HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 06/18/2013 - RESOLUTION 2013-055 CONCERNING THE FORT COLLINS URDATE: June 18, 2013
STAFF: John Voss
AGENDA ITEM SUMMARY
FORT COLLINS CITY COUNCIL 21
SUBJECT
Resolution 2013-055 Concerning the Fort Collins Urban Renewal Authority and its Tax Increment Revenue Refunding
Bonds (North College Avenue Project), Series 2013, Declaring the City Council’s Present Intent to Appropriate Funds
to Replenish the Reserve Fund Securing Such Bonds, If Necessary; and Authorizing a Cooperation Agreement and
Other Actions Taken in Connection Therewith.
EXECUTIVE SUMMARY
The URA intends to refinance a portion of the debt it originally borrowed from the City in relation to the North College
area. Now that an established revenue stream can be shown to investors, private money can be used to replace City
money. The 2013 bonds require the URA to establish a debt reserve fund. To further facilitate the credit rating on the
replacement debt, the City Council is asked to adopt the Resolution expressing the Council’s intent to replenish the
debt reserve fund if such funds are ever used to make debt payments. With this Resolution, the new URA debt is
expected to have an effective interest rate of 3.3%.
BACKGROUND / DISCUSSION
The North College URA Project Area was created in 2004, allowing the URA to receive incremental property taxes
through 2029. Property tax increment revenue in North College was first received in 2007 and the 2012 property taxes
payable in 2013 are expected to be $1.3 million.
Table 1 - Net Property Tax Increment Revenue $000’s
2007 2008 2009 2010 2011 2012 2013 *
$110 $287 $263 $493 $536 $907 $1,285
*anticipated
A common measure used by lenders in determining risk is the ratio of pledged revenue to debt service, called a
coverage ratio. Investors want that ratio to be high – at least 125%. The current revenue of $1.3 million could support
up to $1 million a year in debt service. The proposed maximum annual debt service of $919,000 yields a good
coverage ratio of 142%.
City Loans to URA
The initial financing model adopted for North College has the City providing initial capital through a loan until the tax
increment revenue reaches a maturity level that can support external financing to third party investors. The City Council
first authorized an Interagency Loan Policy in December 2008, with the most recent amendments approved in
December 2012.
Eight loans have been made by the City to the URA in the North College District. The first loan has been repaid. Table
2 recaps the current status of the loans.
June 18, 2013 -2- ITEM 21
Table 2 – North College Loan Status $000’s
Date Project
Original
Value
Current
Balance
Term
Years Rate City Fund Holding
09/2006 Valley Steel, URA start-up
funds
$ 150 $ 0 5 5.55% General Fund
05/2009 North College Market Place,
Phase 1
5,000 4,729 20 2.85% Capital Expansion
12/2010 JAX 173 106 5 2.50% Capital Expansion
06/2011 NEECO 326 326 10 3.01% Storm Drainage
07/2011 Kaufman Robinson 193 193 5 2.46% General Fund
07/2011 North College Market Place,
Phase 2
3,000 2,884 19 4.09% Water Fund
08/2012 North College Road
Improvements
2,700 2,700 18 3.92% Capital Projects BCC
Loans to be refinanced 11,542 10,938 3.44% Weighted average
06/2009 RMI2 5,304 5,304 20 2.50% General Fund
Total North College Area 16,846 16,242
The proposal is to issue enough debt to take out $10.94 million in loans to the City, plus interest and debt issue costs.
For the following reasons the City loan to the URA that relates to RMI is not being refinanced.
• The use of the RMI2 loan proceeds does not qualify the interest to be tax exempt. Therefore the interest rate
would be significantly higher.
• The new market tax credit deal cannot be refinanced until 2017.
• There is not enough revenue capacity to meet external investor expectations. Only about $1 million of the
$5.3 million could be considered for refinancing if the favorable coverage ratio was to be preserved.
The General Fund is holding the URA loan relating to the RMI2. Later this year the loan will be reallocated and held
equally between the Water Fund and Capital Expansion Fund. This will free up some monies in the General Fund.
Future debt payments by the URA will then be allocated appropriately to each fund.
Preliminary Structure of 2013 Bonds
Approximately $11.4 million of bond proceeds will be used to takeout $10.94 million of debt to the City, plus interest
of $254,000, and pay debt issue costs of $206,000. Coupon interest rates vary from 2% for near term bonds and 4%
for longer term bonds. The collective Net Interest Cost is expected to be 3.3%, which compares favorably to 3.44%
weighted average interest rate on the City debt being retired. Future annual payments will vary from $914,000 to
$919,000 through 2029.
City Intent to Replenish Reserves
The Underwriters for the 2013 Bonds have recommended that a debt service reserve fund in the amount of
approximately $920,000 would be advisable for marketing the 2013 Bonds and that purchasing a Surety Policy for such
amount would be preferable to funding such reserve with cash. The cost of such Surety Policy would be $55,000.
