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Home My WebLink AboutMINUTES-11/22/1988-Adjourned' ADJOURNED MEETING OF THE COUNCIL OF THE CITY OF FORT COLLINS November 22, 1988 4:30 p.m. An adjourned meeting of the Council of the City of Fort Collins was held on Tuesday, November 22, 1988 at 4:30 p.m. in the Council Chambers in the City of Fort Collins City Hall. Roll call was answered by the following Councilmembers: Estrada, Horak, Maxey, Stoner, and Winokur. Absent: Councilmembers Kirkpatrick and Mabry Staff Members Present: Burkett, Krajicek, Roy Agenda Review: City Manager City Manager Burkett stated there were no changes to the agenda as published. ' Ordinance No. 165, 1988, Authorizing the Issuance of Taxable Industrial Revenue Bonds in the Amount of $1,000,000 for the Purpose of Loaning Funds to Historical Opera House Properties, Ltd., to Rehabilitate Existing Structures Known as the Opera House Project Adopted Following is staff's memorandum on this item: "FINANCIAL IMPACT The bonds are not a liability of the City. Revenue generated by the project will be the source of payment for the bonds. The fee charged on the tax-exempt issue will be $23,650 and the fee charged on the taxable issue will be $4,762. $4,625 has already has been paid to the City toward these fees. These fees will be used by the economic development program. EXECUTIVE SUMMARY This Ordinance provides additional support to the Historical Opera House Properties, Ltd. project. It authorizes the City to issue $1,000,000 in taxable industrial development revenue bonds to finance the project costs. Historical Opera House Property has requested that the City pass this Ordinance on First Reading prior to November 23 in order to facilitate the completion and closing of $5.8 million tax-exempt industrial development bonds currently escrowed. -469- November 22, 1988 BACKGROUND In December of 1986, Council approved the issuance of tax-exempt industrial revenue bonds in the amount of $5,800,000 and the execution of a loan agreement and indenture of trust for the construction of the Opera House Project. In April of 1987, an agreement was signed between Historical Opera House Properties, Ltd., the City, and the Downtown Development Authority to provide reimbursement to the developer for public improvements made in conjunction with the project. The original documents called for construction of the project to begin in January of 1988. The City has extended the time for the beginning of construction and the related documents have been amended to provide more time for the completion of the financial transaction. The Opera House project has undergone numerous changes over the past few years and a number of financial structures have been tested. Attached is additional background material showing previous pertinent Council actions on the Opera House. The project cannot be completed without the additional $1,000,000 taxable bond issue proceeds. It had previously been anticipated that the developer would be able to provide cash or other equity to pay certain costs needed For the project that were not available from the proceeds of the tax-exempt ' issue. This taxable issue would provide those funds. As with the tax-exempt issue, these bonds do not constitute a liability of the City of Fort Collins. Revenue generated by the Opera House project will be the source of the debt service payments. This issue has been structured so that if the tax-exempt issue does not close as anticipated on November 23, 1988, the taxable bonds will not be issued. Transaction The equity partner in this transaction will be the Mayflower Group, an east coast development corporation. Historical Opera House will be required to secure another Letter of Credit, in addition to the one securing the tax-exempt issue. The bank providing the Letter of Credit will be determined prior to Second Reading of the Ordinance. The financial transaction, as it is expected to be completed, is summarized below. The taxable issue and the tax-exempt issue, as well as the partnership equity and the public improvements, are presented in outline form. Taxable Issue A. Principal Amount of Bonds to be Issued: $1,000,000 B. Interest Rate: 13% Fixed C. Final Maturity of the Bonds: December 1, 2016 , D. Security 1. Capitalized Interest: $195,000 (approximately 18 months) 2. Debt Service Reserve Fund: $1O0,0O0 (from bond proceeds). plus up -470- November 22, 1988 ' to $50,000 (Letter of Credit from Bank not yet identified, subject to release after 5 years upon satisfaction of debt service coverage test - 115% of average debt service for the last 24 months) 3. Mayflower Group Guaranty: $130,000 4. Mortgage of Project to Central Bank of Denver, as trustee for bondholders E. Bond Purchaser: In negotiations (must be private placement under Securities Laws) F. City Council Action: Approval of Bond Ordinance on November 22, 1988, and December 6, 1988 G. Closing Date: December 19, 1988 (last day to file notice of referendum petition on bond ordinance