONCLUDING STATEMENT...... 49
APPENDIX A ± Summary of Cleveland-Cuyahoga County Port Authority Bond Fund Program...... A-1 APPENDIX B ± Certain Authority and Demographic Information...... B-1 APPENDIX C ± Definitions...... C-1 APPENDIX D ± Form of Bond Counsel and Co-Bond Counsel Opinion ...... D-1
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OFFICIAL STATEMENT SUMMARY
This summary is qualified in its entirety by reference to the detailed information appearing elsewhere in this Official Statement and in the Appendices attached hereto. The offering of the Series 2010B Bonds to potential investors is made only by means of the entire Official Statement. No person is authorized to detach this summary from this Official Statement or to otherwise use it without the entire Official Statement. Capitalized terms appearing in this summary are defined on the cover or later in this Official Statement.
PURPOSE OF BOND FUND PROGRAM ...... The Authority's Bond Fund Program has been created to promote economic development in order to create and retain quality private and public sector jobs. The Authority intends to accomplish this goal by enabling borrowers to access the national capital markets through bonds issued within the Bond Fund. The Bond Fund provides long-term and fixed rate financing to these borrowers. SECURITIES BEING OFFERED ...... $8,800,000 Cleveland-Cuyahoga County Port Authority Development Revenue Bonds (Port of Cleveland Bond Fund) Series 2010B (City of Cleveland ± Flats East Development Project) (Tax-Exempt Recovery Zone Facility Bonds). See ªTHE OFFERED BONDSº herein.
RATING...... The Series 2010B Bonds are rated ªBBB-º by S&P.
TAX EXEMPTION...... Interest on the Series 2010B Bonds is excluded from gross income for federal income tax purposes, except for interest on any Series 2010B Bond for any period during which it is held by a ªsubstantial userº of the facilities financed with the proceeds of such Series 2010B Bonds or a ªrelated personº of such ªsubstantial user,º as such quoted terms are defined for purposes of Section 147(a) of the Internal Revenue Code of 1986, as amended (the Code), and is not treated as an item of tax preference for purposes of the alternative minimum tax imposed on individuals and corporations under the Code. The Series 2010B Bonds are Private Activity Bonds and constitute Recovery Zone Facility Bonds within the meaning of the Code. Interest on, any transfer of and any profit made on the sale, exchange, transfer, or other disposition of the Series 2010B Bonds are exempt from the Ohio personal income tax, the Ohio Commercial Activity Tax, the net income base of the Ohio corporation franchise tax, and municipal and school district income taxes in Ohio. See ªTAX MATTERSº herein. SECURITY AND SOURCES OF PAYMENT...... Bond Fund Program. The Series 2010B Bonds will be secured primarily and on a parity basis by the Bond Financing Payments paid by all borrowers from the Authority's Bond Fund and by the Bond Fund Reserves for the Bond Fund Program.
Series 2010B Bonds. The Bond Financing Payments to be paid by the Series 2010B Contracting Party are included in the security for the Series 2010B Bonds, but the primary sources of security for payment of the principal of and interest on the Series 2010B Bonds are payments by the Developer with respect to the TIF District of (i) Service Payments in such amounts as are actually received by the Series 2010B Contracting Party and assigned to the Authority under the Cooperative Agreement, and (ii) Minimum Payments, all as described herein. See ªTHE FINANCED PROJECTº herein.
DENOMINATION...... $5,000 and any integral multiples of $5,000 in excess thereof.
UNDERWRITER...... Robert W. Baird & Co. Incorporated.
INTEREST RATE...... The Series 2010B Bonds will bear interest at a fixed rate of interest and will be computed on the basis of a 360-day year consisting of twelve 30-day months, from the date of issuance, at the rate and mature in the amount and on the date set forth on the cover page hereof.
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INTEREST PAYABLE...... Interest on the Series 2010B Bonds will be payable semiannually on May 15 and November 15 of each year, commencing May 15, 2011.
REDEMPTION...... The Series 2010B Bonds are term bonds subject to redemption prior to stated maturity, including mandatory sinking fund redemption on each May 15 and November 15, commencing November 15, 2014 until maturity. See ªTHE OFFERED BONDSº herein.
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CLEVELAND-CUYAHOGA COUNTY PORT AUTHORITY BOND FUND PROGRAM SIMPLIFIED FLOW OF FUNDS CHART
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DESCRIPTION OF COMMON FUND BOND RESERVES
PRIMARY RESERVE FUND...... Each Contracting Party is required to deposit in a Primary Reserve Fund an amount equal to ten percent (10%) of the original principal amount of each series of Common Fund Bonds. This reserve is not allowed to be reduced during the term of each series of Common Fund Bonds. This reserve can be funded with bond proceeds, cash, or an acceptable letter of credit. The method of funding this reserve is primarily a credit decision made by the Authority. If this reserve is not used to support a default, the full amount, held in that Contracting Party's account, is to be applied by the Trustee towards the Contracting Party's final debt service payment. This reserve is intended to provide the Authority with sufficient time in the event of default to restore delinquent payments or, in those cases where the Trustee holds a first mortgage and security interest on the assets financed with bond proceeds, take control of the assets and either find alternate users or sell the assets.
PROGRAM DEVELOPMENT FUND...... Certain revenues, including the monthly administrative fees of the Authority for the Bond Fund Program and interest earnings from the Program Reserve Fund, are deposited into the Program Development Fund and are available to fund shortfalls in Bond Financing Payments. The amounts received from these administrative fees are deposited into the Program Development Fund. Half of the moneys in the Program Development Fund will be transferred to the Authority for its general purposes on each June 1 and December 1, as long as no deficiencies exist.
PROGRAM RESERVE FUND...... The Program Reserve Fund is held by the Bond Fund Trustee. The Authority has $6,603,922 in deposits, investments, and pledges in the Program Reserve Fund. In addition, Fifth Third Bank has provided a $9,000,000 Letter of Credit, currently expiring on March 1, 2020 and subject to two year extensions, held in the Program Reserve Fund.
ADDITIONAL CREDIT ENHANCEMENTS...... Depending upon the type of project being financed or the credit history of a Contracting Party, some form of additional credit enhancement may be required by the Authority, including personal and corporate guarantees, additional letters of credit, and key-man life insurance policies. Any additional credit enhancements provided by a Contracting Party will be used, to the extent available, first to cure a default in that Contracting Party's Bond Financing Payments prior to using its Primary Reserve Fund and the other Bond Fund Program Reserves.
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$8,800,000 Cleveland-Cuyahoga County Port Authority Development Revenue Bonds (Port of Cleveland Bond Fund) Series 2010B (City of Cleveland – Flats East Development Project) (Tax-Exempt Recovery Zone Facility Bonds)
INTRODUCTORY STATEMENT
General
This Official Statement provides information regarding the Cleveland-Cuyahoga County Port Authority Development Revenue Bonds (Port of Cleveland Bond Fund) Series 2010B (City of Cleveland ± Flats East Development Project) (Tax-Exempt Recovery Zone Facility Bonds) (the ªSeries 2010B Bondsº) to be issued in the aggregate principal amount set forth above by the Cleveland-Cuyahoga County Port Authority (the ªAuthorityº), a body corporate and politic and a political subdivision of the State, in accordance with the terms of a Trust Indenture, dated as of November 1, 1997 (the ªTrust Indentureº), as amended by the Twenty-Fourth Supplemental Trust Indenture, dated as of November 1, 2006 (the ªTwenty-Fourth Supplemental Indentureº) and the Thirtieth Supplemental Trust Indenture, dated as of November 1, 2010 (the ªThirtieth Supplemental Indentureº, and together with the Trust Indenture, and the Twenty-Fourth Supplemental Indenture, the ªBasic Indentureº), as supplemented by the Thirty-Second Supplemental Trust Indenture, dated as of December 1, 2010 (the ªSeries 2010B Supplemental Indentureº), each between the Authority and The Huntington National Bank, a national banking association (together with any successor as trustee, the ªTrusteeº). See ªTHE INDENTUREº herein. The Basic Indenture and supplements thereto (ªSupplemental Indenturesº) are herein referred to collectively as the ªIndenture.º Certain capitalized terms used herein are defined in the text hereof in summary form and more fully defined in APPENDIX C hereto. Terms not so defined are used with the meanings applicable in the Basic Indenture.
Investment Considerations
No person should purchase any Series 2010B Bonds without a careful review and consideration of matters affecting the security of an investment in the Series 2010B Bonds, including those set forth under the caption ªINVESTMENT CONSIDERATIONS.º
Limited Liability of Authority
THE SERIES 2010B BONDS ARE NOT GENERAL OBLIGATIONS AND ARE NOT SECURED BY THE FULL FAITH AND CREDIT OR TAXING POWER NOR ARE THEY PAYABLE FROM ANY OF THE GENERAL FUNDS OR ASSETS OF THE AUTHORITY, THE SERIES 2010B CONTRACTING PARTY, THE COUNTY OF CUYAHOGA OR ANY OTHER GOVERNMENTAL AUTHORITY OR POLITICAL SUBDIVISION. THE SERIES 2010B BONDS ARE PAYABLE ONLY FROM FUNDS PLEDGED TO SECURE THE SERIES 2010B BONDS PURSUANT TO THE BASIC INDENTURE, MONEYS AVAILABLE TO BE DRAWN UNDER THE PROGRAM RESERVE LETTER OF CREDIT DEFINED BELOW, AND THE AUTHORITY’S INTEREST IN THE COLLATERAL, OR ITS INTEREST IN, OR OBLIGATIONS UNDER, THE AGREEMENTS DEFINED BELOW.
Purposes
The Series 2010B Bonds are being issued to finance the project described under the heading ªTHE FINANCED PROJECTº. The Series 2010B Bonds will be secured on an equal and parity basis under the Basic Indenture with other bonds, that have heretofore, or that may be hereafter issued (collectively, all bonds so secured being ªCommon Fund Bondsº). Common Fund Bonds may be issued for any purpose permitted by Sections 4582.01 to 4582.20, Ohio Revised Code, as enacted and amended from time to time (the ªActº). See ªTHE AUTHORITYº herein. Common Fund Bonds are issued primarily for the purpose of applying the proceeds thereof for the benefit of parties (ªContracting Partiesº) pursuant to loan agreements, installment sale agreements, lease agreements or other agreements (the ªAgreementsº) to further economic development through the acquisition, construction and equipping of projects (ªProjectsº). See ªTHE FINANCING PROGRAMº herein. Common Fund Bonds may also be issued for the benefit of the Authority to finance facilities to be used by the Authority. Pursuant to each Agreement, a Contracting Party will be obligated, subject to annual appropriation in certain cases in which the Contracting Party is a public body, to make payments sufficient to pay debt service on the applicable series of Common Fund Bonds (ªBond Financing Paymentsº), which amounts are required to be deposited in the Common Funds described below to pay or secure all Common Fund Bonds equally and ratably. Pursuant to each Agreement, a Contracting Party (other than the Authority) is also required, subject to annual appropriation in certain cases, to pay an administrative fee to the Authority (Administrative Amounts). Collectively, the Bond Financing Payments and Administrative Amounts will constitute Financing Payments.
Common Security
All Common Fund Bonds have an equal and ratable claim against amounts available in the Common Funds, including moneys drawn under the Program Reserve Letter of Credit described below. The Series 2010B Bonds which are offered hereby will be payable solely from such amounts. Thus, the timely payment in full of principal of and interest on the Series 2010B Bonds will depend upon the sufficiency of timely payments of Bond Financing Payments, with respect to not only the Series 2010B Bonds, but all Common Fund Bonds, and the availability of such amounts. See ªSECURITY AND FLOW OF FUNDSº herein.
Bond Financing Payments are required under the Basic Indenture to be payable at times not later than, and in amounts not less than, the principal of and interest due on each applicable series of Common Fund Bonds; provided, that if any Contracting Party is a public body (other than the Authority), the obligation to make Bond Financing Payments each year may be subject to (i) the governing body of the Contracting Party agreeing in its sole discretion to renew the applicable Agreement for such year and to appropriate funds to make payments for such year, or (ii) receipt by the Contracting Party of certain tax increment revenues or special assessments from third parties. Bond Financing Payments from Contracting Parties may be comprised of equal monthly payments. Such level payments may exceed amounts due with respect to the applicable series of Common Fund Bonds in any year and such excesses will be retained in a Level Payment Account in the Bond Fund established under the Indenture for later years when the level payments may be insufficient for such debt service.
All Bond Financing Payments are required to be paid to the Trustee and deposited in the Revenue Fund created under the Basic Indenture. The payments are thereafter first transferred to the Bond Fund created under the Indenture for the purpose of paying principal of and interest on all Common Fund Bonds.
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Pursuant to the Indenture, the Authority agrees to advance to the Trustee an amount of money from its non-tax revenues equal to so much of the Primary Reserve Fund of any Contracting Party which is subject to an order as described in (4) below, if all of the following conditions occur (the ªConditions to an Issuer Promise to Advanceº): (1) the Primary Reserve Fund of the Contracting Party is held in cash by the Trustee and not in the form of a letter of credit; and (2) an Event of Default under an Agreement with the Contracting Party has occurred; and (3) the Contracting Party voluntarily files for protection under the United States Bankruptcy Code or is placed into involuntary bankruptcy under the United States Bankruptcy Code, which involuntary bankruptcy is not set aside within 30 days; and (4) the United States Bankruptcy Court with jurisdiction over the Contracting Party's bankruptcy proceeding issues a final order to the effect that the Primary Reserve Fund held by the Trustee is property of the Debtor or part of the bankruptcy estate of the Contracting Party.
Once all of the Conditions to an Issuer Promise to Advance have occurred, the Authority shall within five (5) business days advance to the Trustee the sum of money subject to the order described in (4) above. The money advanced to the Trustee will be held in a separate Fund to be established and named the ªCleveland-Cuyahoga County Port Authority Issuer Advance Fundº (ªIssuer Advance Fundº). The Issuer Advance Fund will be held by the Trustee for the benefit of the Holders in the same manner as the Primary Reserve Fund for purposes of the Indenture. In the event that any monies transferred under the Conditions to an Issuer Promise to Advance are returned to the Trustee, such moneys shall be deposited into the Primary Reserve Fund and the Trustee will in turn pay a like sum of money to the Authority from the Issuer Advance Fund.
On or before the issuance of any series of Common Fund Bonds there is required to be deposited in an account for that series in the Primary Reserve Fund (established by the Basic Indenture) an amount (the ªBond Reserve Depositº) equal to ten percent (10%) of the proceeds of the series. The proceeds of a series of Common Fund Bonds means the aggregate principal amount thereof less the aggregate amount of any original issue discounts. The Bond Reserve Deposit may consist of cash, government obligations, insurance or Acceptable Letters of Credit and secures payments of all Common Fund Bonds.
Common Funds; Program Reserve Letter of Credit
The Bond Fund, the Primary Reserve Fund and the Program Reserve Fund, together with the Collateral Fund and the Program Development Fund hereinafter described, are referred to herein as the ªCommon Funds.º No series of Common Fund Bonds may be issued unless immediately after such issuance the aggregate of the amounts in the Primary Reserve Fund (including amounts available under letters of credit or insurance therein) and in the Program Reserve Fund total not less than twenty-five percent (25%) of the principal amount of all Common Fund Bonds then outstanding under the Indenture. See ªISSUANCE OF ADDITIONAL COMMON FUND BONDSº herein.
The Common Fund Bonds are also secured by an Irrevocable Letter of Credit (together with any Successor Letter of Credit, the ªProgram Reserve Letter of Creditº) issued by Fifth Third Bank (together with any successor issuer of a Program Reserve Letter of Credit, the ªProgram Reserve Letter of Credit Bankº) in favor of the Trustee issued in the original amount, and currently available to be drawn in the amount, of $9,000,000 and currently expiring on March 1, 2020. The Program Reserve Letter of Credit will be held by the Trustee in the Letter of Credit Account of the Program Reserve Fund and will secure each series of Common Fund Bonds. See ªTHE PROGRAM RESERVE LETTER OF CREDITº herein. No future series of Common Fund Bonds will be issued by the Authority unless the Program Reserve Letter of Credit Bank agrees to secure such series with the Program Reserve Letter of Credit, so long as the Program Reserve Letter of Credit is in effect or amounts are owing under the Reimbursement Agreement between the Authority and the Program Reserve Letter of Credit Bank (together with any successor agreement, the ªReimbursement Agreementº).
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Miscellaneous
This Official Statement contains certain limited information with respect to the Authority, the Series 2010B Project, the Series 2010B Contracting Party, the Developer, the Individual Guarantors, the Contractor, and the Program Reserve Letter of Credit Bank, all as defined herein, as well as brief descriptions of certain provisions of the Series 2010B Bonds, Common Fund Bonds, the Indenture, the Program Reserve Letter of Credit, the Reimbursement Agreement, the Cooperative Agreement, the Disbursing Agreement, the Construction Agency Agreement, the Declaration, the Guaranty, the Individual Guaranty, and the Construction Contract. Such descriptions and information do not purport to be comprehensive or definitive. All references to documents described herein are qualified in their entirety by reference to such documents and the Agreements, copies of which are available for inspection at the principal office of the Authority.
INVESTMENT CONSIDERATIONS
No person should purchase Series 2010B Bonds without considering, among other things, the following matters.
Project-Related Risks
The success of each individual Project financed by proceeds of the applicable series of Common Fund Bonds and the ability of the related Contracting Party to pay Bond Financing Payments when due will be subject to a variety of risks applicable either specifically to the Project or Contracting Party or related generally to the business or industry in which the Project is used or the Contracting Party is engaged. Such risks include, but are not limited to, risks related to construction, rehabilitation and acquisition (including delays or defaults in completion, casualty, environmental problems, improper construction or performance, and cost overruns), inability to obtain other sources of financing necessary for the project, insufficient revenues, excess expenses, economic conditions, competition, conflicts of interest, governmental regulation, changes in governmental policy and uninsured casualty. It is presently anticipated that the majority of the Projects will be located in Cuyahoga County, Ohio. See APPENDIX A ± ªSUMMARY OF CLEVELAND-CUYAHOGA COUNTY PORT AUTHORITY BOND FUND PROGRAMº herein.
Authority Discretion
Subject to restrictions contained under the heading ªISSUANCE OF ADDITIONAL COMMON FUND BONDS,º the Authority may issue Common Fund Bonds on such terms as it may determine, including, but not limited to, those related to aggregate principal amount, interest rates (whether fixed or variable), interest payment dates (including the terms for accreted interest or zero coupon bonds), maturities, redemptions, amortizations of principal and mandatory or optional tenders or purchases.
The Authority also has exclusive discretion to select the Projects to be financed with Common Fund Bonds and to determine all terms related to the Projects, including, but not limited to, those related to any security provided, prior or subordinate liens or encumbrances, ownership, fee title, value, useful life, and acquisition, construction or improvement of the Project.
Except as otherwise discussed under ªISSUANCE OF ADDITIONAL COMMON FUND BONDS,º the Authority has complete discretion as to the terms of any Agreement and the security for the payment of Bond Financing Payments, including, but not limited to the conditions upon which the applicable Contracting Party may terminate the Agreement, the identity, experience and creditworthiness of Contracting Parties and the nature and extent of Collateral, if any, or other security.
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Disbursement of proceeds from Common Fund Bonds for the acquisition, construction or improvement of any Project is also subject to such conditions, if any, as the Authority shall determine, including, but not limited to those related to inspection and certification of construction progress, payment and performance bonds, if any, retention of amounts in reserve and evidence as to the nature and amount of costs incurred or to be incurred.
No person should purchase Series 2010B Bonds unless such person is willing to rely on the ability of the Authority to lend proceeds of Common Fund Bonds to Contracting Parties who will make timely Bond Financing Payments and is satisfied that sufficient security will exist for all Common Fund Bonds (now or hereafter issued) solely from (i) Bond Financing Payments from Contracting Parties, (ii) amounts in the Common Funds to fund defaults in the payment of Bond Financing Payments, and (iii) amounts realized upon a default from the applicable Project or any related Collateral. See ªSECURITY AND FLOW OF FUNDSº and APPENDIX A ± ªSUMMARY OF CLEVELAND-CUYAHOGA COUNTY PORT AUTHORITY BOND FUND PROGRAMº herein.
Bonds Issued for Benefit of the Authority
Except as discussed under the caption ªISSUANCE OF ADDITIONAL COMMON FUND BONDS,º the Authority has the discretion to issue Common Fund Bonds for its own benefit with Bond Financing Payments to be derived solely from revenues which are derived only from the operation of Authority facilities and are determined after provision for payment of expenses related to such facilities.
Optional Redemption ± Contracting Party Default
Upon the occurrence of an ªEvent of Defaultº under the Cooperative Agreement by the Series 2010B Contracting Party or the Developer, the Series 2010B Bonds may be redeemed at the option of the Authority in whole on any date at a redemption price equal to 100% of the principal amount of the Series 2010B Bonds to be redeemed plus accrued interest thereon to the redemption date. Such redemption could occur prior to any date that the Series 2010B Bonds would otherwise be subject to Optional Redemption. Holders of Series 2010B Bonds that are so redeemed will not receive any yield- maintenance premium with respect to their Series 2010B Bonds.
Anticipated Common Fund Bond Financings
The Authority currently intends to issue approximately $2,520,000 in aggregate principal amount of its Taxable Development Revenue Bonds (Port of Cleveland Bond Fund), Series 2010A (City of Cleveland ± Forest Bay Tower City Project) (the ªSeries 2010A Bondsº) on or before December 31, 2010. Depending on various factors, including market conditions, the issuance of the Authority's Series 2010A Bonds may occur before, simultaneously with, or after the issuance of the Authority's Series 2010B Bonds.
Financial Risks of the Series 2004D Bonds
The Authority issued its $8,850,000 Bond Fund Program Development Revenue Bonds, Series 2004D (City of Garfield Heights Project) (the ªSeries 2004D Bondsº) on September 30, 2004. The Series 2004D Project was paid for out of the proceeds of the Series 2004D Bonds and the Summit County Port Authority's $2,750,000 Development Revenue Bonds, Series 2004A (City of Garfield Heights Project) (the ªSummit Port Bondsº). For additional information on the Series 2004D Bonds, see ªAPPENDIX A ± SUMMARY OF CLEVELAND-CUYAHOGA COUNTY PORT AUTHORITY BOND FUND PROGRAM.º
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A receivership action was filed on February 19, 2009 by The Bank of New York Mellon Trust Company, N.A., as trustee for Morgan Stanley Capital I Inc., against City View Center, LLC (ªCity Viewº), the current owner of the largest portion of the Series 2004D Project Site (the ªCity View Propertiesº). City View defaulted on an approximately $80 million loan provided by Morgan Stanley Capital I Inc. for the December 29, 2006 purchase of the City View Properties when it failed to make monthly payments on and after November 1, 2008. As a result of the February 19, 2009 action, the assets of City View were placed into receivership. Foresite Realty Partners, LLC (the ªReceiverº) was appointed as the Receiver for those portions of the Series 2004D Project Site constituting the City View Properties.
City View did not pay any real estate taxes on the City View Properties during the second half of 2009 with respect to taxes imposed for 2008 because of a valuation reduction by the Cuyahoga County Board of Revision. The taxes that would have been paid during the second half of 2009 with respect to taxes imposed for tax year 2008 were not paid because new market values for the City View Properties reduced the taxes due for tax year 2008 below the taxes already paid by City View for tax year 2008. Amounts held by the Trustee in the Service Payment Fund were used to pay Bond Service Charges and Administrative Amounts on the Series 2004D Bonds and debt service and administrative amounts on the Summit Port Bonds (collectively, the ªAggregate Debt Serviceº) due on November 15, 2010. The Service Payment Fund balance is currently sufficient to pay the Aggregate Debt Service through November 15, 2011. Since its appointment, the Receiver has paid real estate taxes and service payments on the City View Properties on time and in full.
Bond Service Charges and Administrative Amounts due on the Series 2004D Bonds are current and have never been delinquent. As of November 1, 2010, the Trustee held $885,000 in the Primary Reserve Fund for the Series 2004D Bonds. The Series 2004D Bonds are further secured by (i) the Series 2004D Service Payments required to be paid by the owners of the Series 2004D Project Site, and (ii) a lien (equivalent to a tax lien and prior to any mortgages) on a portion of the Series 2004D Project Site, including the City View Properties, as a result of the imposition of a special assessment (the ªSeries 2004D Special Assessmentº) on such portion, equal to (a) $1,200,000 each year, less (b) the sum of the amounts held by the Trustee to pay the Aggregate Debt Service and the Series 2004D Service Payments available to pay the Aggregate Debt Service. If such amounts are insufficient to pay the Aggregate Debt Service, the City of Garfield Heights (ªGarfield Heightsº), the Contracting Party for the Series 2004D Bonds, is required to collect the Series 2004D Special Assessment to pay the Aggregate Debt Service.
Certain owners of portions of the Series 2004D Project Site other than City View have not paid their real estate taxes in full or have been delinquent on their real estate tax payments. Any non-payment of real estate taxes will result in the imposition of a tax lien against such properties.
The current estimated market value of the total development at the Series 2004D Project Site is equal to the sum of: (i) $42,182,700, equal to the stipulated value for the City View Properties agreed upon by the Garfield Heights Board of Education and the Receiver and approved by the Cuyahoga County Board of Revision on September 1, 2009, and (ii) $20,815,600, equal to the current market value of those portions of the Series 2004D Project Site other than the City View Properties as reported on the Cuyahoga County Auditor's website. As a result of the September 1, 2009 stipulation, assuming 2008 tax rates and market values (with no further reduction in such values) and assuming full payment of real property taxes by all owners of property at the Series 2004D Project Site, approximately $1,423,055 in Series 2004D Service Payments would be paid and made available to the Authority each year to pay Aggregate Debt Service. The maximum annual Aggregate Debt Service is $1,100,816. Therefore, even after giving effect to the September 1, 2009 stipulation and based on the foregoing assumptions, estimated Series 2004D Service Payments would be sufficient to cover approximately 129% of Aggregate Debt Service in any given year.
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Notwithstanding the security described above, any purchaser of the Series 2010B Bonds should also take into account the possibility that insufficient Series 2004D Service Payment Revenues or insufficient Series 2004D Special Assessment revenues could require the Authority to use amounts in the Program Reserve Fund or Auxiliary Reserve Fund to pay Bond Service Charges and Administrative Amounts on the Series 2004D Bonds.
Assuming the issuance of the Series 2010A Bonds and the Series 2010B Bonds, the Bond Fund has $76,855,000 of outstanding bonds and has $25,931,109 of available reserves (not including any other borrowers' additional bond reserves), which equals a ratio of approximately 33.74% of reserves to Outstanding Bonds.
THE FINANCING PROGRAM
Common Fund Bonds will be issued solely for the benefit of Contracting Parties (including the Authority) to finance or refinance Projects. A Project may include any real and tangible personal property used in connection with any commercial, industrial, distribution, transportation, housing, recreational, educational, governmental, cultural or research facility. The Authority expects Common Fund Bonds to be issued primarily for manufacturing and manufacturing-related and commercial facilities, equipment or activities, and governmental purposes, but reserves the right to issue Common Fund Bonds for any lawful purposes. Proceeds of Common Fund Bonds not used to fund the Bond Reserve Deposits may be applied only to pay ªProject Costsº as defined in the Basic Indenture, which include a variety of costs related to the issuance of the applicable Common Fund Bonds and the costs of acquiring, constructing, renovating, equipping, furnishing, improving and otherwise developing a Project.
The Authority intends Common Fund Bond financing to be used to expand employment opportunities and increase the tax base in Cuyahoga County, Ohio. However, the Authority reserves the right to provide financing to persons undertaking economic development related activities anywhere in the State, to the extent legally permitted.
THE OFFERED BONDS
Interest Rate; Maturity; Payment
The Series 2010B Bonds are being issued pursuant to the Basic Indenture, as supplemented by the Series 2010B Supplemental Indenture, in the aggregate principal amount as set forth on the cover hereof. Series 2010B Bonds will mature in the principal amount or amounts and bear interest at the rates set forth on the cover hereof. Interest on the Series 2010B Bonds will accrue from the dated date of the Series 2010B Bonds and will be payable semi-annually on May 15 and November 15 (each an ªInterest Payment Dateº) of each year, commencing as stated on the cover hereof. Interest will be calculated on the basis of a 360-day year with twelve months of thirty days.
The Series 2010B Bonds will be issued as fully registered bonds without interest coupons in denominations of $5,000 and integral multiples of $5,000 in excess thereof. Series 2010B Bonds will be payable as to principal, whether upon maturity or redemption, at the corporate trust office of the Trustee designated on the cover hereof or its successors. If any payment of interest or principal is due on a day that is not a business day, payment is required to be made on the next succeeding business day with the same effect as if paid when otherwise due. Interest will be payable by check or draft of the Trustee mailed on the Interest Payment Date to the persons who were registered owners thereof as of the first day
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of that month which includes the Interest Payment Date; provided, however, that interest payable to persons who hold of record at least $1,000,000 principal amount of Series 2010B Bonds shall be made, upon appropriate instruction from the Holder at least ten days in advance, by wire transfer. In the case of a default in payment, the Trustee may select another record date for determining the registered owners who are entitled to receive payment.
Exchange; Transfer
The Series 2010B Bonds are transferable and exchangeable only upon the books of the Trustee and only upon presentation and surrender of such Series 2010B Bonds, together with an executed assignment or other acceptable transfer instrument, subject to the payment of any tax or excise that may be imposed in connection therewith and subject to the restrictions imposed by the Indenture. Series 2010B Bonds called for redemption are not required to be transferred or exchanged, nor is transfer or exchange required to be made during the fifteen days preceding the mailing of a notice of redemption.
Replacement
If any Series 2010B Bond is mutilated, lost, wrongfully taken or destroyed, in the absence of written notice to the Authority or the Trustee that a lost or wrongfully taken Series 2010B Bond has been acquired by a bona fide purchaser, the Authority is required to execute, and the Trustee is required to authenticate and deliver, a new Series 2010B Bond of like date, maturity and denomination as the Series 2010B Bond mutilated, lost, wrongfully taken or destroyed, provided, that (i) in the case of any mutilated Series 2010B Bond, the mutilated Series 2010B Bond first is surrendered to the Trustee, and (ii) in the case of any lost, wrongfully taken or destroyed Series 2010B Bond, there is first furnished to the Authority and the Trustee evidence of the loss, wrongful taking or destruction satisfactory to the Authority and the Trustee, together with indemnity satisfactory to them.