If it was ever necessary to draw upon the Surety Policy, the City’s replenishment would repay such draw. Staff prefers
the Surety Policy option but will make a decision later based on the potential impact on the credit rating. The City I snot
legally bound to replenish the reserve fund and it would be subject to annual appropriation of funds by the City Council
in its sole discretion. Sherman & Howard will issue a legal opinion that the City can make this non-binding
commitment.
It is anticipated that the City’s non-binding commitment will result in the replacement debt receiving a credit rating of
Aa3. Without this, and a proven revenue stream, the interest rate would likely be 5% or higher rather than 3.3%.
Authority to Adopt the Resolution
Through the adoption of the URA Resolution, the Urban Renewal Authority is issuing property tax increment revenue
bonds to refinance loans made by the City to the URA. The loans that are being refinanced by the issuance of those
June 18, 2013 -3- ITEM 21
bonds were made by the City to finance public infrastructure. No private improvements were financed through the
loans. In order to enhance the marketability of the bonds that are being issued by the URA, staff is recommending
that the City Council adopt a resolution pursuant to which the City Council would indicate that, if the reserve fund for
the bonds is ever drawn upon, the City Council will consider appropriating funds to replenish the reserve fund. This
is not a legally binding obligation but rather is subject to appropriation by the Council, when and if the reserve fund is
drawn upon. (This has sometimes been referred to as a “moral obligation pledge”.)
Since the City cannot be compelled to appropriate funds under this approach, the Resolution and related documents
do not create a debt for purposes of the City Charter or the Colorado Constitution.
A question has been raised by a local citizen as to whether Council actions such as the making of this non-bindling
commitment violates certain provisions of the City Charter. The Charter provisions in question read as follows:
ARTICLE V. FINANCE ADMINISTRATION
PART I. BUDGET AND FINANCIAL MANAGEMENT
Section 15. Appropriations forbidden.
No appropriation shall be made for any charitable, industrial, educational, or benevolent purposes
to any person, corporation, or organization not under the absolute control of the city, nor to any
denominational or sectarian institution or association.
(Ord. No. 10, 1991, § 1(a), 2-19-91, approved, election 4-2-91)
Section 16. City not to pledge credit.
The city shall not lend or pledge its credit or faith, directly or indirectly, or in any manner to or in aid
of any private person or entity for any amount or any purpose whatever, or become responsible for
any debt, contract, or liability thereof.
(Ord. No. 203, 1986, § 1, Part D, 12-16-86, approved, election 3-3-87; Ord. No. 10, 1991, § 1(a), 2-
19-91, approved, election 4-2-91)
These charter provisions are, in all material respects, identical to provisions contained in the Colorado Constitution.
Thus, the limitations contained in the Charter provisions apply to all Colorado municipalities through the state
constitution.
In response to the concerns that have been expressed, staff has conferred with both the City Attorney’s Office and
the City’s bond counsel to ensure that the proposed transaction does not violate either of the provisions in question.
Legal counsel has confirmed the following:
Article V, Section 15 of the City Charter is not applicable in this situation because (1) the Urban Renewal Authority is
under the absolute control of the City (since its governing body is made up of the same members as the City’s
governing body) and it is not a denominational or sectarian institution; and (2) the projects refinanced by the bonds
are public infrastructure projects; thus, the bond proceeds are not being used, either directly or indirectly, for a
charitable, industrial, educational or benevolent purpose.
Article V, Section 16 of the City Charter is not applicable because: (1) the Urban Renewal Authority is a public entity;
(2) the City would not incur any indebtedness or other legally binding obligation by taking the proposed action; and
(3) as noted above, the projects refinanced by the bonds are public infrastructure projects,.
It should be noted that the financing structure being recommended by staff is not unique to the City. Other
municipalities that have utilized this same procedure in connection with tax increment transactions include the City and
County of Denver, the cities of Thornton, Westminster, and Steamboat Springs, and the Town of Avon. The State of
Colorado has also used this type of financing structures for housing, charter schools and higher education.
June 18, 2013 -4- ITEM 21
Future Financing Model
City staff have communicated to the URA that, going forward, the City intends to only loan money when alternative
financing agreements are not feasible. The reimbursement agreement recently approved for Aspen Heights is an
example of the preferred approach for future development agreements. The Aspen Heights developer will be
reimbursed over time as revenue is collected, rather than in a lump sum upon completion of the project.
Consultants
The URA and City have engaged three firms to help issue the new debt: Sherman & Howard as the Bond Attorney,
BLX as the Financial Advisor and RBC Capital Markets as the Bond Underwriters.
Timeline
June 24 Publish Preliminary Official Statement on Internet Sites
July 9-10 Market Bonds
July 23 Closing
FINANCIAL / ECONOMIC IMPACTS
Property tax revenue in the North College URA plan area is unlikely to decline enough to trigger the use of the Debt
Service Reserve Fund.
The 2013 Bonds will be used to takeout $10.94 million in debt to the City, pay $254,000 of interest and pay $206,000
in delivery date expenses.
Later this summer the City will use some of the returned monies to loan $5 million to the URA for the first Midtown
Project – The Summit (Capstone).
STAFF RECOMMENDATION
Staff recommends adoption of the Resolution.
