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HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 12/05/2006 - SECOND READING OF ORDINANCE NO. 182, 2006, AUTHOR ITEM NUMBER: 8 AGENDA ITEM SUMMARY DATE: December5, 2008 FORT COLLINS CITY COUNCIL STAFF: Chuck Seest SUBJECT Second Reading of Ordinance No. 182, 2006,Authorizing and Approving the Issuance and Sale of Not to Exceed$20,000,000 Pollution Control Refunding Revenue Bonds(Anheuser-Busch Project) Series 2006 of the City of Fort Collins, Colorado, to Refund Certain Bonds of the City of Fort Collins, Colorado, Issued to Refinance Certain Water Pollution Control Facilities, Sewage Facilities and Solid Waste Disposal Facilities; the Execution and Delivery of an Indenture of Trust to Secure Said Bonds; the Execution and Delivery of a Loan Agreement Between Anheuser-Busch Companies,Inc. and the City of Fort Collins, Colorado Providing for the Repayment of the Loan of the Proceeds of Said Bonds; the Execution and Delivery of a Tax Regulatory Agreement, Bond Purchase Agreement, Official Statement and Said Bonds in Connection Therewith; and Providing for Certain Other Matters in Connection with the Delivery of the Bonds. RECOMMENDATION Staff recommends adoption of the Ordinance on Second Reading. EXECUTIVE SUMMARY In 1984, the City issued $35,000,000 of pollution control revenue bonds for the Anheuser-Busch Companies,Inc. (the"Company"). In 1986,the bonds were reissued in the amount of$20,000,000. The 1986 bonds were called at their first call date of September 4, 1996. The bonds were used to finance the costs of acquiring, constructing, installing and equipping pollution control facilities, sewage facilities, and solid waste disposal facilities to be owned by the Company or one of its subsidiary companies. Because of the change in interest rates,the Company would like to refinance the outstanding bonds to attain debt service savings. The 1996 bonds cant'an interest rate of 6.00%. The refinanced rate of interest is expected to be approximately 5.50%. The proposed refinancing will extend the maturity of the bonds from 2036 to 2046. Ordinance No. 182,2006,authorizing and approving the issuance and sale of the bonds, was unanimously adopted on First Reading on November 7, 2006. ITEM NUMBER: 19 AGENDA ITEM SUMMARY DATE: November7, 2006 FORT COLLINS CITY COUNCIL STAFF: Chuck Seest SUBJECT A. First Reading of Ordinance No. 182,2006,Authorizing and Approving the Issuance and Sale of Not to Exceed $20,000,000 Pollution Control Refunding Revenue Bonds (Anheuser-Busch Project) Series 2006 of the City of Fort Collins, Colorado, to Refund Certain Bonds of the City of Fort Collins, Colorado, Issued to Refinance Certain Water Pollution Control Facilities, Sewage Facilities and Solid Waste Disposal Facilities; the Execution and Delivery of an Indenture of Trust to Secure Said Bonds;the Execution and Delivery of a Loan Agreement Between Anheuser-Busch Companies, Inc. and the City of Fort Collins, Colorado Providing for the Repayment of the Loan of the Proceeds of Said Bonds; the Execution and Delivery of a Tax Regulatory Agreement,Bond Purchase Agreement, Official Statement and Said Bonds in Connection Therewith; and Providing for Certain Other Matters in Connection with the Delivery of the Bonds. RECOMMENDATION Staff recommends adoption o CeOrdi()pay FINANCIAL IMPACT The bonds are not and cannot constitute an obligation of the City of Fort Collins. The bonds will be paid by Anheuser-Busch. The City charges an issuance fee which is determined by the structure of the debt service. Staff estimates the issuance fee to be between $40,000 and $50,000. The proceeds of the fee can be used for economic development. EXECUTIVE SUMMARY hi 1984, the City issued $35,000,000 of pollution control revenue bonds for the Anheuser-Busch Companies,Inc. (the"Company"nnds 986 bo a ss in the amount of$20,000,000. The first call date for the 1986 ept b 4, 9 bonds were used to finance the costs of acquiring, constructi ng ing lution control facilities, sewage facilities, and solid waste dispi t e ned by t Company or one of its subsidiary companies. Because of the change in interest rates, the Company would like to refinance the outstanding bonds to attain debt service savings. The 1986 bonds carry an interest rate of 7.375%. The refinanced rate of interest is expected to be around 6.5%. The proposed refinancing will extend the maturity of the bonds from 2014 to 2036. November 7, 2006 -2- Item No. BACKGROUND The Original 1984 Issue The Series 1984 Bonds was o nally i ed o er 3, 84, in the amount of$35,000,000 to provide financing to the Anh er- C p ?es, nc. t "Company")for pollution control facilities and equipment. The 1984 bonds were issued at a floating rate of interest. $9 million of the 1984 bonds were retired in 1985 and an additional$6 million were retired in 1986. In 1986,the remaining bonds were reissued and remarketed at a lower fixed interest rate, 7.375%. The bonds are referred to as special and limited obligations of the City as an Issuer. The bonds do not constitute general obligations of the City or a charge against the general credit or taxing powers of the City or the State of Colorado. The City issued the bonds under the provisions of the Colorado County and Municipality Development Revenue Bond Act, as supplemented and amended. The bonds are payable solely from the revenues derived from the Company's facilities. 