Redemption Prior to Maturity
Mandatory Sinking Fund Redemption. The Series 2010B Bonds are subject to mandatory sinking fund redemption, at a redemption price of 100% of the principal amount redeemed plus interest accrued to the redemption date, on each May 15 and November 15, in the following principal amounts and in the years specified: May 15 November 15 May 15 November 15 Year Principal Amount Principal Amount Year Principal Amount Principal Amount 2014 N/A $55,000 2028 $150,000 $155,000 2015 $55,000 60,000 2029 160,000 165,000 2016 60,000 65,000 2030 170,000 180,000 2017 65,000 70,000 2031 185,000 190,000 2018 70,000 75,000 2032 200,000 205,000 2019 75,000 80,000 2033 215,000 220,000 2020 80,000 85,000 2034 230,000 240,000 2021 90,000 90,000 2035 250,000 260,000 2022 95,000 100,000 2036 265,000 275,000 2023 100,000 105,000 2037 290,000 300,000 2024 110,000 115,000 2038 310,000 320,000 2025 120,000 125,000 2039 335,000 345,000 2026 130,000 130,000 2040 695,000+ N/A 2027 140,000 145,000
+ Maturity Date
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The Authority has the option to deliver to the Trustee for cancellation Series 2010B Bonds in any aggregate principal amount and to receive a credit against the then current mandatory sinking fund requirement (and corresponding mandatory redemption obligation) as set forth above for Series 2010B Bonds. A credit against the then current mandatory sinking fund requirement (and corresponding mandatory redemption obligation) also will be received for any Series 2010B Bonds which would have otherwise been eligible to be selected for mandatory sinking fund redemption, which prior thereto have been redeemed (other than through the operation of the mandatory sinking fund requirements) or purchased for cancellation and canceled by the Trustee. Each Series 2010B Bond so delivered, or previously redeemed, or purchased and canceled, is to be credited at 100% of the principal amount thereof against the then current mandatory sinking fund obligation. Any excess of that amount over the then current mandatory sinking fund requirement will be credited against subsequent mandatory sinking fund redemption obligations in the order directed by the Authority.
The aggregate amount of the Financing Payments that is to be on deposit in the Bond Fund pursuant to the Cooperative Agreement on or before each Financing Payment Date next preceding each Mandatory Redemption Date shall include amounts sufficient to redeem, on the respective Mandatory Redemption Date, the principal amount set forth above for Series 2010B Bonds (less the amount of any credit). The Authority shall exercise the option to deliver the Series 2010B Bonds selected for mandatory sinking fund redemption on or before the forty-fifth day preceding the applicable Mandatory Redemption Date.
The Authority shall furnish to the Trustee a certificate setting forth the extent of the credit to be applied with respect to the mandatory sinking fund requirement. If the certificate is not furnished timely to the Trustee, no credit shall be made against that mandatory sinking fund requirement (and corresponding mandatory redemption obligation), although credits may be available against subsequent mandatory sinking fund requirements.
Mandatory Redemption Upon Determination of Taxability. Upon the occurrence of a Determination of Taxability, the Series 2010B Bonds are subject to mandatory redemption and will be redeemed in whole by the Authority from the proceeds of the payment made by the Series 2010B Contracting Party pursuant to the Cooperative Agreement at a redemption price equal to 100% of the outstanding principal amount thereof, plus interest accrued to the redemption date, on the business day selected by the Series 2010B Contracting Party which is not later than 45 days following the Trustee's notification of the Determination of Taxability.
The duties of the Trustee pursuant to this mandatory redemption upon a Determination of Taxability (and all powers provided for herein which are necessary to carry out the intention of this mandatory redemption upon a Determination of Taxability) will survive the discharge and satisfaction of this Series 2010B Supplemental Indenture, and the Series 2010B Contracting Party will be obligated to pay to the Trustee, on behalf of the Authority, the reasonable fees and actual expenses of the Trustee with respect to the performance of such duties.
All of the Series 2010B Bonds outstanding on the redemption date selected will be redeemed by the Authority on that date, except that Series 2010B Bonds called for mandatory redemption prior to that date, but after selection of the redemption date under this mandatory redemption upon a Determination of Taxability, will be retired on their Mandatory Redemption Date and Series 2010B Bonds for the payment or redemption of which sufficient moneys or investment are held by the Trustee as provided in Section 9.02 of the Basic Indenture, will be redeemed on the redemption date in accordance with this mandatory redemption upon a Determination of Taxability and not otherwise.
Optional Redemption. The Series 2010B Bonds are subject to redemption on or after November 15, 2020, at the option of the Authority, in whole on any date or in part on any Interest Payment Date, at a
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redemption price equal to 100% of the principal amount redeemed plus accrued interest to the Redemption Date.
Optional Redemption from Remaining Series 2010B Bond Proceeds. The Series 2010B Bonds are subject to redemption in whole on any date or in part on any Interest Payment Date, at the option of the Authority, at a redemption price of 100% of the principal amount redeemed, plus interest accrued to the redemption date from amounts remaining in the related account of the Excess Proceeds Fund after the Completion Date and after payment of all Project Costs.
Optional Redemption ± Cooperative Agreement Default. The Series 2010B Bonds are subject to optional redemption in whole or in part on any date, at the option of the Authority, at a redemption price equal to 100% of the principal amount of the Series 2010B Bonds to be redeemed plus accrued interest thereon to the redemption date, following the occurrence of an ªEvent of Defaultº by the Series 2010B Contracting Party or the Developer under the Cooperative Agreement. See ªINVESTMENT CONSIDERATIONS ± Optional Redemption ± Contracting Party Defaultº herein.
Authority's Right to Select Series of Bonds to be Redeemed. Notwithstanding the foregoing, and subject to compliance with any applicable requirements pertaining to the redemption of the applicable Series of Common Fund Bonds, the Authority has reserved the right to call for redemption outstanding Common Fund Bonds of any Series other than the Series 2010B Bonds upon a prepayment of Bond Financing Payments by a Contracting Party.
Selection of Series 2010B Bonds for Redemption. While the Series 2010B Bonds are in book-entry- only form, the selection of ownership interests in Series 2010B Bonds for mandatory sinking fund redemption will be made by DTC in accordance with its procedures. If the Series 2010B Bonds are not in book-entry-only form and fewer than all of the Series 2010B Bonds are to be redeemed, the selection of those Series 2010B Bonds to be redeemed, or portions thereof in integral multiples of $5,000, shall be made by lot by the Trustee within a maturity in integral multiples of $5,000.
Notice of Redemption. With respect to any redemption, the Trustee is required to cause notice of the redemption to be mailed to the registered owner of each Series 2010B Bond to be redeemed (whether in whole or in part), by first-class mail, not less than thirty (30) days prior to the redemption date. Failure to receive a notice, or any defect in any such notice, shall not affect the validity of any proceedings for the redemption of any Series 2010B Bonds.
Ownership
The person in whose name a Series 2010B Bond is registered shall be treated for all purposes as the owner thereof.
BOOK-ENTRY-ONLY SYSTEM
The information in this section concerning DTC and DTC’s book-entry-only system has been obtained from DTC and the Authority takes no responsibility for the completeness or accuracy thereof. The Authority cannot and does not give any assurances that DTC, Direct Participants or Indirect Participants will distribute to the Beneficial Owners (each as hereinafter defined) (a) payments of interest, principal, or premium, if any, with respect to the Series 2010B Bonds, (b) certificates representing ownership interest in or other confirmation or ownership interest in the Series 2010B Bonds, or (c) redemption or other notices sent to DTC or Cede & Co., its partnership nominee, as the registered owner of the Series 2010B Bonds, or that they will so do on a timely basis or that DTC, Direct
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Participants or Indirect Participants will act in the manner described in this Official Statement. The current ªRulesº applicable to DTC are on file with the Securities and Exchange Commission and the current ªProceduresº of DTC to be followed in dealing with DTC Participants are on file with DTC.
DTC will act as securities depository for the Series 2010B Bonds. The Series 2010B Bonds will be issued as fully-registered Series 2010B Bonds 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 2010B Bond certificate will be issued for each issue of the Series 2010B Bonds, each in the aggregate principal amount of such issue, and will be deposited with DTC. If, however, the aggregate principal amount of any issue exceeds $500 million, one certificate will be issued with respect to each $500 million of principal amount, and an additional certificate will be issued with respect to any remaining principal amount of such issue.
DTC, the world's largest depository, is a limited-purpose trust company organized under the New York Banking Law, a ªbanking organizationº within the meaning of the New York Banking Law, a member of the Federal Reserve System, a ªclearing corporationº within the meaning of the New York Uniform Commercial Code, and a ªclearing agencyº 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 (ªDirect Participantsº) 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 (ªDTCCº). 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 the users 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 (ªIndirect Participantsº). DTC has Standard & Poor's highest rating: AAA. The DTC rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com and www.dtc.org.
Purchases of Series 2010B Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Series 2010B Bonds on DTC's records. The ownership interest of each actual purchaser of each Series 2010B Bond (ªBeneficial Ownerº) is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not 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 2010B 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 2010B Bonds, except in the event that use of the book-entry system for the Series 2010B Bonds is discontinued.
To facilitate subsequent transfers, all Series 2010B 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 Series 2010B Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in
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beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Series 2010B Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such Series 2010B 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 2010B Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Series 2010B Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Series 2010B Bonds. For example, Beneficial Owners of Series 2010B Bonds may wish to ascertain that the nominee holding the Series 2010B 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 Bond Registrar and request that copies of the notices be provided directly to them.
Redemption notices shall be sent to DTC. If less than all of the Series 2010B Bonds within an issue are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Series 2010B 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 Authority 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 the Series 2010B Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).
Redemption proceeds, distributions and dividend payments on the Series 2010B 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 Authority or the Bond Registrar, on payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial 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 ªstreet nameº, and will be the responsibility of such Participant and not of DTC, the Bond Registrar, or the Authority, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Authority or the Bond Registrar, 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.
Revision of Book-Entry-Only System - Replacement Bonds
The Indenture provides for issuance of fully registered Series 2010B Bonds (the ªReplacement Bondsº) directly to owners other than DTC or its nominee only if DTC determines not to continue to act as security depository of the Series 2010B Bonds. In such event, the Authority may in its discretion establish a securities depository/book entry relationship with another qualified securities depository. If the Authority does not or is unable to do so, and after appropriate notice to DTC, the Trustee will authenticate and deliver fully registered Replacement Bonds, in the denominations of $5,000 or any multiple thereof, to or at the direction of and, if the event is not the result of Authority action or inaction,
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at the expense (including printing costs) of, any persons requesting such issuance. Replacement Bonds may be transferred, registered and assigned only in the registration books of the Trustee.
SECURITY AND FLOW OF FUNDS
Special Obligations; No Pledge of Taxing Authority
THE SERIES 2010B BONDS WILL BE SPECIAL OBLIGATIONS AND NOT GENERAL OBLIGATIONS OF THE AUTHORITY. THE SERIES 2010B BONDS ARE NOT SECURED BY THE FULL FAITH AND CREDIT OR TAXING POWER NOR ARE THEY PAYABLE FROM ANY OF THE GENERAL FUNDS OR ASSETS OF THE AUTHORITY, THE SERIES 2010B CONTRACTING PARTY, THE COUNTY OF CUYAHOGA, OR ANY OTHER GOVERNMENTAL ENTITY OR POLITICAL SUBDIVISION. NO HOLDER OF ANY SERIES 2010B BOND WILL HAVE THE RIGHT TO DEMAND PAYMENT OF THE PRINCIPAL THEREOF OR PREMIUM, IF ANY, OR INTEREST THEREON FROM ANY FUNDS TO BE RAISED FROM TAXATION OR FROM ANY SOURCES OF REVENUE OTHER THAN THOSE EXPRESSLY PLEDGED TO THE PAYMENT OF COMMON FUND BONDS.
Security Common to All Common Fund Bonds; Adequacy of Funds
The Series 2010B Bonds are payable solely from (a) Bond Financing Payments, (b) all moneys and investments in the Revenue Fund, Bond Fund (other than the Section 5.07 Account and moneys in the Prepayment Account held for Common Fund Bonds which have been defeased), Primary Reserve Fund, Program Reserve Fund, Collateral Fund, Program Development Fund and Excess Proceeds Fund (the ªSpecial Fundsº) created by the Basic Indenture and held by the Trustee and (c) all income and profit from the investment of the foregoing moneys (all of which are herein referred to as ªPledged Revenuesº). The Pledged Revenues (other than amounts in the Excess Proceeds Fund) equally and ratably secure the Series 2010B Bonds and all other series of Common Fund Bonds that may be issued from time to time. Thus, in the event that at any time amounts in the Common Funds (including amounts available to be drawn by the Trustee under the Program Reserve Letter of Credit) are insufficient to pay all principal of and premium and interest then due on the Series 2010B Bonds and all other series of Common Fund Bonds, Holders of the Series 2010B Bonds will be entitled to share in such amounts only on a pro rata basis with Holders of all other Common Fund Bonds.
The timely payment in full of principal of and interest on all Common Fund Bonds will depend upon the sufficiency of timely payments of all Bond Financing Payments with respect to all series of Common Fund Bonds (which are required to be deposited in the Revenue Fund) and other amounts in the Common Funds. See ªINVESTMENT CONSIDERATIONSº herein.
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Fund Balances and Outstanding Bonds
The following are the approximate balances held as of November 15, 2010 in the following funds and the principal amount of outstanding Common Fund Bonds assuming the issuance of the Series 2010A Bonds and the Series 2010B Bonds.
Percent Percent Maximum Contracting Party / Industry Original Outstanding of Bonds of Total Primary Issuance Final Coupon Annual Bond Bond Series Description Principal Principal Outstanding Bond Fund Reserve Date Maturity Rate Debt Service* Port Authority - ESSROC Port Facilities $3,795,000 $2,975,000 78.39% 3.87% $366,641 11/01/97 05/15/27 5.80% 271,128 1997A
Jergens, Inc Distribution, Tooling Components $5,720,000 $2,920,000 51.05% 3.80% $572,000 02/01/98 05/15/18 5.375 481,100 1998A
NOACA Governmental $3,345,000 $1,730,000 51.72% 2.25% $324,472 03/26/98 05/15/18 5.375 285,513 1998B
Port Authority Port Facilities $5,230,000 $2,915,000 55.74% 3.79% $520,385 04/01/99 05/15/19 5.375 433,644 1999A
Universal Heat Industrial/Manufacturing $1,480,000 $380,000 25.68% 0.49% $148,000 11/15/99 11/15/14 6.500 222,675 1999B
Playhouse Square Non-Profit, Entertainment $2,825,000 $0 Bonds Redeemed in full on 11/23/2004 2000A
RITA Governmental $5,000,000 $0 Bonds Redeemed in full on 3/18/2009 2000B
CEOGC Non-Profit, Workforce and $4,440,000 $2,185,000 49.21% 2.84% $444,000 12/19/00 05/15/16 6.250 480,313 2001A Family development
Cleveland Bottle Distribution $1,500,000 $1,060,000 70.67% 1.38% $150,000 09/01/01 11/15/21 6.500 139,088 2001B
CATS Non-Profit, Provider of counseling $2,090,000 $1,545,000 73.92% 2.01% $209,000 06/01/02 05/15/22 5.600 181,590 2002A & human services
ISG Inc. Steel manufacturing, processing $6,000,000 $0 Bonds Redeemed in full on 2/21/2005 2002B
CCH Non-Profit $5,130,000 $3,845,000 74.95% 5.00% $513,000 08/07/02 05/15/22 5.740 434,649 2002C Children, youth and family services
Centaur Inc. Steel processing and servicing $4,250,000 $1,420,000 33.41% 1.85% $425,000 08/28/03 05/15/13 6.100 624,988 2003A
Bellisio Foods Food Processing $5,000,000 $3,470,000 69.40% 4.51% $500,000 03/31/04 11/15/19 5.860 532,065 2004A
City of Cleveland Tax Increment Financing $2,965,000 $1,070,000 36.09% 1.39% $296,500 04/07/04 05/15/22 4.500 451,113 2004B
Tru-Fab Plastic Injected Molding $1,060,000 $850,000 80.19% 1.11% $106,000 04/27/04 11/15/23 6.770 105,078 2004C
Garfield Heights Tax Increment Financing/ $8,850,000 $7,850,000 88.70% 10.21% $885,000 09/30/04 05/15/23 5.250 816,538 2004D Special Assessment
Myers University Higher Education $5,725,000 $0 Bonds Redeemed in full on 9/23/2008 2004E
Goodyear Tire & Rubber Co. Development, manufacture & $4,125,000 $2,190,000 53.09% 2.85% $412,500 05/12/05 05/15/14 5.750 601,762.50 2005A distribution of tires
Fairmount Montessori Primary Education $3,375,000 $2,960,000 87.70% 3.85% $337,500 06/22/05 05/15/25 5.125 284,718.76 2005B
Avery Dennison Manufacture pressure-sensitive $6,000,000 $6,000,000 100.00% 7.81% $600,000 09/09/05 11/15/15 5.750 6,172,500.00 2005C materials & office products
Columbia National Steel Processing and servicing $6,020,000 $4,560,000 75.75% 5.93% $602,000 09/28/05 05/15/20 5.000 622,625.00 2005D
Cavaliers Practice Facility Sports entertainment $9,500,000 $8,645,000 91.00% 11.25% $950,000 12/12/06 05/15/26 6.250 905,781.25 2006A
City of Perrysburg Tax Increment Financing/ $5,060,000 $0 Bonds Redeemed in full on 11/15/2009 2006B Special Assessment
Brush Wellman Manufacturer of engineered $5,155,000 $4,965,000 96.31% 6.46% $515,500 06/25/08 05/15/23 7.250 627,625.00 2008A materials
City of Beachwood (Eaton Corp.) Tax Increment Financing/ $2,000,000 $2,000,000 100.00% 2.60% $200,000 09/24/09 11/15/20 6.000 296,300.00 2009A Minimum Payment
City of Cleveland Tax Increment Financing $2,520,000 $2,520,000 100.00% 3.28% $252,000 12/13/10 05/15/34 8.500 258,975.00 Forest Bay Tower City Project 2010A Minimum Payment
City of Cleveland - Flats Tax Increment Financing $8,800,000 $8,800,000 100.00% 11.45% $880,000 12/21/10 05/15/40 7.000 764,525.00 2010B Minimum Payment
Totals $126,960,000 $76,855,000 $10,209,498
AVAILABLE BOND RESERVES
Primary Reserve $10,209,498 13.28% Program Reserve - Cash 4,120,590 5.36% Program Reserve - OMA (1) 2,483,332 3.23% Program Reserve - LOC 9,000,000 11.71% Program Transfer (2) 117,689 0.15%
TOTAL $25,931,109 33.74%
(1) Ohio Manufacturer's Association pledge of $2,483,332 includes payments of $816,666 and $833,333. Third payment of $833,333 to be received in July of 2011. (2) Amount as of November 15, 2010.
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Summary of Bonds Issued and Total Reserves
The following table sets forth a summary of all Common Fund Bonds issued and those Common Fund Bonds currently outstanding under the Common Fund Bond program assuming the issuance of the Series 2010A Bonds and the Series 2010B Bonds. As of November 15, 2010, assuming the issuance of the Series 2010A Bonds and the Series 2010B Bonds, the amount on deposit in Common Fund Bond reserve funds equaled 33.74% of the total principal amount of Common Fund Bonds outstanding.
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 (1)
Total Bonds Issued as of January 1 Principal Amount $0 $3,795,000 $12,860,000 $19,570,000 $27,395,000 $33,335,000 $46,555,000 $50,805,000 $74,405,000 $93,925,000 $108,485,000 $108,485,000 $113,640,000 $115,640,000 Number of Loans 0 1 3 5 7 9 12 13 18 22 24 24 25 26
Outstanding Bonds as of January 1 Principal Amount $0 $3,795,000 $12,860,000 $19,235,000 $26,550,000 $31,615,000 $43,315,000 $44,720,000 $63,405,000 $76,490,000 $87,870,000 $84,105,000 $79,060,000 $67,485,000 Number of Loans 0 1 3 5 7 9 12 13 17 20 22 22 22 21
New Bonds Issued Principal Amount $3,795,000 $9,065,000 $6,710,000 $7,825,000 $5,940,000 $13,220,000 $4,250,000 $23,600,000 $19,520,000 $14,560,000 $0 $5,155,000 $2,000,000 $11,320,000 Number of Loans 1 2 2 2 2 3 1 5 4 2 0 1 1 2
Bonds Redeemed Prior to Maturity Principal Amount $6,790,000 Number of Loans 0 0 0 0 0 0 0 1 1 0 0 0 2 0
Bonds Matured Number of Loans 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Loan Defaults Outstanding Principal $5,725,000 Number of Loans 0 0 0 0 0 0 0 0 0 0 0 1 0 0
Net Liquidation Proceeds $3,093,000 Port Contribution $2,059,500 Primary Reserve Contribution $872,500 Program Reserve Contribution $0 Amount of Principal Prepaid $5,725,000
Outstanding Bonds as of December 31 Principal Amount $3,795,000 $12,860,000 $19,235,000 $26,550,000 $31,615,000 $43,315,000 $44,720,000 $63,405,000 $76,490,000 $87,870,000 $84,105,000 $79,060,000 $70,035,000 $76,855,000 Number of Loans 1 3 5 7 9 12 13 17 20 22 22 22 21 23
Total Reserves as of December 31 Primary Reserves $367,839 $1,273,612 $1,957,033 $2,766,918 $3,410,025 $4,668,910 $5,314,726 $7,421,585 $8,828,867 $10,400,065 $10,455,336 $10,431,744 $9,077,498 $10,209,498 Program Reserves (2) $4,000,000 $8,000,000 $8,000,000 $8,000,000 $8,000,000 $9,000,000 $9,000,000 $10,000,000 $13,000,000 $13,000,000 $13,000,000 $13,000,000 $13,000,000 $15,603,922 Program Reserve Earnings $6,536 $185,229 $118,394 $112,824 $222,529 $222,190 $222,045 $222,044 $222,817 $223,798 $223,118 $219,974 $130,404 $117,689 Total Reserves $4,374,375 $9,458,841 $10,075,427 $10,879,742 $11,632,554 $13,891,100 $14,536,771 $17,643,629 $22,051,684 $23,623,863 $23,678,454 $23,651,718 $22,207,902 $25,931,109
Reserves to Outstanding Bonds as of December 31 115.27% 73.55% 52.38% 40.98% 36.79% 32.07% 32.51% 27.83% 28.83% 26.89% 28.15% 29.92% 31.71% 33.74%
(1) As of November 15, 2010. (2) Ohio Manufacturer's Association pledge of $2,483,332 includes payments of $816,666 and $833,333. Third payment of $833,333 to be received in July of 2011.
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Debt Service Requirements on Outstanding Bonds
The total of all Common Fund Bonds currently outstanding, assuming the issuance of the Series 2010A Bonds and the Series 2010B Bonds, is $76,855,000. The following table sets forth the debt service requirements for all outstanding Common Fund Bonds as of November 15, 2010, assuming the issuance of the Series 2010A Bonds and the Series 2010B Bonds.
The Series 2010A Bonds (1) The Series 2010B Bonds (1) All Other Bond Schedule (1) All Bonds (1)
Principal Interest New Debt Principal Interest New Debt Principal Interest Total Total Year Due Due Service Due Due Service Due Due Debt Service Debt Service
2011 $0.00 $90,440.00 $90,440.00 $0.00 $554,400.00 $554,400.00 $4,550,000.00 $3,730,414.76 $8,280,414.76 $8,925,254.76 2012 35,000.00 214,200.00 249,200.00 0.00 616,000.00 616,000.00 4,845,000.00 3,464,327.28 $8,309,327.28 $9,174,527.28 2013 35,000.00 211,225.00 246,225.00 0.00 616,000.00 616,000.00 4,920,000.00 3,180,803.39 $8,100,803.39 $8,963,028.39 2014 40,000.00 208,250.00 248,250.00 55,000.00 616,000.00 671,000.00 5,200,000.00 2,890,236.41 $8,090,236.41 $9,009,486.41 2015 45,000.00 204,850.00 249,850.00 115,000.00 610,225.00 725,225.00 10,610,000.00 2,606,966.77 $13,216,966.77 $14,192,041.77 2016 50,000.00 201,025.00 251,025.00 125,000.00 602,000.00 727,000.00 4,650,000.00 1,993,239.15 $6,643,239.15 $7,621,264.15 2017 50,000.00 196,775.00 246,775.00 135,000.00 593,075.00 728,075.00 4,690,000.00 1,728,776.90 $6,418,776.90 $7,393,626.90 2018 55,000.00 192,525.00 247,525.00 145,000.00 583,450.00 728,450.00 4,600,000.00 1,455,614.76 $6,055,614.76 $7,031,589.76 2019 60,000.00 187,850.00 247,850.00 155,000.00 573,125.00 728,125.00 4,005,000.00 1,196,315.13 $5,201,315.13 $6,177,290.13 2020 65,000.00 182,750.00 247,750.00 165,000.00 562,100.00 727,100.00 3,855,000.00 972,922.01 $4,827,922.01 $5,802,772.01 2021 70,000.00 177,225.00 247,225.00 180,000.00 550,200.00 730,200.00 3,070,000.00 752,145.38 $3,822,145.38 $4,799,570.38 2022 80,000.00 171,275.00 251,275.00 195,000.00 537,425.00 732,425.00 3,425,000.00 547,587.26 $3,972,587.26 $4,956,287.26 2023 85,000.00 164,475.00 249,475.00 205,000.00 523,600.00 728,600.00 3,190,000.00 343,091.88 $3,533,091.88 $4,511,166.88 2024 95,000.00 157,250.00 252,250.00 225,000.00 508,900.00 733,900.00 1,240,000.00 213,959.38 $1,453,959.38 $2,440,109.38 2025 100,000.00 149,175.00 249,175.00 245,000.00 492,800.00 737,800.00 1,515,000.00 130,555.63 $1,645,555.63 $2,632,530.63 2026 110,000.00 140,675.00 250,675.00 260,000.00 475,300.00 735,300.00 670,000.00 52,755.00 $722,755.00 $1,708,730.00 2027 120,000.00 131,325.00 251,325.00 285,000.00 456,750.00 741,750.00 500,000.00 14,500.00 $514,500.00 $1,507,575.00 2028 135,000.00 121,125.00 256,125.00 305,000.00 436,450.00 741,450.00 0.00 0.00 $0.00 $997,575.00 2029 145,000.00 109,650.00 254,650.00 325,000.00 414,750.00 739,750.00 0.00 0.00 $0.00 $994,400.00 2030 155,000.00 97,325.00 252,325.00 350,000.00 391,650.00 741,650.00 0.00 0.00 $0.00 $993,975.00 2031 170,000.00 84,150.00 254,150.00 375,000.00 366,625.00 741,625.00 0.00 0.00 $0.00 $995,775.00 2032 185,000.00 69,700.00 254,700.00 405,000.00 339,850.00 744,850.00 0.00 0.00 $0.00 $999,550.00 2033 205,000.00 53,975.00 258,975.00 435,000.00 310,975.00 745,975.00 0.00 0.00 $0.00 $1,004,950.00 2034 430,000.00 36,550.00 466,550.00 470,000.00 280,000.00 750,000.00 0.00 0.00 $0.00 $1,216,550.00 2035 0.00 0.00 0.00 510,000.00 246,400.00 756,400.00 0.00 0.00 $0.00 $756,400.00 2036 0.00 0.00 0.00 540,000.00 210,175.00 750,175.00 0.00 0.00 $0.00 $750,175.00 2037 0.00 0.00 0.00 590,000.00 171,500.00 761,500.00 0.00 0.00 $0.00 $761,500.00 2038 0.00 0.00 0.00 630,000.00 129,500.00 759,500.00 0.00 0.00 $0.00 $759,500.00 2039 0.00 0.00 0.00 680,000.00 84,525.00 764,525.00 0.00 0.00 $0.00 $764,525.00 2040 0.00 0.00 0.00 695,000.00 24,325.00 719,325.00 0.00 0.00 $0.00 $719,325.00
TOTAL $2,520,000.00 $3,553,765.00 $6,073,765.00 $8,800,000.00 $12,878,075.00 $21,678,075.00 $65,535,000.00 $25,274,211.09 $90,809,211.09 $118,561,051.09
(1) As of November 15, 2010.
Priority of Application of Funds
Bond Financing Payments for each series of Common Fund Bonds are required or scheduled to be paid at times not later than and in amounts not less than all scheduled payments of principal of and interest on the related series of Common Fund Bonds; provided, that if a Contracting Party is a political subdivision or other public body (other than the Authority), the obligation to make Bond Financing Payments each year may be subject to (i) the governing body of the Contracting Party agreeing in its sole discretion to renew the applicable Agreement for such year and to appropriate amounts to pay Bond Financing Payments in such year, or (ii) receipt by the Contracting Party of certain tax increment revenues or special assessments from third parties.
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Generally, to the extent a Contracting Party defaults in the payment of any Bond Financing Payments, the defaulting Contracting Party's next due Bond Financing Payments are automatically increased by the amount of such failure.
All Bond Financing Payments are required to be transferred to the Bond Fund to the extent necessary to provide for payment of principal of and interest on all series of Common Fund Bonds. Thereafter, such payments are applied to restore other Common Funds for withdrawals made due to defaults in the payment of Bond Financing Payments. Thereafter, any remaining Bond Financing Payments are deposited in the Program Development Fund. The priority of the application of amounts from these Funds is briefly described in the following subsections. See ªTHE INDENTURE ± The Funds; Application; Withdrawal ± Application of Bond Financing Payments º herein. Additionally, if at any time amounts in the foregoing funds or accounts are insufficient to pay any payment or payments for principal of or interest on any Common Fund Bonds due within the following five (5) days, amounts are available to be drawn by the Trustee under the Program Reserve Letter of Credit (to the extent of any amounts then available) to pay such deficiency.
Interest Payment Account and Principal Payment Account
Upon receipt, Bond Financing Payments are collected in the Revenue Fund and thereupon transferred to the Bond Fund and deposited into the Interest Payment Account and Principal Payment Account, to the extent required to pay interest and principal due on all series of Common Fund Bonds on the next following Interest Payment Date or Principal Payment Date (assuming, in the case of Common Fund Bonds bearing a fixed rate of interest, equal monthly deposits thereafter prior to the next applicable Interest Payment Date or Principal Payment Date).