BOARD / COMMISSION RECOMMENDATION
The Council Finance Committee reviewed and tentatively approved the refinancing and the concept of a Council
Resolution regarding a debt reserve replenishment pledge at its meeting on December 17, 2012 and again on May
20, 2013.
ATTACHMENTS
1. Council Finance Committee minutes, December 17, 2012
2. Council Finance Committee minutes, May 20, 2013
3. Preliminary debt structure, prepared by RBC Capital Markets
4. Powerpoint presentation
Finance Administration
215 N. Mason
2nd Floor
PO Box 580
Fort Collins, CO 80522
970.221.6788
970.221.6782 - fax
fcgov.com
Council Audit & Finance Committee
Minutes
12/17/12
10:00 to 11:00
CIC Room
Council Attendees: Mayor Karen Weitkunat, Mayor Pro Tem Kelly
Ohlson, Ben Manvel
Staff: Darin Atteberry, John Voss, Mike Beckstead (via
conference call),Mindy Pfleiger, Chris Donegon,
Megan Bolin, Josh Birks, Bruce Hendee, Harold
Hall, Heather Shepherd
Others: Jim Manire of BLX; Developers Charlie Vater,
Larry Owens, Dan Fredericks, Rick Shannon
Approval of the Minutes of November 19, 2012
Ben Manvel stated that there is a word that should be removed. The words “prior to” in the
sentence “….decision scenarios before prior to the executive session to help with the
discussion.” are repetitive and should be removed. Ben moved to approve the minutes as
amended and Kelly Ohlson seconded the motion. The November minutes are approved as
amended.
URA Debt Refinancing
John Voss presented data showing how refinancing the current URA debt would be beneficial to the
City. The City has loaned a total of $16.8 million to the URA to date. The URA currently owes $16.2
million of that to the City. John said that this is the debt related to the North College Tax Increment
Financing (TIF) district.
Mayor Weitkunat stated that there should be a notation in the presentation materials of any loans the
URA has already paid off.
John Voss said that the City has been waiting for the revenue stream to mature to refinance the URA
debt. Since revenue is now more predictable and reliable, it can be marketed to third party lenders.
Currently, the North College URA financial situation is healthy and able to repay all existing loans under
current terms.
Lenders will require a coverage ratio. For example 135%:
- $1,262/1.35=$935 of URA’s existing cash balance
- At 4.0% we could refinance about $11 million
ATTACHMENT 1
- At 5.5% we could refinance about $10 million
Lenders will require Debt Service Reserve Fund equal to annual debt service payment
- Ties up approximately $935 of URA’s existing cash balance
These terms are typical for entities with credit similar to the Fort Collins URA.
With this refinancing, the URA would still owe the City between $5 and $6 million in debt.
John Voss also suggested that if the City were to provide a Moral Obligation Pledge, the debt would then
be viewed as ‘investment grade’. The City’s pledge would free up a additional $1 to $2 million.
Darin Atteberry asked if there would be potential for refinancing to affect the City’s overall credit rating.
Jim Manire, outside bond counsel, said that he would not expect the City’s rating to change in relation
to refinancing.
Mike Beckstead told the Committee that he is in solid support of refinancing and the objective at this
meeting is simply to inform the Committee and discuss it before the topic is presented to the City
Council.
Kelly Ohlson said he would prefer that money savings from the refinancing go to the general fund
instead of the staff recommended Summit Project and Capital Expansion Fund.
Darin Atteberry said that overall, he agrees that the refinancing would be a positive move for the City.
Mike Beckstead said that staff members will recommend this to City Council for consideration in the
April or May, 2013 timeframe.
Finance Administration
215 N. Mason
2nd Floor
PO Box 580
Fort Collins, CO 80522
970.221.6788
970.221.6782 - fax
fcgov.com
Council Audit & Finance Committee
Draft of Minutes
5/20/13
10:00 to 12:00
CIC Room
Council Attendees: Mayor Karen Weitkunat, Ross Cunniff, Bob Overbeck
Staff: Darin Atteberry, Mike Beckstead, Carrie Daggett,
Ingrid Decker, Chris Donegon, Harold Hall, John Voss,
Katie Wiggett
Others: Jim Manire, Joel Stewart
Approval of the Minutes of March 18, 2013
Ross Cunniff moved to approve the minutes for the March 18, 2013 meeting. Bob Overbeck seconded
the motion. Minutes were approved unanimously.
Election of Officers
Ross Cunniff nominated the Mayor as chair of the Council Audit and Finance Committee. Bob
Overbeck seconded the nomination.
Other Business
Mike Beckstead announced an additional item on the Agenda. The item “Funding for the Murphy
Center” was added.
