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HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 01/20/2004 - SECOND READING OF ORDINANCE NO. 005, 2004 APPROVIN ITEM NUMBER: 13 AGENDA ITEM SUMMARY DATE: January 20, 2004 FORT COLLINS CITY COUNCIL STAFF: Alan Krcmarik SUBJECT Second Reading of Ordinance No. 005, 2004, Approving and Authorizing the Execution and Delivery of a First Amendment to the Trust Indenture Relating to the City of Fort Collins,Colorado, Multifamily Housing Revenue Bonds, Series 1998 (the Country Ranch II Limited Partnership Project); and Authorizing the Preparation and Execution of Related Documents. RECOMMENDATION Staff recommends adoption of the Ordinance on Second Reading. EXECUTIVE SUMMARY As one of its tools to facilitate the development of affordable housing, the City of Fort Collins occasionally issues private activity bonds on behalf of qualified projects. The interest on the bonds is not subject to income taxation. Therefore the rates are lower than taxable market rates. This allows a portion of the units in a qualified project to pay lower rents. To become qualified, the project must rent the housing units to individuals or families that meet low- or moderate-income guidelines. The City issued bonds for the Country Ranch II Limited Partnership Project in 1998. The changes to the Trust Indenture were requested by AIG Retirement Services,Inc. AIG provides financial security for the 1998 private activity bonds. The changes include a different means by which to calculate the interest on the bonds and a change in the repayment schedule to lower the annual payments. Ordinance No.005,2004,was adopted 6-0(Councilmember Bertschy was absent) on First Reading on January 6, 2004. ORDINANCE NO. 005, 2004 AN ORDINANCE APPROVING AND AUTHORIZING THE EXECUTION AND DELIVERY OF A FIRST AMENDMENT TO TRUST INDENTURE RELATING TO THE CITY OF FORT COLLINS, COLORADO MULTIFAMILY HOUSING REVENUE BONDS (COUNTRY RANCH II LIMITED PARTNERSHIP PROJECT) SERIES 1998; AND AUTHORIZING THE PREPARATION AND EXECUTION OF RELATED DOCUMENTS 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"), to issue revenue bonds for the purpose of financing projects to the end that business enterprises will bring affordable housing to the City of Fort Collins, to enter into financing agreements with others for the purpose of providing revenues to pay such bonds, and further to secure the payment of such bonds; and WHEREAS, the City has, pursuant to the Act, previously issued its Multifamily Housing Revenue Bonds (Country Ranch II Limited Partnership Project) Series 1998 in the original aggregate principal amount of $6,509,000 (the "Bonds") pursuant to a Trust Indenture (the "Indenture") dated as of December 1, 1998 between the City and Chase Bank of Texas, National Association, as trustee (the "Trustee"); and WHEREAS, the City now desires to amend the Indenture, at the request of AIG Retirement Services, Inc. (formerly, AIG SunAmerica, Inc.), as the Funding Facility Issuer under the Indenture, to (i) change the interest mode on the Bonds to a Term Rate Mode in which the interest will be calculated on a weekly basis and will be determined on the basis of an index (BMA plus 20 basis points) and (ii) modify the mandatory sinking fund schedule for the Bonds; and WHEREAS, there has been presented to the Council of the City (the "Council') and filed in the office of the City Clerk of the City (the "Clerk"), the proposed form of First Amendment to Trust Indenture, dated as of January 1, 2004 (the "First Amendment") by and between the City and the Trustee; BE IT ORDAINED BY THE COUNCIL OF THE CITY OF FORT COLLINS, COLORADO: Section 1. The proposed form of First Amendment is in all respects hereby approved, and the Mayor and the City Clerk are authorized to execute such First Amendment in the name of and on behalf of the City and such other documents as in the opinion of the City Attorney are necessary to effect the transactions contemplated thereby and are not inconsistent therewith. 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 on their behalf, shall without further act or authorization of the Council do all things UT_DOCS_A#1145458 v1 S-1 and execute all instruments and documents required to be done or executed by such absent or disabled officers. Section 2. Counsel for the City is hereby authorized and directed to make or agree to any alterations, changes or additions in the instruments hereby approved as it deems necessary or proper to accomplish the purposes of this Ordinance. Section 3. 