1986 Refinancing In 1986, the Company requested a the it r ket Vis reissue the bonds. This step was envisioned at the time of the gina i e b u o tcally high interest rates. The structure of the transaction w change om ie to a fixed interest rate. The bonds were to mature in 2014. e r d an i of 7.375% on the bonds. 1996 Refinancing In 1996, the Company requested that the City remarket and reissue the bonds. The structure of the transaction was to take advantage of lower rates at the ten year call date and extend the length of the financing The term of the bonds were extended, with a new final maturity in 2031. The market provided an interest rate of 6.00% on the bonds. 2006 Refinancing One of the general rules of financing projects is that the term (length) of the financing should not exceed the useful life of the facilities and equipment. Financing over time matches cash flows associated with the project with their associated costs. In the proposed financing,Anheuser-Busch has requested an extension of etheof fi cin u y 2031 to 2046. The expected rates for the refunding bonds e r 5. 00 5 5 %, provided that the markets remain stable from now until he pr o nanc cture calls for a term bond, that is, all bonds will be payable ine oft fi cing. bonds will be callable in ten years with a 2%premium. ORDINANCE NO, 182, 2006 AN ORDINANCE OF THE COUNCIL OF THE CITY OF FORT COLLINS, COLORADO, AUTHORIZING AND APPROVING THE ISSUANCE AND SALE OF NOT TO EXCEED $20,000,000 POLLUTION CONTROL REFUNDING REVENUE BONDS (ANHEUSER-BUSCH PROJECT) SERIES 2006 OF THE CITY OF FORT COLLINS , COLORADO, TO REFUND CERTAIN BONDS OF THE CITY OF FORT COLLINS , COLORADO, ISSUED TO REFINANCE CERTAIN WATER POLLUTION CONTROL FACILITIES , SEWAGE FACILITIES AND SOLID WASTE DISPOSAL FACILITIES ; THE EXECUTION AND DELIVERY OF AN INDENTURE OF TRUST TO SECURE SAID BONDS ; THE EXECUTION AND DELIVERY OF A LOAN AGREEMENT BETWEEN ANHEUSER-BUSCH COMPANIES, INC . AND THE CITY OF FORT COLLINS, COLORADO PROVIDING FOR THE REPAYMENT OF THE LOAN OF THE PROCEEDS OF SAID BONDS ; THE EXECUTION AND DELIVERY OF A TAX REGULATORY AGREEMENT, BOND PURCHASE AGREEMENT, OFFICIAL STATEMENT AND SAID BONDS IN CONNECTION THEREWITH; AND PROVIDING FOR CERTAIN OTHER MATTERS IN CONNECTION WITH THE DELIVERY OF THE BONDS WHEREAS, the City of Fort Collins, Colorado (the "Issuer") , a municipal corporation organized and existing under the Constitution and laws of the State of Colorado (the "State"), is authorized by the laws of the State, and specifically the provisions of the County and Municipality Development Revenue Bond Act, part 1 of article 3 of title 29 , Colorado Revised Statutes, as supplemented and amended (the "Act"), and by its home rule charter, among other things, to issue its bonds for any of the purposes set forth in the Act, including the refunding of any bonds previously issued under the provisions of the Act, to enter into agreements with others for the purpose of providing revenues to pay such revenue bonds and further to secure the payment of such revenue bonds ; and WHEREAS, on December 3 , 1984, pursuant to the Act, the Issuer issued its Pollution Control Revenue Bonds (Anheuser-Busch Companies Project) Series 1984 (the " 1984 Bonds"), originally issued in the aggregate principal amount of $35 ,000,000 and outstanding in 1996 in the aggregate principal amount of $20,000,000, the proceeds of which 1984 Bonds were loaned to Anheuser-Busch Companies, Inc . (the "Company") and Anheuser-Busch, Incorporated, a wholly owned subsidiary of the Company ("ABI") , to finance all or a portion of the costs of acquiring, constructing, installing and equipping certain water pollution control facilities, sewage facilities and solid waste disposal facilities (the "Project") to be operated by ABI and/or Nutri-Turf, Inc . ("Nutri-Turf'), a wholly owned subsidiary of Busch Agricultural Resources, Inc . , which is itself a wholly owned subsidiary of the Company, in connection with the existing brewery operated by ABI within or within eight miles of the corporate boundaries of the Issuer; and WHEREAS , on September 26, 1996 , pursuant to the Act, the Issuer issued its Pollution Control Refunding Revenue Bonds (Anheuser-Busch Project) Series 1996 (the "Prior Bonds"), originally issued and currently outstanding in the aggregate principal amount of $20,000,000, the proceeds of which Prior Bonds were loaned to the Company and ABI to pay a portion of the cost of refunding the 1984 Bonds; and WHEREAS , the Company and the Issuer now desire to refund the Prior Bonds and it is determined by the Issuer that the refunding of the Prior Bonds will require the issuance, sale and delivery of not to exceed $20,000,000 aggregate principal amount of the Issuer' s Pollution Control Refunding Revenue Bonds (Anheuser-Busch Project) Series 2006 (the "Bonds") and the loan of the proceeds thereof to the Company; and WHEREAS , the City Clerk (the "City Clerk") caused the publication in The Coloradoan, a newspaper published and having a general circulation within the boundaries of the Issuer, of notice of a public hearing on the issuance of the Bonds, said publication occurring on October 24, 2006, being at least 14 days prior to November 7, 2006, the date set for such public hearing; and WHEREAS , pursuant to the provisions of Section 147(f) of the Internal Revenue Code of 1986 (the "Code") , the Council of the Issuer (the "Council") has conducted a public hearing on the proposed issuance of the Bonds ; and WHEREAS , the Council is the applicable elected representative of the Issuer within the meaning of Section 147(f)(2)(E) of the Code, and as such is authorized to approve the issuance of the Bonds after such public hearing; and WHEREAS , a Loan Agreement (the "Loan Agreement") expected to be dated as of November-fdate on or after February 1 , 20067 with respect to the Project will be executed by and between the Company and the Issuer, whereby the Company will covenant and agree to make payments sufficient to provide for the payment of principal of, interest on and other amounts payable on the Bonds, as and when the same become due and payable ; and WHEREAS , the Bonds will be issued under and pursuant to, and are to be secured by, an Indenture of Trust (the "Indenture") expected to be dated as of November 1 , 2006 by and between the Issuer and The Bank of New York Trust Company, N.A. as trustee (the "Trustee") ; and WHEREAS , it is necessary and desirable that the Issuer enter into a Bond Purchase Agreement (the "Bond Purchase Agreement"), among the Issuer, the Company and Banc of America Securities LLC, as underwriter (the "Underwriter"), whereby the Underwriter agrees to purchase the Bonds ; and WHEREAS , it is necessary and desirable that the Issuer approve the distribution and use of a Preliminary Official Statement (the "Preliminary Official Statement") and the distribution, use and execution of a final Official Statement (the "Official Statement") to be used in connection with the offer and sale of the Bonds ; and WHEREAS , it is necessary and desirable for the Issuer, the Company and the Trustee to enter into a Tax Regulatory Agreement, expected to be dated as of NovenTher to date on or after February 1 , 20067 (the "Tax Agreement") , governing the investment of the gross proceeds of the Bonds and certain other matters relating to the Bonds ; -2- NOW, THEREFORE, BE IT ORDAINED BY THE COUNCIL OF THE CITY OF FORT COLLINS , COLORADO : Section 1 . Findings . The Council of the Issuer hereby finds and determines in accordance with Sections 29-3 - 113 , 29-3 - 114 and 29-3 - 120 of the Act as follows : (a) the amounts necessary in each year to pay the principal of and interest on the Bonds are set forth in Section 4 . 02(a) of the Loan Agreement as a formula requiring the Company to pay an amount equal to the principal, premium, if any, and interest on the Bonds as and when said amounts become due and payable ; (b) no reserve fund has been established or is proposed to be established for the Bonds or the Project and no such reserve fund is deemed advisable ; (c) Section 4 . 04 of the Loan Agreement provides that the Company shall maintain or cause to be maintained the Project and carry or cause to be carried all proper insurance with respect thereto ; and (d) the amounts payable by the Company under Section 4 . 