Primary Reserve Fund
No series of Common Fund Bonds may be issued unless at the time of issuance thereof the Bond Reserve Deposit is deposited in a separate account in the Primary Reserve Fund. In lieu of all, or any portion, of the cash deposit necessary to satisfy the Bond Reserve Deposit Requirement, the Authority has the right to accept or provide and hold to the credit of the applicable account in the Primary Reserve Fund any combination of the following: (a) letters of credit the issuers of which have capital and surplus of not less than $50,000,000 and have long term debt (or have parents with long term debt) rated by a Rating Service in not less than the third highest rating category or, if no such long term debt is rated, have short term debt (or have parents with short term debt) rated by a Rating Service in the highest rating category or is specifically acceptable to the Authority and, if the Common Fund Bonds are then rated by any Rating Service, by that Rating Service, (b) direct or guaranteed obligations of the United States, (c) surety bonds, guaranties or other credit enhancements issued by insurance companies as to which either (i) the Rating Services rating such issuer have stated that debt insured or enhanced by such insurer will be rated in not less than the second highest long term debt category, or (ii) such insurer is specifically approved by the Authority. In addition, if the Common Fund Bonds are rated by any Rating Service, any surety bonds, guaranties, or other credit enhancements used to satisfy the Bond Reserve Deposit Requirement must be rated not less than the second highest long-term debt category by that Rating Service. Additionally, as discussed above, any Bond Financing Payments that are not required to be deposited in the Bond Fund will be applied to restore amounts drawn from the Primary Reserve Fund Account of the Contracting Party making the Bond Financing Payments. Any Bond Reserve Deposit that is funded in cash or with government obligations shall be credited against the last Bond Financing Payments due under the applicable Agreement or Supplemental Indenture.
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Collateral Fund
A lien in favor of the Trustee (with such priority as the Authority may determine) to secure the payment of all Common Fund Bonds may, but need not, be placed on property financed in whole or in part with proceeds of Common Fund Bonds for the benefit of Bondholders. See ªTHE INDENTURE ± The Funds; Application, Withdrawal ± Collateral Fund º and APPENDIX A ± ªSUMMARY OF CLEVELAND-CUYAHOGA COUNTY PORT AUTHORITY BOND FUND PROGRAMº herein.
Any moneys, net of expenses, received from the foreclosure, sale or other disposition of any property providing security for the payment of Bond Financing Payments or Common Fund Bonds is required to be deposited in the Collateral Fund. Amounts therein may be applied to pay the redemption price of Common Fund Bonds or transferred to the Bond Fund in lieu of Bond Financing Payments not paid under the related Agreement.
Prepayment Account
The Prepayment Account is created in the Bond Fund. All prepayments of Bond Financing Payments and net proceeds received by the Trustee from the release of a portion of a Project, if such moneys are sufficient to redeem all outstanding Common Fund Bonds of the related series, are required to be deposited into the Prepayment Account and used either (i) to make principal and interest payments of such Common Fund Bonds, or (ii) to redeem such Common Fund Bonds. See ªTHE INDENTURE ± The Funds; Application; Withdrawal ± Prepayment Account of Bond Fund º herein.
Program Development Fund
Bond Financing Payments and earnings on all amounts in the Common Funds not required to be deposited in other Common Funds will be deposited in the Program Development Fund. On each June 1 and December 1 one-half of the moneys then on deposit in the Program Development Fund will, at the direction of the Authority, be paid to the Authority and may be used by the Authority for any lawful purpose; provided, however, that (i) if on any June 1 or December 1 the aggregate amount on deposit in the Primary Reserve Fund and the Program Reserve Fund is less than fifteen percent (15%) of the then outstanding principal amount of Common Fund Bonds, such transfer may not be made until such aggregate amount equals such fifteen percent (15%); (ii) if the Authority is not then in compliance with its agreements and obligations with respect to the Common Fund Bonds while all of such bonds are rated by any Rating Service (see ªISSUANCE OF ADDITIONAL COMMON FUND BONDSº herein), such transfer must be delayed until such time as the Authority is in compliance with such agreements and obligations; and (iii) the amount of any such transfer must be reduced by an amount equal to the amount of any then existing deficiency in the Primary Reserve Fund and the balance of that transfer may be made only at such time as the deficiency in the Primary Reserve Fund is eliminated.
Program Reserve Fund
The Program Reserve Fund consists of two accounts - the Authority Account and the Letter of Credit Account. These accounts provide a total of $15,603,922 in reserves. Pursuant to the terms of the Program Reserve Letter of Credit, moneys can be drawn from the Letter of Credit account only after moneys in the Authority Account (in addition to moneys then on deposit in the Bond Fund for the payment of Bond Service Charges on such series of Common Fund Bonds) are exhausted.
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Authority Account. Upon the issuance of the first series of Common Fund Bonds, the Authority deposited into the Authority Account of the Program Reserve Fund the sum of $2,000,000. Such amount was subsequently increased to $4,000,000 using grant moneys received from the State and was further increased to $6,603,922 through interest earnings on the initial deposits and through deposits made or to be made by the FirstEnergy Utilities (as defined below) as a result of the Funding Agreement (as defined below).
Pursuant to an Agreement (the ªFunding Agreementº) dated December 29, 2009 among the Ohio Manufacturers' Association (ªOMAº), the Authority, the Toledo-Lucas County Port Authority, the Summit County Port Authority (collectively the ªPortsº), and the Ohio Edison Company, The Cleveland Electric Illuminating Company, and The Toledo Edison Company (the ªFirstEnergy Utilitiesº), the FirstEnergy Utilities have agreed to contribute $2,483,333 to each of the three Ports for deposit into the program reserves of the Ports' bond fund programs (the ªBond Fund Programsº). The initial contribution to the Authority was made on January 13, 2010 in the amount of $816,666 and deposited into the Authority's Program Reserve Fund, and a subsequent deposit of $833,333 was made on July 1, 2010. A final deposit of $833,333 will be made by the FirstEnergy Utilities into the Authority's Program Reserve Fund on July 1, 2011. In addition, on January 13, 2010 the OMA received a payment of $50,000 to be used by it to market the Ports' Bond Fund Programs to its member manufacturing companies.
These deposits, which total $7,450,000 to the Ports (not including $50,000 paid to OMA to market the availability of loans from the Bond Fund Programs to its members) are being made pursuant to a Stipulation and Recommendation (the ªStipulationº) entered into between the FirstEnergy Utilities and OMA whereby the FirstEnergy Utilities agree to contribute a total of $25 million to various entities to support economic development and job retention activities in their service areas (which include the counties served by the Ports' Bond Fund Programs). As part of that effort, at least $7.5 million is required to be used for projects identified by the OMA, subject to financing criteria established for each of the Ports' Bond Fund Programs.
The FirstEnergy Utilities and OMA entered into the Funding Agreement after investigating various options for use of the $7.5 million committed by the FirstEnergy Utilities to economic development, concluding that contributions to the Ports' Bond Fund Programs, which expressly serve the economic development goals of the Stipulation, was the most effective way to leverage the aggregate $7.5 million of contributions. The OMA is a state-wide trade association representing Ohio's manufacturers, providing services that enable members to work together to create global competitive advantages and establishing opportunities for all Ohio business to succeed and prosper. The OMA will also be paid quarterly the investment income earned on the aggregate $7,450,000 deposited in the three Ports' Bond Fund Programs program reserves, and will use that income, together with the initial $50,000 paid to it, to market the availability of loans to manufacturers from the Ports' Bond Fund Programs.
Amounts withdrawn from the Program Reserve Fund due to a default in Bond Financing Payments are to be restored from Bond Financing Payments not required to be deposited in the Bond Fund or Primary Reserve Fund.
[Balance of Page Intentionally Left Blank]
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Letter of Credit Account. The Program Reserve Letter of Credit held within the Letter of Credit Account of the Program Reserve Fund is currently available in the amount of $9,000,000 and is available in one or more draws. If on any date on which a payment (or payments) of principal of or interest on any Common Fund Bonds is due there are insufficient amounts otherwise available therefor in the Bond Fund, the Primary Reserve Fund, the Program Development Fund, or amounts held in the Authority Account of the Program Reserve Fund or the Collateral Fund to make such payment or payments, amounts are available to be drawn under the Program Reserve Letter of Credit in the amount of the deficiency, or if less, the maximum amount then available under the Program Reserve Letter of Credit, for deposit in the Bond Fund. The amount of the Program Reserve Letter of Credit will be reduced by the amount of any draw and reinstated to the extent any prior amounts so drawn are repaid pursuant to the Reimbursement Agreement. The Program Reserve Letter of Credit currently expires on March 1, 2020, subject to possible two-year extensions unless the extensions are canceled by the Program Reserve Letter of Credit Bank or the Authority. A Successor Program Reserve Letter of Credit can be issued in substitution of an existing Program Reserve Letter of Credit at any time as described herein under the caption ªTHE PROGRAM RESERVE LETTER OF CREDIT.º
ISSUANCE OF ADDITIONAL COMMON FUND BONDS
Pursuant to the Basic Indenture, the Authority may, from time to time by adoption of a Supplemental Indenture, issue additional series of Common Fund Bonds on a parity basis with the Series 2010B Bonds, and any Common Fund Bonds theretofore or thereafter issued, payable from and secured by Bond Financing Payments and amounts in the Common Funds. No limitation is imposed under the Indenture as to the aggregate principal amount of any particular series of Common Fund Bonds or as to the aggregate principal amount of all series of Common Fund Bonds issued under the Indenture; however, no series of Common Fund Bonds may be issued unless the Trustee has received, among other things, evidence satisfactory to the Trustee that after issuance of any Common Fund Bonds the aggregate amount on deposit in the Primary Reserve Fund and the Program Reserve Fund will total not less than twenty-five percent (25%) of the outstanding principal amount of all Common Fund Bonds.
THE FINANCED PROJECT
General
The Authority is issuing the Series 2010B Bonds to provide funds to pay a portion of the costs of constructing, installing, improving, and equipping an approximately 476,000 square foot, 18-story office tower (the ªSeries 2010B Projectº) situated on an approximately 3-acre site (the ªSeries 2010B Project Siteº) located in the downtown area of the City of Cleveland, Ohio (the ªCityº and the ªSeries 2010B Contracting Partyº). The Authority will acquire certain parcels of real property, including the Series 2010B Project Site.
Public Funding for the Series 2010B Project
The Series 2010B Project is estimated to cost approximately $149 million.
In order to provide a portion of the balance of the funds necessary to finance the Series 2010B Project, (i) the Summit County Port Authority will issue $4,700,000 in aggregate principal amount of its Bond Fund Program Tax-Exempt Recovery Zone Facility Revenue Bonds, Series 2010B (City of Cleveland ± Flats East Development Project) (the ªSummit Port Bondsº), and (ii) the Director of Development of the State of Ohio (the ªDirectorº) will, on behalf of the State of Ohio (the ªStateº) make
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a loan to the Authority in the principal amount of $15,000,000 from the proceeds of $15,000,000 in aggregate principal amount of State Economic Development Revenue Bonds (Ohio Enterprise Bond Fund) Series 2010-12 (Flats East Development LLC Project) (Tax-Exempt Recovery Zone Facility Bonds) (the ªOEBF Bondsº).
In addition, the Authority expects to issue its First Mortgage Bonds, Series A-1 and First Mortgage Bonds, Series A-2 in an aggregate principal amount of $88,900,000, to finance a portion of the costs of the Series 2010B Project, the State will provide $5,000,000 in funding through a State Urban Redevelopment Loan, the State will provide $1,000,000 in funding through a State Rapid Outreach Grant, the Series 2010B Contracting Party will provide $13,291,969 in funding through a HUD 108 loan, and Flats East and FED/Main Street (collectively, the ªDeveloperº) will provide approximately $11,816,563 in equity to the Series 2010B Project in the form of cash, real property, and other contributions. Other development activity at the Series 2010B Project Site or in the vicinity of the TIF District (as defined herein) will be funded with other financings, including the Authority's First Mortgage Bonds, Series B to fund construction of an approximately 150-room hotel, the Authority's First Mortgage Bonds, Series C to fund construction of approximately 31,000 square feet of retail space, and the Authority's City of Cleveland, Ohio Appropriation Bonds, Series 2010 to fund acquisition by the Series 2010B Contracting Party of certain real property in the vicinity of the Series 2010B Project Site and the construction of new bulkhead improvements along the Cuyahoga River adjacent to the Series 2010B Project Site. Finally, an approximately 550-space parking garage will be constructed principally through $8,765,717 of funding of the Series 2010B Contracting Party's HUD 108 loan.
Closing on certain of the foregoing bond financings, loans, and grants is an express contingency for the issuance of the Series 2010B Bonds. Specifically, the Series 2010B Bonds may not be issued without the prior or simultaneous closing of the Summit Port Bonds, the OEBF Bonds, the State's State Urban Redevelopment Loan, the State's State Rapid Outreach Grant, the Series 2010B Contracting Party's HUD 108 loans, the Authority's First Mortgage Bonds, Series A-1, the Authority's First Mortgage Bonds, Series A-2, the Authority's First Mortgage Bonds, Series B, the Authority's First Mortgage Bonds, Series C, and the Authority's City of Cleveland, Ohio Appropriation Bonds, Series 2010.
The Series 2010B Bonds, the Summit Port Bonds, and the OEBF Bonds are each being issued to finance expenditures for the construction, reconstruction, renovation or acquisition of recovery zone property to be used in a qualified business in the recovery zone (the ªRecovery Zone Facility Bondsº). Pursuant to the American Recovery and Reinvestment Tax Act of 2009 (the ªStimulus Actº), the Series 2010B Contracting Party has received a Recovery Zone Facility Bond allocation in the amount of Twenty-Eight Million Five Hundred Thousand Dollars ($28,500,000) (the ªAllocationº). The City Council of the Series 2010B Contracting Party passed Ordinance No. 1384-09 on October 5, 2009, as amended by Ordinance No. 894-10, passed July 14, 2010, as amended by Ordinance No. 1181-10, passed September 27, 2010, as amended by Ordinance No. 1470-10, passed November 8, 2010 (collectively, the ªRecovery Zone Ordinanceº) designating the entire area of the City as a recovery zone and allocating its Allocation to the Series 2010B Project. Pursuant to the Recovery Zone Ordinance and a Cooperative Agreement (Recovery Zone Facility Bonds), dated as of December 1, 2010, by and among the Series 2010B Contracting Party, the State acting through the Treasurer and the Director, the Authority, the Summit County Port Authority, Flats East, and FED/Main Street, the Series 2010B Contracting Party has designated and authorized (i) the Authority as an eligible issuer of Recovery Zone Facility Bonds using up to $8,800,000 of the Allocation, (ii) the Summit County Port Authority as an eligible issuer of Recovery Zone Facility Bonds using up to $4,700,000 of the Allocation, and (iii) the Treasurer of the State of Ohio as an eligible issuer of Recovery Zone Facility Bonds using up to $15,000,000 of the Allocation.
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The Series 2010B Project
The Series 2010B Project is a portion of approximately $275 million of improvements located on and adjacent to the Series 2010B Project Site. Such improvements include the construction of a mixed-use development that will include an approximately 550-space public parking garage, an approximately 150- room hotel of a national hotel franchise, approximately 31,000 square feet of retail space, and public infrastructure improvements on and adjacent to the Series 2010B Project Site, including land, streets, utility infrastructure, recreational space, and surface parking.
The Series 2010B Project will be leased to an affiliate of the Developer, Flats East Office LLC (the ªLesseeº), pursuant to a lease dated as of December 1, 2010 (the ªLeaseº) between the Authority and the Lessee. The Developer and the Lessee will construct, install, improve, and equip the Series 2010B Project on the Series 2010B Project Site, including private and related improvements thereto pursuant to the Cooperative Agreement, the Lease, and a Construction Agency Agreement (the ªConstruction Agency Agreementº), dated as of December 1, 2010, between the Authority, the Developer, the Lessee, and the Trustee. The Series 2010B Project is expected to be completed on or before March 31, 2013.
Upon completion of the 476,000 leasable square feet comprising the Series 2010B Project, expected to occur on or before March 31, 2013, the Authority will lease the Series 2010B Project to Lessee pursuant to the Lease. It is expected that (i) Ernst & Young will lease approximately 144,000 square feet of the building under a ten-year lease, (ii) Tucker Ellis & West LLP law firm will lease approximately 108,000 square feet of the building under a twelve-year lease, and (iii) CB Richard Ellis real estate firm will lease approximately 17,000 square feet of the building under a ten-year lease. In addition, a portion of the Series 2010B Project will be leased under a master lease by Lessee, as lessor, to Flats East Master Lease LLC, an Ohio limited liability company, as lessee, and the obligations of Flats East Master Lease LLC to pay rent under the master lease will be jointly and severally guaranteed by the Individual Guarantors. Approximately 65.3% of the leasable space within the Series 2010B Project will be leased upon the commencement of the leases of Ernst & Young, Tucker Ellis & West LLP, CB Richard Ellis, and Flats East Master Lease LLC.
Pursuant to a Cooperative Agreement (the ªCooperative Agreementº), dated as of December 1, 2010, by and among the Authority, the Summit County Port Authority, the Series 2010B Contracting Party, Flats East, FED/Main Street, the State of Ohio (the ªStateº) acting through the Treasurer of the State (the ªTreasurerº) and the Director of the Ohio Department of Development (the ªDirectorº), the Trustee, and the Summit Port Trustee, the Authority has agreed to finance a portion of the costs of constructing, installing, improving, equipping, and financing the Series 2010B Project using (i) the proceeds of the Series 2010B Bonds, (ii) the proceeds of the Summit Port Bonds, and (iii) the proceeds of the OEBF Bonds. The Trustee will retain from the proceeds of the Series 2010B Bonds an amount not exceeding two percent (2%) to pay a portion of the issuance costs, the amount of the Bond Reserve Deposit, and certain capitalized interest amounts. The Summit Port Trustee will retain from the proceeds of the Summit Port Bonds an amount not exceeding two percent (2%) to pay a portion of the issuance costs, the amount of a bond reserve deposit, and certain capitalized interest amounts. The Huntington National Bank, as OEBF trustee, will retain from the proceeds of the OEBF Bonds an amount not exceeding two percent (2%) to pay a portion of the issuance costs, the amount of a bond reserve deposit, and certain capitalized interest amounts. The remaining proceeds of the Series 2010B Bonds, the Summit Port Bonds, and the OEBF Bonds will be deposited with The Huntington National Bank, as disbursing agent (the ªDisbursing Agentº) under a Disbursing and Payment Agreement (the ªDisbursing and Payment Agreementº), dated as of December 1, 2010, by and among the Authority; the Summit County Port Authority; the State acting through the Director; Flats East; FED/Main Street; the Trustee, as trustee for the Series 2010B Bonds; the Summit Port Trustee, as trustee for the Summit Port Bonds; the Trustee, as trustee for the OEBF Bonds; and the Trustee, as Disbursing Agent. The Disbursing Agent will apply the
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remaining proceeds of the Series 2010B Bonds, the Summit Port Bonds, and the OEBF Bonds to the payment of a portion of the costs of constructing, installing, improving, equipping, and financing the Series 2010B Project.
Security for Financing Payments
Financing Payments. The Authority is required by the Series 2010B Supplemental Indenture to make payments to the Trustee, but solely out of revenues assigned to the Authority by the Series 2010B Contracting Party in the Cooperative Agreement, in amounts sufficient to timely pay the scheduled Bond Service Charges and Administrative Amounts on the Series 2010B Bonds (collectively, the ªFinancing Paymentsº).
On October 5, 2009, the City Council of the Series 2010B Contracting Party passed Ordinance No. 1379-09 (the ªTIF Ordinanceº) declaring the increase in assessed value of approximately eighteen (18) acres within the City and including the Series 2010B Project Site (collectively, the ªTIF Districtº) to be a public purpose and exempting 100% of such increase for a period of up to 30 years (the ªTIF Exemptionº), beginning on October 9, 2009 and extending through October 8, 2039, first payable in collection year 2010 and extending through collection year 2040, all pursuant to Ohio Revised Code Sections 5709.41, 5709.42 and 5709.43 (the ªTIF Actº).
Service Payments and Minimum Payments. The Series 2010B Bonds, the Summit Port Bonds, and the OEBF Bonds will be secured on a parity basis by Service Payments (as defined herein) and Minimum Payments (as defined herein) paid by the Developer, as owner of real property within the TIF District.
The Developer is required under the Cooperative Agreement to make semiannual service payments in lieu of taxes resulting from the imposition by the Series 2010B Contracting Party of the TIF Exemption on the TIF District in an amount equal to the amount of real property taxes that the Developer would have paid on the increase in assessed value but for the TIF Exemption on the TIF District (the ªService Paymentsº).
The Developer, as owner of the real property comprising the TIF District, will execute and deliver a Mortgage and Declaration of Covenants and Conditions Relative to Service Payments In Lieu of Taxes (the ªDeclarationº), dated as of December 1, 2010. The Declaration will be recorded in the real property records of the County Recorder of Cuyahoga County, Ohio with respect to each parcel of real property comprising the TIF District in order to evidence the obligations of the Developer to make Service Payments. In addition, under the Declaration, the Developer, as owner of the real property comprising the TIF District, has agreed to make minimum payments (the ªMinimum Paymentsº) with respect to certain established market values for discrete portions of the TIF District. The Minimum Payment obligations are based on the established market values of (i) $109,100,000 for the Series 2010B Project, (ii) $17,680,000 for the hotel development in the TIF District, (iii) $6,750,000 for the retail development in the TIF District, and (iv) $36,208,000 for approximately fifteen (15) acres of remaining real property within the TIF District. Together, Service Payments and Minimum Payments to be paid by the Developer, as owner of each parcel of real property within the TIF District, are calculated to generate revenues in each year sufficient to cover 145% of the full amount due in such year of (i) the Bond Service Charges and Administrative Amounts to be paid on the Series 2010B Bonds in such year, (ii) the debt service charges and administrative amounts due on the Summit Port Bonds in such year, and (iii) the debt service charges and administrative amounts due on the OEBF Bonds in such year.
The Declaration distinguishes between ªPhase 1º parcels, which includes the Series 2010B Project Site on which the Series 2010B Project, the hotel development, and the retail development will be constructed, and ªPhase 2º parcels, which includes approximately fifteen (15) acres of real property
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within the TIF District. Under the Declaration, (i) the titleholder to each Phase 1 parcel is obligated to make scheduled escrow payments each month with respect to the Minimum Payments due on such parcel to the Disbursing Agent in advance of each semiannual real property tax collection date until the Series 2010B Bonds, the Summit Port Bonds, and the OEBF Bonds are paid in full, and (ii) the Developer is obligated to make scheduled escrow payments each month with respect to the Minimum Payments due on any Phase 2 parcel owned by the Developer to the Disbursing Agent in advance of each semiannual real property tax collection date until the Developer no longer owns such parcel. For each such titleholder, if the amount on deposit in the escrow account held by the Disbursing Agent as a result of Minimum Payments made with respect to its parcels is less than the real property taxes, assessments, and Service Payments due on its parcels for the next semiannual real property tax collection date, then the Minimum Payment obligation will require an increase in the final month's escrow payment before the next semiannual real property tax collection date to cover such deficiency. For each such titleholder, if the amount on deposit in the escrow account held by the Disbursing Agent as a result of Minimum Payments made with respect to its parcels is more than the real property taxes, assessments, and Service Payments due on its parcels for the next semiannual real property tax collection date, then the Disbursing Agent will retain the excess of any Minimum Payments over the real property taxes, assessments, and Service Payments due on such titleholder's parcels in the TIF Escrow Account and thereafter transfer such excess to the Service Payment Subaccount to be further distributed in accordance with the Disbursing Agreement.
Flats East, as owner of certain parcels of real property within the TIF District, may elect to release the Minimum Payment obligations from (i) Phase 2 parcels that Flats East dedicates to a governmental entity for use as public improvements, (ii) Phase 2 parcels that it conveys to unrelated third-parties as long as such conveyances do not exceed ten percent (10%) of the total square footage of the Phase 2 parcels, and (iii) Phase 2 parcels that it conveys or dedicates for residential condominium use as long as such conveyances or dedications do not exceed fifteen percent (15%) of the total square footage of the Phase 2 parcels; provided, that any Minimum Payment obligation so released will be reallocated among the remaining Phase 2 parcels owned by Flats East; provided, further, that no such release will reduce the aggregate Minimum Payment obligation attributable to Phase 2 as a whole. The obligations contained in the Declaration will be enforceable at law and in equity by the Trustee, the Summit Port Trustee, and the Disbursing Agent.
Application of Service Payments and Minimum Payments to Payment of Bond Service Charges and Administrative Amounts on the Series 2010B Bonds. Pursuant to the Disbursing Agreement, (i) the Disbursing Agent has agreed to pay real property taxes, assessments, and Service Payments out of the escrow account held by the Disbursing Agent as those payments become due, (ii) upon receipt of the Service Payments, the Series 2010B Contracting Party will assign a proportionate share of the Service Payments to the Authority, the Summit County Port Authority, and the Director, respectively, (iii) the Authority, the Summit County Port Authority, and the Director, respectively, will assign a proportionate share of the Service Payments to the Trustee, the Summit Port Trustee, and the trustee for the OEBF Bonds, respectively, and (iv) the Trustee, the Summit Port Trustee, and the trustee for the OEBF Bonds, respectively, will assign a proportionate share of the Service Payments to the Disbursing Agent for deposit into the Service Payment Subaccount created by the Disbursing Agreement.
The Disbursing Agent will disburse the Service Payments and Minimum Payments on deposit in the Service Payment Subaccount on a proportionate share basis (i) to the Trustee for payment of Bond Service Charges and Administrative Amounts on the Series 2010B Bonds on each May 15 and November 15, (ii) to the trustee for the Summit Port Bonds for payment of debt service charges and administrative amounts on the Summit Port Bonds on each May 15 and November 15, and (iii) to the trustee for the OEBF Bonds for payment of debt service charges and administrative amounts on the OEBF Bonds on each June 1 and December 1. Any amounts remaining on deposit in the Service Payment Subaccount
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following the foregoing payment dates will be transferred to the Excess TIF Revenue Subaccount created by the Disbursing Agreement and applied to pay debt service and administrative expenses then due on other bond financings, loans, and grants used to pay the costs of the Series 2010B Project and related infrastructure improvements in accordance with the priority set forth in the Disbursing Agreement.
Enforceability of Service Payment and Minimum Payment Obligations. Under the TIF Act, Service Payments that are due and owing constitute a lien against the real property from which they are derived. Upon a default in the payment of any Service Payments, the Series 2010B Contracting Party, in accordance with the Cooperative Agreement, will cause the lien for unpaid Service Payments to be enforced by the Treasurer of Cuyahoga County, Ohio. Under the Declaration, Minimum Payments that are due and owning are binding obligations running with the land enforceable at law and in equity by the Series 2010B Contracting Party, the Authority, the Summit County Port Authority, the Director, the Trustee, the Summit Port Trustee, and the Disbursing Agent against the titleholder of the real property from which they are derived. The Minimum Payment obligations (to the extent that they exceed the Service Payment obligations) do not benefit from the priority lien status accorded to regular Service Payment obligations under Ohio Revised Code Section 5709.91. However, the Minimum Payment obligations (to the extent that they exceed the Service Payment obligations) are secured by a mortgage contained in the Declaration and existing as a lien on the TIF District prior to any other mortgage on the TIF District.
The Developer
For purposes of this Official Statement, the Developer means, collectively, Flats East Development LLC (ªFlats Eastº), an Ohio limited liability company and FED/Main Street LLC (ªFED/Main Streetº), an Ohio limited liability company controlled by Flats East, each together with their permitted successors and assigns.
Flats East is a limited liability company formed under the laws of the State of Ohio. The equity ownership of Flats East consists of The Wolstein Group, LLC and Fairmount Flats LLC. The Wolstein Group, LLC is the managing member of Flats East and Fairmount Flats LLC is a member of Flats East.
Scott A. Wolstein and the Iris S. Wolstein Trust are the Class A Members of The Wolstein Group, LLC. The Wolstein Group, LLC is recognized nationally for its residential, commercial, and mixed-use development projects in the United States and abroad. Scott A. Wolstein is Executive Chairman of the Board of Developers Diversified Realty (DDR), a self-administered and self-managed real estate investment trust operating as a fully-integrated real estate company which acquires, develops, leases, and manages shopping centers. Scott A. Wolstein serves as President of Flats East. Iris S. Wolstein is a trustee of the Iris S. Wolstein Trust. Iris S. Wolstein is CEO of Heritage Development Company I, LLC, a full service real estate firm involved in residential, industrial, and commercial real estate projects across the United States.
Fairmount Properties LLC, sole member of Fairmount Flats LLC, is a national, multi-disciplined real estate enterprise, specializing in the development of high-quality districts and neighborhoods accented by new residential, office, hospitality, and entertainment uses.
FED/Main Street is a limited liability company formed under the laws of the State of Ohio. The equity ownership of FED/Main Street consists of Flats East and Main Street Parking LLC, a limited liability company formed under the laws of the State of Ohio. Flats East is the managing member of FED/Main Street.
The Guaranty
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Flats East and FED/Main Street will each execute and deliver an unconditional cognovit guaranty (the ªGuarantyº), dated as of December 1, 2010, for the benefit of the Authority, the Summit County Port Authority, the Director, the Trustee, and the Summit Port Trustee. The Guaranty will jointly and severally guarantee the obligations of Flats East and FED/Main Street to complete construction of the Series 2010B Project on or before November 30, 2013 in accordance with the Cooperative Agreement and the Construction Agency Agreement.
The Individual Guaranty
Scott A. Wolstein, Iris S. Wolstein, and the Iris S. Wolstein Trust (collectively, the ªIndividual Guarantorsº) will execute and deliver a guaranty (the ªIndividual Guarantyº), dated as of December 1, 2010, for the benefit of the Authority, the Summit County Port Authority, the Director, the Trustee, and the Summit Port Trustee. The Individual Guaranty will guarantee the obligations of the Developer to (i) complete environmental remediation of the TIF District; and (ii) make scheduled escrow payments to the Trustee each month to be applied toward the payment of Service Payments and Minimum Payments due on the TIF District. The Individual Guaranty will be released by its beneficiaries when certain conditions are met, including, without limitation, (i) the receipt by the Trustee of a certificate from the Developer evidencing completion of the Series 2010B Project; (ii) the issuance of a ªNo Further Actionº letter by a certified professional acting pursuant to the regulations of the Ohio Environmental Protection Agency with respect to the environmental remediation of the TIF District; and (iii) the valuation of the TIF District by the County Auditor of Cuyahoga County, Ohio with a market value of at least $169,738,000. The Individual Guaranty will also jointly and severally guarantee the obligations of the Individual Guarantors to pay debt service on the Authority's First Mortgage Bonds, Series A.
