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Muskegon City Commission
Commission Meeting Date: November 7th, 2022 Title: LRS PRI Act 99 Installment
Purchase Agreement
Submitted By: Jake Eckholm Department: Development Services
Brief Summary:
Staff is requesting that Commission authorize the statutorily required Act 99 Installment Purchase
Agreement and Resolution.
Detailed Summary & Background:
Public Act 99 of 1933 is a statute which allows municipalities to borrow funds for real estate related
endeavors. We have previously used this Act to partner with the Community Foundation for
Muskegon County on the Jackson Hill Infill Pilot.
The attached resolution covers the requirements laid out in the Act, and has the Agreement itself
attached that is to be executed. This item is jointly presented for consideration along with the
Amended LRS Enterprises ARP Agreement.
Goal/Focus Area/Action Item Addressed:
Goal 1 (Image) Housing Focus Area, Goal 2 (Quality of Life) Housing Focus Area , Action Item 21-8
Expand Housing Options, Goal 3 (Revitalize Revenues) Social Equity Focus Area, Action Item 21-
11 Increase Opportunities for Minorities in Economic Development, and Goal 3 (Revitalize
Revenues) Housing Focus Area, Action Item 21-13 Increase Property Values in Urban Core and
Eastside Neighborhoods
Amount Requested: N/A Amount Budgeted: N/A
Fund(s) or Account(s) : N/A Fund(s) or Account(s): N/A
Recommended Motion: Motion to adopt the Resolution Authorizing the Installment Purchase
Agreement related to the Jackson Hill ARP Infill Housing Project as presented, and to authorize
the Mayor and Clerk to sign .
Approvals: Guest(s) Invited / Presenting:
Immediate Division Head ■ Information Technology □ Yes
□
Other Division Heads
■ Communication
□ No
■
For City Clerk Use Only:
I
Commission Action:
INSTALLMENT PURCHASE AGREEMENT
THIS AGREEMENT, dated as of YU.W·
7 , 2022, by and among the City of
Muskegon, County of Muskegon, State of Michigan (the "City"), LRS Enterprises, Muskegon,
Michigan (the "Builder"), and the Community Foundation for Muskegon County, as assignee of
the Builder (the "Lender"), is as follows:
1. Purchase Price, Title and Useful Life. The City agrees to purchase and the Builder
agrees to construct, sell and deliver 6 single family residences on the property located at 754, 750,
740, 730, 720, and 716 Leonard Street (collectively, the "Property"), all as set fo1ih in the
Residential Constrnction Agreement between the City and the Builder, dated as of November 7th,
2022 (the "Construction Agreement") as attached hereto as Exhibit A, for the sum of $1,500,000
(the "Purchase Price"). The City will finance $750,000 of the Purchase Price by this Agreement
(the "Financed Price" or the "Loan") and the balance of the Purchase Price will be paid by the City
to the Builder from its available funds.
The Financed Price will be payable by the City to the Lender as assignee of the Builder in
accordance with Section 3 hereof within three years from the anniversary date of the Loan. Upon
sale of each home, the resulting net proceeds shall be paid to the Lender and applied to the
outstanding Loan balance. If there remains a Loan balance after the sale of both homes, then the
City shall pay equal monthly payments of principal and interest on the first day of each month, at
the then applicable Interest Rate, amortized by the time remaining to three years from the
anniversary date of the Loan. Notwithstanding the foregoing, the entire principal balance and
accrued interest shall be due and payable in full on the three (3) year anniversary of the Loan. The
Loan may be prepaid at any time, in whole or in part, without penalty.
The City shall pay interest on the unpaid balance of the Financed Price to the Lender as the
assignee of the Builder in accordance with Section 3 hereof, at a rate of interest equal to the Federal
prime interest rate (currently 5.50%) plus two (2.0%) percent per annum on the outstanding
principle balance. Notwithstanding the foregoing, the interest rate will be adjusted annually, and
determined in December for the f01ihcoming year, not to exceed .50% or 50 basis points change in
any one year. The annual prime p01iion of the interest rate on the Note will be adjusted as defined
above, plus two (2.0%) percent (the "Interest Rate"), and readjusted in a like manner thereafter.
Upon receipt by the Builder of the Purchase Price for the Prope1iy, title and occupancy to
the Property shall vest in the City. The City agrees that the useful life of the Prope1iy is at least equal
to or longer than the date of the final payment hereunder.
