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HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 07/06/2004 - ITEMS RELATING TO CERTAIN LEASE CERTIFICATES OF PA ITEM NUMBER: 12 A-B AGENDA ITEM SUMMARY DATE: July6, 2004 FORT COLLINS CITY COUNCIL STAFF: Harrison/Krcmarik/ Mannon SUBJECT Items Relating to Certain Lease Certificates of Participation, Series 2004 A. RECOMMENDATION Staff recommends adoption of the Ordinances on Second Reading and on First Reading. EXECUTIVE SUMMARY A. Second Reading of Ordinance No.099,2004,an Ordinance Approving and Authorizing the City of Fort Collins, Colorado, to Enter into a Site Agreement Between the City and Fort Collins Capital Leasing Corporation, a Lease Agreement Between the Corporation and the City,a Certificate Purchase Agreement among the Corporation,the City and George k.Baum & Company and a Financial Guaranty Agreement Between the City and the Certificate Insurer and Approving a Trust Indenture Between the Corporation and the Trustee, a Leasehold Deed of Trust from the Corporation to the Public Trustee of Larimer County for the Benefit of the Trustee and a Preliminary Official Statement and a Final Official Statement Relating to Certain Lease Certificates of Participation, Series 2004A. The City has been planning for the construction of a Police Services building for many years. Monies for the acquisition of land for the facility were approved by the voters as part of the Building Community Choices dedicated quarter cent sales and use tax. Police Services, with the assistance of Operations Services, has identified a site to serve as the location for the new facility The lease transaction will also provide a funding source for the construction of a storage facility to contain deicing materials at the City's existing Streets facility on North Lemay. The estimated cost of the storage facility will be about $1.7 million with $30,000 of financing costs. Ordinance No. 099, 2004, was unanimously adopted on First Reading on June 15, 2004. B. First Reading of Ordinance No. 120,2004,Appropriating Proceeds from the Lease Purchase Certificates of Participation of the City of Fort Collins, Colorado, Series 2004A for the Purpose of Making Certain Capital Improvements (The Police Building and the Streets Deicing Facility Projects), the Acquisition and Conservation of Natural Areas and Open Lands, and for Costs of Issuance of the Lease Certificates Transaction. This Ordinance appropriates the proceeds from the transaction in the Capital Projects Fund and the Open Lands Fund. July 6, 2004 -2- Item No. 12 A-B BACKGROUND On June 22, 2004, the City received the rating of Aa2 on the lease certificates of participation from Moody's Investors Service. This is the highest rating of any lease transaction for a municipality in Colorado. It indicates that the City has a strong ability to make payments on the certificates and that the chance of default is perceived to be very low. Ambac Insurance Company provided the most competitive bid,roughly 12 basis points(0.12%)less than anticipated in the transaction budget. This provides an"AAA"rating for the transaction and draws the most investors to the transaction. With the underlying rating and insurance in hand, the City was prepared to market the certificates. On June 23,2004,the underwriting firm of George K Baum&Company conducted pre-marketing with key investors to determine the prevailing interest rates in the market. Interest in the City's certificate transaction was firm as many investors indicated they would be willing to buy if the certificates were offered immediately. Therefore, the trading desk at Baum recommended with proceeding with the sale on that same date. To achieve the best rates for the City, the certificates were priced aggressively,that is,the lowest rates that would receive bids from investors. During the day,certificates in certain years were re-priced. In some cases this saved money for the transaction; in other years, we had to increase the amount that we would pay. At the end of the trading day, approximately 1/3 of the certificates were not sold. Confident of its ability to sell the certificates over the next few days, Baum committed to purchase the remainder of the certificates. The interest rate yields(calculated to the first date the certificates can be