The Construction Contract
Gilbane Building Company (the ªContractorº), a Rhode Island corporation, as construction manager for the Developer for the construction of the Series 2010B Project, will execute and deliver a design build guaranteed maximum price contract (the ªConstruction Contractº), dated as of December 1, 2010, requiring the Contractor to complete construction of the Series 2010B Project in accordance with the construction plans and specifications for the Series 2010B Project at a specified cost. The Construction Contract will be executed by the Contractor and the Developer, as construction agent acting on behalf of the Authority.
Pledged Revenues and Covenants of the Series 2010B Contracting Party
The Bond Service Charges on the Series 2010B Bonds are payable solely from the Pledged Revenues, as defined and as provided in the Indenture, including the Financing Payments, and from any collateral that may from time to time be assigned to the Trustee to secure payment of Bond Service Charges, and are an obligation of the Authority only to the extent of the Pledged Revenues and any such collateral.
In satisfaction of its obligation to maintain the Bond Reserve Deposit, the Series 2010B Contracting Party will cause to be delivered to the Trustee a cash deposit out of the Series 2010B Bond proceeds in the amount of $880,000, which is equal to ten percent (10%) of the total principal amount of the Series 2010B Bonds issued, to be deposited in the Primary Reserve Fund.
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SOURCES AND USES OF FUNDS
Shown below is a summary of estimated sources and uses of funds in connection with the costs of the Series 2010B Project.∗
Sources of Funds
Series 2010B Bond Proceeds $8,800,000.00 Summit Port Bond Proceeds 4,700,000.00 OEBF Bond Proceeds 15,000,000.00 Equity to Fund Series 2010B Costs of Issuance in Excess of 2% 171,900.00 Equity to Fund Summit Port Bond and OEBF Bond Costs of Issuance In Excess of 2% 146,110.00 Developer Deposits for Series 2010B Bonds 150,000.00 Developer Deposits for Summit Port Bonds and OEBF Bonds 170,000.00 Original Issue Discount on OEBF Bonds (3,017.15)
Total Sources: $29,134,992.85
Uses of Funds
Series 2010B Project Costs $19,865,255.27 Estimated Capitalized Interest on Series 2010B Bonds 1,929,760.00 Estimated Capitalized Interest on Summit Port Bonds and OEBF Bonds 3,341,967.58 Bond Reserve Fund Deposit for Series 2010B Bonds 880,000.00 Summit Port Bond Reserve Deposit for Summit Port Bonds 470,000.00 OEBF Bond Reserve Fund Deposit for OEBF Bonds 1,500,000.00 Estimated Transaction and Closing Costs for Series 2010B Bonds∗∗ 497,900.00 Estimated Transaction and Closing Costs for Summit Port Bonds and OEBF Bonds 650,110.00
Total Uses: $29,134,992.85
THE AUTHORITY
The Authority is authorized under the Act to undertake activities that promote, among other things, industry, commerce, distribution, research and economic development. In connection with such activities, the Authority may, among other things, purchase, construct, equip, furnish, develop, improve, sell, lease and operate facilities and issue revenue bonds for such purposes. The Authority's Real Estate and Development Finance Group has primary administrative responsibility for the Authority's program for issuing Common Fund Bonds. The Real Estate and Development Finance Group has responsibility for originating and evaluating potential Projects to be financed with proceeds of Common Fund Bonds. The staff of the Authority will review acquisition, construction or installation progress of the Projects. The Trustee will be responsible for enforcing remedies, including, in the case of defaults under
∗ The total financing for the Series 2010B Project is approximately $275 million, funded by a consortium of public and private sources including bond financings, grants, loans, and equity, specifically including the Authority's First Mortgage Bonds, Series A (aggregating $88,900,000), a State Urban Redevelopment Loan (aggregating $5,000,000), a State Rapid Outreach Grant (aggregating $1,000,000), a HUD 108 loan from the Series 2010B Contracting Party (aggregating $30,000,000, of which $13,291,969 will be used for the Series 2010B Project), and approximately $11,816,563 in Developer equity in the form of cash, real property, and other contributions. Closing on certain of the foregoing bond financings, grants, and loans is an express contingency for issuance of the Series 2010B Bonds. ∗∗ Closing costs to be paid from Series 2010B Bond proceeds will not exceed two percent (2%) of the Series 2010B Bond proceeds.
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Agreements, foreclosure, management and sale of collateral. For further information regarding the Authority, see APPENDIX B ± ªCERTAIN AUTHORITY AND DEMOGRAPHIC INFORMATIONº herein.
The Series 2010B Bonds will not constitute or give rise to any pecuniary liability of the Authority, the Series 2010B Contracting Party, the County of Cuyahoga or the State of Ohio or a charge against their respective general credit or taxing powers. No Holder of any Series 2010B Bond will have the right to demand payment of the principal thereof or interest or any premium thereon out of any funds to be raised from taxation or from any sources of revenue other than those expressly pledged to the payment of Common Fund Bonds.
THE SERIES 2010B CONTRACTING PARTY
The City of Cleveland, Ohio is the Series 2010B Contracting Party. The Series 2010B Contracting Party is a municipal corporation, organized and existing under the laws of the State and its Charter, located in the County of Cuyahoga, Ohio. The City Council of the Series 2010B Contracting Party has passed legislation (i) establishing tax increment financing with respect to the TIF District, and (ii) establishing a recovery zone that includes the Series 2010B Project Site, and (iii) authorizing the use of its $28,500,000 Recovery Zone Facility Bond Allocation by (a) the Authority as an eligible issuer of Recovery Zone Facility Bonds using up to $8,800,000 of the Allocation, (b) the Summit County Port Authority as an eligible issuer of Recovery Zone Facility Bonds using up to $4,700,000 of the Allocation, and (c) the Treasurer of the State of Ohio as an eligible issuer of Recovery Zone Facility Bonds using up to $15,000,000 of the Allocation. See ªTHE FINANCED PROJECTº herein.
Notwithstanding anything to the contrary herein, the sole obligation of the Series 2010B Contracting Party under the Cooperative Agreement or agreements related thereto or with respect to the Series 2010B Bonds, the Summit Port Bonds, and the OEBF Bonds is limited to its obligation to pay the Service Payments and Minimum Payments to the Trustee if and when such Service Payments and Minimum Payments are received by the Series 2010B Contracting Party. The Series 2010B Contracting Party has no obligation to pay any amounts with respect to the Series 2010B Bonds, the Summit Port Bonds, and the OEBF Bonds or under the Cooperative Agreement or agreements related thereto from amounts other than those received from the Service Payments and Minimum Payments, and neither the full faith and credit nor taxing power of the Series 2010B Contracting Party is pledged or obligated to the payment of any amounts with respect to the Series 2010B Bonds or under the Cooperative Agreement or agreements related thereto.
THE INDENTURE
The following is a summary of certain provisions of the Basic Indenture. For discussion of additional provisions of the Indenture, see ªTHE OFFERED BONDS,º ªSECURITY AND FLOW OF FUNDSº and ªISSUANCE OF ADDITIONAL COMMON FUND BONDSº herein. This summary is qualified in its entirety by reference to the Indenture.
Pledge and Assignment
To secure the payment of principal of, interest and premium, if any, on of all Common Fund Bonds, pursuant to the Basic Indenture the Authority has assigned to the Trustee and its successors in trust all right, title and interest of the Authority in and to (i) the Pledged Revenues; (ii) on the occurrence of an Event of Default, the Agreements (except for the Unassigned Issuer's Rights); (iii) the Project Fund; and
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(iv) moneys and investments in the funds and accounts assigned by a Supplemental Indenture.
The Funds; Application; Withdrawal
Establishment of Funds. The Basic Indenture creates the following funds: (i) the Project Fund which includes a separate account for proceeds of each series of Common Fund Bonds and an Awards Account for the proceeds of any eminent domain award or casualty insurance payment, (ii) the Revenue Fund, (iii) the Bond Fund which includes the Interest Payment Account, Principal Payment Account, Level Payment Account, the Section 5.07 Account and the Prepayment Account, (iv) the Primary Reserve Fund, (v) the Program Reserve Fund, (vi) the Program Development Fund, (vii) the Excess Proceeds Fund, (viii) the Collateral Fund, (ix) the Rebate Fund, and (x) the Defeasance Fund (all of the foregoing collectively referred to herein as ªFundsº). All of the foregoing Funds are to be maintained in the custody of the Trustee. Except for the Revenue Fund, the Section 5.07 Account, the Program Reserve Fund and the Program Development Fund, and except as may be otherwise provided in a Supplemental Indenture, each Fund or account referenced above contains a separate account or sub-account relating to each series of Common Fund Bonds for which moneys are deposited in such Fund.
Project Fund. All proceeds of each series of Common Fund Bonds, except for any accrued interest and proceeds representing the Bond Reserve Deposit, are required under the Indenture to be deposited in a separate account in the Project Fund relating to the applicable series of Common Fund Bonds. Moneys on deposit in the accounts of the Project Fund shall be disbursed in accordance with the provisions of the related Agreement and used to pay Project costs, including any capitalized interest. Unless otherwise provided in the applicable Supplemental Indenture, upon completion of a Project and the payment of all costs and expenses incident thereto and receipt by the Trustee of a certificate of the Authority (made in reliance on a certificate of the applicable Contracting Party) stating, among other things, the date upon which the Project was substantially completed, the balance remaining in the related account in the Project Fund (except for amounts therein held to pay Project costs not yet payable), is to be used to (i) acquire, construct, install, equip, furnish, develop and improve additional real or personal property in connection with the Project; or (ii) purchase Common Fund Bonds of the related series in the open market for the purpose of cancellation; or (iii) redeem Common Fund Bonds of the related series; or (iv) pay debt service on the related series of Common Fund Bonds; or (v) any combination of the foregoing; provided, however, that the foregoing applications may be made only to the extent that such application would not cause the interest on any Common Fund Bonds which are Tax-Free Bonds to be included in the gross income of the holders for federal income tax purposes. If an Event of Default occurs under the applicable Agreement prior to completion of the related Project and moneys are undisbursed in the related account of the Project Fund, the Authority may, in its discretion, either use the funds to complete the Project or transfer the moneys to the Prepayment Account of the Bond Fund.
Application of Bond Financing Payments. All Bond Financing Payments are required to be deposited in the Revenue Fund and promptly thereafter transferred by the Trustee to the credit of the following funds in the following amounts and in the following order, subject to certain credits as set forth below; provided, however, that payments into the Bond Fund from the Revenue Fund for Common Fund Bonds bearing a variable interest rate are to be paid into the Bond Fund at the times and in the amounts set forth in the applicable Supplemental Indenture:
First, into the following accounts of the Bond Fund, after giving credit to any transfers from other Common Funds made into the Bond Fund prior to the next Interest Payment Date:
(a) into the Interest Payment Account, and after giving effect to any amounts on deposit therein and any amounts of capitalized interest available and intended to be used to pay interest on the next Interest Payment Date, an amount such that, if the same amount were paid in each of the following calendar
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months preceding the next Interest Payment Date, the aggregate of the amounts so paid would be sufficient to pay the interest due and payable on all outstanding Common Fund Bonds on that next Interest Payment Date;
(b) into the Principal Payment Account, beginning with the eleventh calendar month preceding each annual Principal Payment Date if principal is payable annually or beginning with the fifth calendar month preceding each Interest Payment Date if principal is payable semi-annually, and after giving effect to any amounts on deposit therein, an amount such that, if the same amount were paid in each of the calendar months preceding the next Principal Payment Date on which principal of or accreted interest (on capital appreciation bonds) on outstanding Common Fund Bonds matures or principal is subject to mandatory sinking fund redemption or is otherwise required by the terms of such Common Fund Bonds to be then paid, the aggregate of the amounts so paid would be sufficient to pay the principal amount of outstanding Common Fund Bonds and any accreted interest of any capital appreciation bonds so due on that next Principal Payment Date whether by maturity, mandatory sinking fund redemption or other required payment; and
(c) into the Level Payment Account the aggregate amount directed by the Supplemental Indentures for the particular due date of the Bond Financing Payments.
Deposits into the Bond Fund for any series of Common Fund Bonds will be discontinued when the account in the Primary Reserve Fund relating to that series has received and not disbursed for that series of Common Fund Bonds moneys sufficient to retire at or prior to maturity all of the Common Fund Bonds of that series and the amounts therein are thereupon transferred to the Prepayment Account in the Bond Fund and used solely for the purpose of retiring, by call for redemption or purchase on the open market, a principal amount of Common Fund Bonds equal to the outstanding principal amount of such series.
Second, into the Primary Reserve Fund an amount to restore amounts withdrawn from accounts therein in the inverse order in which such amounts were withdrawn, except that restoration of an account on which a draw has been made because of a Contracting Party's failure to pay in full the required Financing Payments will only be made from increased Financing Payments made by such Contracting Party.
Third, into the Program Reserve Fund an amount to restore amounts withdrawn therefrom and paid into the Interest Payment Account or Principal Payment Account in the Bond Fund.
Fourth, into the Collateral Fund and the accounts therein an amount to restore, in inverse order of withdrawal, amounts withdrawn therefrom and paid into the Interest Payment Account or Principal Payment Account in the Bond Fund to pay Bond Service Charges on Common Fund Bonds other than the Common Fund Bonds for which the accounts were created.
Fifth, into the Prepayment Account and the subaccounts thereof an aggregate amount to restore in inverse order in which such amounts were drawn amounts paid into the Interest Payment Account or Principal Payment Account in the Bond Fund.
Sixth, into the Program Development Fund on the day following the transfers required in that calendar month pursuant to the above specified paragraphs, the remaining amounts in the Revenue Fund.
Priority of Withdrawal. After November 16 but prior to December 1 of each year, there is to be paid to the related Contracting Party from each account in the Primary Reserve Fund the amount by which the then balance in that account (including investment earnings thereon) exceeds the Bond Reserve Deposit for the related series of Common Fund Bonds as of the immediately preceding November 16. In the
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event moneys in either the Interest Payment Account or Principal Payment Account are insufficient on any Interest Payment Date or Principal Payment Date to pay interest, principal and any accreted interest then due and payable, the Trustee is required under the Indenture to withdraw moneys from the Funds necessary to make up the deficiency, and to transfer such moneys to the applicable account of the Bond Fund, from the following accounts and Funds and in the following order:
First, from the account of the Primary Reserve Fund created at the issuance of and relating to the series of Common Fund Bonds for which Bond Financing Payments pursuant to the related Agreement have not been made or made in a reduced amount, a sum equal to the deficiency in the amount of Bond Financing Payments made but not exceeding the moneys in such account;
Second, from moneys then on deposit in the Program Development Fund, in an amount equal to any deficiency remaining after the transfer required as set forth above;
Third, from moneys then on deposit in the Program Reserve Fund and then, to the extent that such moneys are not sufficient, from moneys drawn under the Program Reserve Letter of Credit, in an amount equal to any deficiency remaining after all transfers required as set forth above;
Fourth, from moneys then on deposit in each account in the Collateral Fund pro rata to the amounts in each such account, in an amount equal to any deficiency remaining after all transfers required as set forth above;
Fifth, from moneys then on deposit in the remaining accounts in the Primary Reserve Fund, pro rata to the amounts in each such account, in an amount equal to any deficiency remaining after all transfers required above;
Sixth, pro rata to the amounts in each, from moneys then on deposit in all subaccounts of the Prepayment Account in the Bond Fund, except for moneys deposited therein and held for redemption of Common Fund Bonds for which notice of redemption has been given in an aggregate amount equal to any deficiency remaining after all transfers required as set forth above; and
Seventh, from moneys then on deposit in the Level Payment Account, an amount equal to any then remaining deficiency.
Prepayment Account of Bond Fund. Moneys received as the prepayment of Bond Financing Payments (exclusive of those portions thereof which are to be paid to the Authority for reimbursement of its administrative fees) are required to be deposited in a subaccount of the Prepayment Account established for the relevant series of Common Fund Bonds. If the Contracting Party has directed that the prepayment is a prepayment of only a specified portion of the Financing Payments and that Common Fund Bonds are not to be purchased or called for redemption or the amount received for release of a portion of a Project is not sufficient to purchase or call Common Fund Bonds for redemption, then such moneys are required to be held in the Prepayment Account and transferred to the Interest Payment Account and the Principal Payment Account in an amount and on the business day on which each prepaid Financing Payment (exclusive of Administrative Amounts) would have been paid. If no specification is given as to which Financing Payments have been prepaid, then the amount prepaid is required to be applied as a prepayment of Financing Payments in inverse order of their due date and transferred to the Interest Payment Account and Principal Payment Account accordingly. If the prepayment or the amount received for the release of a portion of the Project is in an amount sufficient (after paying the Administrative Amounts into the Revenue Fund) to permit the call for redemption of the outstanding Common Fund Bonds of the related series, then the Trustee will either purchase on the open market or call for redemption Common Fund Bonds selected by the Authority (which may, but need not be
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Common Fund Bonds of the related series) in a principal amount at least equal to the outstanding principal amount of the Common Fund Bonds of the related series for which prepayment has been made. The Trustee will withdraw from the Interest Payment Account and pay into the Prepayment Account an amount equal to the amount of interest paid into the Interest Payment Account since the then immediately preceding Interest Payment Date for the principal amount of the Common Fund Bonds of the related series equal to the principal amount of Common Fund Bonds then to be redeemed. In the event the interest payment on the Common Fund Bonds purchased or called for redemption is greater than the amount of interest payable on the outstanding Common Fund Bonds of the related Series, the Trustee is required to make the difference available from the Interest Payment Account. Any residual amounts remaining which are not sufficient to purchase or call Common Fund Bonds for redemption are required to be transferred to the Principal Payment Account for the related Common Fund Bonds and used on the next Principal Payment Date.
Collateral Fund. Any moneys realized from the foreclosure, sale or other disposition of any property providing security for the payment of Bond Financing Payments and/or the payment of principal of, premium, if any, and interest on any Common Fund Bonds are required to be deposited in an account of the Collateral Fund established for the relevant series of Common Fund Bonds. At the sole option of the Authority, the amount received from the foreclosure, sale or disposition of property providing security will be used to purchase on the open market or to call for redemption all outstanding Common Fund Bonds of the related series or a principal amount of any other series of Common Fund Bonds selected by the Authority or will be held in the Collateral Fund and transferred to pay principal of or interest on the Common Fund Bonds of the related series. If any amount remains after such purchase or redemption, that amount is required to be used first to restore (i) pro rata any unreimbursed amounts drawn from accounts in the Primary Reserve Fund, other than the related account, and (ii) any unreimbursed amounts drawn from the Program Reserve Fund to pay debt service on the related series secured by such property. Any moneys thereafter remaining are required to be deposited in the Program Development Fund.
Awards Account of Project Fund. If the moneys received by the Trustee resulting from damage or destruction of a Project or eminent domain awards relating to a Project are in an amount sufficient to redeem all outstanding Common Fund Bonds of the related series, then such moneys are required to be paid into the Prepayment Account in the Bond Fund and used for the purchase or redemption of Common Fund Bonds unless the Contracting Party has advised the Authority that the Project is to be rebuilt, in which event the moneys received are required to be deposited in the Awards Account in the Project Fund. If such moneys received by the Trustee are insufficient to redeem all outstanding Common Fund Bonds of the related series, then such moneys are required to be paid into the subaccount of the Awards Account established for the related series.
Excess Proceeds Fund. Excess moneys in an account of the Project Fund established for the relevant series of Common Fund Bonds are required to be transferred upon completion of the relevant Project from the Project Fund and deposited in an account of the Excess Proceeds Fund established for such series of Common Fund Bonds. Unless otherwise provided by the related Supplemental Indenture, moneys in such account of the Excess Proceeds Fund are required to be used either to purchase on the open market or to call for redemption Common Fund Bonds of the related series.
Primary Reserve Fund. The Indenture establishes a Primary Reserve Fund, and requires the establishment of a separate account for each series of Common Fund Bonds into which must be deposited cash or other acceptable obligations (see ªSECURITY AND FLOW OF FUNDS ± Primary Reserve Fundº herein) an amount equal to the Bond Reserve Deposit Requirement. At such time as the account for a series of Common Fund Bonds has credited to it an amount sufficient to retire (by redemption or purchase or at maturity) all of the Bonds of that series then outstanding, the amount in that account will, at the direction of the Authority, be transferred either to (i) the Prepayment Account in the Bond Fund if
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such Bonds are to be redeemed or purchased, (ii) to an account in the Defeasance Fund if such Bonds are to be defeased pursuant to the terms of the Indenture, or (iii) the Principal Account and Interest Account if such Bonds are to be retired at their maturity, and used for the purpose for which transferred.
Program Development Fund. On any June 1 or December 1, one-half of the moneys then on deposit in the Program Development Fund, except when required to be applied to payment of principal of or premium, if any, or interest on any Common Fund Bonds after the withdrawals as set forth under ªTHE INDENTURE -- Funds; Application; Withdrawal; Priority of Withdrawal,º may be transferred to the Authority and used for any lawful purposes; provided, however, that (i) if on any June 1 or December 1 the aggregate amount on deposit in the Primary Reserve Fund and the Program Reserve Fund is less than fifteen percent (15%) of the then outstanding principal amount of Common Fund Bonds, such transfer may not be made until such aggregate amount equals fifteen percent (15%) of the principal amount of outstanding Common Fund Bonds; (ii) if the Authority is not then in compliance with certain covenants under the Basic Indenture, as described in the first paragraph under ªISSUANCE OF ADDITIONAL COMMON FUND BONDS,º such transfer must be delayed until such time as the Authority is in compliance with those covenants; and (iii) the amount of any such transfer must be reduced by an amount equal to the then existing amount of any deficiency in the Primary Reserve Fund and the balance of that transfer may only be made at such time as the deficiency in the Primary Reserve Fund is eliminated.
Program Reserve Fund. Bond Financing Payments will be deposited into the Program Reserve Fund to restore amounts withdrawn and paid into the Interest Payment Account and Principal Payment Account in the Bond Fund. As of the closing date of the Series 2010B Bonds, there will be $6,603,922 in deposits, investments, and pledges in the Program Reserve Fund with an additional $9,000,000 available from the Program Reserve Letter of Credit.
Rebate Fund. All moneys required to be rebated to the United States Government pursuant to Section 148(f) of the Code relating to the Tax-Free Bonds are required to be credited to an account of the Rebate Fund established for the relevant series of Common Fund Bonds. Amounts in the Rebate Fund are not subject to the lien of the Indenture. If moneys in any account of the Rebate Fund are in excess of the amount necessary to satisfy Section 148(f) of the Code, such excess is to be paid to the Authority. If such moneys are less than the amount necessary to satisfy the requirements of Section 148(f) of the Code, such deficiency is required, after notice from the Trustee to the Authority, to be paid from the Program Development Fund.
Promise to Advance
Pursuant to the Basic Indenture, the Authority agrees to advance to the Trustee an amount of money from its non-tax revenues equal to so much of the Primary Reserve Fund of any Contracting Party which is subject to an order of the United States Bankruptcy Court with jurisdiction over the Contracting Party's bankruptcy proceeding to the effect that the Primary Reserve Fund held by the Trustee is property of the Debtor or part of the bankruptcy estate of the Contracting Party, if all of the Conditions to an Issuer Promise to Advance are met.
Once all of the Conditions to an Issuer Promise to Advance have occurred, the Authority shall within five (5) business days advance to the Trustee the sum of money subject to the order described above. The money advanced to the Trustee will be held in the Issuer Advance Fund. The Issuer Advance Fund will be held by the Trustee for the benefit of the Holders in the same manner as the Primary Reserve Fund for purposes of the Indenture. In the event that any monies transferred under the Conditions to an Issuer Promise to Advance are returned to the Trustee, such moneys shall be deposited into the Primary Reserve Fund and the Trustee will in turn pay a like sum of money to the Authority from the Issuer Advance Fund.
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Investment of Funds
Moneys in the Funds may be invested in the following (collectively, ªEligible Investmentsº):
(a) obligations (including stripped obligations the principal of and interest on which have been separated and offered for sale separately from each other) issued or guaranteed as to full and timely payment by the United States of America or by any legal entity or natural person controlled or supervised or acting as an instrumentality of the United States of America pursuant to authority granted by Congress;
(b) obligations issued or guaranteed by any state or political subdivision thereof (including stripped obligations the principal of and interest on which have been separated and offered for sale separately from each other) and long-term debt obligations of any other legal entity or natural person, which are rated by a Rating Service in the highest category if rated as short-term obligations or not lower than the third highest category if rated as long-term obligations by any Rating Services;
(c) commercial or finance paper which is rated, if S&P is then rating the Common Fund Bonds and rates such obligations, by S&P and otherwise by any Rating Service in its highest rating category;
(d) deposit accounts, bankers' acceptances, certificates of deposit or bearer deposit notes in one or more banks, trust companies or savings and loan associations (including, without limitation, the Trustee or any bank affiliated with the Trustee) organized under the laws of Canada or the United States of America or any state or province thereof, each bank or trust company having a reported capital and surplus of at least $100,000,000 in dollars of the United States of America and being insured by the Federal Deposit Insurance Corporation and each savings and loan association having a reported unimpaired capital and surplus, or retained income, as the case may be, of at least $100,000,000 in dollars of the United States of America and being insured by the Federal Deposit Insurance Corporation;
(e) investment agreements (which term shall not include repurchase agreements) with a bank or bank holding company or an insurance company rated, if S&P is then rating the Common Fund Bonds and rates such obligations, by S&P and otherwise by any Rating Service in at least the second highest rating category, without distinction as to number or symbol assigned within a category, if rated as long-term debt, and if rated as short-term debt, in the highest rating category;
(f) repurchase agreements with a financial institution (including the Trustee) insured by the Federal Deposit Insurance Corporation, or any broker or dealer (as defined in the Securities Exchange Act of 1934, as amended), that is a dealer in government bonds and that is recognized by, trades with and reports to, a Federal Reserve Bank as a primary dealer in government securities, provided in any case (i) the collateral for the repurchase agreement is described in paragraph (a) above, (ii) the current market value of the collateral securing the repurchase agreement is at least equal to the amount of the repurchase agreement and is determined not less frequently than monthly, (iii) the Trustee, or an agent acting solely on its behalf, has possession of the collateral, (iv) the Trustee has a priority perfected security interest in the collateral, and (v) the collateral is free and clear of any third-party claims; provided that, the Trustee may rely on the certificate of its agent as to possession, priority of the security interest and absence of third-party claims; and
(g) investments in money market funds which are principally composed of obligations described in either paragraph (a) or (b) above.
Investments of moneys in the Bond Fund, the Primary Reserve Fund, the Program Reserve Fund, the Program Development Fund and the Collateral Fund must mature or be redeemable at the times and in the
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amounts necessary to provide moneys to pay the principal, premium or interest of the Common Fund Bonds as they become due at stated maturity or by redemption. Each investment of moneys in the Project Fund must mature or be redeemable at such time as may be necessary to make payments from the Project Fund.
An investment made from moneys credited to a fund will constitute part of that respective fund and of the account or subaccount therein to which the moneys invested were credited. Investment earnings, when realized and net of any losses, on all of the funds and the accounts and subaccounts therein, except for the Project Fund, the Bond Fund, and the Primary Reserve Fund are required when realized to be deposited in the Revenue Fund. Unless otherwise provided in the Supplemental Indenture creating an account, investment earnings on the Project Fund, the Bond Fund and the Primary Reserve Fund are required to be credited to the fund and the account therein to which the moneys invested were credited. Investment earnings on the Prepayment Account are required to be credited to that account and the subaccount therein to which the moneys invested were credited. The value of obligations maturing within twenty-four months in which moneys of any fund are invested is computed at the cost thereof with any premium or discount amortized over the period to the maturity of such obligations.
Nonpresentment of Common Fund Bonds
If a Common Fund Bond is not presented for payment when due or an interest payment check or draft is uncashed, and if moneys for the purpose of paying and sufficient to pay that amount have been made available to the Trustee, all liability of the Authority to the Holder for the payment will thereupon cease and be completely discharged. There is a separate subaccount in the Section 5.07 Account created under the Indenture (which account is not a Special Fund) for the exclusive benefit of the Holder of the relevant Common Fund Bond. Moneys so held by the Trustee, and which remain unclaimed for four years after the due date thereof is required to be paid to the Authority free of any trust or lien, and thereafter the Holder of that Common Fund Bond may look only to the Authority for payment and then only to the amounts so received by the Authority without any interest thereon, and the Trustee will have no responsibility with respect to those moneys.
Events of Default
Each of the following constitutes an ªEvent of Defaultº under the Indenture:
(a) failure to pay interest on any Common Fund Bond when due and payable;
(b) failure to pay principal of or any premium on any Common Fund Bond when due and payable, whether at stated maturity, by redemption, pursuant to any mandatory sinking fund requirements, by acceleration or otherwise; and
(c) failure by the Authority to observe or perform any other covenant, agreement or obligation on its part to be observed or performed contained in the Indenture or in any Common Fund Bonds, which failure has continued for a period of 60 days after written notice, by registered or certified mail, to the Authority and, if the failure is a result of a Contracting Party being in default under its respective Agreement, then also to that Contracting Party, specifying the failure and requiring that it be remedied, which notice may be given by the Trustee in its discretion and is required to be given by the Trustee at the written request of the Holders of not less than twenty-five percent (25%) in aggregate principal amount of Common Fund Bonds then outstanding.
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Notice of Default
If an Event of Default occurs with respect to the payment of principal of or premium or interest on any Common Fund Bond, the Trustee is required to give written notice of the Event of Default to the Authority, the registrar, any paying agent and authenticating agent, any Rating Service then rating any series of Common Fund Bonds and the original purchaser of each series, within 5 days after the Trustee has knowledge of the Event of Default. If an Event of Default occurs otherwise of which the Trustee has notice, the Trustee is required to give written notice thereof within 30 days after the Trustee's receipt of notice of its occurrence, to the original purchaser of each series, any Rating Service then rating any series of Common Fund Bonds and the Holders of all Common Fund Bonds then outstanding as shown on the register for the Common Fund Bonds at the close of business 15 days prior to the mailing of that notice; provided that except in the case of a default in the payment of the principal of or premium or interest on any Common Fund Bond or in the payment of any mandatory sinking fund redemption requirement, the Trustee will be protected in withholding such notice if its board of directors, executive committee or a trust committee of directors or other responsible officers of the Trustee in good faith determines that the withholding of notice to the Holders is in the interests of the Holders.
