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HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 04/17/2001 - FIRST READING OF ORDINANCE NO. 60, 2001, AUTHORIZI AGENDA ITEM SUMMARY ITEM NUMBER: 23 DATE: April 17, 2001 FORT COLLINS CITY COUNCIL STAFF: Alan Krcmarik SUBJECT: First Reading of Ordinance No. 60, 2001, Authorizing the Issuance of Variable Rate Economic Development Revenue Refunding Bonds for the Comridge Project. RECOMMENDATION: Staff recommends adoption of the Ordinance on First Reading. FINANCIAL IMPACT: The Comridge Partnership has requested that the City of Fort Collins refinance the outstanding bonds from the 1984 industrial development revenue bonds that were issued for its office and light manufacturing project. The amount of bonds to be issued is not to exceed $2.7 million, the amount now outstanding from the 1984 issue. The City will receive an issuer's fee of approximately $5,700. The Comridge Partnership is responsible for all debt payments on the bonds. Federal and state laws prohibit the use of City money to make debt payments. The bonds are not considered to be a debt of the City of Fort Collins. EXECUTIVE SUMMARY: In 1984, the City of Fort Collins issued $3.5 million of industrial revenue development bonds for the Comridge Partnership Project. The project consisted of a 50,000 square-foot office and light manufacturing building. The project has been the home of Comlinear Corporation, a maker of high-tech electronic equipment. Under the laws and regulations that govern private activity bonds, they may be refinanced by the issuer to achieve interest payment savings. By adoption of this Ordinance, the $2.7 million of outstanding bonds will be refinanced by issuing variable rate bonds. The Project has been beneficial to the City and the community and serves as a positive example of how this financing technique can be used. BACKGROUND: THE PROJECT Under the federal tax laws and the Colorado Revised Statutes, the City's role in this transaction 411 is to be the Issuer of the Bonds. The proceeds of the Bonds will be loaned to the Company, according to the terms of the Loan Agreement to assist in refunding the outstanding principal balance of the prior issue. ($3,500,000 The City of Fort Collins, Colorado, Industrial Development Revenue Bonds, Series 1984 for the Comridge Project). The bonds issued in 1984 DATE: April 17, 2001 2 ITEM NUMBER: 23 were used to assist in the financing of costs of certain office and light manufacturing facilities located in the southeast portion of the city. The facilities are located within the incorporated boundaries of the Issuer and are more particularly described as 4800 Wheaton Drive, Fort Collins, Colorado 80525. SOURCES AND USES The sources and uses of funds to pay the costs of the Project are estimated to be as follows: Sources of Funds: Bonds Proceeds $2,700,000.00 Contributions by Company $ 111,901.50 Total Sources $2,811,901.50 sources will be increased by accrued interest Uses of Funds: Refund of Principal of Prior Bonds $2,701,700.00 Letter of Credit Fees $ 6,750.00 Cost (2) $ 97,751.50 Issuer's Fees $ 5,700.00 Total Uses $2,811,901.50 Uses will also be increased by accrued interest. All amounts are subject to change until the bonds are sold. STRUCTURE OF THE REFUNDING TRANSACTION The objective of this financial transaction is to lower the Company's debt service costs. The underwriter believes this can best be accomplished by structuring the transaction using variable rate bonds. Using this technique, interest rates fluctuate and reset periodically. The underwriter is estimating an interest rate of about 4% on the bonds. The Bond documents set up the repayment schedule. The documents supporting this transaction have estimated the following principal repayment schedule: DATE: April 17, 2001 3 ITEM NUMBER: 23 Date of Principal Principal Amount Redemption to be Redeemed 2002 $ 80,000 2002 $135,000 2003 $145,000 2004 $150,000 2005 $165,000 2006 $170,000 2007 $175,000 2008 $190,000 2009 $200,000 2010 $220,000 2011 $235,000 2012 $265,000 2013 $280,000 2014 (Final Maturity) $290,000 Payment to be made on December 1 of each year According to City of Fort Collins' policies regarding issuance of tax-exempt financing for this type of project, the City charges an issuer's fee when the bonds are issued. According to the debt service schedule and the interest rates estimated by the underwriter, the issuer's fee for this transaction is estimated to be $5,700. Staff will finalize the issuer's fee when the bonds are issued. The issuer's fee is deposited into a reserve account in the City's general fund and is available to be used for affordable housing and economic development purposes. . ORDINANCE NO. 60 ,2001 AN ORDINANCE AUTHORIZING AND APPROVING THE ISSUANCE BY THE CITY OF FORT COLLINS, COLORADO OF ITS VARIABLE RATE ECONOMIC DEVELOPMENT REVENUE