2. Incorporation by Reference. The Builder and the City agree to all the instructions,
terms and conditions as may be outlined in the Constrnction Agreement and any supplements
thereto, which are hereby incorporated by reference in full herein. In the event of a conflict in terms
between this Agreement and the Construction Agreement regarding the financing of the Financed
Price, the specific terms of this Agreement shall govern.
3. Assignment to the Lender; Disbursement of Funds. The Builder hereby irrevocably
assigns this Agreement immediately to the Lender in consideration for and effective upon a
payment from the Lender to the Builder of the first draw of funds under this Agreement. The City
shall make a written request for disbursement for each draw of funds of the Loan, with a written
request by the City and submitted to the Lender at least 5 business days in advance of the
disbursement. The request for a disbursement shall specify the amount of the draw. The date of
receipt by the city of the first draw will mark the anniversary date of the Loan. Draws shall not be
made more frequently than once per calendar month. The proceeds of the draw shall only be used
to pay the Builder for the Prope1iy in accordance with the terms of the Construction Agreement
with the Builder.
The City hereby consents to said assignment, except with respect to the warranties and other
obligations of the Builder set forth in Section 2 and 5 of this Agreement, all of which shall remain
the sole responsibility of the Builder and shall not be assignable. With respect to the Lender, the
City hereby waives any defenses based upon wairnnty, failure, or inability of the Builder to perform
its non-assignable obligations or the failure of the Property to perform its intended function. To the
extent that funds are received by the City from the Lender in accordance with this paragraph, the
City's obligation to the Lender is absolute and unconditional and shall remain in full force and
effect until the amount of the payment to the City by the Lender as specified in this paragraph
together with interest thereon shall have been paid by the City to the Lender, and such obligation
shall not be affected, modified or impaired upon the happening from time to time of any event,
including without limitation any of the following:
(a) Any failure of title with respect to the Builder's or the City's interest
in the Property specified herein or the invalidity, enforceability, or termination of
this Agreement;
(b) The modification or amendment (whether material or otherwise) of
any obligation, covenant or agreement set fmih in this Agreement;
(c) The voluntary or involuntary liquidation, dissolution, sale or other
disposition of all or substantially all of the assets, marshaling of assets and
liabilities, receivership, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition with creditors or readjustment
or other similar proceedings affecting the Builder or any of its assets or any
allocation or contest of the validity of this Agreement, or the disaffirmance of this
Agreement in any such proceeding;
(d) To the extent permitted by law, any event or action which would, in
the absence of this clause, result in release or discharge by operation of law of the
Builder from the performance or observation of any obligation, covenant or
agreement contained in this Agreement; or
(e) The default or failure of the Builder fully to perform any of its
obligations set fo1ih in this Agreement.
The City shall make payments to the Lender when due and shall not withhold any such
payments as a result of any disputes arising between the City and the Builder or any other person,
nor shall the City assert any right of set-off or counterclaim against its obligation to make such
2
payments or be entitled to any abatement of such payments as a result of accident or unforeseen
circumstances, or the Property being defective.
It is expressly agreed between the Builder, the City and the Lender, by acceptance of the
assignment of this Agreement, that the City shall make all payments of principal and interest of the
Financed Price directly to the Lender.
4. Reporting. The City covenants and agrees that until all payments of principal
and interest under this Agreement have been paid in full, it will:
(a) Use the funds strictly m accordance with the terms of this
Agreement.
(b) Permit the Lender to review and evaluate the Property funded by the
Loan, including visits to the Project and discussions with the City's staff and City
Council.
(c) Provide the Lender with a quarterly written progress report on the
project.
5. Warranty. The Builder warrants its Property as set fmih in the Construction
Agreement. Any waiTanties with respect to the Property shall not be assigned, but shall remain
enforceable by the City.
The Builder represents and warrants that the assignment to the Lender of this Agreement
does not violate any agreement, contract or loan agreement to which it is a party, and that the
Agreement has been duly executed and delivered by the Builder.
The Lender makes no warranty or representation, express or implied, as to any matter
whatsoever, including, without limitation, as to the merchantability or fitness for any particular
purpose of any of the Property or as to the value, design, condition, use, capacity or durability of
any of the Prope1iy. The City agrees that (a) the Lender has no liability for the delivery or
installation of the Property, (b) the Lender assumes no obligation with respect to any
manufacturer's or Builder's product warranties or guaranties, (c) neither Builder nor any
manufacturer or any representative of said parties is an agent of the Lender, and (d) any wairnnty,
representation, guaranty or agreement made by any manufacturer or by the Builder or any
representative of said parties shall not be binding upon the Lender.