URA North College Refinance
John Voss presented the URA’s plan to refinance approximately $11.2 million of the debt it originally
borrowed from the City in relation to the North College area. Because an established revenue stream
can be shown to investors, private money can be used to replace City money. The 2013 bonds require
the URA to establish a debt reserve fund. To better enhance the credit rating on the replacement debt,
the City must pledge to replenish the URA’s debt reserve fund if the URA ever uses the funds to make
debt payments. With the City’s pledge, the new URA debt is expected to have an effective interest rate
of 2.98% and a credit rating of Aa3. Without the City’s pledge, the interest rate would likely be 5% or
higher. The refinancing of this debt will improve the cash flows of the URA and is expected to save
$922,000 through 2029.
The City’s pledge includes a commitment to maintain an unrestricted fund balance in the General Fund
in an amount at least equal to the Reserve Fund Requirement, estimated at $961,000. The General
Fund can easily meet that requirement: at the end of 2012, the collective unrestricted fund balances in
ATTACHMENT 2
May 31, 2013 9:19 am Prepared by RBC Capital Markets
TABLE OF CONTENTS
Fort Collins Urban Renewal Authority
Tax Increment Revenue Refunding Bonds, Series 2013
(North College Avenue Project)
'Aa3' Est Rating | Callable 12/1/23 @ 100 | 5/31/13 Mkt Rates
**Preliminary Numbers - Subject to Change**
Report Page
Sources and Uses of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Bond Pricing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Bond Summary Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Bond Debt Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Bond Solution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ATTACHMENT 3
May 31, 2013 9:19 am Prepared by RBC Capital Markets Page 1
SOURCES AND USES OF FUNDS
Fort Collins Urban Renewal Authority
Tax Increment Revenue Refunding Bonds, Series 2013
(North College Avenue Project)
'Aa3' Est Rating | Callable 12/1/23 @ 100 | 5/31/13 Mkt Rates
**Preliminary Numbers - Subject to Change**
Dated Date 07/23/2013
Delivery Date 07/23/2013
Sources:
Bond Proceeds:
Par Amount 10,995,000.00
Net Premium 403,271.50
11,398,271.50
Uses:
Project Fund Deposits:
Proceeds to Takeout Loans - Principal 10,938,089.54
Proceeds to Takeout Loans - Interest 254,057.40
11,192,146.94
Delivery Date Expenses:
Cost of Issuance 101,513.06
Underwriter's Discount 49,477.50
Surety @ 6% (AGM Est) 55,134.00
206,124.56
11,398,271.50
May 31, 2013 9:19 am Prepared by RBC Capital Markets Page 2
BOND PRICING
Fort Collins Urban Renewal Authority
Tax Increment Revenue Refunding Bonds, Series 2013
(North College Avenue Project)
'Aa3' Est Rating | Callable 12/1/23 @ 100 | 5/31/13 Mkt Rates
**Preliminary Numbers - Subject to Change**
Maturity Yield to Premium
Bond Component Date Amount Rate Yield Price Maturity (-Discount)
Serial bonds:
12/01/2014 545,000 2.000% 0.760% 101.668 9,090.60
12/01/2015 555,000 3.000% 0.950% 104.763 26,434.65
12/01/2016 570,000 3.000% 1.260% 105.698 32,478.60
12/01/2017 590,000 3.000% 1.590% 105.909 34,863.10
12/01/2018 605,000 3.000% 1.930% 105.417 32,772.85
12/01/2019 625,000 3.000% 2.320% 103.995 24,968.75
12/01/2020 645,000 3.000% 2.550% 102.998 19,337.10
12/01/2021 665,000 3.000% 2.780% 101.628 10,826.20
12/01/2022 685,000 3.000% 3.000% 100.000
12/01/2023 705,000 3.000% 3.130% 98.855 -8,072.25
12/01/2024 725,000 4.000% 3.240% 106.637 C 3.294% 48,118.25
12/01/2025 755,000 4.000% 3.340% 105.734 C 3.427% 43,291.70
12/01/2026 785,000 4.000% 3.440% 104.840 C 3.542% 37,994.00
12/01/2027 815,000 4.000% 3.510% 104.220 C 3.620% 34,393.00
12/01/2028 845,000 4.000% 3.580% 103.603 C 3.690% 30,445.35
12/01/2029 880,000 4.000% 3.650% 102.992 C 3.753% 26,329.60
10,995,000 403,271.50
Dated Date 07/23/2013
Delivery Date 07/23/2013
First Coupon 12/01/2013
Par Amount 10,995,000.00
Premium 403,271.50
Production 11,398,271.50 103.667772%
Underwriter's Discount -49,477.50 -0.450000%
Purchase Price 11,348,794.00 103.217772%
Accrued Interest
Net Proceeds 11,348,794.00
May 31, 2013 9:19 am Prepared by RBC Capital Markets Page 3
BOND SUMMARY STATISTICS
Fort Collins Urban Renewal Authority
Tax Increment Revenue Refunding Bonds, Series 2013
(North College Avenue Project)