Remedies; Acceleration
In the event principal of or premium, if any, or interest on Common Fund Bonds is not paid when due, the Trustee may, and upon written request of Holders of not less than a majority in aggregate principal amount of the outstanding Common Fund Bonds is required to declare by a notice in writing delivered to the Authority the principal of all Common Fund Bonds then outstanding and the interest accrued thereon to be due and payable immediately unless otherwise provided in the related Supplemental Indenture. Unless otherwise provided in the related Supplemental Indenture, upon the failure of a Contracting Party to pay in full any Financing Payment the Trustee may declare, and upon written request of the Holders of not less than twenty-five percent (25%) in aggregate principal amount of outstanding Common Fund Bonds of the series as to which the Financing Payment was not made, the Trustee is required to declare by a notice in writing delivered to the Authority the principal and accrued interest of the applicable series to be immediately due and payable; provided that no such notice of acceleration may be given unless there is then on deposit with the Trustee sufficient moneys in the accounts in the Primary Reserve Fund and Collateral Fund and the subaccount in the Prepayment Account, Interest Payment Account and Principal Payment Account of the Bond Fund for the applicable series to pay in full the principal of and interest on such series on the date selected by the Trustee for tender of payment. Notwithstanding the foregoing, if at any time after declaration of acceleration and prior to the entry of a judgment in a court for enforcement under the Indenture (after an opportunity for hearing by the Authority), (i) all amounts required under the Indenture to cure such default (plus interest to the extent permitted by law) shall have been duly paid or provision shall have been duly made for such payment and (ii) all other Events of Default for the applicable series shall have been cured, then the Event of Default will be considered waived and the declaration of acceleration shall be automatically rescinded and annulled.
Other Remedies
Upon the occurrence and continuation of an Event of Default, the Trustee may, and upon request to do so by Holders of at least twenty-five percent (25%) in aggregate principal amount of Common Fund Bonds outstanding, is required to pursue any available remedy to enforce the payment of principal, premium and interest or the observance and performance of any other covenant, agreement or obligation under the Indenture, any Agreement or other instrument securing such Common Fund Bonds; and may
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exercise any remedy provided to it in any Agreement or other instrument providing security for the Common Fund Bonds.
All remedies conferred upon the Trustee under the Indenture are cumulative. No waiver of any default or Event of Default under the Indenture shall extend to or affect any subsequent default or Event of Default or impair any right or power consequent thereto.
Rights of Holders
The Holders of a majority in aggregate principal amount of outstanding Common Fund Bonds have the right at any time by written instrument delivered to the Trustee, to direct the method and place of conducting any and all remedial proceedings under the Indenture, provided that the direction is in accordance with the provisions of law and of the Indenture and the Trustee is indemnified to its satisfaction.
Holders of any Common Fund Bonds are not entitled to enforce the provisions of the Indenture or to institute any suit, action or proceeding for the enforcement of the Indenture unless (i) there has occurred an Event of Default of which the Trustee has been notified; (ii) the Holders of not less than twenty-five percent (25%) in outstanding principal amount of Common Fund Bonds shall have made written request to the Trustee to proceed with the exercise of remedies under the Indenture; (iii) the Trustee thereafter fails or refuses to exercise such remedies; and (iv) if acceleration of principal of any Common Fund Bonds is requested, then the requirements set forth in the first sentence under the caption ªTHE INDENTURE - Remedies; Accelerationº shall be satisfied.
Application of Moneys
After payment of any costs, expenses, liabilities and advances paid, incurred or made by the Trustee in the collection of moneys pursuant to any right given or action taken under the provisions of the Indenture or any Agreement or other document securing the Common Fund Bonds (including without limitation, reasonable attorneys' fees and expenses, except as limited by law or judicial order or decision), all moneys received by the Trustee are required to be applied as follows, subject to certain provisions of the Indenture relating to payment of Common Fund Bonds for which notice of redemption shall have been duly given and moneys held for Common Fund Bonds the payment of principal or interest which shall have been theretofore due and payable:
(a) Unless the principal of all of the Common Fund Bonds shall have become, or shall have been declared to be, due and payable, all of those moneys shall be deposited in the Bond Fund and shall be applied:
First -- To the payment to the Holders entitled thereto of all installments of interest then due on the series of Common Fund Bonds as to which an Event of Default has occurred including the amount of interest accreted on Capital Appreciation Bonds (as defined in the Indenture) to the immediately preceding Interest Payment Date, in the order of the dates of maturity or accretion of the installments of that interest, treating Capital Appreciation Bonds as if interest was payable on each Interest Payment Date, beginning with the earliest date of maturity and, if the amount available is not sufficient to pay in full any particular installment, then to the payment thereof ratably, according to the amounts due on that installment, to the Holders entitled thereto, without any discrimination or privilege, except as to any difference in the respective rates of interest specified in the Common Fund Bonds of that series; and
Second -- To the payment to the Holders entitled thereto of the unpaid principal of any of the Common Fund Bonds of those series (as to which an Event of Default has occurred) which shall have
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become due (other than Common Fund Bonds of those series previously called for redemption for the payment of which moneys are held pursuant to the provisions of the Indenture), whether at stated maturity, by redemption or pursuant to any mandatory sinking fund requirements, in the order of their due dates, beginning with the earliest due date, with interest on those unpaid principal amounts from the respective dates upon which they became due at the rates specified in the respective Common Fund Bonds, and if the amount available is not sufficient to pay in full all Common Fund Bonds due on any particular date, together with that interest, then to the payment thereof ratably, according to the amounts of principal due on that date, to the Holders entitled thereto, without any discrimination or privilege, except as to any difference in the respective rates of interest specified in the respective Common Fund Bonds.
(b) If the principal of all of the Common Fund Bonds shall have become due or shall have been declared to be due and payable pursuant to the Indenture, all of those moneys are required to be deposited into the Bond Fund and applied to the payment of the principal and interest then due and unpaid upon the Common Fund Bonds, treating interest accreted on Capital Appreciation Bonds to the immediately preceding Interest Payment Date as being then due and unpaid, without preference or priority of principal over interest, of interest over principal, of any installment of interest over any other installment of interest, or of any Common Fund Bond over any other Common Fund Bond, ratably, according to the amounts due respectively for principal and interest, to the Holders entitled thereto, without any discrimination or privilege, except as to any difference in the respective rates of interest specified in the Common Fund Bonds.
(c) If the principal of all of the Common Fund Bonds shall have been declared to be due and payable pursuant to the Indenture, and if that declaration thereafter shall have been rescinded and annulled, subject to the provisions of paragraph (b) above, in the event that the principal of all of the Common Fund Bonds shall become due and payable later, the moneys are required to be deposited in the Bond Fund and be applied in accordance with the provisions of the Indenture.
(d) Whenever the Trustee directs the application of those moneys, it will fix the date upon which the application is to be made, and upon that date, interest will cease to accrue on the amounts of principal, if any, to be paid on that date, provided that the moneys are available therefor. The Trustee is required to give notice of the deposit with it of any moneys and of the fixing of that date, all consistent with the requirements of the Indenture.
Defeasance
If there is paid all principal, premium and interest due or to become due on all outstanding Common Fund Bonds, and provision is made for paying all other sums payable under the Indenture by the Authority, then the Indenture will become null and void, and the covenants, agreements and other obligations of the Authority thereunder will be discharged and satisfied.
All or any part of the Common Fund Bonds will be deemed to have been paid for the purposes of defeasance if:
(a) if the Common Fund Bonds affected are Tax-Free Bonds, the Trustee has received an opinion of nationally recognized bond counsel that the procedure proposed to be followed will not adversely affect for federal income tax purposes the exclusion from gross income of interest paid on Tax-Free Bonds; and
(b) in the case of any affected Bonds, (i) the Trustee holds, in trust for and irrevocably committed thereto, sufficient moneys; or (ii) the Trustee holds, in trust for and irrevocably committed thereto, Defeasance Obligations certified by an independent public accounting firm of national reputation to be of
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such maturities and interest payment dates and to bear such interest as will, without further investment or reinvestment of either the principal or the interest earnings, be sufficient, together with moneys referred to in (i) above, for the payment, at the maturity or redemption date of all principal, premium and interest thereon to the date of maturity or redemption, as the case may be, or if default in that payment shall have occurred on such date, then to the date of the tender of that payment; provided that if any Common Fund Bonds are to be redeemed prior to their maturity, notice of that redemption has been given or provisions satisfactory to the Trustee have been made for the giving of that notice. Any funds held in connection with such defeasance are required to be invested only in Defeasance Obligations the maturity or redemption dates of which, at the option of the Holder, shall be not later than the time or times at which those moneys will be required for the purposes for which they are held.
The Trustee
The Trustee under the Indenture is The Huntington National Bank with its principal corporate trust office in Cleveland, Ohio. The Indenture provides that prior to the occurrence of any Event of Default under the Indenture and after the curing of all Events of Default that have occurred, the Trustee is required to perform only such duties as are specifically set forth in the Indenture. During the existence of an Event of Default, the Trustee is required to exercise such of the rights and powers vested in it under the Indenture and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under those circumstances in the conduct of its own affairs.
In the absence of bad faith on its part, the Trustee may rely conclusively as to the truth and accuracy of any statements and any opinions expressed therein and upon certain certificates and opinions furnished to the Trustee and may also rely on any directions of Holders of not less than a majority of the aggregate amount of Common Fund Bonds in exercising its duties under the Indenture. The Trustee is not responsible for the sufficiency of any security and is not otherwise liable to the Holders except for its own negligent action, negligent failure to act or own willful misconduct.
So long as an Event of Default does not exist, the Authority may, at its sole determination, transfer from the Trustee to the Authority all or part of the duties, obligations, rights, functions and performances imposed on the Trustee by the Indenture with respect to the Special Funds, other than the Bond Fund. Under the conditions set forth in the Indenture, a successor Trustee or Trustees may be appointed who is a trust company or bank with reported capital and surplus of not less than $50,000,000.
Supplemental Indentures; Modifications and Amendments
A Supplemental Indenture is to be entered into in connection with the issuance of each series of Common Fund Bonds, which is required to provide, among other things, the form of the applicable Common Fund Bonds.
Supplemental Indentures, other than those described in the next succeeding paragraph, which modify, alter, amend, add to or rescind in particular any of the terms or provisions of the Indenture, require the consent and approval of the owners of not less than a majority of the aggregate principal amount of either the Common Fund Bonds at the time outstanding or, if affecting less than all of the outstanding Common Fund Bonds, of the series affected (and with the consent of the applicable Contracting Parties if required by the Indenture), except that (i) an extension of the maturity of any Common Fund Bonds, or a reduction in any Common Fund Bonds principal amount, rate of interest or redemption premium, or a reduction in the amount or extension of the time of any payment required by any mandatory sinking fund requirements, will require the consent of the Holder of each Common Fund Bond so affected, and (ii) the creation of a privilege or priority of any Common Fund Bond or Common Fund Bonds over any other Common Fund Bond or Common Fund Bonds or a reduction in the aggregate principal amount of the
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Common Fund Bonds required for consent to a Supplemental Indenture, will require the consent of all Holders of all Common Fund Bonds then outstanding.
Without consent of or notice to any Holders of Common Fund Bonds, the Authority and the Trustee may enter into Supplemental Indentures for any one or more of the following purposes:
(a) to cure any ambiguity, inconsistency or formal defect or omission in the Indenture;
(b) to grant to or confer upon the Trustee for the benefit of the Holders any additional rights, remedies, powers or authority that lawfully may be granted to or conferred upon the Holders or the Trustee;
(c) to assign additional revenues under the Indenture;
(d) to accept additional security and instruments and documents of further assurance with respect to a Project;
(e) to add to the covenants, agreements and obligations of the Authority under the Indenture, other covenants, agreements and obligations to be observed for the protection of the Holders, or to surrender or limit any right, power or authority reserved to or conferred upon the Authority in the Indenture;
(f) to evidence any succession to the Authority and the assumption by its successor of the covenants, agreements and obligations of the Authority under the Indenture, the Agreements and the Common Fund Bonds;
(g) to make necessary or advisable amendments or additions in connection with the issuance of a series of Common Fund Bonds pursuant to and upon the conditions provided for in the Basic Indenture;
(h) to permit the exchange of Common Fund Bonds, at the option of the Holder or Holders thereof for coupon bonds of the same series payable to bearer, in an aggregate principal amount not exceeding the unmatured and unredeemed principal amount of the exchanged Common Fund Bonds, bearing interest at the same rate or rates and maturing on the same date or dates, with coupons attached representing all unpaid interest due or to become due thereon if in the opinion of Bond Counsel the exchange thereof would not result in interest on any Tax-Free Bond being included in the gross income of the Holders thereof;
(i) to permit the use of a book-entry system to identify the owner of an interest in an obligation issued by the Authority;
(j) to permit the Trustee to comply with any obligations imposed upon it by law;
(k) to further specify the duties and responsibilities of the Trustee, the Registrar and any Authenticating Agents or Paying Agents;
(1) to achieve compliance of the Indenture with any applicable federal securities or tax law;
(m) to make amendments to the provisions of the Indenture relating to arbitrage matters with respect to any Tax-Free Bonds under Section 148 of the Code, if such amendments would not cause the interest on Tax-Free Bonds outstanding to be included in gross income of the Holders thereof for federal income tax purposes;
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(n) to obtain or maintain a rating from a Rating Service; and
(o) to permit any other amendment which, in the judgment of the Trustee, is not to the prejudice of the Trustee or the Holders.
Meetings of Holders
A meeting of Holders of all Common Fund Bonds or of Holders of any particular series, may be called at any time and from time to time pursuant to the provisions of the Indenture, to take any action which is authorized to be taken by or on behalf of the Holders of any specified aggregate principal amount of Common Fund Bonds or of a particular series of Common Fund Bonds, or which is otherwise authorized or permitted by law. Provisions with respect to the time, notice of meeting, and place therefor, including provisions with respect to who is entitled to cast a vote, are set forth in the Indenture.
THE PROGRAM RESERVE LETTER OF CREDIT
Program Reserve Letter of Credit
The Program Reserve Letter of Credit in the amount of $9,000,000 has been deposited into the Letter of Credit Account of the Program Reserve Fund. If, on any date on which a payment or payments of principal of or interest on any Common Fund Bonds is due there are insufficient amounts otherwise available therefor in the Common Funds, amounts are available to be drawn by the Trustee under the Program Reserve Letter of Credit in the amount of the deficiency, or if less, the maximum amount then available under the Program Reserve Letter of Credit, for payment of principal of or interest on Bonds. Pursuant to its terms, the Program Reserve Letter of Credit currently expires on March 1, 2020, provided that on March 1, 2012 and March 1 every two years thereafter (each, an ªExtension Dateº), the duration of the Program Reserve Letter of Credit is automatically extended by an additional two years, unless thirty (30) days prior to each applicable Extension Date the Program Reserve Letter of Credit Bank delivers written notice to the Authority and the Trustee that the automatic extension is canceled or the Authority delivers written notice of such cancellation to the Program Reserve Letter of Credit Bank and the Trustee.
The face amount available to be drawn under the Program Reserve Letter of Credit is $9,000,000, but such amount will be decreased to the extent of any draws under the Program Reserve Letter of Credit and reinstated to the extent amounts so drawn are repaid to the Program Reserve Letter of Credit Bank.
Without notice to any Holders, a Successor Letter of Credit can be issued in substitution of an existing Program Reserve Letter of Credit at any time upon notice from the Authority to the existing Program Reserve Letter of Credit Bank and Trustee. A Successor Letter of Credit must contain substantially the same terms as the existing Program Reserve Letter of Credit (with any differences therein being those which the Trustee determines are not to the detriment of the Trustee or the Holders); provided that the Trustee shall have received a letter from each Rating Service then rating Common Fund Bonds at the request of the Authority that such substitution will not result in a suspension, removal or reduction of the existing rating on the Common Fund Bonds.
The Reimbursement Agreement
Pursuant to the Reimbursement Agreement, upon issuance of any series of Common Fund Bonds secured by the Program Reserve Letter of Credit, the Program Reserve Letter of Credit Bank is to be paid a fee of $1,500. Additionally, the Authority is required to pay the Program Reserve Letter of Credit Bank
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annual fees equal to two percent (2%) of the stated amount of the Program Reserve Letter of Credit in four equal quarterly payments. The Authority is also required to reimburse the Program Reserve Letter of Credit Bank for amounts drawn under the Program Reserve Letter of Credit, but solely from amounts realized from Collateral and moneys in the Program Development Fund available for transfer to the Authority. Amounts drawn under the Program Reserve Letter of Credit will bear interest at the rate of five percent (5%) above the LIBOR rate. The Indenture provides that, to the extent that moneys are drawn under the Program Reserve Letter of Credit and the Program Reserve Letter of Credit Bank has not been reimbursed for such drawing from the sources described above, the Trustee is required to take any action with respect to the property providing security for the Financing Payments and/or the payment of any Bond Service Charges with respect to a particular series of Common Fund Bonds, including foreclosure, sale or other disposition of such property, as is directed in writing by the Program Reserve Letter of Credit Bank.
Program Reserve Letter of Credit Bank
The Program Reserve Letter of Credit Bank is Fifth Third Bank and is subject to substitution if a Successor Program Reserve Letter of Credit is issued as discussed above. The Program Reserve Letter of Credit Bank has its principal office in Cincinnati, Ohio. It is wholly-owned by The Fifth Third Corporation, which is one of the largest bank holding companies headquartered in the State. The Program Reserve Letter of Credit is an obligation of the Program Reserve Letter of Credit Bank and not The Fifth Third Corporation. With respect to the years ending December 31, 2007, 2008, and 2009, Fifth Third Bank reported, according to their annual and other financial reports, net income, total assets, and total shareholders' equity as follows:
2007 2008 2009
Net Income $1,076,000,000 ($2,113,000,000) $737,000,000 Total Assets $110,962,515,000 $114,296,000,000 $114,856,000,000 Shareholder's Equity $9,161,000,000 $10,038,000,000 $13,053,000,000
The Program Reserve Letter of Credit Bank is assigned to the ªwell capitalizedº category of banks by the Office of the Controller of Currency.
THE AGREEMENT
In connection with the issuance of a series of Common Fund Bonds, each Contracting Party is required to enter into an Agreement that may be a loan agreement, lease, installment sale agreement or other instrument, which, in the case where the Authority is the Contracting Party, will be the Supplemental Indenture for the series of Common Fund Bonds. Each Agreement will provide, among other things, for the payment of Bond Financing Payments, at the times specified in the applicable Agreement, which, if timely made, are expected to be sufficient in the aggregate to pay the principal of and interest on the related series of Common Fund Bonds. Notwithstanding the foregoing, if a Contracting Party is a political subdivision or other public body (other than the Authority), the obligation to pay Bond Financing Payments each year may be subject to the governing body of the Contracting Party agreeing in its sole discretion each year to renew the Agreement and to appropriate amounts to pay Bond Financing Payments in such year. Except as otherwise discussed under ªISSUANCE OF ADDITIONAL COMMON FUND BONDS,º the Authority has complete discretion as to the terms of any Agreement, which shall generally include provisions with respect to (i) disbursement of proceeds; (ii) payments of taxes and other charges relating to the Project; (iii) insurance requirements; (iv) application of insurance and condemnation proceeds; (v) events of default; and (vi) such other matters as the Authority, in its sole
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discretion, deems appropriate. See ªINVESTMENT CONSIDERATIONS ± Authority Discretionº herein.
LEGAL REPRESENTATION; ENFORCEABILITY OF OBLIGATIONS
Legal matters incident to the issuance of the Series 2010B Bonds and with respect to the tax-exempt status of the interest on the Series 2010B Bonds are subject to the legal opinion of Climaco, Wilcox, Peca, Tarantino & Garofoli Co., L.P.A., and Wilkerson & Associates Co., LPA whose legal services as Bond Counsel and Co-Bond Counsel, respectively, have been retained by the Authority. The legal opinion, dated and premised on law in effect as of the date of original delivery of the Series 2010B Bonds, will be delivered to the Underwriter at the time of original delivery, and the text of the opinion will be printed on the Series 2010B Bonds. The proposed text of the legal opinion is set forth in APPENDIX D attached hereto. The opinion will speak only as of its date, and subsequent distribution of it by recirculation of the Official Statement or otherwise shall create no implication that Bond Counsel has reviewed or expressed any opinion concerning any of the matters referred to in the opinion subsequent to its date. The legal opinion delivered may vary from the proposed text set forth in APPENDIX D if necessary to reflect facts and law on the date of delivery.
Climaco, Wilcox, Peca, Tarantino & Garofoli Co., L.P.A. will deliver its opinion as general counsel to the Authority. Bricker & Eckler LLP will deliver its opinions as counsel to the Underwriter with respect to the Series 2010B Bonds. Tucker Ellis & West LLP and Jones Day LLP will deliver opinions as counsel to the Developer. Jones Day LLP and Schottenstein, Zox & Dunn Co., L.P.A. will deliver opinions as counsel to the Individual Guarantors. Certain legal matters will be passed upon by the Director of Law of the Series 2010B Contracting Party. At the time of the issuance of the Program Reserve Letter of Credit, Kahn, Kleinman, Yanowitz & Aronson Co., L.P.A. (now a part of Taft Stettinius & Hollister LLP) delivered its opinion that the Program Reserve Letter of Credit was a valid and legally binding obligation of the Program Reserve Letter of Credit Bank.
While the Series 2010B Bonds are secured or payable pursuant to the Indenture, and the Bond Financing Payments are secured by Series 2010B Supplemental Indenture, the practical realization of any security upon any default will depend upon the exercise of various remedies specified in the respective instruments. These and other remedies are dependent in many respects upon judicial action, which is subject to discretion and delay. Accordingly, the remedies specified in the Basic Indenture and the Series 2010B Supplemental Indenture may not be readily available or may be limited.
ELIGIBILITY UNDER OHIO LAW FOR INVESTMENT AND AS SECURITY FOR THE DEPOSIT OF PUBLIC FUNDS
To the extent that the subject matter is governed by Ohio law, and subject to applicable limitations under other provisions of Ohio law, the Series 2010B Bonds under the provisions of present Section 4582.18, Ohio Revised Code, are lawful investments for the following entities: banks and trust companies with approval of the superintendent of banks, savings and loan associations, bond retirement funds or the sinking funds of municipal corporations, boards of education, port authorities and counties, the administrator of workers' compensation, the retirement board of the state teachers retirement system, the retirement board of the state public school employees retirement system, the retirement board of the public employees retirement system, and domestic life insurance companies and domestic insurance companies other than life. The Series 2010B Bonds are acceptable under Ohio law as security for the deposit of public moneys.
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TAX MATTERS
In the opinion of Climaco, Wilcox, Peca, Tarantino & Garofoli Co., L.P.A., Bond Counsel, and Wilkerson & Associates Co., LPA, as Co-Bond Counsel, under existing law and assuming compliance with certain covenants and accuracy of certain representations: (i) interest on the Series 2010B Bonds is excluded from gross income for federal income tax purposes under Section 103(a) of the Code, except for interest on any Series 2010B Bond for any period during which it is held by a ªsubstantial userº of the facilities financed with the proceeds of such Series 2010B Bonds or a ªrelated personº of such ªsubstantial user,º as such quoted terms are defined for purposes of Section 147(a) of the Code, and is not treated as an item of tax preference under Section 57 of the Code for purposes of the alternative minimum tax imposed on individuals and corporations; and (ii) interest on the Series 2010B Bonds, the transfer thereof, and any profit on their sale, exchange, transfer, or other disposition are exempt from the Ohio personal income tax, the Ohio Commercial Activity Tax, the net income base of the Ohio corporate franchise tax, and municipal and school district income taxes in Ohio.
The opinions on federal tax matters will be based on and will assume the accuracy of certain representations and certifications, and continuing compliance with certain covenants, of the Authority and the Series 2010B Contracting Party to be contained in the transcript of proceedings and that are intended to evidence and assure the foregoing, including that the Series 2010B Bonds are and will remain obligations the interest on which is excludable from gross income for federal income tax purposes. Bond Counsel will not independently verify the accuracy of those certifications and representations.
The Code prescribes a number of qualifications and conditions for the interest on state and local government obligations to be and remain excluded from gross income for federal income tax purposes, some of which require future or continued compliance after the issuance of the obligations in order for the interest to be and to continue to be so excluded from the date of issuance. Noncompliance with these requirements by the Authority or the Series 2010B Contracting Party may cause the interest on the Series 2010B Bonds to be included in gross income for federal income tax purposes and thus to be subject to federal income tax retroactively to the date of issuance of the Series 2010B Bonds. The Series 2010B Contracting Party, subject to certain limitations, and the Authority have each covenanted to take the actions that may be required of it for the interest on the Series 2010B Bonds to be and remain excluded from gross income for federal income tax purposes, and not to take any actions that would adversely affect that exclusion.
A portion of the interest on the Series 2010B Bonds earned by certain corporations may be subject to a federal corporate alternative minimum tax. In addition, interest on the Series 2010B Bonds may be subject to a federal branch profits tax imposed on certain foreign corporations doing business in the United States, and to a federal tax imposed on excess net passive income of certain S corporations.
Under the Code, the exclusion of interest from gross income for federal income tax purposes can have certain adverse federal income tax consequences on items of income, deductions or credits for certain taxpayers, including financial institutions, certain insurance companies, recipients of Social Security and Railroad Retirement benefits, those that are deemed to incur or continue indebtedness to acquire or carry tax-exempt obligations, and individuals otherwise eligible for the earned income tax credit. The applicability and extent of these or other tax consequences will depend upon the particular tax status or other tax items of the owner of the Series 2010B Bonds. Bond Counsel expresses no opinion regarding these or other tax consequences.
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Purchasers of the Bonds at other than their original issuance at the respective prices indicated on the cover of this Official Statement should consult with their own tax advisors regarding other tax considerations such as the consequences of market discount.
A copy of the draft form of opinion of Bond Counsel is included as APPENDIX D hereto.
UNDERWRITING
Under the terms of a bond purchase agreement (the ªBond Purchase Agreementº) relating to the Series 2010B Bonds, Robert W. Baird & Co. Incorporated (the ªUnderwriterº) has agreed, subject to the approval of certain legal matters by counsel and to certain other conditions, to purchase all, but not less than all, of the Series 2010B Bonds at a purchase price of $8,696,000.00 (which reflects the par amount of the Series 2010B Bonds ($8,800,000.00), less Underwriter's discount of $104,000.00), plus accrued interest to the date of delivery, if any.
The Underwriter is purchasing the Series 2010B Bonds as originally issued for purpose of resale. The Underwriter reserves the right to join with dealers and other underwriters in offering the Series 2010B Bonds to the public. The Underwriter may offer and sell the Series 2010B Bonds to certain dealers (including dealer banks and dealers depositing the Series 2010B Bonds into unit investment trusts, certain of which may be sponsored or managed by the Underwriter), and others at prices lower than the public offering prices noted on the cover hereof. The initial offering prices of the Series 2010B Bonds may be changed, from time to time, by the Underwriter.
The obligation of the Underwriter to accept delivery of the Series 2010B Bonds is subject to various conditions of the Purchase Agreement. The Underwriter is obligated to purchase all of the Series 2010B Bonds if any of the Series 2010B Bonds are purchased.
The Developer and the Underwriter have agreed in the Bond Purchase Agreement to indemnify the other parties thereto against certain liabilities arising in connection with the offer and sale of the Series 2010B Bonds, including certain liabilities under the Securities Act.
RATING
General
As noted on the cover page, the Authority has applied for a rating of the Series 2010B Bonds from S&P, which has rated the Series 2010B Bonds ªBBB-º. No application for a rating has been made to any other rating agency.
The rating reflects only the views of S&P. Any explanation of the significance of the rating may only be obtained from S&P at 55 Water Street, New York, New York 10041, (212) 438-2000.
The Authority furnished to S&P certain information and materials, some of which may not have been included in this Official Statement, relating to the Series 2010B Bonds and the Authority. Generally, rating agencies base their ratings on such information and materials, as well as investigation, studies and assumptions by the rating agency. Such ratings are not recommendations to buy, sell or hold the Series 2010B Bonds.
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There can be no assurance that a rating, when assigned, will continue for any given period of time or that it will not be lowered or withdrawn entirely by a rating agency if, in its judgment, circumstances so warrant. In addition, the Authority currently expects to provide to S&P (but assumes no obligation to furnish to the Underwriter or the Holders from time to time of the Series 2010B Bonds) further information and materials that it or they may request. The Authority does not, however, obligate itself hereby to furnish such information and materials, and may issue unrated bonds and notes from time to time. Failure by the Authority to furnish such information and materials, or the issuance of unrated bonds or notes, may result in the suspension or withdrawal of S&P's rating on the Series 2010B Bonds. Any lowering, suspension or withdrawal of such ratings may have an adverse effect on the marketability or market price of the Series 2010B Bonds. S&P has indicated that its rating will be withdrawn in the event that the Series 2010B Bonds are defeased. In addition, S&P does not rate the likelihood of purchasers of the Series 2010B Bonds receiving premium associated with the Series 2010B Bonds.
The Authority has agreed that, so long as S&P is continuing to rate all series of Common Fund Bonds, it will, among other things, restrict the issuance of an additional series of Common Fund Bonds and will regulate the amount of outstanding Common Fund Bonds as compared to the amounts then held in the Primary Reserve Fund, the Program Reserve Fund and the Program Development Fund. See ªISSUANCE OF ADDITIONAL COMMON FUND BONDSº herein.
Bond Fund Rating Change
On August 20, 2010, Fitch Ratings issued a press release indicating it had withdrawn its ratings on six (6) Ohio Port Authority loan programs. Among those loan programs was the Cleveland-Cuyahoga County Port Authority Bond Fund Program. As a result of this decision by Fitch Ratings, bonds issued under the Authority's Bond Fund Program are no longer rated by Fitch Ratings.
On August 20, 2010, S&P issued ratings on all of the Authority's then outstanding Common Fund Bonds. S&P assigned all series of Common Fund Bonds a long-term rating of ªBBB-º with a stable outlook.