called) on the certificates varied from 1.650%in 2005 to 5.110%in 2006. The rates have been incorporated into the Second Reading of the Ordinance. Based on comparisons to other similar transactions near this time period,the Fort Collins transaction did very well. Investors were looking for certain performance and this led the underwriter to price some of the certificates at a premium (investors pay more than the par amount, but get a higher coupon) or at a discount (investors pay an amount less than the face value of the certificate, but receive a lower interest rate. The net result of the premium and discount certificates is that the City will have more proceeds from the sale of the certificates than the par amount. Through the transaction, the City has been able to meet its financial objectives. There is sufficient funding for the projects and within the anticipated budgets for each. The following table shows how the proceeds from the transaction will be used by the City. July 6, 2004 -3- Item No. 12 A-B City of Fort Collins Lease Certificates of Participation Sources and Uses of Funds Police Sources Natural Areas Buildiva Streets Total Principal Amount of COPS $ 14,735,000 $ 32,250,000 $ 1,665,000 $48,650,000 Net Premium Paid for COPs 509,641 1,139,527 66,563 1,715,732 Subtotal Sources $ 15,244,641 $ 33,389,527 $ 1,731,563 $ 50,365,732 Uses Project Fund $ 15,000,000 $32,839,500 $ 1,700,000 $49,539,500 Debt Service Surety 27,923 51,392 2,923 82,237 Underwriter's Fee 91,468 200,337 10,389 302,194 Bond Insurance 74,970 198,533 9,814 283,317 Cost of Issuance 45,432 99,435 5,134 150,000 Contingency 4,849 331 3,304 8,483 Subtotal Uses $ 15,244,641 $ 33,389,527 $ 1,731,563 $50,365,732 All numbers have been rounded to the nearest dollar. Some columns or rows may not add due to the rounding. ORDINANCE NO. 099, 2004 AN ORDINANCE APPROVING AND AUTHORIZING THE CITY OF FORT COLLINS, COLORADO, TO ENTER INTO A QUITCLAIM DEED FROM THE CITY TO FORT COLLINS CAPITAL LEASING CORPORATION, A SITE AGREEMENT BETWEEN THE CITY AND THE CORPORATION, A LEASE AGREEMENT BETWEEN THE CORPORATION AND THE CITY, A CERTIFICATE PURCHASE AGREEMENT AMONG THE CORPORATION, THE CITY AND GEORGE K. BAUM & COMPANY AND A GUARANTY AGREEMENT BETWEEN THE CITY AND AMBAC ASSURANCE CORPORATION AND APPROVING A TRUST INDENTURE BETWEEN THE CORPORATION AND U.S. BANK NATIONAL ASSOCIATION, AS TRUSTEE, A DEED OF TRUST AND A LEASEHOLD DEED OF TRUST FROM THE CORPORATION TO THE PUBLIC TRUSTEE OF LARIMER COUNTY FOR THE BENEFIT OF THE TRUSTEE AND A PRELIMINARY OFFICIAL STATEMENT AND A FINAL OFFICIAL STATEMENT RELATING TO CERTAIN LEASE CERTIFICATES OF PARTICIPATION, SERIES 2004A. WHEREAS, the City of Fort Collins, Colorado (the "City"), has need for and desires to provide certain real and personal property for City purposes; and WHEREAS, the City is authorized by Colo. Const. art. XX, §6, Chapter 23, Article IV, Division 2 of the Code of the City of Fort Collins (the "City Code") and part 7 of article 15 of title 31, Colorado Revised Statutes, as amended, to lease City property as lessor; and WHEREAS, the City is authorized by Colo. Const. art. XX, §6 and part 8 of article 15 of title 31, Colorado Revised Statutes, as amended, to enter into rental or leasehold agreements in order to provide necessary land, buildings, equipment and other property for governmental or proprietary purposes, and such agreements may include options to purchase and acquire title to such leased or rented property; and WHEREAS, Fort Collins Capital Leasing Corporation, a Colorado nonprofit corporation (the "Corporation"), has offered to accept a conveyance of certain real property from the City pursuant to a Quitclaim Deed, dated its delivery date (the "Quitclaim Deed"), from the City, as seller, to the Corporation, as buyer, and to lease certain other real property from the City pursuant to a Site Agreement, dated its delivery date (the "Site Agreement'), between the City, as lessor, and the Corporation, as lessee, and to lease such real property (collectively, the "Site") and the improvements and equipment to be acquired, constructed and installed thereon (collectively, the "Improvements") to the City under a Lease Agreement, dated its delivery date (the "Lease"),between the Corporation, as lessor, and the City, as lessee; and WHEREAS, the Corporation