'Aa3' Est Rating | Callable 12/1/23 @ 100 | 5/31/13 Mkt Rates
**Preliminary Numbers - Subject to Change**
Dated Date 07/23/2013
Delivery Date 07/23/2013
Last Maturity 12/01/2029
Arbitrage Yield 3.089727%
True Interest Cost (TIC) 3.263604%
Net Interest Cost (NIC) 3.295575%
All-In TIC 3.378388%
Average Coupon 3.632958%
Average Life (years) 9.537
Duration of Issue (years) 8.009
Par Amount 10,995,000.00
Bond Proceeds 11,398,271.50
Total Interest 3,809,676.67
Net Interest 3,455,882.67
Total Debt Service 14,804,676.67
Maximum Annual Debt Service 918,900.00
Average Annual Debt Service 905,177.24
Par Average Average PV of 1 bp
Bond Component Value Price Coupon Life change
Serial bonds 10,995,000.00 103.668 3.633% 9.537 7,719.30
10,995,000.00 9.537 7,719.30
All-In Arbitrage
TIC TIC Yield
Par Value 10,995,000.00 10,995,000.00 10,995,000.00
+ Accrued Interest
+ Premium (Discount) 403,271.50 403,271.50 403,271.50
- Underwriter's Discount -49,477.50 -49,477.50
- Cost of Issuance Expense -101,513.06
- Other Amounts -55,134.00 -55,134.00 -55,134.00
Target Value 11,293,660.00 11,192,146.94 11,343,137.50
Target Date 07/23/2013 07/23/2013 07/23/2013
Yield 3.263604% 3.378388% 3.089727%
May 31, 2013 9:19 am Prepared by RBC Capital Markets Page 4
BOND DEBT SERVICE
Fort Collins Urban Renewal Authority
Tax Increment Revenue Refunding Bonds, Series 2013
(North College Avenue Project)
'Aa3' Est Rating | Callable 12/1/23 @ 100 | 5/31/13 Mkt Rates
**Preliminary Numbers - Subject to Change**
Period
Ending Principal Coupon Interest Debt Service
12/01/2013 132,426.67 132,426.67
12/01/2014 545,000 2.000% 372,450.00 917,450.00
12/01/2015 555,000 3.000% 361,550.00 916,550.00
12/01/2016 570,000 3.000% 344,900.00 914,900.00
12/01/2017 590,000 3.000% 327,800.00 917,800.00
12/01/2018 605,000 3.000% 310,100.00 915,100.00
12/01/2019 625,000 3.000% 291,950.00 916,950.00
12/01/2020 645,000 3.000% 273,200.00 918,200.00
12/01/2021 665,000 3.000% 253,850.00 918,850.00
12/01/2022 685,000 3.000% 233,900.00 918,900.00
12/01/2023 705,000 3.000% 213,350.00 918,350.00
12/01/2024 725,000 4.000% 192,200.00 917,200.00
12/01/2025 755,000 4.000% 163,200.00 918,200.00
12/01/2026 785,000 4.000% 133,000.00 918,000.00
12/01/2027 815,000 4.000% 101,600.00 916,600.00
12/01/2028 845,000 4.000% 69,000.00 914,000.00
12/01/2029 880,000 4.000% 35,200.00 915,200.00
10,995,000 3,809,676.67 14,804,676.67
May 31, 2013 9:19 am Prepared by RBC Capital Markets Page 5
BOND SOLUTION
Fort Collins Urban Renewal Authority
Tax Increment Revenue Refunding Bonds, Series 2013
(North College Avenue Project)
'Aa3' Est Rating | Callable 12/1/23 @ 100 | 5/31/13 Mkt Rates
**Preliminary Numbers - Subject to Change**
Period Proposed Proposed Total Adj Revenue Unused Debt Serv
Ending Principal Debt Service Debt Service Constraints Revenues Coverage
12/01/2013 132,427 132,427 1,300,000 1,167,573 981.67537%
12/01/2014 545,000 917,450 917,450 1,300,000 382,550 141.69710%
12/01/2015 555,000 916,550 916,550 1,300,000 383,450 141.83623%
12/01/2016 570,000 914,900 914,900 1,300,000 385,100 142.09203%
12/01/2017 590,000 917,800 917,800 1,300,000 382,200 141.64306%
12/01/2018 605,000 915,100 915,100 1,300,000 384,900 142.06098%
12/01/2019 625,000 916,950 916,950 1,300,000 383,050 141.77436%
12/01/2020 645,000 918,200 918,200 1,300,000 381,800 141.58135%
12/01/2021 665,000 918,850 918,850 1,300,000 381,150 141.48120%
12/01/2022 685,000 918,900 918,900 1,300,000 381,100 141.47350%
12/01/2023 705,000 918,350 918,350 1,300,000 381,650 141.55823%
12/01/2024 725,000 917,200 917,200 1,300,000 382,800 141.73572%
12/01/2025 755,000 918,200 918,200 1,300,000 381,800 141.58135%
12/01/2026 785,000 918,000 918,000 1,300,000 382,000 141.61220%
12/01/2027 815,000 916,600 916,600 1,300,000 383,400 141.82850%
12/01/2028 845,000 914,000 914,000 1,300,000 386,000 142.23195%
12/01/2029 880,000 915,200 915,200 1,300,000 384,800 142.04545%
10,995,000 14,804,677 14,804,677 22,100,000 7,295,323
1
1
City’s Pledge for URA Refinancing
City Council
June 18, 2013
2
Overview
• City has loaned money to the URA
• Looking to refinance some of those loans with
external investors
• A ‘moral obligation pledge’ by City Council
enhances the credit rating
• Returns about $11.2 million, including interest, to
the City
ATTACHMENT 4
2
3
City Loans to URA for N. College
Date Project
Orig.