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. Section 4. If any provision of this Ordinance shall be held or deemed to be or shall, in fact, be illegal, inoperative or unenforceable, the same shall not affect any other provision or provisions herein contained or render the same invalid, inoperative or unenforceable to any extent whatever. Section 5. All provisions of prior ordinances, or parts thereof, in conflict with the provisions of this Ordinance are, to the extent of such conflicts, hereby repealed. Section 6. This Ordinance shall be in full force and effect on the tenth day following its passage. INTRODUCED, READ, APPROVED ON FIRST READING AND ORDERED PUBLISHED BY NUMBER AND TITLE ONLY this 6th day of January, A.D. 2004. CITY OF FORT CO / S, COLORADO By: Mayor (SEAL) ATI'EST: City Clerk READ FI NALLY PASSED ON SECOND READING AND ORDERED PUBLISHED BY NUMBER AND TITLE ONLY this 20th day of January, A.D. 2004. CrfY OF FORT COLLINS, COLORADO B : Y Mayor (SEAL) ATTEST: City Clerk ITEM NUMBER: 13 AGENDA ITEM SUMMARY DATE: January 6, 2004 FORT COLLINS CITY COUNCIL STAFF: Alan Krcmarik SUBJECT First Reading of Ordinance No. 005,2004,Approving and Authorizing the Execution and Delivery of a First Amendment to the Trust Indenture Relating to the City of Fort Collins, Colorado, Multifamily Housing Revenu ond@, S 19 nt Ranch II Limited Partnership Project); and Authorizing the epara£id eQ do fad Documents. RECOMMENDATION Staff recommends adoption of the Ordinance on First Reading. FINANCIAL IMPACT The City is the issuer of the p ' '9te activity bo s t t p v d t,e initial funding for the Country Ranch II Limited Partnership ject. P%s ate ac it .,bo ds ructured according to federal and state law. These laws prohibi he y' om u ' 'ng any ditct financial responsibility for the bonds or their eventual repaymen : The N50is not allowed to make payments on behalf of the project or the bondholders. The debt associated with the bonds is not part of the City's legal or financial obligations. EXECUTIVE SUMMARY As one of its tools to facilitate the development of affordable housing, the City of Fort Collins occasionally issues private actiyvf y b'Ad n bd If qn ifi py)ects. The interest on the bonds is not subject to income taxa n. The ore tlr ION than taxable market rates. This allows a portion of the units iflka quJa i project, y pay low rents. To become qualified, the project must rent the housing un-lft'o in uals or families t at meet low- or moderate-income guidelines. The City issued bonds for the Country Ranch II Limited Partnership Project in 1998. The proposed changes to the Trust Indenture are being requested by AIG Retirement Services,Inc. AIG provides financial security for the 1998 private activity bonds. The changes include a different means by which to calculate the interest on the bonds and a change in the repayment schedule to lower the annual payments. With these two changes accomplished, the Bonds will be transferred to the Federal Home Loan Mortgage Corporation (also known as Freddie Mac). January 6, 2004 -2- Item No. 13 BACKGROUND The City of Fort Collins, Colorado (the "Issuer") has previously issued its Multifamily Housing Revenue Bonds (Country Ranch II Limited Partnership Project) Series 1998 in the original aggregate principal amount of $6,509,000 (the "Bonds") pursuant to a Trust Indenture (the "Indenture") dated as of December 1, 1998 between the Issuer and Chase Bank of Texas,National Association, as trustee (the "Trustee"). In January, 2001, SunAmenciInc., predecessor—.to A Q� R ment Services, Inc. ("AIG Retirement"), replaced Dynexif pital";I as t`` F" di " 1 ' 'li( Issuer under the Indenture, and AIG Retirement issued its vocable�ond nd P chase Agreement (the "Alternate Credit Facility") in order to se e the tiely.pgyrnt of theincipal of and interest on, and to provide liquidity for, the Bonds, which Alternate Credit Facility is guaranteed by American International Group, Inc. ("AIG Guarantee"), of which AIG Retirement is a wholly-owned subsidiary. AIG Retirement, as the Funding Facility Issuer under the Indenture, now desires to amend the Indenture in order to change the interest rate mode on the Bonds to a Term Rate Mode in which the interest will be calculated on a weekly basis and will be determined on the basis of an index (BMA plus 20 basis points)and modify the amortization schedule for the Bonds to provide approximately level debt service at a lowerja �rtizationrate. c n 'o uVit ese amendments and pursuant to the terms of the Indentue AlltW' ,be te d' Fa i drelated AIG Guarantee will be released;AIG Retirement wiignitsts a u ng FaciIssuer under the Indenture to MM Enhancement, LLC; and tDods tra ferred t reddie Mac for deposit into a securitization trust. The trust interests which are sold to the public will be credit enhanced by Freddie Mac. AIG Retirement believes that these changes will solidify the financial foundation of the project for a long period of time. These changes will cause a reissuance of the Bonds for federal tax purposes. As a result, a tax opinion will be necessary and Form 8038 must be filed with the Internal Revenue Service. The Ordinance that makes th hanges ,the VeluYaond epared by Loring Harkness of Ballard Spahr Andrews and In ersoll. is fi '` h'� serve counsel to the City since the late 1970s. The Ordinance has been revie y l aI and staff.