proposes to acquire its interests in the Site and to acquire, construct and install the Improvements for lease to the City with the proceeds of Lease Certificates of Participation, Series 2004A, dated their delivery date, in the aggregate principal amount of $48,650,000 (the "Series 2004A Certificates") evidencing assignments of proportionate interests in its right to receive rental payments and certain other revenues under the Lease; and WHEREAS, in order to provide security for the payment of the principal of and interest on the Series 2004A Certificates, the Corporation proposes to assign its interests in the Site and the Improvements (collectively, the "Leased Property") and its right to receive rental payments and certain other revenues under the Lease to U.S. Bank National Association, as trustee(the "Trustee"), under a Trust Indenture, dated its delivery date (the "Indenture"), between the Corporation, as grantor, and the Trustee, as trustee, and a Deed of Trust, Security Agreement and Financing Statement and a Leasehold Deed of Trust, Security Agreement and Financing Statement, each dated its delivery date (collectively, the "Deed of Trust"), between the Corporation, as grantor, and the Public Trustee of Larimer County, as grantee, for the benefit of the Trustee, as beneficiary; and WHEREAS, Ambac Assurance Corporation (the "Certificate Insurer")has offered to provide a surety bond in lieu of a cash reserve otherwise required as security for the Series 2004A Certificates pursuant to a Guaranty Agreement, dated its delivery date (the "Guaranty Agreement"),between the City and the Certificate Insurer; and WHEREAS, neither the Lease nor the Guaranty Agreement constitutes a "multiple-fiscal year direct or indirect debt or other financial obligation" of the City within the meaning of Colo. Const. art. X, §20(4)(b) and may therefore be entered into without voter approval in advance; and WHEREAS, George K. Baum & Company (the "Underwriter") has offered to purchase the Series 2004A Certificates pursuant to a Certificate Purchase Agreement, dated its execution date (the "Purchase Agreement"), among the Corporation, the City and the Underwriter; and WHEREAS the forms of the Quitclaim Deed, the Site Agreement, the Lease, the Indenture, the Deed of Trust, the Guaranty Agreement, the Purchase Agreement and the Preliminary Official Statement relating to the Series 2004A Certificates (the "Preliminary Official Statement") have been filed with the City Clerk. BE IT ORDAINED BY THE COUNCIL OF THE CITY OF FORT COLLINS, COLORADO: 1. The forms of the Quitclaim Deed, the Site Agreement, the Lease, the Indenture, the Deed of Trust, the Guaranty Agreement and the Purchase Agreement are hereby approved, together with any revisions thereto as may be considered necessary or desirable by the Financial Officer in consultation with the City Attorney. The preparation and use of the Preliminary Official Statement is hereby ratified, approved and confirmed. The City is authorized to prepare or cause to be prepared a final Official Statement(the "Official Statement") in connection with the offering and sale of the Series 2004A Certificates. The Mayor is 2 authorized to execute and deliver the Official Statement, and the execution of the Official Statement by the Mayor shall be conclusively deemed to evidence the approval of the form and contents thereof by the City. 2. The City Council (the "Council') hereby finds that the execution of the Quitclaim Deed, the Site Agreement and the Lease and the sale and lease of the Leased Property as provided therein is in the best interests of the City and its inhabitants. In addition, the determinations set forth in Section 6.5 of the Lease are incorporated herein by this reference as if set forth in full herein. 3. The Mayor and the City Clerk are hereby authorized and directed to execute the Quitclaim Deed, the Site Agreement, the Lease, the Guaranty Agreement and any other documents or certificates that, in the opinion of the City Attorney, are necessary to effect the transactions contemplated thereby and not inconsistent therewith. The City Manager is hereby authorized to accept and execute the Purchase Agreement on behalf of the City immediately following the marketing of the Series 2004A Certificates and prior to final adoption of this Ordinance, but the Purchase Agreement shall not become effective according to the terms thereof until the effective date of this Ordinance. 