Value
Current
Balance
Term
Years Rate City Fund Holding
09/06 V. Steel, URA start-up funds $ 150 $ 0 5 5.55% General Fund
05/09 N.C. Market Place, phase 1 5,000 4,729 20 2.85% Capital Expansion
12/10 JAX 173 106 5 2.50% Capital Expansion
06/11 NEECO 326 326 10 3.01% Storm Drainage
07/11 Kaufman Robinson 193 193 5 2.46% General Fund
07/11 N.C. Market Place, phase 2 3,000 2,884 19 4.09% Water Fund
08/12 N.C. Road Improvements 2,700 2,700 18 3.92% Capital Projects
BCC
Loans to be refinanced 11,542 10,938 3.44% Weighted average
06/09 RMI2 5,304 5,304 20 2.50% General Fund
Total North College Area 16,846 16,242
$000’s
4
North College TIF District
• Created in 2004, expires in 2029
• Increment on property taxes, none on sales tax
• Property tax increment revenue started flowing in 2007
• Revenue is now mature and stable, more attractive to
investors
* anticipated
2007 2008 2009 2010 2011 2012 2013 *
$110 $287 $263 $493 $536 $907 $1,285
Tax Increment Revenue $000s
3
5
If approved, the City Pledges to:
• Replenish the URA’s debt service reserve fund, if it
were to used to make debt payments
– Non-binding; pledge is to consider replenishing
– However, not honoring the pledge would significantly impact
the City’s credit rating and ability to borrow money in future
6
Concerns about Ability to Pledge
• Article V, Section 15 Appropriations Forbidden, No appropriation shall be made
for any charitable, industrial, educational, or benevolent purposes to any person,
corporation, or organization not under the absolute control of the city, nor to any
denominational or sectarian institution or association.
– does not apply because:
1. URA is under absolute control of City
2. Projects being refinanced were for public infrastructure projects
• Article V, Section 16 City not to pledge credit, The city shall not lend or pledge
its credit or faith, directly or indirectly, or in any manner to or in aid of any private
person or entity for any amount or any purpose whatever, or become responsible for
any debt, contract, or liability thereof.
– does not apply because:
1. URA is public entity
2. Moral obligation is not debt or legal obligation
3. Projects refinanced are public infrastructure projects
4
7
Pledge is Not Unique
• The same tax increment financing procedure is
used by
– City & County of Denver
– City of Thornton
– City of Westminster
– City of Steamboat Springs
– Town of Avon
• State of Colorado uses moral obligation financing
structures for housing, charter schools and higher
education.
8
Benefits and Risks of City Pledge
• Enhances credit rating of URA debt
• Lower interest rate allows for more public
improvements in North College Area
• City already has a risk of not getting paid because
it currently holds the debt
• Without City’s pledge the amount being repaid to
the City would be substantially less than $11.2
million
– instead City would get paid back over many years
5
9
Next Steps
• June 24 Publish Preliminary Official Statement
• July 9-10 Market the bonds
• July 23 Closing
10
RESOLUTION 2013-055
OF THE COUNCIL OF THE CITY OF FORT COLLINS
CONCERNING THE FORT COLLINS URBAN RENEWAL AUTHORITY AND ITS TAX
INCREMENT REVENUE REFUNDING BONDS (NORTH COLLEGE AVENUE PROJECT),
SERIES 2013, DECLARING THE CITY COUNCIL’S PRESENT INTENT TO
APPROPRIATE FUNDS TO REPL-ENISH THE RESERVE FUND SECURING SUCH
BONDS, IF NECESSARY; AND AUTHORIZING A COOPERATION AGREEMENT AND
OTHER ACTIONS TAKEN IN CONNECTION THEREWITH
WHEREAS, the City Council (the “City Council”) of the City of Fort Collins,
Colorado (the “City”) has heretofore created the Fort Collins Urban Renewal Authority
(“Authority”) as an urban renewal authority pursuant to Colorado Revised Statutes, Part 1 of
Title 31, Article 25, as amended (the “Act”); and
WHEREAS, the City Council by Resolution No. 2004-152 approved and adopted
on December 21, 2004 has authorized and approved the “North College Urban Renewal Plan” as
an urban renewal plan under the Act (the “Plan”) for the area described therein (the “Plan
Area”); and
WHEREAS, in order to undertake certain urban renewal projects within the Plan
Area, the Authority has previously borrowed money from the City and entered into certain prior
loan agreements with the City and executed certain prior promissory notes (collectively, the
“Prior City Loans”) in connection therewith; and
WHEREAS, pursuant to an Indenture of Trust (the “Indenture”) between the
Authority and U.S. Bank National Association, as trustee (the “Trustee”), the Authority is
issuing its Tax Increment Revenue Refunding Bonds (North College Avenue Project), Series
2013 (the “Series 2013 Bonds”) for the purpose of repaying the Prior City Loans made by the
City to the Authority; and
WHEREAS, a reserve fund (the “Reserve Fund”) will be created under the
Indenture to secure the payment of the Series 2013 Bonds and such Reserve Fund is required to
be maintained in an amount equal to the Reserve Fund Requirement (as defined in the
Indenture); and
WHEREAS, the Indenture provides that the Reserve Fund may either be cash
funded or that a reserve fund insurance policy (a “Reserve Fund Policy”) may be deposited in the
Reserve Fund; and
WHEREAS, the City Council wishes to make a non-binding statement of its
present intent with respect to the appropriation of funds for the replenishment of the Reserve
Fund or the repayment of any draws made under any Reserve Fund Policy, if necessary, and to
authorize and direct the City Manager to take certain actions for the purpose of causing requests
for any such appropriation to be presented to the City Council for consideration; and
WHEREAS, in connection with the issuance of the Series 2013 Bonds, it is
necessary and in the best interests of the City to enter into a Cooperation Agreement (the
“Cooperation Agreement”) between the City and the Authority; and
2
WHEREAS, there is attached hereto as Exhibit A the proposed form of the
Cooperation Agreement; and
WHEREAS, capitalized terms used herein and not otherwise defined shall have
the meanings given to them in the Indenture.