LITIGATION
The Authority is a party to various legal proceedings from time to time seeking damages, appropriation or injunctive relief and generally incidental to its operations, but unrelated to the issuance of the Series 2010B Bonds. The ultimate disposition of those proceedings is not presently determinable, but will not if adversely determined, in the opinion of the appropriate Authority officials, have a material adverse effect on the Series 2010B Bonds or the security for the Series 2010B Bonds or the Series 2010B Project. There is no litigation pending seeking to restrain or enjoin the issuance or delivery of the Series 2010B Bonds or which in any manner questions the right of the Authority or the Series 2010B Contracting Party to acquire, construct, finance or operate the Series 2010B Project in the manner described herein.
The Series 2010B Contracting Party has advised the Authority and the Underwriter that there is no litigation pending or, to its knowledge, threatened against the Series 2010B Contracting Party that would materially adversely affect the financial position of the Series 2010B Contracting Party.
The Developer has advised the Authority and the Underwriter that there is no litigation pending or, to its knowledge, threatened against the Developer that would materially adversely affect the financial position of the Developer.
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In each Agreement with a Contracting Party, the Authority requires the Contracting Party to give the Authority prompt notice of any action, suit or proceeding by or against such Contracting Party at law or in equity, or before any governmental instrumentality or agency, or any of the same which may be threatened, which, if adversely determined, would materially impair such Contracting Party's right or ability to carry on the business contemplated by the applicable Project, or would materially and adversely affect the business, operations, properties, assets or condition of such Contracting Party. Except as described in ªTHE FINANCED PROJECT ± Generalº, the Authority has not received any such notice from any Contracting Party.
CONTINUING DISCLOSURE
Pursuant to the Securities and Exchange Commission (the ªSECº) Rule 15c2-12 (the ªRuleº), the Authority has agreed in the Series 2010B Supplemental Indenture, for the benefit of the Holders and beneficial owners of the Series 2010B Bonds, to provide or cause to be provided financial information and operating data as described below. The Authority must provide to the Municipal Securities Rulemaking Board (the ªMSRBº), in an electronic format as prescribed by the MSRB:
A. Not later than September 30 of each year, commencing September 30, 2011, (i) Annual Information consisting of annual financial information and operating data of the type included herein under the captions ªSECURITY AND FLOW OF FUNDS ± Fund Balances and Outstanding Bonds ± Reserve Balances º and ªSECURITY AND FLOW OF FUNDS ± Fund Balances and Outstanding Bonds ± Debt Service Requirements on Outstanding Bonds º and the information contained in APPENDICES A and B hereof, and (ii) Annual Information pertaining to each Contracting Party that is a Significant Obligor as of the immediately preceding November 16;
B. When and if available, (i) audited financial statements of the Authority for each fiscal year ending on or after December 31, 2010, and (ii) audited financial statements of each Contracting Party that is a Significant Obligor for the fiscal year of that Contracting Party concluded most recently after each November 16 (commencing November 16, 2011) on which that Contracting Party is determined to be a Significant Obligor;
C. To the Municipal Securities Rulemaking Board (the ªMSRBº), in a timely manner, notice of the following events: (i) the Authority's failure to provide the Annual Information on or prior to the date specified above; (ii) any change in the accounting principles applied in the preparation of the Authority's annual financial statements; (iii) any change in the Authority's fiscal year or the fiscal year of any Contracting Party that is a Significant Obligor; (iv) the failure of the Authority or any Contracting Party to appropriate funds in accordance with any Agreement; and (v) the termination of the Continuing Disclosure Agreement; and
D. To the MSRB, notice of any of the following events in a timely manner not later than ten (10) business days after the occurrence of any of the following events (each, a ªSpecified Eventº):
1. Principal and interest payment delinquencies with respect to any Common Fund Bonds;
2. Defaults with respect to the Series 2010B Bonds not related to the payment of principal and interest, if material;
3. Unscheduled draws on debt service reserves with respect to any Common Fund Bonds reflecting financial difficulties;
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4. Unscheduled draws on credit enhancements with respect to any Common Fund Bonds reflecting financial difficulties;
5. Substitution of any credit or liquidity providers with respect to the Series 2010B Bonds, 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 security, or other material events affecting the tax status of the security;
7. Modifications to rights of Holders or beneficial owners of any Series 2010B Bonds;
8. Calls for redemption of any Series 2010B Bonds, if material, and tender offers;
9. Defeasances of the Series 2010B Bonds;
10. Release, substitution or sale of property securing repayment of any Series 2010B Bonds, if material;
11. Rating changes with respect to any Common Fund Bonds;
12. Bankruptcy, insolvency, receivership or similar event of the obligated person with respect to the Series 2010B Bonds;
13. Consummation of a merger, consolidation, or acquisition involving an obligated person with respect to the Series 2010B Bonds or the sale of all or substantially all of the assets of the obligated person, 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; and
14. Appointment of a successor or additional trustee or the change of name of a trustee, if material.
Any of the above-mentioned filings must be made solely by transmitting such filings to the MSRB's EMMA disclosure service, as approved by the SEC and as provided at http://emma.msrb.org, by electronic submission in an electronic portable document format (ªPDFº) capable of being word-searched by a user thereof and must be accompanied by identifying information as prescribed by the MSRB.
The scheduled redemption of any Common Fund Bonds pursuant to mandatory sinking fund redemption requirements does not constitute a Specified Event; notice of any such call for redemption will be given to Holders as described under ªTHE OFFERED BONDS ± Redemption Prior to Maturity - Notice of Redemption.º
The Annual Information, financial statements and notices of Specified Events, are provided under the Series 2010B Supplemental Indenture solely for the benefit of the Holders and beneficial owners of the Series 2010B Bonds. The exclusive remedy for any breach of the Agreement by the Authority is to be limited, as hereinafter described, to a right of Holders and beneficial owners, or the Trustee, to cause proceedings at law or in equity to be instituted and maintained to obtain the specific performance by the Authority of its obligations under the Series 2010B Supplemental Indenture. Any individual Holder or beneficial owner may institute and maintain, or cause to be instituted and maintained, such proceedings to
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require the Authority to provide or cause to be provided a pertinent filing if such filing is due and has not been made. Any such proceedings to require the Authority to perform any other obligation under the Series 2010B Supplemental Indenture (including any proceedings that contest the sufficiency of any pertinent filing) shall be instituted and maintained only by the Trustee, which may institute and maintain any such proceedings in its discretion and is required to do so, subject to the same conditions, limitations, and procedures that would apply under the Trust Indenture if the breach were an Event of Default under the Trust Indenture, at the direction of the Holders of at least ten percent (10%) in aggregate principal amount of the Series 2010B Bonds then outstanding. See ªTHE INDENTURE ± Events of Defaultº herein.
The Series 2010B Supplemental Indenture will remain in effect only for such period that the Series 2010B Bonds are outstanding in accordance with their terms.
MISCELLANEOUS
The foregoing summaries or descriptions of provisions of the Series 2010B Bonds, the Cooperative Agreement, the Disbursing Agreement, the Construction Agency Agreement, the Declaration, the Guaranty, the Individual Guaranty, the Construction Contract, and the Indenture and all references to other agreements are only brief summaries of certain provisions. For further information relating to such matters, reference is hereby made to the complete documents, copies of which are available for inspection during the period of this offering at the offices of the Underwriter and at the offices of the Authority.
CONCLUDING STATEMENT
To the extent that any statements made in this Official Statement involve matters of opinion or estimates, whether or not expressly stated to be such, they are made as such and not as representations of fact or certainty, and no representation is made that any of such statements will be realized. The Authority has authorized the use of this Official Statement.
[Balance of Page Intentionally Left Blank]
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APPENDIX A SUMMARY OF CLEVELAND-CUYAHOGA COUNTY PORT AUTHORITY BOND FUND PROGRAM
The information in this Appendix concerning Contracting Parties or their guarantors or lessees is based on information provided by the applicable Contracting Parties. Such information may or may not have been derived from audited financial statements. Neither the Authority nor the Placement Agent/Underwriter has undertaken any independent verification of information from the Contracting Parties. Neither the Authority nor the Placement Agent/Underwriter assumes any responsibility for the accuracy or completeness thereof. The Placement Agent/Underwriter assumes no responsibility for the accuracy or completeness of information herein regarding the Authority. Unless otherwise noted, the information contained in this Appendix constitutes a projection of the status of the Bond Fund Program as of November 15, 2010 and assumes the issuance of the Series 2010A Bonds and the Series 2010B Bonds.
SUMMARY OF BOND FUND PORTFOLIO $76,855,000 BONDS OUTSTANDING
Cleveland-Cuyahoga County Port Authority Bond Fund Program Breakdown by Sector $76,855,000 Outstanding Manufacturing $27,815,000 36% Governmental $7,620,000 10%
Commercial $8,645,000 11%
Non-Profit $10,535,000 14%
Tax Increment & Special Assessment Bonds $22,240,000 29%
A-1
SUMMARY OF BOND FUND PORTFOLIO $76,855,000 BONDS OUTSTANDING (CONTINUED)
Manufacturing Borrowers 36% of Outstanding Bonds - $27,815,000 Governmental Borrowers TIF & SA Borrowers Brush Wellman Jergens 10% of Outstanding Bonds - $7,620,000 Universal Heat 29% of Outstanding Bonds - $22,240,000 (Industrial) (Industrial) Port Authority (Industrial) Cleveland Bottle Garfield Heights (Seaport Series 2008A Series 1998A (TIF) Port Authority Series 1999B (Containers) Facility) Columbia $4,965,000 $2,920,000 Series 2010B Series 2004D (Seaport $380,000 Series 2001B Series 1999A National 6% 4% Facility) .5% $1,060,000 City of $7,850,000 $2,915,000 (Industrial) Series 1997A 1% Cleveland - Flats 10% 4% Series 2005D $2,975,000 Heidtman Steel (TIF) 4% $4,560,000 (Industrial) $8,800,000 6% Series 2003A 11% $1,420,000 2% Bellisio Foods (Food Processing) Eaton Corp. Tru-Fab Series 2004A (TIF) Avery Dennison (Industrial) $3,470,000 Series 2009A (Consumer 5% Forest Bay Tower City of Cleveland NOACA Goodyear Series 2004C $2,000,000 Products) City (TIF) (Transportation) (Automotive) $850,000 2% Series 2005C (TIF) Series 2004B Series 1998B Series 2005A 1% Series 2010A $6,000,000 $1,070,000 $1,730,000 $2,190,000 $2,520,000 1% 2% 8% 3% 3%
Commercial Borrowers Non-Profit Borrowers 11% of Outstanding Bonds - $8,645,000 14% of Outstanding Bonds - $10,535,000 Fairmount CEOGC Montessori (Transportation) Cleveland Cav©s (Charter School) Series 2001A (Entertainment) Series 2005B $2,185,000 Series 2006A $2,960,000 3% $8,645,000 4% 11%
CAF (Healthcare) Series 2002A $1,545,000 2% Cleveland Christian (Healthcare) Series 2002C $3,845,000 5%
A-2
SUMMARY OF OUTSTANDING COMMON FUND BONDS
Percent Percent Maximum Contracting Party / Industry Original Outstanding of Bonds of Total Primary Issuance Final Coupon Annual Bond Bond Series Description Principal Principal Outstanding Bond Fund Reserve Date Maturity Rate Debt Service* Port Authority - ESSROC Port Facilities $3,795,000 $2,975,000 78.39% 3.87% $366,641 11/01/97 05/15/27 5.80% 271,128 1997A
Jergens, Inc Distribution, Tooling Components $5,720,000 $2,920,000 51.05% 3.80% $572,000 02/01/98 05/15/18 5.375 481,100 1998A
NOACA Governmental $3,345,000 $1,730,000 51.72% 2.25% $324,472 03/26/98 05/15/18 5.375 285,513 1998B
Port Authority Port Facilities $5,230,000 $2,915,000 55.74% 3.79% $520,385 04/01/99 05/15/19 5.375 433,644 1999A
Universal Heat Industrial/Manufacturing $1,480,000 $380,000 25.68% 0.49% $148,000 11/15/99 11/15/14 6.500 222,675 1999B
Playhouse Square Non-Profit, Entertainment $2,825,000 $0 Bonds Redeemed in full on 11/23/2004 2000A
RITA Governmental $5,000,000 $0 Bonds Redeemed in full on 3/18/2009 2000B
CEOGC Non-Profit, Workforce and $4,440,000 $2,185,000 49.21% 2.84% $444,000 12/19/00 05/15/16 6.250 480,313 2001A Family development
Cleveland Bottle Distribution $1,500,000 $1,060,000 70.67% 1.38% $150,000 09/01/01 11/15/21 6.500 139,088 2001B
CATS Non-Profit, Provider of counseling $2,090,000 $1,545,000 73.92% 2.01% $209,000 06/01/02 05/15/22 5.600 181,590 2002A & human services
ISG Inc. Steel manufacturing, processing $6,000,000 $0 Bonds Redeemed in full on 2/21/2005 2002B
CCH Non-Profit $5,130,000 $3,845,000 74.95% 5.00% $513,000 08/07/02 05/15/22 5.740 434,649 2002C Children, youth and family services
Centaur Inc. Steel processing and servicing $4,250,000 $1,420,000 33.41% 1.85% $425,000 08/28/03 05/15/13 6.100 624,988 2003A
Bellisio Foods Food Processing $5,000,000 $3,470,000 69.40% 4.51% $500,000 03/31/04 11/15/19 5.860 532,065 2004A
City of Cleveland Tax Increment Financing $2,965,000 $1,070,000 36.09% 1.39% $296,500 04/07/04 05/15/22 4.500 451,113 2004B
Tru-Fab Plastic Injected Molding $1,060,000 $850,000 80.19% 1.11% $106,000 04/27/04 11/15/23 6.770 105,078 2004C
Garfield Heights Tax Increment Financing/ $8,850,000 $7,850,000 88.70% 10.21% $885,000 09/30/04 05/15/23 5.250 816,538 2004D Special Assessment
Myers University Higher Education $5,725,000 $0 Bonds Redeemed in full on 9/23/2008 2004E
Goodyear Tire & Rubber Co. Development, manufacture & $4,125,000 $2,190,000 53.09% 2.85% $412,500 05/12/05 05/15/14 5.750 601,762.50 2005A distribution of tires
Fairmount Montessori Primary Education $3,375,000 $2,960,000 87.70% 3.85% $337,500 06/22/05 05/15/25 5.125 284,718.76 2005B
Avery Dennison Manufacture pressure-sensitive $6,000,000 $6,000,000 100.00% 7.81% $600,000 09/09/05 11/15/15 5.750 6,172,500.00 2005C materials & office products
Columbia National Steel Processing and servicing $6,020,000 $4,560,000 75.75% 5.93% $602,000 09/28/05 05/15/20 5.000 622,625.00 2005D
Cavaliers Practice Facility Sports entertainment $9,500,000 $8,645,000 91.00% 11.25% $950,000 12/12/06 05/15/26 6.250 905,781.25 2006A
City of Perrysburg Tax Increment Financing/ $5,060,000 $0 Bonds Redeemed in full on 11/15/2009 2006B Special Assessment
Brush Wellman Manufacturer of engineered $5,155,000 $4,965,000 96.31% 6.46% $515,500 06/25/08 05/15/23 7.250 627,625.00 2008A materials
City of Beachwood (Eaton Corp.) Tax Increment Financing/ $2,000,000 $2,000,000 100.00% 2.60% $200,000 09/24/09 11/15/20 6.000 296,300.00 2009A Minimum Payment
City of Cleveland Tax Increment Financing $2,520,000 $2,520,000 100.00% 3.28% $252,000 12/13/10 05/15/34 8.500 258,975.00 Forest Bay Tower City Project 2010A Minimum Payment
City of Cleveland - Flats Tax Increment Financing $8,800,000 $8,800,000 100.00% 11.45% $880,000 12/21/10 05/15/40 7.000 764,525.00 2010B Minimum Payment
Totals $126,960,000 $76,855,000 $10,209,498
AVAILABLE BOND RESERVES
Primary Reserve $10,209,498 13.28% Program Reserve - Cash 4,120,590 5.36% Program Reserve - OMA (1) 2,483,332 3.23% Program Reserve - LOC 9,000,000 11.71% Program Transfer (2) 117,689 0.15%
TOTAL $25,931,109 33.74%
(1) Ohio Manufacturer's Association pledge of $2,483,332 includes payments of $816,666 and $833,333. Third payment of $833,333 to be received in July of 2011. (2) Amount as of November 15, 2010.
A-3
SUMMARY OF BONDS ISSUED AND TOTAL RESERVES
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 (1)
Total Bonds Issued as of January 1 Principal Amount $0 $3,795,000 $12,860,000 $19,570,000 $27,395,000 $33,335,000 $46,555,000 $50,805,000 $74,405,000 $93,925,000 $108,485,000 $108,485,000 $113,640,000 $115,640,000 Number of Loans 0 1 3 5 7 9 12 13 18 22 24 24 25 26
Outstanding Bonds as of January 1 Principal Amount $0 $3,795,000 $12,860,000 $19,235,000 $26,550,000 $31,615,000 $43,315,000 $44,720,000 $63,405,000 $76,490,000 $87,870,000 $84,105,000 $79,060,000 $67,485,000 Number of Loans 0 1 3 5 7 9 12 13 17 20 22 22 22 21
New Bonds Issued Principal Amount $3,795,000 $9,065,000 $6,710,000 $7,825,000 $5,940,000 $13,220,000 $4,250,000 $23,600,000 $19,520,000 $14,560,000 $0 $5,155,000 $2,000,000 $11,320,000 Number of Loans 1 2 2 2 2 3 1 5 4 2 0 1 1 2
Bonds Redeemed Prior to Maturity Principal Amount $6,790,000 Number of Loans 0 0 0 0 0 0 0 1 1 0 0 0 2 0
Bonds Matured Number of Loans 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Loan Defaults Outstanding Principal $5,725,000 Number of Loans 0 0 0 0 0 0 0 0 0 0 0 1 0 0
Net Liquidation Proceeds $3,093,000 Port Contribution $2,059,500 Primary Reserve Contribution $872,500 Program Reserve Contribution $0 Amount of Principal Prepaid $5,725,000
Outstanding Bonds as of December 31 Principal Amount $3,795,000 $12,860,000 $19,235,000 $26,550,000 $31,615,000 $43,315,000 $44,720,000 $63,405,000 $76,490,000 $87,870,000 $84,105,000 $79,060,000 $70,035,000 $76,855,000 Number of Loans 1 3 5 7 9 12 13 17 20 22 22 22 21 23
Total Reserves as of December 31 Primary Reserves $367,839 $1,273,612 $1,957,033 $2,766,918 $3,410,025 $4,668,910 $5,314,726 $7,421,585 $8,828,867 $10,400,065 $10,455,336 $10,431,744 $9,077,498 $10,209,498 Program Reserves (2) $4,000,000 $8,000,000 $8,000,000 $8,000,000 $8,000,000 $9,000,000 $9,000,000 $10,000,000 $13,000,000 $13,000,000 $13,000,000 $13,000,000 $13,000,000 $15,603,922 Program Reserve Earnings $6,536 $185,229 $118,394 $112,824 $222,529 $222,190 $222,045 $222,044 $222,817 $223,798 $223,118 $219,974 $130,404 $117,689 Total Reserves $4,374,375 $9,458,841 $10,075,427 $10,879,742 $11,632,554 $13,891,100 $14,536,771 $17,643,629 $22,051,684 $23,623,863 $23,678,454 $23,651,718 $22,207,902 $25,931,109
Reserves to Outstanding Bonds as of December 31 115.27% 73.55% 52.38% 40.98% 36.79% 32.07% 32.51% 27.83% 28.83% 26.89% 28.15% 29.92% 31.71% 33.74%
(1) As of November 15, 2010. (2) Ohio Manufacturer's Association pledge of $2,483,332 includes payments of $816,666 and $833,333. Third payment of $833,333 to be received in July of 2011.
A-4
SUMMARY OF SECURITY AND DESCRIPTION OF BOND FUND PROJECTS
Contracting Party / Outstanding Industry Primary Additional Bond Series Principal Description Reserve Reserve Description of Security and Lien Position Physical Description of Project Port Authority - ESSROC $2,975,000 Port Facilities $366,641 $0
Ground Lease between ESSROC and Authority Infrastructure improvements to Dock 20 for 1997A Non-tax revenues of the Authority the Port of Cleveland Lease pa
Jergens, Inc $2,920,000 Distribution, Tooling Components $572,000 $0 First mortgage on land and building.
Construction of a 94,000 square foot 1998A Full pay-out lease with Glenn Properties LLC and manufacturing facility. Jergens, Inc.
NOACA $1,730,000 Governmental $324,472 $0 First mortgage on land and building. Acquisition and renovation of a 39,000
1998B Full pay-out lease with NOACA. square foot office building.
Port Authority $2,915,000 Port Facilities $520,385 $0 Port Improvements, bulk heading, dredging
1999A Non-tax revenue pledge of Port Authority. and other dock, building utility and walkway improvements.
Universal Heat $380,000 Industrial/Manufacturing $148,000 $0 First mortgage on land and building and security Manufacturing facility and equipment used interest in financed equipment. for heat treating and strengthening industrial 1999B Personal guaranties of Ernest and Kathleen D© Amato. parts.
Playhouse Square $0 Non-Profit, Entertainment $0 $0 Bonds Redeemed in full on 11/23/2004 2000A
RITA $0 Governmental $0 $0 2000B Bonds Redeemed in full on 3/18/2009
CEOGC $2,185,000 Non-Profit, Workforce and $444,000 $0 First mortgage on land and building. Acquisition of land and construction of a
2001A Family development Full pay-out lease with CEOGC. 32,000 square foot building.
First mortgage on land and building. Personal Acquisition of land and construction and Cleveland Bottle $1,060,000 Distribution $150,000 $83,347 guaranties of C.G. Van Duyn and Patricia Van Duyn.
improvement of a 62,000 square foot facility 2001B $500,000 key-man life insurance policy on C.G. Van
Acquisition of land and improvement of a First mortgage on land and building.
$1,545,000 $209,000 $0 15,000 square foot facility and 3,000 square CATS Non-Profit, Provider of counseling Full pay-out lease with CATS. 2002A & human services foot new expansion.
ISG Inc. $0 Steel manufacturing, processing $0 $0 Bonds Redeemed in full on 2/21/2005 2002B
First mortgage on land and buildings. Acquistion, construciton and renovation of
$3,845,000 $513,000 $75,000 CCH Non-Profit Full payout loan agreement with CCH. three exisitng buildings. 2002C Children, youth and family services
Parity first mortgage with the State of Ohio Director of Acquisiton of 44 acres of land and $1,420,000 $425,000 $212,500 Centaur Inc. Steel processing and servicing Development. construciton of an industrial distribution 2003A Full pay-out lease with Heidtman Steel Products. facility.
Shared first mortgage on the real estate with Toledo Real Estate and Equipment - 82,000 sq ft 2- Bellisio Foods $3,470,000 Food Processing $500,000 $0 Port and State of Ohio. story facility 2004A Shared first security interest in equipment with Toledo Port and the State of O
Unpaid TIF Service Payments are a priority tax lien $33,000,0000 Plain Dealer Headquarters and senior to any mortgage holder.
Building. City of Cleveland $1,070,000 Tax Increment Financing $296,500 $0 Excess TIF used to prepay Bonds. 2004B
Acquistion of land and two industrial First mortgage on land and building.
buildings of approximatley 23,080 and 4,800 Full pay-out lease from Tru-Fab Technology, inc. Tru-Fab $850,000 Plastic Injected Molding $106,000 $0 square feet used for manufacturing. 2004C
A-5
SUMMARY OF SECURITY AND DESCRIPTION OF BOND FUND PROJECTS (CONTINUED)
Contracting Party / Outstanding Industry Primary Additional Bond Series Principal Description Reserve Reserve Description of Security and Lien Position Physical Description of Project
Garfield Heights $7,850,000 Tax Increment Financing/ $885,000 $0 Unpaid TIF Service Payments and Special
Assessments are a priority tax lien and senior to any $100,000,000 retail center (completed). 2004D Special Assessment mortgage holder. Excess TIF used to prepay Bonds.
Myers University $0 Higher Education $0 $0 2004E Bonds Redeemed in full on 9/23/2008
Parity collateral assignment and security interest in Goodyear Tire & Rubber Co. $2,190,000 Development, manufacture & $412,500 $0 Power generation and distribution certain power generation and distribution equipment 2005A distribution of tires equipment in the Goodyear North Americal with the State of Ohio and Summit County Port Headquarters Building. Authority.
Fairmount Montessori $2,960,000 Primary Education $337,500 $0
Acquistion and renovation of an existing First mortgage on land and buildings. 2005B 9,000 square foot educational facillity.
15 acres of land, one four story, 151,000 Avery Dennison $6,000,000 Manufacture pressure-sensitive $600,000 $0 Parity first mortgage on Avery Dennison Roll square foot office building, a one and a half 2005C materials & office products Materials Worldwide division headquarters. story, 14,000 square foot connector building
Columbia National $4,560,000 Steel Processing and servicing $602,000 $0 Parity first mortgage lien on the exisisng building and Construction of an approximantely 40,800 expansion.
square foot facility and the acquision of Personal guaranty of David P. Miller up to 25% of the certain equipment. 2005D combined outstanding principal amou
Cavaliers Practice Facility $8,645,000 Sports entertainment $950,000 $0
Parity first mortgage on real estate with Summit Port 50,000 square foot practice facility. 2006A Authority and Toledo Port Authority.
First Tax Lien on all Special Assessed Property, City of Perrysburg $0 Tax Increment Financing/ $0 $0 Backed by 100% Letter of Credit until Construction is $29m Retail Center when completed 2006B Special Assessment complete.
Construction of a new beryllium
Manufacturer of engineered manufacturing facility including a new Parity first ,mortgage lien on the project.
Brush Wellman $4,965,000 materials $515,500 $0 122,000 square foot beryllium manufacturing Corporate guaranty of Brush Engineered Materials facility, a 2,200 square foot storage Inc. facility, and rehabilitation of a 1,200 square 2008A foot existing support facility.
Parity senior pledge of TIF payments
Corporate word headquarter of Eaton City of Beachwood (Eaton Corp.) $2,000,000 Tax Increment Financing/ $200,000 $0 Parity assignment of minimum service payments
Corporation which will be located on a 53 Any past due TIF payment is senior to any first 2009A Minimum Payment acre parcel of land in the City of Beachwood. mortgage
Senior pledge of TIF payments Improvemnts to a 14-story, 800,000 sq. ft.
City of Cleveland $2,520,000 Tax Increment Financing/ $252,000 $0 Assignment of minimum service payments Any office building first built in 1931, which is Forest Bay Tower City Project 2010A Minimum Payment past due TIF payment is senior to any first mortgage located in downtown Cleveland, Ohio.