4. The City hereby waives any available defense of governmental immunity from liability in tort for any failure to surrender possession of the Leased Property as provided in the Lease. 5. The Council hereby authorizes the amendment of the Site Agreement and the Lease, and consents to the amendment of the Indenture and the Deed of Trust, to revise the definitions of "Site" and "Leased Property" as provided in the Site Agreement, the Lease, the Indenture and the Deed of Trust. 6. If any section, paragraph, clause or provision of this Ordinance shall for any reason be held to be invalid or unenforceable, the invalidity or unenforceability of such section, paragraph, clause or provision shall not affect any of the remaining provisions of this Ordinance. 7. All action not inconsistent with the provisions of this Ordinance heretofore taken by the City or its officers, and otherwise by the City directed toward the completion of the transactions described herein is hereby ratified, approved and confirmed. 8. All ordinances, resolutions and orders, or parts thereof, of the City inconsistent herewith and with the documents approved hereby are hereby repealed to the extent only of such inconsistency. This repealer shall not be construed as reviving any ordinance, resolution or order, or part thereof. 9. Any inconsistency between the provisions of this Ordinance and those of any applicable statute, including parts 7 and 8 of article 15 of title 31, Colorado Revised Statutes, as amended, is intended by the Council. To the extent of any such inconsistency the provisions of this Ordinance shall be deemed made pursuant to Colo. Const. art. XX, §6 and shall supersede to the extent permitted by law any such conflicting provisions. 3 READ, AMENDED, FINALLY PASSED AS AMENDED ON SECOND READING, AND ORDERED PUBLISHED BY NUMBER AND TITLE ONLY this 6th day of July, 2004. CITY OF FORT COLLINS, COLORADO By: Mayor (CITY) (SEAL) ATTEST: City Clerk 4 ORDINANCE NO. 120, 2004 OF THE COUNCIL OF THE CITY OF FORT COLLINS APPROPRIATING PROCEEDS FROM THE LEASE PURCHASE CERTIFICATES OF PARTICIPATION OF THE CITY OF FORT COLLINS, COLORADO, SERIES 2004A FOR THE PURPOSE OF MAKING CERTAIN CAPITAL IMPROVEMENTS (THE POLICE BUILDING AND THE STREETS DEICING FACILITY PROJECTS), THE ACQUISITION AND CONSERVATION OF NATURAL AREAS, AND FOR COSTS OF ISSUANCE OF THE LEASE CERTIFICATES TRANSACTION WHEREAS, on July 6, 2004, City Council adopted Ordinance No. 099, 2004, authorizing the Council authorized the execution of issuance of the City of Fort Collins, Colorado, Lease Certificates of Participation, Series 2004A (the "COPS"), in the aggregate principal amount $48,650,000; and WHEREAS, the marketing and the sale of the certificates of participation using premiums an discounts resulted in net proceeds of$50,365,732; and WHEREAS, the execution of the agreements associated with the lease transaction, and the appropriation of the proceeds thereof, are necessary to complete the construction of certain capital improvements and the acquisition and conservation of open lands and natural areas by the City; and WHEREAS, Article V, Section 9, of the Charter of the City of Fort Collins permits the City Council to make supplemental appropriations by ordinance at any time during the fiscal year, provided that the total amount of such supplemental appropriations, in combination with all previous appropriations for that fiscal year, does not exceed the current estimate of actual and anticipated revenues to be received during the fiscal year; and WHEREAS, it is the desire of the Council to appropriate the sum of $50,365,732 in unanticipated revenue in the Capital Project Fund and the Natural Areas Fund, representing proceeds from the lease financing described herein, to be used for the Police Building Project, the Streets Deicing Facility Project, the acquisition and conservation of open lands and natural areas, and the payment of costs associated with said lease financing. NOW, THEREFORE, BE IT ORDAINED BY THE COUNCIL OF THE CITY OF FORT COLLINS as follows: Section 1. That, contingent upon the closing of the Series 2004A lease certificate of participation transaction, there is hereby