is December 16, 1988) Tax -Exempt Issue A. Principal Amount: $5,800,000 B. Interest Rate: 11% (fixed) plus up to 3% additional on original principal amount contingent on net operating income after debt service C. Final Maturity: December 1, 2016 D. Premium upon Sales: Up to 3% on original principal amount (contingent on sale profits) E. Proceeds: Escrowed until taxable industrial development bonds issued - Mayflower Group to provide Guaranty regarding negative arbitrage on escrowed funds F. Security 1. Capitalized interest: $957,000 (approximately 18 months) 2. Debt Service Reserve Fund: $580,000 (cash or Letter of Credit from Bank not yet identified) plus $1,000,000 (Mayflower Group cash) plus up to $250,000 (letter of Credit from Bank not yet determined, subject to release after 5 years upon satisfaction of debt service coverage test - 115% of average debt service for last 24 months) 3. Mayflower Group Guaranty: $680,000 4. Mortgage of Project to Central Bank of Denver, as trustee for bondholders G. Bond Purchaser: Van Kampen Merritt Fund H. City Council Action: None required I. Closing Deadline: November 23, 1988 Partnershi A. New Partner: Mayflower Group - 50% partner B. Purchase price of partnership interest: Guaranty and Letter of Credit described in the Tax -Exempt transaction described above; cash C. Closing Deadline: November 23, 1988 -471- November 22, 1988 Public Equity A. Source of Equity: City of Fort Collins, Colorado, Downtown Development Authority Tax Increment Revenue Refunding and Improvement Bonds B. Amount: $750,000 C. Closing Date: June 9, 1988 ' This is the transaction as currently proposed. Additional revisions may be required prior to Second Reading of the Ordinance. Staff will keep Council advised as the information becomes known." Councilmember Maxey made a motion, seconded by Councilmember Winokur, to adopt Ordinance No. 165, 1988 on First Reading. Finance Director Alan Krcmarik gave a brief overview of taxable bonds and responded to questions from Council. He introduced the new partner to the City, the Mayflower Group and Walt Brown from the Historical Opera House Society and noted minor amendments to the Ordinance. Councilmember Winokur made a motion, seconded by Councilmember Maxey, to amend to the Ordinance as described by Finance Director Alan Krcmarik. Yeas: Councilmembers Estrada, Horak, Maxey, Stoner, and Winokur. Nays: None. THE MOTION CARRIED. ' Mayor Stoner indicated he had signed the tax exempt documents and expressed his support for the success of the project. The vote on Councilmember Winokur's motion to adopt Ordinance No. 165, 1988 as amended on First Reading was as follows: Yeas: Councilmembers Estrada, Horak, Maxey, Stoner, and Winokur. Nays: None. THE MOTION CARRIED. Executive session Authorized Councilmember Estrada made a motion, seconded by Councilmember Maxey, to adjourn into Executive Session for the purpose of conducting the City Attorney's performance evaluation. Yeas: Councilmembers Estrada, Horak, Maxey, Stoner, and Winokur. Nays: None. THE MOTION CARRIED. (Secretary's Note: Councilmembers Kirkpatrick and Mabry arrived during the Executive Session) At the conclusion of the Executive Session, Councilmember Estrada made a motion, seconded by Councilmember Winokur, to direct staff to reexamine the I cruising situation in the downtown area and return with options. -472- November 22, 1988 Councilmember Winokur suggested attention be given to the timing of the traffic signals to increase traffic flow. The vote on Councilmember Estrada's motion was as follows: Yeas: Councilmembers Estrada, Mabry, Winokur, and Stoner. Nays: None. (Councilmembers Horak, Kirkpatrick, and Maxey out of the room) Adjournment Councilmember Winokur made a motion, seconded by Councilmember Stoner to adjourn the meeting until later in the evening at 9:15 p.m. Yeas: Councilmembers Estrada, Mabry, Winokur, and Stoner. Nays: None. (Councilmembers Horak, Kirkpatrick, and Maxey out of the room) THE MOTION CARRIED. (Secretary's Note: Council held a work session prior to reconvening the the adjourned meeting at 9:15 p.m. The following Councilmembers were present: Estrada, Horak, Mabry, Maxey, and Stoner. [Councilmember Winokur out of the room]) Executive Session Authorized Councilmember Mabry made a motion, seconded by Councilmember Kirkpatrick, to adjourn into Executive Session to discuss water and legal issues. Yeas: Councilmembers Estrada, Horak, Kirkpatrick, Mabry, Maxey, and Stoner. Nays: None. (Councilmember Winokur out of the room) THE MOTION CARRIED. Adjournment At the conclusion of the Executive Session, Councilmember Winokur made a motion, seconded by Councilmember Estrada, to adjourn the meeting until 8:00 p.m. on Tuesday, November 29, 1988 to consider adjourning into Executive Session to discuss personnel matters relating to the salaries of the City Manager and City Attorney. Yeas: Councilmembers Estrada, Horak, Kirkpatrick, Mabry, Maxey, Stoner, and Winokur. Nays: None. The meeting adjourned at 10:30 p.m. M -473-