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HomeMy WebLinkAboutMinutes - Finance Committee - 04/11/2014 -_____C .Finance Administration_____I 0 215N Mason——2~FloorhOrtLOLLFortCoil ns CO 80522 970.221.6788 /_%evt(r%&=;iiIllIllI..PIIIIlI_IIIbIIbbt%%_%%%.970 221 6782~fax Council Audit &Finance Committee Draft Minutes 4/11/14 9:00 a.m.to 10:00 am. CIC Room Council Attendees:Bob Overbeck,Ross Cunniff Staff:Darin Atteberry,Mike Beckstead,Carrie Daggett,John Duval, Tom Leeson,Jeff Mihelich,Steve Roy,Katie Wiggett Others:Mike Pruznick,Sarah Pruznick,Betsy Pruznick First Amendment to Mall Redevelopment Agreement Mike Beckstead explained the 3 modifications to the current agreement: 1.Modification to Section 3.1(c)concerning leased space required prior to City authorization to issue Metro District Bonds 2.Clarification to Section 4.3 concerning payment required of the Developer if the residential units are not completed on time 3.Modification of Section 3.2(c)wording to allow for Supplement Reserve to be used before the Reserve in the event of insufficient Pledged Revenue. Mike noted that there are seven conditions precedent to issuance of Bonds;the developer has indicated that all conditions will be met with the exception of (c):“240k square feet of executed leased space with 120k square feet new tenants to Fort Collins.”The Developer is asking for the following modifications: .Bonds issued with 155k of executed lease agreements .90k of the 155k to be new tenants to Fort Collins .Leases to have an average sales per square foot of at least $375 .$23M of $53M in bond proceeds released to Developer Remaining $30M held in escrow and released in S1OM tranches as additional leases signed —final release at 310k .Portion of leases new to Fort Collins is laddered to total leases o of The table below provides an overview of the proposed change to the lease requirement and how funds would be released with additional leased space: Lease Space Sq Ft Funds Released Percent of... New to AssignedFunds.Orig Mall (lessTotalForttoCityReleased240kMacy’s)Tranche Collins lmprov _________________ Current 240k 120k $53 $8 100%47% Request 1 155k 90k $23 $3 65%30% 2 205k 120k 33 1 85%40% 3 255k 130k 43 2 106%50% 4 310k 150k 53 2 129%60% Mike pointed out that the Equity Partner,Walton,has demonstrated a commitment to and a confidence in this project;Walton’s equity position and recourse commitment are above normal.Also,worked into the new agreement is an agreement that Alberta will provide monthly status reports on leasing and construction and quarterly tours of the project for staff and elected officials. Concerning the Risks and implications,Bob Overbeck said that he was not comfortable with saying there is “no financial risk to the City.”Mike explained that while there is political risk to the City if the deal fails, there is no financial risk because the bonds come through the Metro District—not through the City—also the City has not entered into a moral obligation on the bonds.Ross Cunniff suggested changing the wording to “No direct risk to City’s bond rating.” Ross asked whether the URA had any financial risk.Mike answered,no and explained that the risk to the Metro District associated with this modification is primarily related to a low-probability event within the next 4-6 months. Darin Atteberry noted that,when giving the risks and implications it is also extremely important to list the benefits.Staff will add a slide on the benefits of the deal. Mike said that one benefit to highlight is the good interest rate environment we currently are in for releasing bonds.Bob Overbeck agreed that the current market climate is excellent for bonding. Mike explained the interdependency of the different elements of the agreement,noting that all elements must come together simultaneously.If one element is delayed,the ripple can impact the completion date which can impact leasing strategy.Bob Overbeck said that the information provided about the importance of timing is extremely helpful. Mike then explained the Developer’s second request,a clarification of wording in Section 4.3.The intent of the original Section 4.3 was to require the Developer to pay 50%of the lost property tax increment in the event the residential units were delayed,but only until such time as the residential units are built and the property tax increment is being paid.The current wording isn’t clear that the 2 r Fort ColLins Developer is no longer required to pay the 50%once the units are built.Staff recommends clarifying the language. The District Bond Counsel is also asking that the wording in Section 3.2(c)be corrected to allow the Supplemental Reserve to be used before the Reserve in the event of insufficient Pledged Revenue.The current wording requires the Reserve to be used before the Supplemental Reserve;however,this requirement does not work with a bond transaction as it would trigger a default on the bonds. Correcting this wording will have no financial impact to the City.Staff recommends changing the Redevelopment agreement to use Supplemental first. Next Steps Finance Committee did not support the proposed modifications because there were too many unanswered questions regarding the financial impacts to the City.