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HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 05/01/2001 - SECOND READING OF ORDINANCE NO. 60, 2001, AUTHORIZ AGENDA ITEM SUMMARY ITEM NUMBER: 12 DATE: May 1, 2001 FORT COLLINS CITY COUNCIL FROM: Alan Krcmarik SUBJECT: Hearing and Second 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 Second Reading. 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. This Ordinance, which was unanimously adopted on First Reading on April 17, 2001, authorizes the refinancing of$2.7 million of outstanding bonds by issuing variable rate bonds. AGENDA ITEM SUMMARY ITEM NUMBER: 23 FORT COLLINS CITY COUNCIL DATE: April 17,2001 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: R` 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 thJ"1984 issue.. The City`,will receive an issuer's fee of approximately $5,700. The Comridge Partnersfiip.is responsiblefor'all debt payments on the g : 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 SUMMAiYc ` In 1984, the City of Fort Collms 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 Comlineaz 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 Or 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 fin ancine technique can be used. BACKGROUND: " THE PROJECT Under the federal tax laws and the Colorado Revised Statutes, the City's role in this transaction 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 toabe ss 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 $ 5700.00 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.