05 of the Loan Agreement are sufficient to pay, in addition to all other requirements of the Loan Agreement and the Act, all payments in lieu of taxes, if any, payable pursuant to Section 29-3 - 120 of the Act. The Project will be owned by the Company or ABI and will be taxed as such. Section 2. Authorization of Indenture. In order to refinance the cost of the Project through the refunding of the Prior Bonds, the Bonds be and the same are hereby authorized and ordered to be issued pursuant to the Indenture in substantially the form presented at this meeting and on file with the City Clerk and containing substantially the terms and provisions set forth therein, and the form, terms and provisions of the Indenture are hereby authorized and approved, with such changes and revisions therein as shall be approved by the Mayor of the Issuer (the "Mayor"), or the Mayor' s designated representative, which may include, among others, the Finance Director of the Issuer (the "Designated Representative") executing the same, such officer' s signature thereon to constitute conclusive evidence of such approval, and the Mayor or such Designated Representative is hereby authorized and directed to execute and deliver, and the City Clerk is hereby authorized to attest and seal, the Indenture. Section 3. TEFRA Approval. Pursuant to and for purposes of Section 147(f) of the Code, the Council, as the "applicable elected representative" of the Issuer, hereby approves the issuance of the Bonds by the Issuer in an aggregate principal amount of not to exceed $20,000,000, the proceeds of which will be used to pay a portion of the cost of refunding the Prior Bonds . Section 4. Authorization of Loan Agreement. The loan of the proceeds of the Bonds to the Company to provide for the payment of a portion of the cost of refunding of the Prior Bonds, pursuant to the Loan Agreement in substantially the form presented at this meeting and on file with the City Clerk and containing substantially the terms and provisions (including repayment provisions) set forth therein, and the form, terms and provisions of the Loan Agreement, are hereby authorized and approved, with such changes and revisions therein as shall be approved by the Mayor -3 - or the Designated Representative executing the same, such officer' s signature thereon to constitute conclusive evidence of such approval, and the Mayor or such Designated Representative is hereby authorized and directed to execute and deliver and the City Clerk is hereby authorized to attest and seal, the Loan Agreement. Section 5. Authorization of Bond Purchase Agreement. The Bond Purchase Agreement in substantially the form presented at this meeting and on file with the City Clerk and containing substantially the terms and provisions set forth therein, is hereby authorized and approved, with such changes and revisions therein as shall be approved by the Mayor or the Designated Representative executing the same, such officer' s signature thereon to constitute conclusive evidence of such approval, and the Mayor or such Designated Representative is hereby authorized and directed to execute and deliver the Bond Purchase Agreement. Section 6. Authorization of Tax Agreement. The Tax Agreement in substantially the form presented at this meeting and on file with the City Clerk and containing substantially the terms and provisions set forth therein, is hereby authorized and approved, with such changes and revisions therein as shall be approved by the Mayor or the Designated Representative executing the same, such officer' s signature thereon to constitute conclusive evidence of such approval, and the Mayor or such Designated Representative is hereby authorized and directed to execute and deliver the Tax Agreement. Section 7. Authorization of Official Statement. The distribution by the Underwriter of the Preliminary Official Statement relating to the Bonds in substantially the form presented at this meeting and on file with the City Clerk is hereby in all respects authorized and approved and the proposed use by the Underwriter of a final Official Statement is hereby approved, with such changes and revisions therein as shall be approved by the Mayor or the Designated Representative executing the same, such officer' s signature thereon to constitute conclusive evidence of such approval, and the Mayor or such Designated Representative is hereby authorized and directed to execute and deliver the final Official Statement, Section 8. Term of Bonds ; Execution . The Mayor or the Designated Representative and the City Clerk be and are hereby authorized, empowered and directed to cause to be prepared an issue of not to exceed $20,000,000 in aggregate principal amount of the Bonds of the Issuer, bearing interest to maturity at the fixed rate set forth in the Indenture, as executed; in no event, however, shall the net effective interest rate exceed 6 . 