Construction of an approximately 476,000 City of Cleveland - Flats $8,800,000 Tax Increment Financing/ $880,000 $0 square foot, 18-story office tower situated on 2010B Minimum Payment Senior pledge of TIF payments an approximately 3-acre site located on the
Assignment of minimum service payments Any banks of the Cuyahoga River in the past due TIF payment is senior to any first mortgage downtown area of the City of Cleveland, Ohio. The Project will be leased to Ernst & Yo
Totals $76,855,000 $10,209,498 $370,847 A-6
FOR-PROFIT BOND FUND PROJECTS HISTORICAL INFORMATION AS OF NOVEMBER 15, 2010
Depreciation / Contracting Party / Original Outstanding Fiscal Yr. Sales Net Amortization/ Current Current Total Total Bond Series Principal Principal Ending Revenue Income One Time Loss Assets Liabilities Assets Liabilities Equity Port Authority 1997A $3,795,000 $2,975,000 See Governmental and Non-Profit Historical Financial Information
Jergens (1) 03/31/10 $46,201,465 $966,101 $672,850 $24,313,265 $9,791,929 $32,156,697 $14,739,428 $17,417,269 1998A $5,720,000 $2,920,000 03/31/09 55,418,151 1,563,909 680,482 25,478,411 12,357,654 33,200,445 16,879,189 16,321,256 03/31/08 57,960,993 3,090,124 645,653 24,244,118 12,125,256 31,664,971 17,029,459 14,635,512
NOACA $3,345,000 $1,730,000 1998B See Governmental and Non-Profit Historical Financial Information
Port Authority 1999A $5,230,000 $2,915,000 See Governmental and Non-Profit Historical Financial Information
Universal Heat (2) 12/31/09 $1,545,584 $23,699 $29,383 $272,270 $936,254 $800,102 $936,254 ($136,152) 1999B $1,480,000 $380,000 12/31/08 2,364,720 10,890 29,383 392,464 1,095,161 935,310 1,095,162 (159,852) 12/31/07 2,275,454 108,486 17,481 455,456 1,198,887 1,028,145 1,198,887 (170,742)
CEOGC 2001A $4,440,000 $2,185,000 See Governmental and Non-Profit Historical Financial Information
Cleveland Bottle (3) 12/31/09 $8,412,143 $724,417 $21,450 $2,667,475 $1,124,078 $2,759,734 $1,280,999 $1,478,735 2001B $1,500,000 $1,060,000 12/31/08 9,158,411 672,210 19,486 2,125,910 950,925 2,208,089 1,107,899 1,100,190 12/31/07 7,533,937 73,419 32,781 1,485,894 870,765 1,547,901 1,097,651 450,250
CATS 2002A $2,090,000 $1,545,000 See Governmental and Non-Profit Historical Financial Information
CCH 2002C $5,130,000 $3,845,000 See Governmental and Non-Profit Historical Financial Information
Centaur Inc. (4) 03/31/10 $442,846,382 $14,323,344 $10,817,962 $126,744,964 $104,348,811 $237,987,561 $208,924,122 $29,063,439 2003A $4,250,000 $1,420,000 03/31/09 754,842,634 (28,134,240) 11,223,523 90,436,643 177,866,051 212,101,973 191,129,244 20,972,729 03/31/08 763,289,357 (17,713,353) 11,079,181 228,469,478 183,028,899 572,813,261 412,308,819 160,504,442
Bellisio Foods, Inc. (5) 01/03/10 $319,373,000 $842,000 $21,149,000 $62,002,000 $33,282,000 $278,685,000 $216,344,000 $62,341,000 2004A $5,000,000 $3,470,000 12/31/08 $367,411,000 $6,890,000 $23,408,000 $65,072,000 $41,909,000 $293,666,000 $231,990,000 $61,676,000 12/31/07 366,374,000 20,639,000 20,243,000 67,834,000 53,246,000 292,871,000 233,586,000 59,285,000
City of Cleveland 2004B $2,965,000 $1,070,000 See Tax Increment Financing and Special Assessment Financial Information
Tru-Fab (6) 12/31/09 $3,513,280 $273,110 $414,389 $849,158 $222,874 $1,261,217 $222,874 $1,038,343 2004C $1,060,000 $850,000 12/31/08 $4,879,633 $364,586 $596,353 $493,857 $191,838 $993,288 $191,838 $801,450 12/31/07 $4,845,048 $323,088 $293,192 ($85,564) $44,580 $635,591 $162,968 $472,623
City of Garfield Heights 2004D $8,850,000 $7,850,000 See Tax Increment Financing and Special Assessment Financial Information
The Goodyear Tire (7) 12/31/09 $16,301,000,000 ($375,000,000) $656,000,000 $7,225,000,000 $4,095,000,000 $14,401,000,000 $12,831,000,000 $986,000,000 Rubber Company $4,125,000 $2,190,000 12/31/08 $19,488,000,000 ($77,000,000) $660,000,000 $8,340,000,000 $4,779,000,000 $15,226,000,000 $13,354,000,000 $1,872,000,000 2004D 12/31/07 19,644,000,000 602,000,000 614,000,000 10,172,000,000 4,664,000,000 17,191,000,000 14,341,000,000 2,850,000,000
Fairmount Montessori 2005B $3,375,000 $2,960,000 See Governmental and Non-Profit Historical Financial Information
A-7
FOR-PROFIT BOND FUND PROJECTS HISTORICAL INFORMATION AS OF NOVEMBER 15, 2010 (CONTINUED)
Depreciation / Contracting Party / Original Outstanding Fiscal Yr. Sales Net Amortization/ Current Current Total Total Bond Series Principal Principal Ending Revenue Income One Time Loss Assets Liabilities Assets Liabilities Equity Avery Dennison (8) 12/31/09 $5,952,700,000 ($746,700,000) $267,300,000 $1,733,200,000 $1,867,700,000 $5,002,800,000 $3,640,200,000 $1,362,600,000 2005C $6,000,000 $6,000,000 12/31/08 $6,710,400,000 $266,100,000 $278,400,000 $1,930,400,000 $2,058,000,000 $6,035,700,000 $4,285,700,000 $1,750,000,000 12/31/07 6,307,800,000 303,500,000 234,600,000 2,058,300,000 2,477,600,000 6,244,800,000 4,255,400,000 1,989,400,000
Columbia National (9) 12/31/09 $83,165,000 $745,000 $1,326,000 $35,108,000 $8,322,000 $51,727,000 $13,412,000 $38,315,000 2005D $6,020,000 $4,560,000 12/31/08 $162,522,000 $17,557,000 $1,328,000 $41,644,000 $8,008,000 $52,758,000 $13,499,000 $39,259,000 12/31/07 140,126,000 3,145,000 1,299,000 43,005,000 19,531,000 54,317,000 25,406,000 28,911,000
Cavaliers (10) 06/30/09 $179,842,000 ($59,851,000) $40,234,000 $40,747,000 $50,227,000 $282,751,000 $281,247,000 $1,504,000 Operating LLC $9,500,000 $8,645,000 06/30/08 164,158,000 (77,408,000) 54,640,000 39,993,000 44,870,000 321,378,000 260,023,000 61,355,000 2006A 06/30/07 163,080,000 (49,773,000) 53,985,000 61,709,000 39,070,000 394,925,000 256,162,000 138,763,000
Brush Engineered (11) 12/31/09 $715,186,000 ($12,355,000) $32,369,000 $280,176,000 $139,694,000 $621,953,000 $282,094,000 $339,859,000 Materials $5,155,000 $4,965,000 12/31/08 $909,710,000 $18,360,000 $33,830,000 $294,380,000 $104,480,000 $581,900,000 $234,800,000 $347,100,000 2008B 12/31/07 955,709,000 53,825,000 23,880,000 329,436,000 113,183,000 550,551,000 196,837,000 353,714,000
City of Beachwood (Eaton Corp.) 2009A $2,000,000 $2,000,000 See Tax Increment Financing and Special Assessment Financial Information
City of Cleveland Forest Bay Tower City Project 2010A $2,520,000 $2,520,000 See Tax Increment Financing and Special Assessment Financial Information
City of Cleveland - Flats 2010B $8,800,000 $8,800,000 See Tax Increment Financing and Special Assessment Financial Information
Totals $102,350,000 $76,855,000
(1) From Jergens reviewed consolidated financial statements as of March 31, 2008, 2009 and 2010. (2) From Universal Heat unaudited financial statements as of December 31, 2007, 2008 and 2009. (3) From Cleveland Bottle reviewed financial statements as of December 31, 2007, 2008 and 2009. (4) From Centaur Inc. audited consolidated financial statements as of March 31, 2008, 2009 and 2010. (5) From Bellisio Foods, Inc. and subsidiaries audited consolidated financial statements as of December 31, 3007, December 28, 2008 and as of January 3, 2010. (6) From Tru-Fab reviewed financial statements as of December 31, 2007, 2008 and 2009. (7) From the Goodyear Tire & Rubber Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2009, filed with the Securities and Exchange Commission on February 18, 2010. (8) From Avery Dennison©s Annual Report on Form 10-K for the fiscal year ended December 31, 2009, filed with the Securities and Exchange Commission on March 1, 2010. (9) From Columbia National Group, Inc. and subsidiaries audited consolidated financial statements as of December 31, 2007, 2008 and 2009. (10) From Cavaliers Operating Company, LLC audited financial statements as of June 30, 2007, 2008 and 2009. (11) From Brush Engineered Materials Annual Report on Form 10-K for the fiscal year ended December 31, 2009, filed with the Securities and Exchange Commission on March 8, 2010.
A-8
GOVERNMENTAL AND NON-PROFIT BOND FUND PROJECTS HISTORICAL FINANCIAL INFORMATION AS OF NOVEMBER 15, 2010
Total Total Contracting Party / Original Outstanding Fund Fiscal Yr. Revenues & Pledged Change in Depreciation / Current Current Total Total Total Net Bond Series Principal Principal Analyzed Ending Other Sources Revenues Fund Balances Amortization Assets Liabilities Assets Liabilities Assets Rating Port Authority (1) 12/31/09 $7,511,758 n/a ($368,714) $1,234,451 $15,598,663 $7,490,441 $63,669,091 $19,742,576 $43,926,515 1997A $3,795,000 $2,975,000 Statement of 12/31/08 7,958,137 n/a (588,537) 1,236,715 12,505,305 5,216,251 64,451,769 20,156,540 44,295,229 Fitch "BBB-" Net Assets 12/31/07 8,399,232 n/a 561,592 1,213,860 15,129,988 5,954,217 65,587,485 19,299,777 46,287,708
NOACA (2) Total 06/30/09 $5,747,564 n/a ($65,515) $152,232 n/a n/a $4,926,171 $2,788,509 $2,137,662 1998B $3,345,000 $1,730,000 Governmental 06/30/08 5,989,378 n/a (49,093) $106,557 n/a n/a 5,347,124 3,142,858 2,204,266 Unrated Funds 06/30/07 5,342,279 n/a 132,250 $151,945 n/a n/a 5,458,197 3,234,611 2,223,586
Port Authority (1) Statement of 12/31/09 $7,511,758 n/a ($368,714) $1,234,451 $15,598,663 $7,490,441 $63,669,091 $19,742,576 $43,926,515 1999A $5,230,000 $2,915,000 12/31/08 7,958,137 n/a (588,537) 1,236,715 12,505,305 5,216,251 64,451,769 20,156,540 44,295,229 Fitch "BBB-" Net Assets 12/31/07 8,399,232 n/a 561,592 1,213,860 15,129,988 5,954,217 65,587,485 19,299,777 46,287,708
CEOGC (3) Statement of 01/31/10 $50,598,448 n/a $2,621,419 $516,177 $3,972,615 $3,938,677 $12,006,280 $6,600,575 $5,405,705 2001A $4,440,000 $2,185,000 Financial 01/31/09 44,319,708 n/a (181,037) 526,145 3,618,202 3,571,481 12,018,498 9,234,212 2,784,286 Unrated Position 01/31/08 43,939,537 n/a (527,715) 854,921 5,106,407 4,972,138 13,937,297 10,971,974 2,965,323
CATS (4) Statement of 06/30/09 $4,519,240 n/a $443,176 $152,554 $1,254,907 $241,606 $4,169,578 $2,024,673 $2,144,905 2002A $2,090,000 $1,545,000 Financial 06/30/08 4,460,553 n/a 476,656 151,943 1,529,971 181,384 3,874,603 2,172,874 1,701,729 Unrated Position 06/30/07 4,207,280 n/a 355,427 151,633 1,251,021 238,318 3,431,724 2,206,651 1,225,073
CCH (5) Statement of 06/30/09 $10,066,205 n/a ($850,593) $432,219 $1,572,317 $3,461,814 $12,613,289 $11,765,026 $848,263 2002C $5,130,000 $3,845,000 Financial 06/30/08 9,571,469 n/a (1,067,466) 444,190 1,466,978 2,270,776 12,654,950 10,956,094 1,698,856 Unrated Position 06/30/07 8,964,328 n/a (630,277) 436,718 1,855,054 2,245,591 13,513,632 10,747,330 2,766,302
Fairmount Montessori (6) Statement of 06/30/10 $3,789,396 n/a ($44,815) $347,797 $762,972 $548,085 $7,922,121 $4,658,024 $3,264,097 2005B $3,375,000 $2,960,000 Financial 06/30/09 3,455,249 n/a (108,587) 344,429 698,391 589,847 8,126,991 4,818,079 3,308,912 Unrated Position 06/30/08 3,139,316 n/a 112,105 328,272 480,333 527,360 8,259,319 4,841,820 3,417,499
Totals - Governmental $27,405,000 $18,155,000 and Non-Profit
(1) From the Cleveland-Cuyahoga County Port Authority audited basic financial statements as of December 31, 2007, 2008 and 2009. (2) From NOACA audited financial statements as of June 30, 2007, 2008 and 2009. (3) From CEOGC audited financial statements as of January 31, 2008, 2009 and 2010. (4) From Community Assessment and Treatment Services Inc. audited financial statements as of June 30, 2007, 2008 and 2009. (5) From Cleveland Christian Home audited consolidated financial statements as of June 30, 2007, 2008 and 2009. (6) From Fairmount Montessori Association audited financial statements as of June 30, 2008, 2009 and 2010.
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TAX INCREMENT FINANCING AND SPECIAL ASSESSMENT HISTORICAL FINANCIAL INFORMATION AS OF NOVEMBER 15, 2010
Development Estimated Estimated Service Maximum Estimated Contracting Party / Original Outstanding Type of Completion Market Value Payment Available Annual Debt Debt Service Bond Series Principal Principal Project Year of Development to pay Debt Service Service Coverage Security City of Cleveland TIF - Unpaid TIF Service Payments are a priority tax lien and senior to (Plain Dealer) $2,965,000 $1,070,000 TIF 2002 $31,428,834 $388,802 $157,250 2.47 any mortgage holder. 2004B
City of Garfield Heights TIF - Unpaid TIF Service Payments and Special Assessments are priority (2) $1,560,772 (3) $1,100,816 1.42 tax lien and senior to any mortgage holder. (City View) $8,850,000 $7,850,000 2006 $62,998,300 Special Assessment - An annual assessment equal to $1,200,00 2004D (1) TIF & Special Assessment
TIF & Minimum Payments - Unpaid TIF Service Payments and City of Beachwood TIF & Under Const. Minimum Service Payments are priority tax lien and senior to any (Eaton Corporate HQ) $2,000,000 $2,000,000 Minimum Ex. Completion $150,000,000 $3,510,000 $296,300 2.00 mortgage holder. Excess Payment 2009A 2012 Proceeds - Excess TIF used to p
City of Cleveland TIF & Minimum Payments - Unpaid TIF Service Payments are priority TIF & tax lien and senior to any mortgage holder. Minimum Excess Proceeds - Excess TIF used to fund additional reserve equal (Forest Bay Tower City LLC) $2,520,000 $2,520,000 2010 $30,399,093 $313,970 $258,975 1.21 Payment 2010A TIF & Minimum Payments - Unpaid TIF Service Payments are priority City of Cleveland - Flats TIF & tax lien and senior to any mortgage holder. Minimum 2010B $8,800,000 $8,800,000 Payment 2012 $169,747,773 $3,678,800 $2,423,139 1.52
Totals - TIF and Special $25,135,000 $22,240,000 Assessment
(1) The current owner of Phase 1 of the Series 2004D Project, City View Center, LLC is a wholly-owned subsidiary of McGill Property Group, LLC. McGill Property Group, LLC filed for voluntary bankruptcy reorganization under Chapter 11 of the United States Bankruptcy Code on May 15, 2009. The assets of McGill Property Group, LLC, including the assets of City View Center, LLC, were placed into receivership. The current receiver for the real property comprising Phase 1 of the Series 2004D Project is Foresite Realty Partners, LLC (the "Receiver").
(2) The current estimated market value of the development at the Series 2004D Project Site is equal to the sum of: (i) $42,182,700, equal to a stipulated value for Phase 1 agreed upon by the Garfield Heights School District and the Receiver and approved by the Cuyahoga County Board of Revision on September 1, 2009, and (ii) $20,815,600, equal to the current market value of those portions of the Series 2004D Project Site other than Phase 1 as reported on the Cuyahoga County Auditor©s website.
(3) The estimated Service Payment available to pay debt service on the Series 2004D Bonds, as a result of the stipulation described in footnote (2) above, is approximately $1,560,772.
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TRUSTEE REPORT AS OF NOVEMBER 1, 2010
REQUIRED PRIMARY REQUIRED ADDITIONAL TOTAL ORIGINAL PRINCIPAL DUE DATE PAYMENT PAYMENT PRIMARY RESERVE ADDITIONAL RESERVE RESERVE SOURCE OF METHOD SERIES BORROWER PRINCIPAL BALANCE DATE (a) RECEIVED DUE RECEIVED RESERVE BALANCE RESERVE BALANCE BALANCE RESERVES OF PAYMENT 1997A ESSROC / Port $3,795,000 $3,020,000 11/01/10 11/01/10 $21,798 $21,798 $366,641 $371,390 $371,390 Cash ACH Tfr 1998A Jergens 5,720,000 3,075,000 11/01/10 11/01/10 40,760 40,760 572,000 572,000 572,000 Nat©l City Bank LOC FED Wire 1998B NOACA 3,345,000 1,825,000 11/01/10 11/01/10 24,281 24,281 324,472 332,584 332,584 Cash Check 1999A Port Authority 5,230,000 3,050,000 11/01/10 11/01/10 36,924 36,924 520,385 520,385 520,385 KeyBank LOC ACH Tfr 1999B Universal Heat 1,480,000 405,000 11/01/10 11/01/10 6,528 6,528 148,000 148,000 148,000 Cash Direct Debit 2000B RITA (d) 5,000,000 0 N/A N/A N/A N/A 0 0 0 Cash ACH Tfr 2001A CEOGC 4,440,000 2,345,000 11/01/10 11/01/10 39,222 39,222 444,000 484,192 484,192 KeyBank LOC / Cash Check 2001B Cleveland Bottle 1,500,000 1,090,000 11/01/10 11/01/10 11,215 11,215 150,000 150,000 83,347 83,347 233,347 Huntington LOC Direct Debit 2002A CAF 2,090,000 1,585,000 11/01/10 11/01/10 15,004 15,004 209,000 209,000 209,000 Cash Check 2002C CCH 5,130,000 3,945,000 11/01/10 36,461 0 513,000 513,142 75,000 76,782 589,924 Cash Check 2003A Centaur 4,250,000 1,680,000 11/01/10 11/01/10 52,657 52,657 425,000 425,000 212,500 249,934 674,934 Bank One LOC / Cash FED Wire 2004A Bellisio Foods 5,000,000 3,620,000 11/01/10 11/01/10 44,337 44,337 500,000 500,000 500,000 Nat©l City Bank LOC FED Wire 2004B City of Cleveland 2,965,000 1,070,000 05/01/10 N/A N/A N/A 296,500 296,673 296,673 Cash FED Wire 2004C Tru-Fab 1,060,000 870,000 11/01/10 11/01/10 8,687 8,687 106,000 122,816 122,816 Cash FED Wire 2004D Garfield Heights (b) 8,850,000 7,850,000 11/01/10 N/A N/A 885,000 885,000 885,000 Cash Internal Tfr 2005A Goodyear 4,125,000 2,420,000 11/01/10 11/01/10 51,038 51,038 412,500 458,528 458,528 Cash FED Wire 2005B Fairmount 3,375,000 3,015,000 11/01/10 11/01/10 23,425 23,425 337,500 337,537 337,537 Cash Direct Debit 2005C Avery Dennison 6,000,000 6,000,000 05/01/10 N/A N/A N/A 600,000 666,023 666,023 Cash FED Wire 2005D Columbia Natonal 6,020,000 4,740,000 11/01/10 11/01/10 51,923 51,923 602,000 602,000 602,000 KeyBank LOC FED Wire 2006A Cavs Practice Fac 9,500,000 8,800,000 11/01/10 11/01/10 165,823 165,823 950,000 950,000 950,000 CitiBank LOC FED Wire 2006B City of Perrysburg(f) 5,060,000 0 N/A N/A N/A N/A 0 4 4 Cash Cap Int 2008A Brush Wellman 5,155,000 5,080,000 11/01/10 11/01/10 52,270 52,270 515,500 515,500 515,500 JPMorgan LOC FED Wire 2009A Eaton Corporation 2,000,000 2,000,000 Cap Int Cap Int Cap Int Cap Int 200,000 200,042 200,042 Cash Cap Int
Total $101,090,000 $67,485,000 $682,354 $645,893 $9,077,498 $9,259,816 $370,847 $410,063 $9,669,879
Primary Reserve Funds $9,077,498 Program Reserve - Cash 4,120,590 Program Reserve - OMA (c) 2,483,332 Program Reserve LOC 9,000,000 Program Development Fund 122,034 Total Reserve Funds $24,803,454
Outstanding Bond Balance $67,485,000
Reserves to Outstanding Bonds 36.75%
(a) The Due Date for all borrowers is the first business day of each month. However, there is a 2 day grace period following the due date before late payment penalty fees can be enforced.
(b) T.I.F. payment received from Garfield Hts on 5/14/10 in amount of $583,675.71. The Service Payment Fund balance is sufficient to pay debt service for the 11/15/10, 05/15/11 and 11/15/11 payment dates
(c) OMA pledged $2,483,332 to be received in 3 equal installments by July 1, 2011. $1,649,999 has been received as of November 1, 2010.
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APPENDIX B
CERTAIN AUTHORITY AND DEMOGRAPHIC INFORMATION
GENERAL PORT AUTHORITY INFORMATION
Overview
The Cleveland-Cuyahoga County Port Authority (the ªAuthorityº) was formed in 1968 by the City of Cleveland (the ªCityº) and the County of Cuyahoga (the ªCountyº) pursuant to the Act (Sections of 4582.01 through 4582.20 of the Ohio Revised Code) and pursuant to legislation adopted by and an agreement entered into between the City and County (the ªJoint Agreementº). The Authority is a body corporate and politic pursuant to the Act and is an independent political subdivision of the State of Ohio and not part of the City or the County. The Joint Agreement provides for a nine-member board of directors (the ªBoard of Directorsº) to be appointed by the City and County. The Authority's staff handles the day-to-day operations of the Authority (see ªManagementº) under the direction of its President.
The Authority is authorized under the Act to undertake activities that promote water transportation and economic development, among other things, and it is organized into primarily two operating groups, Maritime and Real Estate and Development Finance (See ªMaritime Operationsº and ªReal Estate and Development Finance Groupº). In connection with such activities, the Authority may, among other things, exercise the right of eminent domain, purchase, construct, equip, sell, lease, and operate facilities and issue revenue bonds for such purposes.
Nearly 125 longshoremen load and unload ships at the Port of Cleveland (including Authority-owned and privately-owned facilities, the ªPortº), and approximately 11,000 other people in Northeastern Ohio depend on the Port to ship the raw materials and manufactured goods produced by their employment. In addition to the Authority-owned facilities discussed below, the Port includes numerous privately owned and operated docks stretching along the Cuyahoga River from Lake Erie. The Port brings more than $1,390,000,000 to the greater Cleveland economy through business revenues and personal income each year, and generates approximately $200,000,000 in state and local tax revenues.
The Authority has held a grant of license as Foreign Trade Zone No. 40 since 1978. This designation offers a number of benefits to manufacturing subzones, including the elimination or deferral of duties on imported goods. International docks cover approximately 100 acres of land on Lake Erie with an additional 44 acres on the Cuyahoga River at the Cleveland Bulk Terminal. Subzones and general purpose zone benefits are being realized by companies in Cleveland, Solon, Bedford, Strongsville, Glenwillow, Morgan Township, and Lorain. Additionally, the communities of Ashtabula, Vermilion and Brookpark have established general purpose zones that can be used by interested companies.
As more fully described below, the Authority's non-tax revenues are primarily derived from rental payments received from seaport facilities owned, leased or operated by the Authority and leased or subleased to private companies. In addition, the Authority receives revenues for some ton of cargo, that cross onto or off the Authority owned docks (current wharfage = $0.80/metric ton) and for dockage of the vessel (currently based on $0.09 per gross registered ton per 24 hours or fraction thereof). Other non-tax revenues are received through fees charged in connection with the Authority's Real Estate and Development Finance operations.
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Maritime Operations
The Port is an interlake and international shipping center stretching along the shores of Lake Erie and up the Cuyahoga River. International ships arrive at the Port through the St. Lawrence Seaway, while interlake vessels, serving the needs of greater northeast Ohio, arrive from other Great Lakes ports.
The Port primarily handles steel and bulk commodities. In addition, the Port has heavy-lift capabilities, because of its equipment and is a favorable location for moving heavy loads such as automobile manufacturing equipment, presses, raw and finished steel and factory components for overseas assembly. The Port's protective six-mile breakwater and 27 foot depth allow it to accommodate all ships that pass through the St. Lawrence Seaway locks. The Authority's docks are accessible by rail transportation, the Cuyahoga River channel and the intersection of four interstate highways. The Authority's dock and Foreign Trade Zone sites create a cost-effective vehicle for international trade, particularly in heavy equipment and project cargo. The Port has a history of positive labor-management relations on its docks.
The Port serves both outbound and inbound shipments with the vast majority of cargo either generated or delivered within a 75-mile radius of the Port. The Greater Cleveland Partnership, the area's Chamber of Commerce, lists over 6,000 corporate members engaged in manufacturing, many of which are involved in international trade.
The Authority owns and leases to private operating companies approximately 150 acres of land used for maritime activities. The Authority employs approximately 20 people in connection with such activities, and with the Real Estate and Development Finance Group activities described below.
The Authority-owned lakefront facilities include 2,880,000 square feet of paved pier space, 360,000 square feet of covered warehouse space, nine deep-water berths capable of accepting full St. Lawrence Seaway size vessels at full draft (27 feet), over 7,800 feet of dock space, eight traveling cranes, one heavy lift crane (accommodating/capable of lifting/weighing 150 tons), and a 45 acre bulk handling facility capable of accommodating 1,000 foot vessels for discharge of bulk commodities. The Authority also owns 6 acres of property on the Old River which are currently leased and under contract for sale to Great Lakes Towing Company, the largest tug and towing operation on the Great Lakes.
Real Estate and Development Finance Group
The economic development mission of the Authority is to assist private industry in the creation and preservation of jobs and employment opportunities within northeastern Ohio. To further this mission, the Board of Directors expanded outside the Authority's traditional maritime operations by adding an Economic Development Group to the Authority in 1993, now known as the Real Estate and Development Finance Group.
The Authority became a key player in Greater Cleveland's economic development when it issued $39 million of revenue bonds to finance the Rock and Roll Hall of Fame and Museum. The Real Estate and Development Finance Group monitored the construction of the Rock and Roll Hall of Fame and Museum, and on Labor Day, 1995, the Rock and Roll Hall of Fame and Museum was completed and opened on- time and on-budget. The revenue bonds issued by the Authority to finance the Rock and Roll Hall of Fame and Museum are supported by a bed tax assigned as rent by the Rock and Roll Hall of Fame and Museum to the Trustee of the bonds and do not involve any Authority assets or require payment of any general Authority revenues to such Trustee.
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In 1995 the Real Estate and Development Finance Group acquired responsibility for the management and development of North Coast Harbor. The Authority's management responsibilities are contingent upon receipt of monthly fees for operation from the museums and other key users of North Coast Harbor. This area, bordering the Port to the East, houses the Rock and Roll Hall of Fame and Museum, the Great Lakes Science Center and the William G. Mather Steamship Museum. North Coast Harbor is also home to the Voinovich Park amphitheater, the State of Ohio's gift to the City for its 1996 bicentennial.
The Real Estate and Development Finance Group continues to undertake, from time to time, financing, management, and other responsibilities for qualifying projects in addition to its role as issuer of Common Fund Bonds, as described in the front part of this Official Statement under the heading ªTHE FINANCING PROGRAM.º
Management
The Board of Directors. A nine-member Board of Directors governs the Authority. The Mayor of the City of Cleveland appoints six board members with concurrence of City Council, and the Board of Cuyahoga County Commissioners appoints three board members. Terms of Directors expire on January 28th or 29th of the year indicated hereafter, or when a successor Director is appointed.
Name Occupation Term Expiration
Steven J. Williams, Chairman and CEO, 1/28/2012 Chair Elsons International Inc.
Robert C. Smith, President and CEO, 1/28/2011 Vice Chair Spero-Smith Investment Advisers, Inc.
Robert M. Peto, CEO and Executive Secretary/Treasurer, 1/29/2012 Secretary/Fiscal Officer Ohio & Vicinity Regional Council of Carpenters
Richard M. Knoth, Attorney, 1/28/2012 Board Member Baker & Hostetler
Paul Hoogenboom Senior Vice President and CIO, 1/28/2013 Board Member RPM International
John J. Carney, Attorney, Real Estate Owner & Developer 1/28/2012 Board Member
Anthony R. Moore, Attorney, 1/28/2012 Board Member Jones Day
Mark Krantz, Attorney, 1/28/2013 Board Member Kohrman, Jackson & Krantz
Vacant
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Executive Staff. The Authority's executive staff is responsible for the day-to-day operations of the Authority and is employed at the direction of the Board of Directors. Information regarding the Authority executive staff follows:
Name Title Year of Hire William D. Friedman President & CEO 2010 Brent R. Leslie Chief Financial Officer 2003 David Gutheil Vice President, Maritime Services 2010 Garth Woodson Assistant Vice President, Development Finance 2006
CERTAIN ECONOMIC AND DEMOGRAPHIC INFORMATION CONCERNING THE COUNTY AND CITY
The following limited economic and demographic information regarding the County and City (within which the Authority is situated) has been compiled from public documents and other sources believed to be accurate; however, no representation is made as to the completeness of that information, as to whether the information is accurate as of any date subsequent to those dates indicated herein, as to whether any adverse changes have occurred since such dates or as to whether that information is indicative of any trends or future events. Reference should be made to the sources cited, and to any updates of those sources, for more complete information.
General
The City and County are located in the Cleveland-Akron-Lorain Consolidated Metropolitan Statistical Area (ªCMSAº), which is the 16th most populous CMSA of the 276 consolidated metropolitan statistical areas in the United States (rankings based on the 2000 Census figures). The City and the County are also located in the Cleveland Primary Metropolitan Statistical Area (ªPMSAº), which is comprised of the counties of Cuyahoga, Geauga, Lake and Medina and is the 23rd most populous PMSA of the 71 metropolitan statistical areas in the United States. Effective in 1994, the PMSA was redefined to include Ashtabula and Lorain Counties in addition to the original four counties. Most statistics, including historical data, have been revised to reflect the new PMSA and, unless otherwise noted, PMSA statistics included in this Official Statement are for the newly defined PMSA.
The County is served by diversified transportation facilities including six U.S. highways and seven interstate highways, four railroads, four airports, and the Port.
The City is a regional financial center and is the headquarters of the Fourth District Federal Reserve Bank, which serves Ohio, the western portion of Pennsylvania and portions of Kentucky and West Virginia.
There are a number of public and private two-year and four-year colleges and universities located in the City's metropolitan area, including, among others, Baldwin-Wallace College, Case Western Reserve University, Cleveland State University, Cuyahoga Community College, Hiram College, John Carroll University, Kent State University, Lorain County Community College, Notre Dame College, Oberlin College, The University of Akron, and Ursuline College.
The City is noted for its many cultural institutions, including the internationally acclaimed Cleveland Orchestra and the Cleveland Museum of Art. Theaters and entertainment centers include Playhouse Square (a complex of six theaters with seating for over 9,000), the Cleveland Play House, Public
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Auditorium, Karamu House, and Severance Hall. Other cultural institutions include the Cleveland Opera and Great Lakes Theater Festival.
Public mass transit for the area is provided by the Greater Cleveland Regional Transit Authority.
Population
The County is Ohio's largest county in terms of population, and the City, the County's seat of government, has a greater population per square mile than any other city in Ohio.
In the 2000 Census classifications, the City was in the Cleveland-Akron Consolidated Metropolitan Statistical Area (ªCMSAº), which consisted of eight northeast Ohio counties. In 2000, the CMSA had a population of 2,945,831, making it the 16th largest metropolitan area (out of 276) in the United States. The City was also in the Cleveland-Lorain-Elyria Primary Metropolitan Statistical Area (ªPMSAº), which consisted of the counties of Ashtabula, Cuyahoga, Geauga, Lake, Lorain and Medina. In June 2003, the U.S. Census Bureau ceased using the PMSA and CMSA distinctions. The former CMSA and PMSA including Cleveland is now the Cleveland-Elyria-Mentor Metropolitan Statistical Area (ªMSAº) and now consists of Cuyahoga, Geauga, Lake, Lorain and Medina counties.
Set forth below are population statistics from the U.S. Bureau of the Census for the City, the County, the PMSA, the CMSA and the State for each decade from 1950 to 2000 and for the City, the County, the MSA, and the State for 2006 through 2009.
