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HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 05/15/2007 - FIRST READING OF ORDINANCE NO. 066, 2007, APPROPRI ITEM NUMBER: 11 AGENDA ITEM SUMMARY DATE: May 15, 2007 FORT COLLINS CITY COUNCIL STAFF: Chuck Seest SUBJECT First Reading of Ordinance No.066,2007,Appropriating Proceeds from the Refunding Certificates of Participation("COPs"), Series 2007 Representing Assignments of the Right to Receive Certain Revenues Pursuant to an Amended and Restated Lease Agreement dated as of May 1,2007,Between the Fort Collins Leasing Corporation and the City of Fort Collins for the Purpose of Refunding the 1998 and 1999 COPs and for Costs of Issuance of the 2007 Refunding COPS. RECOMMENDATION Staff recommends adoption of the Ordinance on First Reading. EXECUTIVE SUMMARY The Finance Department monitors the interest rate environment for opportunities to refinance the City's debt and achieve savings for the organization. This Ordinance would appropriate in the Fort Collins Leasing Corporation Debt Service Fund,$14,595,000 of proceeds from the 2007 Refunding COPs issued for the purpose of refunding the 1998 and 1999 Certificates of Participation that were originallyissued for the construction of the City's Mason Street Parking Structure, the 215 North Mason Office Building and an off-site Police Facility and the payment of costs associated with the 2007 refunding transaction. This refunding resulted in$997,419 in savings to the City over the next 11 years. The refunding was also structured to realize$759,907 of those savings in fiscal year 2007. BACKGROUND On March 6,2007,City Council adopted Ordinance No. 041,2007,which authorized the execution and delivery by the City of an amended and restated site agreement and lease agreement, a continuing disclosure undertaking, an official statement and related documents, concerning the leasing of the Mason Office Building and the Mason Street Parking Structure. Staff and the financial advisor on this transaction originally scheduled a competitive bid for the Refunding COPS for April loth. Staff expected the refunding to lower interest rates on the COPS from 5.07% - 5.60% to an average annual interest rate of 4.50% - 4.75%. This would achieve net cashflow savings of approximately$700,000. The week prior to the April 1 Oth competitive bid, the financial advisor was notified of a potential buyer(JP Morgan Chase)who desired to submit a bid during the week prior to the scheduled sale. May 15, 2007 -2- Item No. 11 JP Morgan Chase had pursued a similar refunding of the City of Lakewood's COPS during the past year. Staff confirmed with Lakewood staff that a positive result was achieved in their transaction with JP Morgan Chase. The financial advisor was familiar with JP Morgan Chase and advised City staff that Fort Collins should at a minimum, consider the offer. It should also be noted that the economic news during the first week of April caused the bond market to sell-off,so the City's ability to achieve its targeted results was becoming questionable. On Friday April 6th, JP Morgan Chase submitted a bid of 3.86%for the COPs. Its bid also waived the requirement of bond insurance on the COPS. Bond insurance addresses the buyer's risk in the event of default on a payment from the City. It is a requirement of the market for a majority of competitive bids. Staff was very pleased and accepted the bid and scheduled a May 1 st closing pending due diligence by JP Morgan Chase's outside bond counsel. The pricing outperformed the anticipated parameter and resulted in net cashflow savings of $997,419. Of that amount, $759,907 will be realized by the General Fund during 2007. At the closing, JP Morgan Chase informed City staff that the Refunding COPS were purchased for its holding company to be held within the JP Morgan Chase's inventory. JP Morgan Chase stated it was willing to buy the COPS uninsured, since JP Morgan Chase assigns high value to the City's strong bond credit rating which was reaffirmed at Aa2 by Moody's during the process prior to the competitive bid. By purchasing the COPS uninsured and without the use of an underwriter, JP Morgan Chase saved the City approximately$140,000 of typical issuance costs. In summary, JP Morgan Chase provided an offer that was equal to or better than an insured rate resulting from a competitive bid and without insurance or the necessity of an underwriter required by a competitive bid process. ORDINANCE NO. 066, 2007 OF THE COUNCIL OF THE CITY OF FORT COLLINS APPROPRIATING PROCEEDS FROM THE REFUNDING CERTIFICATES OF PARTICIPATION, SERIES 2007, TO REFUND THE 1998 AND 1999 CERTIFICATES OF PARTICIPATION AND FOR COSTS OF ISSUANCE OF THE REFUNDING CERTIFICATES WHEREAS,on March 6,2007,City Council adopted Ordinance No.041,2007,authorizing the Council to execute and deliver an amended and restated site agreement and lease agreement, a continuing disclosure undertaking, an official statement and related documents, concerning the leasing of the Mason Office Building and the Mason Street Parking Structure, ratifying action previously taken,and providing other matters related to Refunding Certificates in aprincipal amount not to exceed $16,000,000; and WHEREAS, the marketing and the sale of the refunding certificates of participation at par resulted in gross proceeds of$14,595,000; and WHEREAS, proceeds from the refunding certificates of participation of$14,595,000 were not included in the 2007 budget, and the appropriation of such proceeds is necessary to authorize the payment to the refunded certificates of participation escrow agent and of issuance costs; 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 $14,595,000 in unanticipated revenue in the Fort Collins Leasing Corporation Debt Service Fund for the purpose of refunding the 1998 and 1999 Certificates of Participation that were originally issued for the construction of the Mason Street Parking Structure, the 215 North Mason Office Building and an off-site Police Facility and the payment of costs associated with the 2007 refunding transaction. NOW, THEREFORE, BE IT ORDAINED BY THE COUNCIL OF THE CITY OF FORT COLLINS that, subsequent to the closing of the Series 2007 refunding certificate of participation transaction on May 3,2007,the proceeds of the transaction in the amount of FOURTEEN MILLION FIVE HUNDRED AND NINETY-FIVE THOUSAND DOLLARS ($14,595,000) are hereby appropriated in the Fort Collins Leasing Corporation Debt Service Fund for payment to the refunding certificates escrow agent and refunding certificates issuance costs. Introduced, considered favorably on first reading, and ordered published this 15th day of May, A.D. 2007, and to be presented for final passage on the 5th day of June, A.D. 2007. Mayor ATTEST: City Clerk Passed and adopted on final reading on the 5th day of June, A.D. 2007. Mayor ATTEST: City Clerk