6. Borrower Representations. The City makes the following representations to induce
the Lender to make the Loan:
(a) The City is a duly created, validly existing and fully constituted
political subdivision of the State of Michigan and has the power and authority to enter
into the Agreement.
3
(b) The Agreement is a valid and binding obligation of the City
enforceable against the City in accordance with its terms.
(c) There is no action, suit or proceeding pending or threatened
against the City in any material respect that could adversely impact its repayment
of the Loan.
(d) The City agrees that, in the performance of this Agreement,
it will not unlawfully discriminate in its employment practices, volunteer
opportunities, or the delivery of programs or services, on the basis of race, religion,
gender, national origin, age, medical condition, handicap, veteran status, marital
status, or sexual orientation.
7. Entire Agreement. This Agreement and the documents expressly incorporated by
reference herein constitute the entire agreement of the paiiies with respect to the financing of the
Prope1iy. All prior or contemporaneous agreements, understandings, representations, and
statements, oral or written, are hereby terminated.
8. Amendments. Any attempt to modify the terms of this Agreement or of any
supporting document shall be ineffectual unless in writing, signed by all paiiies and the City agrees
to secure the consent of the Lender to any such modifications, provided that the consent of the
Builder to the modification of any of the terms of payment by the City to the Lender shall not be
required.
9. Security. The obligation of the City to pay principal and interest under this
Agreement is a limited tax general obligation of the City. The City shall include in its budget and
pay each year, until this Agreement is paid in full, as a first budget obligation, such sum as may
be necessary each year to make all payments hereunder, when due. In addition, the City hereby
pledges to levy in each fiscal year ad valorem taxes on all taxable property in the City each year
in an amount necessary to make its debt service payments under this Agreement, subject to
applicable constitutional, statutory and chmier tax rate limitations.
10. Legislative Authorization; Governing Law. This Agreement is made in accordance
with and pursuant to Act 99, Public Acts of Michigan, 1933, as amended. This Agreement shall
be construed in all respects in accordance with the laws of the State of Michigan.
10. Severability. In the event any provision of this Agreement shall be held invalid or
unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render
unenforceable any other provision hereof.
11. Binding Effect. The covenants herein contained shall bind, and the benefits and
advantages shall inure to, the respective successors and permitted assigns of the paiiies hereto.
4
12. Counterparts. This Agreement may be signed in any number of counterparts, which
counterparts shall be considered as one and the same instrument. Facsimile copies of this
Agreement shall have the full force and effect of an original document.
CITY OF MUSKEGON
By:
Its: Mayor
By:
Its: City Clerk
COMMUNITY FOUNDATION FOR
:YLe~ ~
MUSKEGON COUNTY
Its: '??Cf;,t/.J~ 'f" )e,£iJ
I
LRS ENTERPRISES
as Builder
By:
5
EXHIBIT A
36892771.1/063684.00048
6
RESOLUTION AUTHORIZING
INSTALLMENT PURCHASE AGREEMENT
CITY OF MUSKEGON
County of Muskegon, State of Michigan
2022-96(1)
Minutes of a regular meeting of the City Commission of the City of Muskegon, County of
Muskegon, State of Michigan, held on the 7th Day of November, 2022 at 5:30 p.m., prevailing
Eastern Time.