50% per annum. The Bonds shall mature as set forth in the Indenture, on one or more dates on or before December 1 , 2046 . The Bonds shall be issued in denominations, shall be dated, shall be subject to optional and mandatory redemption in accordance with the terms and provisions of the Indenture and shall have such series designation (which may be "Series 2006 " or "Series 2007 ") and such other terms and provisions as specified in the Indenture (as executed) to be included therein. Bonds shall be executed in the name of the Issuer with the manual or facsimile signature of the Mayor, countersigned with the manual or facsimile signature of the Finance Director and attested with the manual or facsimile signature of the City Clerk, and the seal of the Issuer or a facsimile thereof shall be affixed thereto or imprinted thereon. -4- Under the provisions of the Act, and as provided in the Loan Agreement, the Bonds shall be special, limited obligations of the Issuer payable solely from, and secured by a pledge of, the revenues derived from the Loan Agreement. The Bonds shall never constitute the debt or indebtedness of the Issuer within the meaning of any provision or limitation of the Constitution or statutes of the State or of the Issuer' s home rule charter and shall not constitute or give rise to a pecuniary liability of the Issuer or a charge against its general credit or taxing powers . Section 9 . Approval of Bonds . The form of the Bonds submitted to this meeting, subject to appropriate insertion and revision in order to comply with the provisions of the Indenture, be, and the same hereby is, approved, and when Bonds in such form shall be executed on behalf of the Issuer in the manner contemplated by the Indenture and this Ordinance in an aggregate principal amount not to exceed $20,000 ,000, they shall represent the approved definitive form of the Bonds . Section 10. Sale of Bonds . The Mayor or the Designated Representative and the City Clerk be and hereby are authorized, empowered and directed to issue and sell to the purchaser or purchasers thereof not to exceed $20,000,000 in aggregate principal amount of the Bonds, at a price of not less than 98% of the principal amount thereof (excluding any original issue discount), plus accrued interest; provided that the Bonds shall be delivered to the purchaser or purchasers thereof not later than March 30, 2007, or such later date as this Council may determine by subsequent action duly taken. Section 11 . Further Authority. The Mayor or the Designated Representative and the City Clerk are hereby authorized and directed to execute, attest, seal and deliver any and all documents and do any and all things deemed necessary to cause the issuance and sale of the Bonds, the execution and delivery of the Loan Agreement, the Indenture, the Bond Purchase Agreement, the Tax Agreement and the final Official Statement and to carry out the intent and purposes of this Ordinance, including the preamble hereto . Section 12. Book-Entry System. The Bonds may be initially issued in book-entry form and registered in the name of The Depository Trust Company, New York, New York ("DTC"), or its nominee, as securities depository for the Bonds . The Mayor or the Designated Representative and the City Clerk are hereby authorized, empowered and directed to execute and deliver an agreement with DTC and any other necessary parties in order to effect such book-entry registration. Section 13. Further Acts . All acts of the members of the Council, the Mayor or the Designated Representative, the City Clerk or of the staff and counsel to the Issuer which are in conformity with the purposes and intent of this Ordinance and in furtherance of the issuance and sale of the Bonds in an aggregate principal amount not to exceed $20,000,000 and the refunding and redemption of the Prior Bonds be, and the same hereby are, in all respects, authorized, approved and confirmed. Section 14. Ordinance Irrepealable. After the Bonds are issued, this Ordinance shall be and remain irrepealable until the Bonds and the interest thereon shall have been fully paid, cancelled and discharged. Section 15. Severability. The provisions of this Ordinance are hereby declared to be separable and if any Section, phrase or provision shall for any reason be declared to be invalid, such -5 - declaration shall not affect the validity of the remainder of the Sections, phrases and provisions . Section 16. Documents . All documents referenced herein as having been presented at this meeting are on file in the City Clerk' s office and are by this reference made a part hereof as if actually attached hereto. Section 17. Repealer. All ordinances, resolutions, acts and orders, or pansrts thereof, in conflict with the provisions of this Ordinance are, to the extent of such conflict, hereby repealed. Introduced, considered favorably on first reading, and ordered published this 7th day of November, A.D . 2006, and to be presented for final passage on the 5th day of December, A.D . 2006 . Mayor ATTEST : City Clerk Passed and adopted on final reading on the 5th day of December, A.D . 2006 . Mayor ATTEST : City Clerk -6-