REFUNDING BONDS, SERIES 2001 (COMRIDGE, LLP PROJECT) IN THE PRINCIPAL AMOUNT OF $2,700,000 FOR THE PURPOSE OF REFUNDING THE OUTSTANDING PRINCIPAL BALANCE OF A PRIOR ISSUE OF BONDS OF THE CITY, WHICH WERE USED TO ASSIST IN THE FINANCING OF COSTS OF CERTAIN FACILITIES LOCATED IN THE JURISDICTION OF THE CITY; AUTHORIZING THE EXECUTION AND DELIVERY OF A TRUST INDENTURE FROM THE CITY TO BANK ONE TRUST COMPANY, N.A., AS TRUSTEE; AUTHORIZING THE EXECUTION AND DELIVERY OF A LOAN AGREEMENT BETWEEN THE CITY AND COMRIDGE, LLP, AND THE ASSIGNMENT BY THE CITY TO THE TRUSTEE OF ITS INTEREST IN THE LOAN AGREEMENT AND RELATED PROMISSORY NOTE; AUTHORIZING THE EXECUTION AND DELIVERY OF A BOND PURCHASE AGREEMENT AMONG COMRIDGE, LLP, THE CITY, AND GATES CAPITAL CORPORATION, AS UNDERWRITER, AND AUTHORIZING THE PREPARATION AND THE EXECUTION OF RELATED DOCUMENTS AND INSTRUMENTS. WHEREAS, the City of Fort Collins, Colorado (the "City") is authorized by Part 1 of Article 3 of Title 29, Colorado Revised Statutes, as amended (the "Act') and its charter, to issue revenue bonds for the purpose of assisting in the promotion of economic development, maintaining employment, and encouraging job opportunities in areas of unemployment and underemployment; and WHEREAS, pursuant to a Resolution duly adopted on March 20, 2001 (the "Inducement Resolution"), the City expects to take all necessary and advisable steps to issue such bonds in accordance with the provisions of the Act for the purpose of refunding the outstanding principal balance of a prior issue of bonds of the City(the"Refunding Project'), which were used to assist in the financing of costs of certain facilities located in the jurisdiction of the City(the "Facility"); and WHEREAS, to accomplish its stated purposes, the City is authorized and empowered under the Act to issue its bonds and other obligations to finance the Refunding Project in the City; and WHEREAS, Comridge, LLP, a Colorado limited liability partnership (the "Company") has requested the City to issue economic development revenue refunding bonds to finance the Refunding Project; and WHEREAS, the City has given due consideration to the request and to representations by the Company that preserving the Facility and completing the Refunding Project will assist in promoting economic development or in maintaining employment in the area in which the • Facility is located, or in an area reasonably accessible thereto, or in the reduction of unemployment or underemployment in such area; and WHEREAS, the City wishes to authorize the issuance of up to $2,700,000 aggregate principal amount of its Variable Rate Economic Development Revenue Refunding Bonds, Series 2001 (Comridge, LLP Project) (the "Bonds") upon the terms and conditions stated herein and to use the proceeds thereof to finance the Refunding Project; and WHEREAS, the Company and City desire to prepay the outstanding $3,500,000 City of Fort Collins, Colorado, Industrial Development Revenue Bonds, Series 1984 (The Comridge Project) (the"Prior Bonds'l with the proceeds of the Bonds; and WHEREAS, the following documents have been submitted to the City Council of the City of Fort Collins, Colorado (the "Council") and filed in the office of the City Clerk (the "Clerk") and are there available for public inspection: (i) a Trust Indenture, to be dated as of June 1, 2001 (the "Indenture"), between the City and Bank One Trust Company,N.A., as trustee(the "Trustee"); (ii) a Loan Agreement(the "Loan Agreement")to be dated as of June 1, 2001, between the City and Company, including a form of the Company's Note to the City (the "Company Note"); (iii) Letter of Credit, to be dated as of the issuance date of the Bonds, in the approximate amount of$2,793,206 issued by Bank One, Colorado, N.A. (the "Bank"), pursuant to a Reimbursement Agreement to be dated as of June 1, 2001, between the Company and the Bank; (iv) a Bond Purchase Agreement to be dated its date of delivery (the "Bond Purchase Agreement") among Gates Capital Corporation, as underwriter(the "Underwriter"), the City and the Company; and (v) the Official Statement (the "Official Statement') relating to the Bonds; and WHEREAS, if the City proceeds with the Refunding Project, then the City is willing to: (i) enter into the Indenture, the Loan Agreement and the Bond Purchase Agreement; (ii) acknowledge the use and distribution of the Official Statement and consent to the use of the information therein under the caption "THE ISSUER"; and (iii) issue, execute and deliver the Bonds; and BE IT ORDAINED BY THE COUNCIL OF THE CITY OF FORT COLLINS, COLORADO: -2- . ARTICLE I DEFINITIONS, LEGAL AUTHORIZATION, ELECTION,APPROVALS AND FINDINGS 1.1. Definitions. The terms used herein, unless the context hereof shall require otherwise, shall have the same meanings when used herein as assigned to them in the Indenture unless the context or use thereof indicates another or different meaning or intent. 