NOW, THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE CITY OF FORT
COLLINS, COLORADO:
Section 1. Finding of Best Interests and Public Purpose. The City Council
hereby finds and determines, pursuant to the Constitution, the laws of the State and the City’s
Charter, and in accordance with the foregoing recitals, that adopting this Resolution, entering
into the Cooperation Agreement, and facilitating the issuance of the Series 2013 Bonds by the
Authority to finance the Refunding Project are necessary, convenient, and in furtherance of the
City’s purposes and are in the best interests of the inhabitants of the City; and will serve the
important public purpose of facilitating the repayment of the Prior City Loans by the Authority
to the City.
Section 2. Replenishment of Reserve Fund; Declaration of Intent. To the
extent that the Reserve Fund is cash funded, within 90 days after the City’s receipt of the written
notice from the Trustee of a draw on the Reserve Fund, to the extent that such draw has not been
replenished by another source, as provided in Section 4.06 of the Indenture (the “Written
Notice”), the City shall replenish the Reserve Fund to the Reserve Fund Requirement from
legally available funds of the City, subject to appropriation by the City Council in its sole
discretion. Any such City payment (the “City Payment”) shall be made directly to the Trustee
for deposit in the Reserve Fund in immediately available funds pursuant to the instructions set
forth in the Written Notice. It is the present intention and expectation of the City Council to
appropriate the City Payment requested in any such Written Notice received by the City, within
the limits of available funds and revenues, but this declaration of intent shall not be binding upon
the City Council or any future City Council in any future fiscal year. The City Payments shall
constitute currently appropriated expenditures of the City.
In the event that a Reserve Fund Policy is deposited in the Reserve Fund and the
City receives written notice from the Trustee that it has drawn on the Reserve Fund Policy and
such draw has not been repaid by another source, the City shall repay the provider of the Reserve
Fund Policy in the amount of such draw, plus any interest due thereon, from legally available
funds of the City, subject to appropriation by the City Council in its sole discretion. Any such
payment shall be made directly to the provider of the Reserve Fund Policy. It is the present
intention and expectation of the City Council to appropriate moneys to repay the provider of any
Reserve Fund Policy in the event of a draw thereunder, within the limits of available funds and
revenues, but this declaration of intent shall not be binding upon the City Council or any future
City Council in any future fiscal year. Any such payments shall constitute currently appropriated
expenditures of the City.
This Resolution shall not create a general obligation or other indebtedness or
multiple fiscal year direct or indirect debt or other financial obligation of the City within the
meaning of its Home Rule Charter or any constitutional debt limitation, including Article X,
Section 20 of the Colorado Constitution. Neither this Resolution nor the issuance of the Series
3
2013 Bonds shall obligate or compel the City to make City Payments or to repay the provider of
any Reserve Fund Policy in the event of a draw thereunder beyond those appropriated in the City
Council’s sole discretion.
Section 3. Direction to City Manager. To the extent that the Reserve Fund is
cash funded, within five (5) Business Days following a draw on the Reserve Fund to pay the debt
service requirements on the Series 2013 Bonds, to the extent any such draw is not replenished
from another source, the Trustee is required under Section 4.06 of the Indenture to provide
Written Notice of such draw to the City. The Written Notice shall state the amount required to
be paid by the City to restore the Reserve Fund to the Reserve Fund Requirement after
replenishment from all other sources available under the Indenture. The Written Notice shall
also include instructions for making the City Payment. Any such Written Notice is required to
be sent to the City Manager. Upon receipt of a Written Notice by the City Manager, the City
Council hereby authorizes and directs the City Manager to prepare and submit to the City
Council a request for an appropriation of the amount set forth in the Written Notice. Such
request shall be made in sufficient time to enable the City to make the City Payment within 90
days of receipt of the Written Notice as provided in Section 1 hereof.