PRESENT: Mayor Johnson, Vice Mayor German, Commissioners St.Clair, Gorman,
and Emory
ABSENT: Commissioners Hood and Ramsey
The following preamble and resolution were offered by Vice Mayor German and supported
by Commissioner St.Clair:
WHEREAS, the City of Muskegon, County of Muskegon, State of Michigan (the "City")
desires to acquire six single family residences on the prope1iy located at 754, 750, 740, 730, 720,
and 716 Leonard Street (collectively, the "Prope1iy"), all as set forth in the Residential
Construction Agreement between the City and LRS Enterprises, Muskegon, Michigan (the
"Builder"), dated as of November 7th , 2022 (the "Construction Agreement"); and
WHEREAS, under the provisions of Act No. 99, Public Acts of Michigan, 1933, as
amended ("Act 99"), the City is authorized to enter into any contracts or agreements for the
purchase of the Property to be paid for in installments over a period of not to exceed the useful life
of the Property acquired as determined by resolution of the City; and
WHEREAS, an Installment Purchase Agreement (the "Agreement") between the City, the
Builder, and Community Foundation for Muskegon County (the "Lender"), for the installment
purchase of the Prope1iy has been prepared; and
WHEREAS, the City shall acquire the Property for the sum of $1,500,000 (the "Purchase
Price") of which amount the total of $750,000 (the "Financed Price") shall be financed through
the execution of the Agreement; and
WHEREAS, the outstanding balance of all purchases by the City under Act 99, exclusive
of interest, shall not exceed one and one quaiier percent (1-1/4%) of the taxable value of the real
and personal property in the City at the date of such contract or agreement; and
WHEREAS, purchase of the Prope1iy pursuant to an installment purchase agreement will
not result in the outstanding balance of all such purchases in excess of the limitation contained
within Act 99 as set fotih above; and
WHEREAS, the Agreement is to be assigned to the Lender; and
WHEREAS, it is necessary to approve the Agreement and authorize the Mayor and City
Clerk to execute the Agreement and authorize City officials to execute certain other documentation
relative thereto.
NOW THEREFORE, BE IT RESOLVED THAT;
1. Approval of Agreement; Agreement Terms. The Agreement is hereby approved
substantially in the form attached hereto as Exhibit A. The City shall incur the debt described in
the Agreement through execution of the Agreement by the officers authorized below which debt
shall consist of the Financed Price of $750,000 which shall be payable within three years of the
anniversary date of the first draw of the Financed Price, at a rate of interest equal to the federal
prime interest rate (currently 5.5%) plus two percent (2.0%) per annum from the date funds are
distributed by the Lender. The rate of interest on the Loan will be adjusted to the federal prime
interest rate then in effect plus two percent (2.0%) and readjusted on the yearly anniversaiy date of
the Loan, provided that the rate of interest will be adjusted annually on the yearly anniversary date
of the Loan to the federal prime interest rate then in effect plus (2.0%) percent per annum. The
Mayor, City Clerk and Finance Director are each hereby authorized to adjust the payment dates
and final details set forth herein to the extent necessary or convenient to complete the transaction
authorized herein, and in pursuance of the foregoing are each authorized to make determinations
regarding the principal and interest payment dates.
2. Execution and Delivery of Agreement. The Mayor and City Clerk are hereby
authorized and directed to execute the Agreement and deliver it to the Builder, substantially in the
form attached hereto with such additions, changes and modifications as shall be approved by the
City's Bond Counsel.
3. Useful Life of Property. The useful life of the Property is hereby determined to be
not less than fifteen (15) years.
4. Authorization of Officers. The Mayor, City Clerk and City Treasurer are each
hereby authorized and directed to execute such additional documentation and open such accounts
as shall be necessary to effectuate the closing of the Agreement and the assignment thereof to the
Lender within the parameters set forth in this resolution.
5. Assignment of Agreement. The assignment of the Agreement by the Builder to the
Lender is hereby approved.
6. Security; Limited Tax Pledge. The City hereby agrees to include in its budget for
each year, commencing with the present fiscal year, a sum which will be sufficient to pay the
principal of and the interest coming due under the Agreement during such fiscal year. In addition,
the City hereby pledges to levy ad valorem taxes on all taxable property in the City each year in
an amount necessary to make its debt service payments under the Agreement, subject to applicable
constitutional, statutory and chaiier tax rate limitations.
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7. Rescission. All resolutions and parts of resolutions insofar as they conflict with the
provisions of this resolution be and the same hereby are rescinded to the extent of such conflict.
AYES: German, Gmman, Emory, St.Clair, and Johnson
NAYS: None
RESOLUTION DECLARED ADOPTED.
\
'/) c,>
Ann Marie Meisch
City Clerk
I hereby certify that the foregoing is a true and complete copy of a resolution adopted by
the City Commission of the City of Muskegon, County of Muskegon, State of Michigan, at a
regular meeting held on November 7, 2022, and that said meeting was conducted and public notice
of said meeting was given pursuant to and in full compliance with the Open Meetings Act, being
Act 267, Public Acts of Michigan, 197 6, and that the minutes of said meeting were kept and will
be or have been made available as required by said Act.
Ann Marie Meisch
City Clerk
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Exhibit A
[Attach Form of Installment Purchase Agreement here]
36892841. 1/063684.00048
A-1