1.2. Legal Authorization. The City is a municipality and political subdivision of the State of Colorado and is authorized under the Act and its charter to finance the Refunding Project and to issue and sell the Bonds for the purpose, in the manner and upon the terms and conditions set forth in the Act, its charter and in this Ordinance,without voter approval in advance. 1.3. Findings. Based upon the representations made by the Company to the City, the City hereby makes the following findings and determinations: (a) Preserving the Facility and completing the Refunding Project will assist in promoting economic development or in maintaining employment in the area in which the Facility is to be located, or in an area reasonably accessible thereto, or in the reduction of unemployment or underemployment in such area, which will promote the public welfare, • convenience and prosperity. (b) The Loan Agreement provides for payment to the City of such revenues that, together with any government subsidies relating to the Facility and the Refunding Project and other moneys available or expected to be available, will be sufficient in each year to pay the principal of and interest on the Bonds, to pay all taxes which may be due and owing with respect to the Facility and the Refunding Project, and to build up and maintain any reserves deemed advisable by the City in connection with the retirement of the Bonds and the maintenance of the Facility therewith. The Loan Agreement provides that the Company shall maintain the Facility and carry all proper insurance with respect thereto. (c) It is desirable and in the public interest for the City to approve the Refunding Project and to issue the Bonds in a principal amount sufficient to finance the cost of the Refunding Project. (d) The Bonds and the interest accruing thereon shall be special and limited obligations of the City and shall never constitute the debt or indebtedness of the City within the meaning of any provision or limitation of the constitution or statutes of the State of Colorado or its charter, and the Bonds and the interest thereon do not create any multiple fiscal year direct or indirect debt or other financial obligation of the City and shall not constitute nor give rise to a pecuniary liability of the City or a charge against its general credit or taxing powers. The Bonds and the interest accruing thereon shall be payable solely from payments to be made by the Company under the Loan Agreement and from funds pledged under the Indenture. -3- 1.4. Authorization and Ratification of Refunding. The City hereby authorizes the Company to provide for the Refunding Project by such means as shall be available to the Company and in the manner determined by the Company. 1.5. Election by Issuer. The City hereby elects,with respect to the Bonds, to be within the limitation imposed by the provisions of Section 144(a)(4)(A) of the Internal Revenue Code of 1986, as amended (the "Code") and the City Clerk is hereby directed to keep this election in the City Clerk's official records of the proceedings of the Council, and any and all acts heretofore taken pertaining to such election and relating to such requirements are hereby ratified and confirmed. ARTICLE II THE BONDS 2.1. Issuance and Sale of Bonds, Interest Rates. The City hereby authorizes the issuance of its Variable Rate Economic Development Revenue Refunding Bonds, Series 2001 (Comridge, LLP Project) to be dated the date of their delivery, in a principal amount not to exceed$2,700,000 for the purpose, in the form and upon the terms set forth in the Bonds and the Indenture. The Bonds shall be subject to redemption as set forth in the Indenture. The Bonds shall be sold by the Underwriter pursuant to the terms of the Bond Purchase Agreement. The Bonds shall be numbered consecutively from "R-l" upward, shall be issued in minimum denominations of $100,000, or any larger denomination constituting an integral multiple of $5,000. Interest on the Bonds shall be payable as set forth in Section 203 of the Indenture. Each Bond shall bear interest until the principal sum thereof has been paid; provided, however, that if Bonds have been called for redemption and funds are available for the payment on the redemption date thereof in full accordance with the terms of this Ordinance and the Indenture, the Bonds shall then cease to bear interest. The Bonds shall bear interest as more fully described in the Indenture and shall mature on December 1, 2014. The Bonds shall be subject to mandatory sinking fund redemption as provided in the Indenture. The Bonds will be sold by the Underwriter and the Underwriter will use an Official Statement(as defined in the Bond Purchase Agreement) in the sale of the Bonds. The maximum net effective interest rate authorized for the Bonds is twelve