appropriated for expenditure from certificate of participation proceeds in the Capital Projects Fund, the Police Building Project, the sum of THIRTY-THREE MILLION THREE HUNDRED-EIGHTY-NINE THOUSAND FIVE- HUNDRED-TWENTY-EIGHT DOLLARS ($33,389,528). Section 2. That, contingent upon the closing of the Series 2004A lease certificate of participation transaction, there is hereby appropriated for expenditure from certificate of participation proceeds in the Capital Projects Fund, the Streets Deicing Facility Project, the sum of ONE-MILLION SEVEN-HUNDRED-THIRTY-ONE-THOUSAND FIVE-HUNDRED- SIXTY-THREE DOLLARS ($1,731,563). Section 3. That, contingent upon the closing of the lease certificate of participation transaction, there is hereby appropriated for expenditure from certificate of participation proceeds in the Natural Areas Fund the sum of FIFTEEN MILLION TWO-HUNDRED FORTY- FOUR-THOUSAND SD{-HUNDRED-FORTY ONE DOLLARS ($15,244,641). Introduced and considered favorably on first reading and ordered published this 6th day of July, A.D. 2004, and to be presented for final passage on the 20th day of July, A.D. 2004. Mayor ATTEST: City Clerk Passed and adopted on final reading this 20th day of July,A.D. 2004. Mayor City Clerk ITEM NUMBER: 14 AGENDA ITEM SUMMARY DATE: June 15, 2004 FORT COLLINS CITY COUNCIL STAFF: Harrison/Krcmarik/ Mannon SUBJECT First Reading of Ordinance No. 099, 2004, an Ordinance Approving and Authorizing the City of Fort Collins, Colorado, to Ente ' " o-.4 S' e e jenie'City and Fort Collins Capital Leasing Corporation, a Leas greein t Bet a th otion and the City, a Certificate Purchase Agreement among Corpo tion, a ity andge k. Baum & Company and a Financial Guaranty Agreement en t y e Ceto Insurer and Approving a Trust Indenture Between the Corporation and the Trustee,a LeaseholdDeed of Trust from the Corporation to the Public Trustee of Larimer County for the Benefit of the Trustee and a Preliminary Official Statement and a Final Official Statement Relating to Certain Lease Certificates of Participation, Series 2004A. RECOMMENDATION Staff recommends adoption o he Ordi nce o i din FINANCIAL IMPACT The total amount of Certificates of Participation ("COPS") to be authorized will be approximately $30.1 million for the Police Services Building and $1.7 million for the Deicing Materials Storage Facility. For the Police Building,the annual payments will be approximately$2.4 million per year. Both the size of the transaction and the annual payments may change due to fluctuations in interest rates. The source for repayCgs. e Po ' Services share of th annual payments will be the City's General Fund,Capitala xp i fe r u sums in prior dedicated quarter- cents projects and interest eae he pas s, ncil and City staff have earmarked funds within the General Fup os source of a annual payments for the Streets deicing storage facility will be the Transportation fund. EXECUTIVE SUMMARY The City has been planning for the construction of a Police Services building for many years. Monies for the acquisition of land for the facility were approved by the voters as part of the Building Community Choices dedicated quarter cent sales and use tax. Police Services, with the assistance of Operations Services,has identified a site to serve as the location for the new facility. The building will be approximately 92,800 square feet and will be located on approximately 10 acres of land on the west side of Timberline Road between Drake and Prospect Roads. The cost of the Police June 15, 2004 -2- Item No. 14 Services facility transaction, including land costs, will be approximately $30.1 million which includes $585,000 in financing costs. The lease transaction will also provide a funding source for the construction of a storage facility to contain deicing materials at the City's existing Streets facility on North Lemay. The estimated cost of the storage facility will be about$1.7 million with $30,000 of financing costs. BACKGROUND Police BuildingUU F Y A new Police Services building is part of the Police Services Strategic Plan and the City's Facility Master Plan. The existing building at 300 LaPorte Avenue was not designed for a police agency and is no longer suitable for a department the size of Police Services; the current staffing level is 245.5 employees. The new facility is necessary