Year City County PMSA CMSA State 1950 914,808 1,389,532 1,759,431 2,154,722 7,946,627 1960 876,050 1,647,895 2,220,050 2,732,350 9,706,397 1970 750,973 1,721,330 2,418,809 2,999,811 10,652,017 1980 573,822 1,498,400 2,277,949 2,834,412 10,797,630 1990 505,616 1,412,140 2,202,069 2,859,644 10,847,115 2000 478,403 1,393,978 2,250,871 2,945,831 11,353,140 2006 452,208 1,305,273 2,106,336(b) 2,929,617 11,470,685 2007 438,042 1,293,600 2,099,185(b) 2,896,968 11,477,641 2008 433,748 1,282,800 2,094,051(b) 2,887,492 11,485,910 2009(a) 431,363 1,275,709 2,091,286(b) 2,891,988 11,542,645
(a) Estimate as of July 2009. Source: U.S. Bureau of the Census. (b) Indicates population of MSA. Source: U.S. Bureau of the Census.
The following is a breakdown by age groups of the population for the City (according to 2000 Census figures):
Under 5 5-19 20-24 25-44 45-54 55-64 65+ Total 38,594 111,002 32,061 145,669 55,111 35,987 59,979 478,403
Employment
The following table compares estimated employment and unemployment statistics for the City, the County and the MSA, including comparisons with unemployment rates for the State and the United States.
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Employment Statistics*
Employed Unemployment Unemployment Rate Year City County MSA City County MSA City County MSA Ohio U.S. 2005 176,800 629,000 1,032,800 15,200 40,500 62,600 7.9% 6.1% 5.7% 5.9% 5.1% 2006 175,600 626,700 1,034,800 13,300 36,700 58,600 7.1% 5.5% 5.4% 5.5% 4.6% 2007 175,100 624,600 1,031,300 14,400 39,800 64,200 7.6% 6.0% 5.9% 5.6% 4.6% 2008 163,800 583,300 979,300 16,000 44,800 74,700 8.9% 7.1% 7.1% 7.7% 7.1% 2009 162,400 581,200 981,300 20,300 58,800 98,100 11.1% 9.2% 9.1% 10.2% 9.3% 2010(a) 165,300 591,400 998,600 22,800 66,800 106,600 12.1% 0.1% 9.6% 10.1% 9.6% (a) As of August 2010. *Rounded to the nearest hundred. Source: Ohio Department of Job & Family Services, Labor Market Information Division
The following table indicates the distribution of employee classifications in the MSA for the years 2005 through August 2010:
Distribution of Employees by Sector (Amounts in 000’s)
2005 2006 2007 2008 2009 August 2010
Goods Producing Industries Mining, Logging, Construction 42.9 41.6 41.0 38.4 32.8 31.8 Primary Metal 11.1 11.1 10.6 10.6 8.1 6.9 Fabricated Metal 31.2 31.8 32.0 31.3 26.0 25.5 Transportation Equipment 19.9 18.4 15.6 13.6 10.0 9.8 Other 87.0 86.2 84.6 83.3 74.0 77.8
Total Goods Producing Industries 192.1 189.1 183.8 177.2 150.9 151.8
Service Producing Industries Transportation & Public Utilities 32.9 33.8 34.3 33.6 30.7 29.6 Wholesale Trade 55.3 56.1 55.1 54.0 49.7 48.3 Retail Trade 110.5 109.7 109.4 107.6 102.7 106.2 Finance, Insurance & Real Estate 74.9 73.8 72.2 68.8 65.3 62.0 Health Services 140.9 143.8 146.9 149.8 153.2 161.0 Other Services 324.6 328.0 327.5 324.7 307.5 312.7 Federal Government 18.1 18.1 18.5 18.9 19.0 19.6 State Government 8.3 8.2 8.0 7.8 7.5 7.1 Local Government 114.5 114.1 116.5 116.2 114.6 105.6 Total Service Producing Industries 880.0 885.9 888.4 881.4 850.2 852.1 Total 1,072.1 1,075.0 1,072.2 1,058.6 1,001.1 1,003.9 Goods Producing Percentage 17.9% 17.6% 17.6% 16.5% 15.1% 15.1% Service Producing Percentage 82.1% 82.4% 82.9% 82.2% 84.9% 84.9%
Source: Ohio Department of Job & Family Services, Labor Market Information Division.
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Largest Employers
The following employers (private and public ranked by full-time equivalent local employees) with headquarters or major operations in northeast Ohio had the largest work forces in northeast Ohio as of June 30, 2010:
Approximate Number of Employer Nature of Activity or Business Employees* Cleveland Clinic Health care provider 34,000 U.S. Office of Personnel Management Federal government 14,843 University Hospitals Health care provider 13,224 State of Ohio State government 9,932 Progressive Corp. Insurance and financial company 8,900 Cuyahoga County County government 8.036 Summa Health System Health care provider 8,000 U.S. Postal Service U.S. postal service 7,641 The City of Cleveland Municipal government 7,580 Cleveland Municipal School District Education 7,385 Group Management Services Inc. Human Resources, Payroll, Employment 6,652 KeyCorp Bank holding company 5,553 MetroHealth System Health care provider 5,408 FirstEnergy Corp. Electric utility holding company 5,367 Kent State University Higher education 5,030 General Motors Corp. Automobile manufacturer 4,500 Case Western Reserve University Higher education 4,449 Summit County County government 4,164 Akron General Health System Health care provider 4,151 Timken Co. Friction management and power transmission 3,700 products and services Swagelok Co. Designer and manufacturer of industrial fluid 3,600 system components Ford Motor Co. Automobile manufacturer 3,500 Akron Children's Hospital Pediatric hospital 3,179 Sherwin-Williams Co. Coatings and related products 3,058 Goodyear Tire & Rubber Co. Tire manufacturer 3,000
Source: Crain's Cleveland Business July 26, 2010 * Employees working in Ashland, Ashtabula, Cuyahoga, Erie, Geauga, Huron, Lake, Lorain, Mahoning, Medina, Portage, Stark, Summit, Trumbull & Wayne Counties.
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APPENDIX C
DEFINITIONS
ªAcceptable Letter of Creditº means an irrevocable letter of credit issued by a bank or trust company which has capital and surplus of not less than $50,000,000 and either (i) the long term debt of it or its parent corporation is rated in not lower than the third highest long term debt rating category (without regard to modifiers) by a Rating Service or, if no long term debt is rated then the short term debt of it or its parent corporation is rated by a Rating Service in the highest short term debt category or (ii) the bank or trust company issuing the letter of credit is specifically approved by the Authority and, if any Rating Service is then rating the Common Fund Bonds, by such Rating Service.
ªActº means Sections 4582.01 to 4582.20, both inclusive, Ohio Revised Code, as enacted and amended from time to time pursuant to Sections 13 and 16 of Article VIII of the Ohio Constitution, and Sections 9.98 and 9.983 of the Ohio Revised Code, as the same may be amended.
ªAdditional Bond Reserve Depositº means, with respect to each Contracting Party, the amount, if any, which the Contracting Party was required to deposit in a bond reserve account, in addition to the Bond Reserve Deposit at the time of the issuance of the Common Fund Bonds for the benefit of that Contracting Party.
ªAdministrative Amountsº means the portion of each Financing Payment identified as such in the applicable Agreement to reimburse the Authority for certain costs and expenses and to pay the fees of the Trustee.
ªAgreementsº or ªAgreementº means loan agreements, installment sale agreements, leases, other documents or instruments to which the Authority is a party including those between the Authority and a Contracting Party, each as amended or supplemented from time to time, in which a Contracting Party or the Authority or each acknowledges that it has received the benefit of the proceeds of Common Fund Bonds and agrees to pay to the Authority or the Trustee specified amounts in consideration of the receipt of such benefit.
ªAnnual Informationº means annual financial information and operating data (i) with respect to the Port of Cleveland Bond Fund Program of the type set forth in the Official Statement for the Series 2010B Bonds under the captions ªSECURITY AND FLOW OF FUNDS -- Fund Balances and Outstanding Bondsº and ªSECURITY AND FLOW OF FUNDS -- Debt Service Requirements on Outstanding Bondsº and in APPENDIX A hereto, for the Authority fiscal year ended immediately preceding the filing of that Annual Information, and (ii) with respect to any Contracting Party that is a Significant Obligor as of the November 16 immediately preceding the filing of the Annual Information, of the type set forth in ªCONTINUING DISCLOSUREº, for the fiscal year of that Contracting Party concluded most recently prior to that filing for which that information is available at the time of the filing.
ªAuthorityº means the Cleveland-Cuyahoga County Port Authority, a port authority and political subdivision and body corporate and politic, duly organized and validly existing under the laws of the State, and any successors or assigns.
ªAvailable Moneysº means moneys of the Authority which are derived other than from taxes of the Authority and other than from payments required to be made to the Authority by agreements or proceedings in connection with the issuance (heretofore or hereafter) of revenue bonds under authority of Section 4582.06 of the Act and Section 13 of Article VIII of the Constitution of the State which revenue
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bonds are not secured by the Bond Fund or other funds created by the Indenture and which payments are obligated for or pledged to the payment of principal of and premium, if any, and interest on said revenue bonds.
ªBasic Indentureº means the a Trust Indenture, dated as of November 1, 1997, as amended by the Twenty-Fourth Supplemental Trust Indenture, dated as of November 1, 2006 and the Thirtieth Supplemental Trust Indenture, dated as of November 1, 2010, each between the Authority and The Huntington National Bank, a national banking association (together with any successor as trustee, the ªTrusteeº), and as it may be supplemented pursuant to Section 8.02 thereof other than amendments necessary or advisable in connection with the issuance of a specific series of Common Fund Bonds.
ªBond Financing Paymentsº means the Financing Payments, less the amounts to be received by the Authority as the Administrative Amounts portion of the Financing Payments.
ªBond Fundº means the Special Fund by such name created under the Indenture from which are paid principal of and premium, if any, and interest on Common Fund Bonds.
ªBond Purchase Agreementº means the Bond Purchase Agreement, dated December 13, 2010, by and among the Underwriter, the Authority, and the Developer.
ªBond Reserve Depositº means for any series of Common Fund Bonds (i) a letter of credit meeting the requirements set forth in the Indenture, (ii) direct obligations of or obligations fully and timely guaranteed by, the United States of America maturing not later than 36 months later, (iii) cash, (iv) a surety bond, guaranty or other instrument of credit enhancement meeting the requirements set forth in the Indenture, (v) a combination of the foregoing, which shall be an amount for each series which is equal to the Bond Reserve Deposit Requirement.
ªBond Reserve Deposit Requirementº means for any series of Common Fund Bonds an amount equal to ten percent (10%) of the proceeds of that series, or if the Series is of Tax-Free Bonds, such lesser amount, if any, required to conform to and determined in accordance with Section 148 of the Code and Treasury Regulation §1.148-2(f), or any successor provisions.
ªBond Service Chargesº means the principal of and interest and any premium on the Series 2010B Bonds.
ªBusiness Dayº means a day which is not a (i) Saturday, Sunday, or legal holiday in the State of Ohio or (ii) day on which the Trustee is closed or banks in Ohio or New York are authorized to close.
ªCityº means the City of Cleveland, Ohio.
ªClosing Dateº means December 21, 2010.
ªCodeº means the Internal Revenue Code of 1986, as amended, including, when appropriate, the statutory predecessor of the Code, and all applicable regulations (whether proposed, temporary or final) under that Code and the statutory predecessor of the Code, and any official rulings and judicial determinations under the foregoing.
ªCollateralº means the real or personal property and any moneys realized from the foreclosure, sale or other disposition of such property providing security for the payment of Bond Financing Payments.
ªCollateral Fundº means the Collateral Fund as described under the caption ªTHE INDENTURE - Funds; Application; Withdrawal -- Collateral Fund.º
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ªCommon Fundsº means the Revenue Fund, Bond Fund (exclusive of the Sections 5.07 Account and moneys in the Prepayment Account held pursuant to Section 9.02 of the Indenture), Primary Reserve Fund, Program Reserve Fund (including the Authority Account and the Letter of Credit Account therein), Collateral Fund and Program Development Fund.
ªCommon Fund Bondsº or ªBondsº means all bonds heretofore or hereafter issued by the Authority which are secured by the Basic Indenture.
ªConstruction Agency Agreementº means the Construction Agency Agreement, dated as of December 1, 2010, between the Authority, the Developer, the Lessee, and the Trustee.
ªContracting Partyº or ªContracting Partiesº means any person or persons who have received the benefit of a series of Common Fund Bonds under an Agreement and their successors and assigns.
ªContractorº means Gilbane Building Company, a Rhode Island corporation, and any permitted successors and/or assigns thereof.
ªCooperative Agreementº means the Cooperative Agreement, dated as of December 1, 2010 by and among the Authority, the Summit County Port Authority, the Series 2010B Contracting Party, Flats East, FED/Main Street, the State of Ohio acting through the Treasurer of the State and the Director, the Trustee, and the Summit Port Trustee, as described under the heading ªTHE FINANCED PROJECTº.
ªCountyº means the County of Cuyahoga, Ohio.
ªDeclarationº means the Mortgage and Declaration of Covenants and Conditions Relative to Service Payments In Lieu of Taxes, dated as of December 1, 2010 and recorded by the Developer on the TIF District securing the obligations to make Service Payments and Minimum Payments with respect to each parcel of real property within the TIF District (i) as joint, several, and collective obligations of Flats East and FED/Main Street, and (ii) as individual obligations of future owners of each parcel of real property within the TIF District.
ªDefeasance Obligationsº means (i) noncallable direct obligations of, or noncallable obligations the principal of and interest on which are guaranteed as to full and timely payment by, the United States of America or (ii) obligations which have been determined in a Supplemental Indenture to be Defeasance Obligations and which shall be Defeasance Obligations only as to those Bonds issued pursuant to that Supplemental Indenture.
ªDetermination of Taxabilityº means, with respect to the Series 2010B Bonds, (i) the enactment of legislation or the adoption of final regulations or a final decision, ruling or technical advice by any federal judicial or administrative authority which has the effect of requiring interest on the Series 2010B Bonds to be included in the gross income of the Holders for federal income tax purposes (other than a Holder who is a ªsubstantial userº of the Project or a ªrelated personº as those terms are used in Section 147(a) of the Code), or (ii) the receipt by the Trustee of an Opinion of Bond Counsel to the effect that interest on the Series 2010B Bonds must be included in the gross income of the Holders for federal income tax purposes (other than a Holder who is a ªsubstantial userº of the Project or a ªrelated personº as those terms are used in Section 147(a) of the Code), provided that no decision by any court or decision, ruling or technical advice by any administrative authority shall be considered final (a) unless the Holder involved in the proceeding or action giving rise to such decision, ruling or technical advice (i) gives the Series 2010B Contracting Party and the Trustee prompt notice of the commencement thereof, and (ii) offers the Series 2010B Contracting Party the opportunity to control the contest thereof, provided the Series 2010B Contracting Party shall have agreed to
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bear all expenses in connection therewith and to indemnify that Holder against all liabilities in connection therewith, and (b) until the expiration of all periods for judicial review or appeal.
ªDeveloperº means, collectively, Flats East and FED/Main Street.
ªDirectorº means the Director of the Department of Development of the State.
ªDisbursing Agreementº means the Disbursing and Payment Agreement, dated as of December 1, 2010 by and among the Authority, the Summit County Port Authority, the State of Ohio acting through the Treasurer of the State and the Director, Flats East, FED/Main Street, the Trustee, and the Summit Port Trustee, as described under the heading ªTHE FINANCED PROJECTº.
ªExcess Proceeds Fundº means the Excess Proceeds Fund described under the caption ªTHE INDENTURE ± The Funds; Application; Withdrawal ± Excess Proceeds Fund.º
ªFED/Main Streetº means FED/Main Street LLC, an Ohio limited liability company, and any permitted successors and/or assigns thereof.
ªFinancing Paymentsº means amounts required to be paid by a Contracting Party pursuant to the provisions of an Agreement or by the Authority pursuant to a Supplemental Indenture, for deposit as provided in the Basic Indenture. Each Financing Payment by other than the Authority is composed of a Required Amount and Administrative Amounts.
ªFlats Eastº means Flats East Development LLC, an Ohio limited liability company, and any permitted successors and/or assigns thereof.
ªHolderº or ªBondholderº means the person in whose name such a Common Fund Bond is registered on the respective register maintained by the registrar for those Common Fund Bonds.
ªIndentureº means the Basic Indenture, all Supplemental Indentures and amendments thereto.
ªInterest Payment Accountº means the account by such name in the Bond Fund from which interest is paid on Common Fund Bonds.
ªInterest Payment Dateº or ªInterest Payment Datesº means, as to all series of Common Fund Bonds, May 15 and November 15 provided that this definition shall not inhibit a delay for a series of the first Interest Payment Date for that series, the issuance of capital appreciation bonds or the payment of interest more frequently than semiannually if so provided in the Supplemental Indenture.
ªLeaseº means a lease relating to the Series 2010B Project, dated as of December 1, 2010, between the Authority and the Lessee.
ªLesseeº means Flats East Office LLC, an Ohio limited liability company, and any permitted successors and/or assigns thereof.
ªLevel Payment Accountº means in general the account by such name in the Bond Fund to be used to hold portions of Bond Financing Payments not yet required to be applied to the payment of debt service.
ªMinimum Paymentsº means the semiannual minimum payments required to be paid by the Developer under the Cooperative Agreement and the Declaration with respect to each parcel of real
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property within the TIF District based on certain established market values for discrete portions of the TIF District, as described under the heading ªTHE FINANCED PROJECTº.
ªOutstanding Bond Amountº means the outstanding principal amount of all Common Fund Bonds.
ªPersonº or words importing persons means firms, associations, partnerships (including without limitation, general and limited partnerships), limited liability companies, joint ventures, societies, estates, trusts, corporations, public or governmental bodies, other legal entities and natural persons.
ªPledged Revenuesº means (a) Bond Financing Payments, (b) all moneys and investments in the Special Funds and (c) all income and profit from the investment of the foregoing moneys.
ªPrepayment Accountº means the account by such name in the Bond Fund into which prepayments of Bond Financing Payments and proceeds of insurance and eminent domain are deposited.
ªPrimary Reserve Fundº means the Primary Reserve Fund described under the caption ªTHE INDENTURE - The Funds; Application; Withdrawal -- Primary Reserve Fund.º
ªPrincipal Payment Accountº means the account by such name in the Bond Fund from which principal is paid on Common Fund Bonds.
ªPrincipal Payment Dateº means for all series of Common Fund Bonds, either May 15 or November 15 or both.
ªProgram Development Fundº means the Program Development Fund described under the caption ªTHE INDENTURE - The Funds; Application; Withdrawal -- Program Development Fund.º
ªProgram Reserve Fundº means the Program Reserve Fund described under the caption ªTHE INDENTURE - The Funds; Application; Withdrawal -- Program Reserve Fund.º
ªProgram Reserve Letter of Creditº means an irrevocable letter of credit in the stated amount of $9,000,000 issued by the Program Reserve Letter of Credit Bank on or prior to the date of delivery of the Series 2010B Bonds, and any Successor Program Reserve Letter of Credit.
ªProgram Reserve Letter of Credit Bankº means Fifth Third Bank, or any successor issuer of a Program Reserve Letter of Credit.
ªProjectº means, collectively, the real, tangible personal and real and tangible personal property that has been or is expected to be acquired, constructed or improved from the proceeds of a series of Common Fund Bonds and which constitutes ªport authority facilitiesº as defined in the Act.
ªProject Fundº means the fund by such name created by the Indenture into which proceeds of all Common Fund Bonds are deposited for application to pay costs of a Project.
ªRating Serviceº means Fitch Ratings, Moody's Investors Service, or Standard & Poor's Ratings Services, a division of The McGraw Hill Companies.
ªRebate Fundº means the Rebate Fund described under the caption ªTHE INDENTURE - The Funds; Application; Withdrawal -- Rebate Fund.º
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ªReimbursement Agreementº means the Reimbursement Agreement between the Authority, the Trustee and the Program Reserve Letter of Credit Bank.
ªRequired Amountº means the portion of each Financing Payment identified as such in the applicable Agreement to make principal and interest payments with respect to the applicable Bonds.
ªRevenue Fundº means the fund by such name created by the Indenture into which all Bond Financing Payments are initially deposited by the Trustee.
ªS&Pº means Standard & Poor's Ratings Services, a division of The McGraw Hill Companies.
ªSection 5.07 Accountº means the account by such name in the Bond Fund for moneys held by the Trustee for the payment of the principal of a Bond, which is due but has not been presented for payment.
ªSeries 2010B Bondsº means the bonds issued pursuant to the Series 2010B Supplemental Indenture designated as ªDevelopment Revenue Bonds (Port of Cleveland Bond Fund) Series 2010B (City of Cleveland ± Flats East Development Project) (Tax-Exempt Recovery Zone Facility Bonds)º in the amount of $8,800,000.
ªSeries 2010B Contracting Partyº means the City.
ªSeries 2010B Projectº means the construction, installation, improvement, and equipment of an approximately 476,000 square feet, 18-story office tower situated on the Series 2010B Project Site, financed in part by the proceeds of the Series 2010B Bonds, which space, when constructed, installed, improved, and equipped, constitutes ªport authority facilitiesº as defined in the Act.
ªSeries 2010B Project Siteº means an approximately 3-acre site located on the banks of the Cuyahoga River in the downtown area of the City, in and on which the Series 2010B Project will be constructed, installed, improved, and equipped.
ªSeries 2010B Supplemental Indentureº means the indenture supplemental to the Basic Indenture, which authorizes the issuance and establishes terms of the Series 2010B Bonds.
ªService Paymentsº means semiannual service payments in lieu of taxes required to be paid by Flats East and FED/Main Street under the Cooperative Agreement and the Declaration and Flats East, FED/Main Street, and any future owner of each parcel of real property within the TIF District resulting from the imposition by the Series 2010B Contracting Party of the TIF Exemption on the TIF District in an amount equal to the amount of real property taxes that would have paid on the increase in assessed value but for the TIF Exemption on the TIF District.
ªSignificant Obligorº means, as of any November 16 on or after November 16, 2011, any Contracting Party as to which the quotient determined by dividing (i) the Contracting Party Bond Amount for that Contracting Party, by (ii) the Outstanding Bond Amount, each determined as of that November 16, exceeds twenty percent (20%); provided that if, as of that November 16, the aggregate amount of the Reserves is equal to or greater than eighty percent (80%) of the Outstanding Bond Amount, no Contracting Party shall be considered to be a Significant Obligor as of that November 16.
ªSpecial Fundsº means the Common Funds plus the Excess Proceeds Fund.
ªStateº means the State of Ohio.
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ªSuccessor Program Reserve Letter of Creditº means any letter of credit issued to replace the Program Reserve Letter of Credit.
ªSummit Port Trusteeº means U.S. Bank National Association.
ªSupplemental Indentureº means any indenture supplemental to the Basic Indenture and entered into in accordance with the Basic Indenture.
ªTax-Free Bondsº means those Common Fund Bonds the interest on which, in the opinion of nationally recognized bond counsel delivered at the time of issuance thereof is excludable from the gross income of the holder thereof for federal income tax purposes.
ªTIF Districtº means approximately eighteen (18) acres within the City and including the Series 2010B Project Site and certain real property in the immediate vicinity of the Series 2010B Project Site subject to the TIF Exemption.
ªTIF Ordinanceº means Ordinance No. 1379-09, passed by the City Council of the City on October 5, 2009, authorizing the TIF Exemption.
ªTIF Exemptionº means the exemption of 100% of the increase in assessed value of the TIF District for a period of up to 30 years beginning on October 9, 2009 and extending through October 8, 2039, first payable in collection year 2010 and extending through collection year 2040, authorized by the TIF Ordinance.
ªTrusteeº means The Huntington National Bank, with its principal corporate trust office in Cleveland, Ohio, until a successor Trustee shall have become such pursuant to the applicable provisions of the Indenture, and thereafter, ªTrusteeº shall mean the successor Trustee.
ªUnassigned Issuer's Rightsº means all of the rights of the Authority to receive Administrative Expenses (as defined in the Cooperative Agreement), Additional Payments (as defined in the Cooperative Agreement) under any lease of or mortgage on the Series 2010B Project, transfers from the Program Development Fund, the right to be held harmless, indemnified, and reimbursed for reasonable attorney fees and expenses under the Cooperative Agreement and any other agreement made pursuant to the Cooperative Agreement or in furtherance of the Series 2010B Project, the right to consent to amendments of the Cooperative Agreement and any agreements, mortgage, lease, assignment or note made pursuant to the Cooperative Agreement or in furtherance of the Series 2010B Project, and any other Unassigned Issuer's Rights as may be set forth in any of the foregoing or in the Indenture.
ªUnderwriterº means Robert W. Baird & Co. Incorporated.
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APPENDIX D
FORM OF BOND COUNSEL OPINION
December [___], 2010
To: Robert W. Baird & Co. Incorporated Columbus, Ohio
We have examined the transcript of proceedings (ªTranscriptº) relating to the issuance by the Cleveland-Cuyahoga County Port Authority (ªAuthorityº) of its $8,800,000 Development Revenue Bonds (Port of Cleveland Bond Fund) Series 2010[] (City of Cleveland ± Flats East Development Project) (Tax-Exempt Recovery Zone Facility Bonds) dated December [___], 2010 (ªBondsº). The Bonds are being issued in connection with a Cooperative Agreement (ªAgreementº) dated as of December 1, 2010 among the Authority, the Summit County Port Authority, the City of Cleveland, Ohio (ªCityº), Flats East Development LLC (ªDeveloperº), FED/Main Street LLC (ªDeveloper Partnerº), the State of Ohio Acting Through the Treasurer of the State of Ohio and the Director of the Department of Development of the State of Ohio, The Huntington National Bank, and U.S. Bank National Association in connection with financing a portion of the costs of the acquisition, construction and installation of an office building for authorized purposes of the Authority, including industry, commerce, distribution, research, and economic development (the ªProjectº), all as more fully described in or pursuant to the Agreement. The documents in the Transcript examined include signed counterparts of (i) the Agreement, and (ii) the Trust Indenture dated as of November 1, 1997 between the Authority and The Huntington National Bank, as Trustee (ªTrusteeº), as amended by the Twenty-Fourth Supplemental Trust Indenture dated as of November 1, 2006 and the Thirtieth Supplemental Trust Indenture dated as of November 1, 2010, and as supplemented by the Thirty-Second Supplemental Trust Indenture dated as of December 1, 2010 (collectively, the ªIndentureº). We have also examined a copy of a signed and authenticated Bond.
Based on this examination we are of the opinion that, as of the date hereof, under existing law:
1. The Bonds, the Agreement, and the Indenture are legal, valid, binding and enforceable as to the Authority in accordance with their respective terms, subject to bankruptcy laws and other laws affecting creditors' rights and to the exercise of judicial discretion.
2. The Bonds constitute special obligations of the Authority, and the principal of and interest and any premium on the Bonds (collectively, ªdebt serviceº) are payable solely from the revenues and other moneys assigned by the Indenture to secure that payment. The Bonds and the payment of debt service are not secured by an obligation or pledge of any moneys raised by taxation, and the Bonds do not represent or constitute a debt or pledge of the faith and credit of the Authority.
3. Under existing law and assuming compliance with certain covenants, the interest on the Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986, as amended (the ªCodeº), except for interest on any Bond during any period while such Bond is held by a ªsubstantial userº of the Project financed by the proceeds of the Bonds, or a ªrelated personº as those terms are used in Section 147(a) of the Code. The Bonds are ªprivate activity bondsº and constitute Recovery Zone Facility Bonds within the meaning of the Code. As such, the interest on the Bonds is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations.
4. Interest on, and any profit made on the sale, exchange or other disposition of, the Bonds are exempt from the Ohio personal income tax, the Ohio commercial activity tax, the net income base of the Ohio corporate franchise tax, and municipal and school district income taxes in Ohio.
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We express no opinion and make no representation as to any other tax consequences regarding the Bonds.
A portion of the interest on the Bonds earned by certain corporations may be subject to a federal corporate alternative minimum tax. In addition, interest on the Bonds may be subject to a federal branch profits tax imposed on certain foreign corporations doing business in the United States and to a federal tax imposed on excess net passive income of certain S corporations.
In giving the foregoing opinions, we have assumed and relied upon continuing compliance with the covenants of the Authority, the City, Developer and Developer Partner and the accuracy, which we have not independently verified, of the representations and certifications of the Authority, the City, the Developer and Developer Partner, as contained in the Transcript. The accuracy of certain of those representations and certifications, and future or continuing compliance by the Authority, the City, the Developer and Developer Partner with those covenants, may be necessary for the interest on the Bonds to be and to remain excluded from gross income for federal income tax purposes and other tax affects stated above. Failure to comply with certain of those covenants subsequent to issuance of the Bonds could cause the interest on the Bonds to be included in gross income for federal income tax purposes and thus to be subject to federal income tax retroactively to the date of issuance of the Bonds.
The opinions set forth herein are qualified in their entirety as follows: (i) the terms and provisions of any instrument or agreement are subject to the application of bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights and, in addition, are subject generally to the application of equitable principles; (ii) the remedy of specific performance is generally discretionary with the court and may not be available with respect to the enforcement of the terms and provisions of any instrument or agreement; (iii) judicial decisions indicate that public policy may make unenforceable provisions in agreements respecting payment by a debtor of the costs of enforcement, including, without limitation, attorneys' fees; and (iv) certain of the notice, waiver and remedial provisions contained in the instruments and agreements referred to in this opinion may be unenforceable in whole or in part.
We are admitted to the practice of law solely in the State of Ohio. The opinions expressed herein are limited to the laws of the State of Ohio and federal laws of the United States of America; we express no opinion as to the effect of any other applicable law. We do not undertake to advise you of matters which may come to our attention subsequent to the date hereof which may affect our legal opinions expressed herein.
In giving the foregoing opinions, with your consent, we have (i) assumed the due authorization, execution and delivery by, and the binding effect and enforceability against, the Trustee of the Indenture, (ii) relied upon the legal opinions of Tucker Ellis & West LLP and Jones Day LLP as counsel for the Developer and Developer Partner, and (iii) relied upon the legal opinion of the Law Director for the City, contained in the Transcript as to all matters concerning the due authorization, execution and delivery of the Agreement by the Developer and Developer Partner and the City, the binding effect of the Agreement and its enforceability against the Developer and Developer Partner and the City.
We bring to your attention the fact that our legal opinions are an expression of professional judgment and are not a guarantee of result.
Respectfully submitted,
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