percent (12%) per annum. The initial net-effective interest rate on the Bonds shall be as provided in the Indenture but not in excess of such maximum. -4- ARTICLE III PREPAYMENT AND REDEMPTION OF PRIOR BONDS 3.1 Redemption and Prepayment of Prior Bonds. The City hereby opts, upon instruction from the Company, to redeem and prepay the Prior Bonds, prior to maturity, in their entirety, with the proceeds of the Bonds, if the Company (a) provides 30 days prior written notice of the same to the City and First National Bank, N.A. ("FNB'), the owner of the Bonds and the assignee of the City's rights and interest in the Loan Agreement dated December 12, 1984, between the City and the Company, which relates to the Prior Bonds, pursuant to the Assignment of Loan Agreement between the City and FNB, formerly known as First Interstate Bank of Fort Collins, N.A. and (b) redeems and prepays the Prior Bonds, including outstanding principal and accrued interest,within 90 days of the issuance of the Bonds. ARTICLE IV GENERAL COVENANTS 4.1. Payment of Principal and Interest. The principal and interest are payable solely from and secured by revenues and proceeds payable pursuant to the Indenture, the Loan Agreement, the Company's Note, and the Letter of Credit; and nothing in the Bonds or in this Ordinance shall be considered as assigning, pledging or otherwise encumbering any funds or assets or property of the City. 4.2. Performance of and Authority for Covenants. The City covenants that it will faithfully perform at all times any and all covenants, undertakings, stipulations and provisions contained in this Ordinance, the Indenture, the Loan Agreement, the Bonds and in all proceedings of the Council pertaining thereto; that it is duly authorized under the Constitution and laws of the State of Colorado including particularly, and without limitation, the Act and its charter to issue the Bonds, pledge the revenues and assign the Loan Agreement and endorse the Company Note in the manner and to the extent set forth in this Ordinance, the Indenture, the Bonds and the Loan Agreement; and that all action on its part for the issuance of the Bonds and for the execution and delivery thereof has been duly and effectively taken. 4.3. Nature of Security. Notwithstanding anything contained in the Bonds, the Indenture, the Loan Agreement, the Bond Purchase Agreement, the Letter of Credit or any other document referred to in this Ordinance, the Bonds and the interest thereon shall never constitute the debt, indebtedness or multiple fiscal year direct or indirect debt or other financial obligation of the City within the meaning of any provision or limitation of the constitution or statutes of the State of Colorado or its charter and shall not constitute nor give rise to a pecuniary liability of the City or a charge against its general credit or taxing powers; and the City, its directors, members, agents, officers and employees shall not be subject to any personal or pecuniary liability thereon. The Bonds and the interest thereon shall be special, limited obligations of the City and shall be payable solely from the revenues pledged under the Indenture. -5- 4.4 No Individual Recourse. All covenants, stipulations, promises, agreements and obligations of the City contained in this Ordinance shall be deemed to be the covenants, stipulations, promises, agreements and obligations of the City and not of any Councilmember, officer, agent or employee of the City in his or her individual capacity, and no recourse shall be had for the payment of the principal or redemption price of or interest on the Bonds or for any claim based thereon or on this Ordinance, either jointly or severally, against any director, member, officer, agent or employee of the City or any person executing the Bonds. ARTICLE III MISCELLANEOUS 5.1. Severability. If any provision of this Ordinance, except Section 4.3 hereof, shall be held or deemed to be, or shall, in fact, be, inoperative or unenforceable as applied in any particular case in any jurisdictions or in all cases because it conflicts with any provisions of any constitution or statute or rule or public policy, or for any other reason, such circumstances shall not have the effect of rendering the provision in question inoperative or unenforceable in any other case or circumstance, or of rendering any other provision or provisions herein contained invalid, inoperative or unenforceable to any extent whatever. The invalidity of any one or more phrases, sentences, clauses or paragraphs in this Ordinance, except Section 4.3 hereof, shall not affect the remaining portions of this Ordinance or any part hereof. In the event Section 4.3 hereof is held to be inoperative or unenforceable for any reason, no other provision or section of this Ordinance shall be given effect in any manner so as to impose any indebtedness or liability