to maintain service to the community, conduct business, and provide public safety. The voter-approved Building Community Choices ("BCC") capital program included funding for land acquisition and initial de oca lice Building. A Police Services facility needs assessment study was compla 0 s ar footbuilding is required for a centralized facility. If a decet ildin were to be pursued the total size would increase to 102,000 sq Council and City staff have expressed a preference for a centralized facility. A ten-acre parcel of land on Timberline Road has been identified for acquisition for the new facility. The cost estimate of the facility is $30.1 million and includes land acquisition. Please see the attached map for the site location. Deicing Materials Storage Facility A new Deicing Materials Sto e FacilOf' c17nsthe Streets Department tostore roadway deicing materials,inc ng deianeing systemThe stcture willprovide a permanent enclosed s h00f material. The new structure is designed to be corrosion resistant to all types of deicing materials including sand,salt,and ice slicer. This structure will replace the historic warehouse building currently being used to store these materials. The current historic warehouse building is rapidly deteriorating due to the storage of corrosive materials, and it will be restored as an equipment storage facility. Please see the attached map for the site location. June 15, 2004 -3- Item No. 14 SOURCES AND USES OF LEASE CERTIFICATE FUNDS Combined Police Streets Cost of Building Building Facilities Sources New Issue Certificates of Participation $29,515,000 $1,705,000 $31,220,000 Accrued Interest and Premium 570,000 25,000 595,000 Total Sources $30,085,000 $1,730,000 $31,815,000 Uses of Proceeds Police Facility " ' " Y ,000 $29,500,000 Streets Storage Facility $1,700,000 1,700,000 Cost of Issuance 96,600 4,300 100,900 Certificate Sales Costs 180,500 8,000 188,500 Lease Certificate Insurance 237,200 10,500 247,700 Surety Bond 70,400 3,200 73,600 Contingency 300 4,000 4,300 Total Uses $30,085,000 $1,730,000 $31,815,000 All of the figures above areCsed arket ti at as ne 3, 2004. Interest rates will undoubtedly change betweent sale t certificat The total size of the transaction will be resized when the finaldo 1 Global Credit Research New Issue moo*%b"Vedl6 Msorrdoo 24 JUN 2004 New Issue: Fort Collins(City of)CO MOODY'S ASSIGNS INITIAL Aa2 RATING TO CITY OF FORT COLLINS COLORADO'S LEASE CERTIFICATES OF PARTICIPATION,SERIES 2004 RATING AFFECTS$46.795M IN OUTSTANDING OBLIGATIONS Municipality CO Moody's Rating ISSUE RATING Lease Certificates of Participation, Series 2004A Aa2 Sale Amount $48,795,000 Expected Sale Date 06/25/04 Rating Description Certificates of Participation Opinion NEW YORK, Jun 24,2004--Moody's Investors Service has assigned an initial Aa2 rating to the City of Fort Collins'$48.795M Lease Certificates of Participation, Series 2004A.The COPS are secured by rental payments due from the City of Fort Collins,Colorado(GO rated Aal)to the City of Fort Collins Capital Leasing Corporation ("the Corporation"), as lessor, under an annually renewable lease purchase agreement. The current offering will fund the acquisition and construction of a new, centralized police services building ($32.1 M), a deicing materials storage facility($1.7M)and the purchase of properties for preservation as natural areas($14.99M).The Aa2 rating reflects the essential nature of the police and deicing facilities as well as the city's identification of two funding sources restricted for park and open space purposes,which are expected to pay debt service for the open space portion of the COPs.The Aa2 rating also reflects factors incorporated in the Aat general obligation bond rating for the city including a stable local economy supported by the presence of Colorado State University(revenue bonds rated Al by Moody's);satisfactory finances with consistent reserve levels;and a manageable debt burden. CURRENT OFFERING FUNDS THREE MAJOR PROJECTS; SECURITY ENHANCED BY ESSENTIALITY OF POLICE AND DEICING FACILITIES AND IDENTIFIED PAYMENT SOURCES FOR OPEN SPACE PURCHASES. The current offering will fund three major projects.The first consists of the purchase of ten acres of land and construction of a centralized police services building.The 93,000 sq.ft. building will