Fort Walton Beach Council agenda — 01-08-13--regular — reading text

the meaning of the Code. To that end, the Local Borrower will not permit more than 5% of the Project or portion thereof financed with Tax- Exempt Bonds to be used for a Private Business Use. The term " Private Business Use" means use directly or indirectly in a trade or business or any other activity carried on by any Private Person other than use as a member of, and on the same basis as, the general public. The term " Private Person' means any person other than a Govemmental Unit. For this purpose, the United States or any agency or instrumentality thereof is not a Governmental Unit and is therefore a Private Person. For purposes of this paragraph ( 5), property is considered " used" by a Private Person if. i) it is owned by, or leased, to such Private Person; ii) it is operated, managed or otherwise physically employed, utilized or consumed by such Private Person, other than operation or management pursuant to an agreement that meets the conditions described in paragraph ( 6) below; iii) capacity in or output service from such property is reserved or committed to such Private Person under a take -or -pay, output, incentive payment or similar contract or arrangement; iv) such property is used to provide service to ( or such service is committed to or reserved for) such Private Person on a basis or terms that are different from the basis or terms on which such service is provided ( or committed or reserved) to members of the public generally ( except possibly for the amount of use and any corresponding rate adjustment); v) such Private Person is a developer and a significant amount of the Project financed with proceeds of Tax- Exempt Bonds serves only a limited area substantially all of which is owned by such Private Person, or a limited group of developers, unless such PacKetiPg. 100  14.2. b improvement carries out an essential governmental function, such developer reasonably expects to proceed with all reasonable speed to develop the improvement and property benefited by that improvement, and the improvement is in fact transferred to a Governmental Unit promptly after the property benefited by the improvement is developed; or vi) substantial burdens and benefits of ownership of the Project financed with proceeds of Tax -Exempt Bonds are otherwise effectively transferred to such Private Person. oa` 6) Use of Bond -Financed Property. 0 i) For purposes of this Agreement, the use by a Private Person of the Project financed with the proceeds of Tax -Exempt Bonds ( the " Bond Financed Property ") pursuant to a Qualified Use Contract ( as hereafter defined) shall not be treated as a Private Business Use by such Private Person of such Bond -Financed Property or of funds used to finance or refinance such Bond -Financed Property. it) An arrangement under which services we to be provided by a Private Person involving the use of all or any portion of, or any function of, the Bond -Financed Property ( for example, management services for an entire facility or a specific department of a facility ( " Use Contract ")) is a " Qualified Use Contract" if all of the following conditions are satisfied: A) the compensation for services provided pursuant to the Use Contract is reasonable; N m B) none of the compensation for services provided pursuant to the Use N Contract is based on net profits from operation of the Bond- Financed Property or any portion thereof; a C) the compensation provided in the Use Contract satisfies one of the following subparagraphs: 1) At least 95% of the compensation for each annual period during the term of the Use Contract is based on a periodic fixed fee and the term of the Use Contract, including all renewal options, does not exceed the lesser of 80% of the reasonably expected useful life of the Bond -Financed Property and 15 years. For purposes of this subparagraph ii), a " periodic fixed fee" means a stated dollar amount for services rendered for a specified period of time that does not increase except for automatic increases pursuant to a specified, objective external standard that is not linked to the output or efficiency of the Bond -Financed Property e. g., the Consumer Price Index) and a " renewal option" means a provision under which either party to the Use Contract has a legally enforceable right to renew the Use Contract; or Packet Pg. 101  14. 2. b 11) At least 80% of the compensation for each annual period during the term of the Use Contract is based on a periodic fixed fee and the term of the Use Contract, including all renewal options, does not exceed the lesser of 80% of the reasonably expected useful life of the Bond -Financed Property and 10 years; or 111) At least 50% of the compensation for each annual period during the term of the Use Contract is based on a periodic fixed fee, the term of the Use Contract, including all renewal options, does not exceed 5 years, and the Use Contract is terminable by the Local Borrower on reasonable notice, without penalty or cause, at the end of the third year of the Use Contract term; or IV) All of the compensation for services is based on a capitation fee or a combination of a capitation fee and a periodic fixed fee, the term of the Use Contract, including all renewal options, does not exceed 5 years, and the Use Contract is terminable by the Local Borrower on reasonable notice, without penalty or cause, at the end of the third year of the Use Contract term. A " capitation fee" means a fixed periodic amount for each person for whom the Service Provider assumes the responsibility to provide all needed services for a specified period so long as the quantity and type of service actually provided to covered persons varies substantially; or V) All of the compensation for services is based on a per -unit fee or a combination of a per -unit fee and a periodic fixed fee, the term of the Use Contract, including all renewal options, does not exceed 3 yens and the Use Contract is terminable by the Local Borrower on reasonable notice, without penalty or cause, at the end of the second year of the Use Contract term. A " per -unit fee" means a fee based on a unit of service provided ( e. g., a stated dollar amount for each specified procedure); or VI) All of the compensation for services is based on a percentage of fees charged or a combination of a per -unit fee and a percentage of revenue or expense fee, the term of the Use Contract, including all renewal options, does not exceed 2 years and the Use Contract is terminable by the Local Borrower on reasonable notice, without penalty or cause, at the end of the first year of the Use Contract term. This subparagraph ( VI) applies only to ( a) Use Contracts under which the Private Person primarily provides services to third parties, or ( b) Use Contracts involving the Bond -Financed Property during an initial start- up period for which there have been insufficient operations to establish a reasonable estimate of the amount of the annual gross revenues or gross expenses in the case of a Use Contract based on a percentage of gross expenses) ( e. g., a Use Contract for general management services for the first year of operations), in which case, the compensation for services may be based on a percentage of gross revenues, adjusted gross revenues 10 Packet Pg: 102  14.2. b i. e., gross revenues less allowances for bad debts and contractual and similar allowances) or expenses of the Bond- Financed Facilities, but not more than one. For purposes of this paragraph ( 6)( ii)(C), a Use Contract is considered to contain termination penalties if the termination limits the Local Borrower' s right to compete with the Private Person, requires the Local Borrower to purchase equipment, goods, or services from the Private Person, or requires the Local Borrower to pay liquidated damages for cancellation of the Use Contract. Another contract between the Private Person and the Local Borrower ( for example, a loan or guarantee by the Private Person) is considered to create a contract termination penalty if that contract contains terms that are not customary or arm' s- length that could operate to prevent the Local Borrower from terminating the Use Contract. A requirement that the Local Borrower reimburse the Private Person for ordinary and necessary expenses, or restrictions on the hiring by the Local Borrower of key personnel of the Private Person, are not treated as contract termination penalties; D) The Private Person has no role or relationship with the Local Borrower, directly or indirectly, that, in effect, substantially limits the Local Borrower' s ability to exercise its rights under the Use Contract, including cancellation rights. This requirement is satisfied if: 1) The Private Person and its directors, officers, shareholders and employees possess in the aggregate, directly or indirectly, no more than 20 percent of the voting power of the governing body of the Local Borrower; II) No individual who is a member of the governing body of the Private Person and the Local Borrower is the chief executive officer of the Local Borrower or the Private Person or the chairperson of the governing body of the Local Borrower or the Private Person; and III) The Local Borrower and the Private Person are not " related parties" ( within the meaning of Treasury Regulations § 1. 150- 1( b). iii) The Local Borrower may treat a Use Contract that does not comply with one or more of the criteria of subparagraph ( 6)( ii) as not resulting in Private Business Use of Bond -Financed Property if it delivers to the Corporation