upon the City or to cause the creation of any multiple fiscal year direct or indirect debt or other financial obligation of the City. 5.2. Authorization to Execute Documents. (a) The forms of the proposed Indenture, the Loan Agreement and the Bond Purchase Agreement are hereby approved in substantially the form presented to the Council, together with any revisions thereto as may be considered necessary or desirable by the Financial Officer in consultation with the City Attorney as provided in Section 5.3 hereof, and the Mayor and the City Clerk are authorized to endorse the Company Note and execute the Loan Agreement and the Indenture in the name of and on behalf of the City and such other documents as Bond Counsel considers appropriate in connection with the issuance of the Bonds, including IRS Form 8038. The City Manager is authorized to execute the Bond Purchase Agreement on behalf of the City. The officials and officers of the City specified in the Indenture are authorized to execute the Bonds. After the Bonds have been duly executed, the Financial Officer shall cause the Bonds to be delivered to the Underwriter upon receipt of the agreed purchase price. The Mayor and the City Clerk and other proper City officials are hereby severally authorized, empowered and directed to do all acts and things required or provided for by the Indenture, the Loan Agreement, and the Bond Purchase Agreement, to assign or transfer a portion or all of its rights under the Indenture, the Loan Agreement, and the Bond Purchase Agreement to the Trustee for the benefit of the owners, from time to time, of the Bonds. In the event of the absence or disability of the Mayor or the City Clerk, such officers of the City as, in the opinion of the City Attorney, may act in their behalf, shall without further act or authorization of the Council do all things and execute -6- • all instruments and documents requested to be done or executed by such absent or disabled officers. (b) The information under the caption "THE ISSUER" in the Official Statement is hereby approved in substantially the form presented to the Council. The Council hereby consents to the use of such information and acknowledges the use and distribution of the Official Statement containing such information in connection with the sale of Bonds. The City makes no representation or warranty as to, and has no responsibility for, the accuracy or completeness of any other information contained in the Official Statement. The Underwriter is authorized to use the Official Statement in the sale of the Bonds. 5.3. Authority to Change Documents. The Financial Officer in consultation with the City Attorney is hereby authorized and directed to make or agree to any alterations, changes or additions in the instruments hereby approved as he deems necessary or desirable to accomplish the purposes of this Ordinance; provided, however, no alteration, change or addition shall be made which shall alter the maximum net effective interest rate, denomination, date, maturities, form, interest rates, registration privileges, manner of execution, places of payment or terms of prepayment of the Bonds or which shall increase the aggregate principal amount of the Bonds authorized by the Council or in any way create a multiple fiscal year direct or indirect debt or other financial obligation of the City or give rise to a pecuniary liability of the City or a charge against its general credit or taxing powers with respect to the Bonds. . 5.4. Further Authority. The Mayor and the City Clerk and other proper City officials, and each of them, are hereby authorized to execute and deliver for and on behalf of the City any and all additional certificates, documents and other papers and to perform all other acts they may deem necessary or appropriate in order to implement and carry out the matters herein authorized. If necessary, the Council may provide additional details, not inconsistent herewith, by Supplemental Ordinance. 5.5. Repealer. All Ordinances or parts thereof in conflict with this Ordinance are hereby repealed. 5.6. Ordinance Irrenealable; Amendments. After the Bonds are issued this Ordinance shall be and remain irrepealable until the Bonds and the interest thereon shall have been fully paid, satisfied and discharged. In the event this Ordinance is amended, modified or changed in any manner, written notice of same shall be given by the City to the Trustee. 5.7. Effective Date. This Ordinance shall take effect on the tenth day following its introduction and passage. -7- Introduced, approved on first reading and ordered published by number and title this 17th day of April, 2001, and to be presented for final passage on the 1st day of May, 2001. (SEAL) ATTEST: Wanda M. Krajicek, City Clerk Randolph R. Martinez, Mayor APPROVED AS TO FORM: City Attorney \conuidge\bonds\dms\BondOrdlnance(F)040901.doc 8