include office space, holding cells and interview rooms.The city expects to acquire the site in July 2004,with construction beginning in September 2004, and completion expected in June 2007. Enhancing security,the mortgaged interest in the police headquarters facility extends for 22 years,throughout the repayment period for the cops. The current issuance will also fund the construction of a new 12,000 sq.ft. deicing storage facility that will be located next to the current facility. The storage facility will house deicing liquid tanks and dispensing systems and will replace the city's outmoded structure,which will be used to house street vehicles and other equipment. Construction time for this project is estimated at 8-12 months.A leasehold interest in this facility extends for 21 years. Finally,approximately$15M of the current issuance will fund expected purchases of identified properties for preservation as open space.These properties include the Soapstone Ranch property(16,379 acres),the Bobcat Ridge Natural area(1,785 acres)and the Andrijeski property(154 acres).Out of the$15M designated for open space purchases in the current issuance, $6.3M will reimburse the city for purchases that have already been made,with the remaining$8.7 million targeted for new purchases.While the failure to purchase properties for open space with a total fair market value of$8.7M by May 31,2005,would constitute an event of default under the lease and indenture,city officials report that most of these properties are largely under option or could readily be replaced with alternative open space purchases. In addition,the city could also approve an asset transfer to provide additional lease hold collateral while the purchases were being finalized. The certificates are to be repaid from the city's annual budget appropriations to make base rental payments, equal to debt service,to the trustee under an annually renewable lease purchase agreement between the Corporation,as lessor,and the city.A nonappropriation of funds would require the city to vacate the property, and following an event of default,the trustee may release the collateralized leased property of the deicing facility and open space,and sell or release the police facility,although alternative uses of the police and deicing properties,because of their specialized purposes,would be limited. In addition, alternative uses for the leased open space areas would be negligible. However,Moody's believes that the critical nature of the pledged civic properties reduces the likelihood of nonappropriation. Also supporting credit quality is the city's identification of uncommitted revenue sources outside of the General Fund for rental payments on debt service associated with the open space purchases,which will be amortized over a fifteen year period, in advance of the twenty-two year maturity period.While not specifically pledged,the city intends to pay these base rental payments from the city's voter-approved 0.25%sales and use tax, authorized through 2030,which is dedicated to the maintenance of open space, natural areas, wildlife habitat, parks and trails.This tax has generated an average of$5.4M annually over the last five years, although recent collections have declined to around$5.1 M. In addition, the city also plans to use, as necessary, its share of Larimer County's(COPs rated A1)0.25%sales tax dedicated to spending on open space and parks.A minimum of 55%of the proceeds of this tax,which is authorized through 2018,is pledged to the six municipalities in the county.The city has received approximately$3M annually from this revenue source over the past five years. Combined, receipts of these two identified revenue sources totaled $8.3M in fiscal 2003, providing 5.85 times coverage of level debt service on the open space portion of the COP lease payments.While these revenues are expected to be sufficient to fully cover rental payments,the city may, if required, allocate any other legally available funds to cover rental payments, including those held in the General Fund. Strong voter support for the city and county open space measures is also noted. Other legal provisions, including title insurance, commercial general liability insurance, property and workers' compensation insurance,also contribute to credit quality.A base rentals debt service reserve fund equal to MAIDS is expected to be funded with a surety bond at the time of closing. STABLE LOCAL ECONOMY ENHANCED BY PRESENCE OF COLORADO STATE UNIVERSITY(CSU) Moody's expects that the city's economy,with a full valuation approaching$11 billion,will continue to demonstrate favorable growth trends. Over the past five years, annual full valuation growth has averaged 12%, due to continued, albeit slowed, residential and commercial development.Among the city's largest employers is Colorado State University(CSU)which employs over 7,900 individuals and enrolls approximately 25,000 students, a record high for the university.The city's largest industrial employers include Hewlett Packard (Senior Unsecured debt rated A3), and Agilent(Moody's issuer rating of Ba2 with a negative outlook)which together provide 4,450 jobs. Median family income exceeds state averages and has improved slightly from the last census,with a current median family income of$59,332 (106.2%of state) improving from a 1990 census figure of$37,491 (104.3%of state.)A below-average per capita income reflects the city's significant student population. FAVORABLE FINANCIAL MARGINS DESPITE SLOWING IN REVENUE GROWTH. Moody's believes that Fort Collins'financial operations will continue to be characterized by a trend of satisfactory reserves and a strong cash position given the city's prudent fiscal management and continued, though slowed, revenue growth. Over the past four years, General Fund balance has averaged$33 million, or close to 38%of revenues. In fiscal 2003, General Fund balances remained in line with this trend,totaling close to$36.8 million or 38.2%of revenues. Significantly,the city also maintains a fund balance policy requiring a minimum of 15%in combined undesignated General Fund reserves.Again, over the past four years, unreserved General Fund balances have exceeded this target,averaging close to 28%.Although the city's unreserved General Fund balance fell to the minimum required level of 15% in fiscal 2003,city officials report that year-to-date revenues are running above budgeted figures,with expected improvement in this figure in fiscal 2004. Maintenance of sound reserve levels that meet or exceed the city's minimum reserve policy continues to represent a critical factor in supporting the city's current credit quality. Moody's expects reserve levels to remain satisfactory, helping to mitigate concerns associated with the city's large dependence on sales and use taxes. Positively,through the first five months of fiscal 2004, sales and use tax collections are up 5.2%over the same period in 2003. Moody's expects that the city's conservative budgeting and spending practices,which have sustained a sound financial position,will continue,and that stable financial operations will be maintained. LOW DEBT BURDEN, MODEST FUTURE BORROWING PLANS Moody's believes that the city's debt position will remain low due to its limited future debt issuance plans and the extensive use of pay-as-you-go financing.The city's overall debt burden of 2.5%remains low, especially given population growth approaching 36%over the past decade.The city is able to complete a significant portion of its capital plan through a dedicated .25%sales tax as well as the voter approved"de-Brucing" measure,which allowed the city to permanently retain all revenues in excess of TABOR restrictions and use them to finance a variety of capital projects. KEY STATISTICS: 2003 estimated population: 130,566 2003 full valuation:$10.97 billion FV per capita: $84,044 1999 Median family income:$59,332 (106.2%of state) 1999 Median home value: $169,600(101.8%) Overall debt burden:2.5% FY03 General Fund balance: $36.8 million (38.2%of operating revenues) FY03 General Fund unreserved balance: $14.8 million (15.3%of revenues) Analysts Helen Cregger Analyst Public Finance Group Moody's Investors Service Patrick Ford Backup Analyst Public Finance Group Moody's Investors Service Matthew Jones Senior Credit Officer Public Finance Group Moody's Investors Service Contacts Journalists: (212)553-0376 Research Clients:(212)553-1653 © Copyright 2004, Moody's Investors Service,Inc. and/or its licensors Including Moody's Assurance Company, Inc. (together, "MOODY'S"). All rights reserved. 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