In the event that a Reserve Fund Policy is deposited in the Reserve Fund and the
City receives written notice from the Trustee that a draw has been made on the Reserve Fund
Policy and such draw has not been repaid from another source, the City Council hereby directs
the City Manager, upon receipt of such notice, to forthwith prepare and submit to the City
Council a request for an appropriation in an amount sufficient to repay the provider of such
Reserve Fund Policy for such draw, plus any interest due thereon.
Section 4. Repayment of Amounts Appropriated. In the event that the City
Council appropriates funds to make a payment as contemplated by Section 1 hereof, any
amounts actually transferred by the City to the Trustee in accordance with the provisions of
Section 1 or transferred by the City to the provider of a Reserve Fund Policy in accordance with
the provisions of Section 1, shall be treated as an advance under the Cooperation Agreement and
shall be repaid by the Authority in accordance with the provisions of the Cooperation
Agreement, on a basis expressly subordinate and junior to that of the Series 2013 Bonds, any
Additional Bonds and any other obligations or indebtedness that is secured or payable in whole
or in part by the Pledged Revenues on a parity with the Series 2013 Bonds.
Section 5. Limitation to Series 2013 Bonds. Unless otherwise expressly
provided by a subsequent resolution of the City Council, the provisions of this Resolution shall
apply only to the replenishment of the Reserve Fund originally established in the Indenture that
secures the payment of the Series 2013 Bonds and shall not apply to any other reserve funds
established in connection with the issuance of any other obligations.
Section 6. Approval of Cooperation Agreement. The Cooperation
Agreement, in substantially the form attached hereto as Exhibit A, is in all respects approved,
authorized and confirmed. The Mayor is hereby authorized and directed to execute and deliver
the Cooperation Agreement, for and on behalf of the City, in substantially the form and with
substantially the same content as attached hereto as Exhibit A, provided that such document may
be completed, corrected or revised as deemed necessary by the parties thereto in order to carry
4
out the purposes of this Resolution. The execution of the Cooperation Agreement by the Mayor
shall be conclusive evidence of the approval by the City Council of such document in accordance
with the terms hereof and thereof.
Section 7. Direction to Act. The City Clerk of the City (the “City Clerk”) is
hereby authorized and directed to attest all signatures and acts of any official of the City in
connection with the matters authorized by this Resolution and to place the seal of the City on any
document authorized and approved by this Resolution. The Mayor, the Mayor Pro-Tem of the
City, the City Manager, the Financial Officer, the City Clerk and other appropriate officials or
employees of the City are hereby authorized and directed to execute and deliver for and on
behalf of the City any and all additional certificates, documents, instruments and other papers,
and to perform all other acts that they deem necessary or appropriate, in order to implement and
carry out the transactions and other matters authorized by this Resolution.
Section 8. Ratification. All actions (not inconsistent with the provisions of
this Resolution) heretofore taken by the City Council or the officers, employees or agents of the
City directed toward the issuance of the Series 2013 Bonds by the Authority and the execution
and delivery of the Cooperation Agreement are hereby ratified, approved and confirmed.
Section 9. Severability. If any section, subsection, paragraph, clause or
provision of this Resolution or the documents hereby authorized and approved shall for any
reason be held to be invalid or unenforceable, the invalidity or unenforceability of such section,
subsection, paragraph, clause or provision shall not affect any of the remaining provisions of this
Resolution or such documents, the intent being that the same are severable.
Section 10. Repealer. All prior resolutions, or parts thereof, inconsistent
herewith are hereby repealed to the extent of such inconsistency.
Section 11. Effectiveness. This Resolution shall take effect immediately upon
its passage.
Passed and adopted at a regular meeting of the Council of the City of Fort Collins this
18th day of June, A.D., 2013.
Mayor
ATTEST:
City Clerk
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PUBFIN/1606587.7
Exhibit A
Attach Cooperation Agreement
COOPERATION AGREEMENT
BETWEEN THE CITY OF FORT COLLINS AND
THE FORT COLLINS URBAN RENEWAL AUTHORITY
THIS COOPERATION AGREEMENT (this “Agreement”) dated as of ____ __, 2013,
is made and entered into between the CITY OF FORT COLLINS, COLORADO (the “City”)
and the FORT COLLINS URBAN RENEWAL AUTHORITY (the “Authority”).
WHEREAS, the City is a Colorado home rule municipality with all the powers and
authority granted pursuant to Article XX of the Colorado Constitution and its City Charter;
and
WHEREAS, the Authority is a Colorado Urban Renewal Authority, with all the
powers and authority granted to it pursuant to Title 31, Article 25, Part 1, Colorado Revised
Statutes (“C.R.S.”) (the “Urban Renewal Law”); and
WHEREAS, pursuant to Article XIV of the Colorado Constitution, and Title 29,
Article 1, Part 2, C.R.S., the City and the Authority are authorized to cooperate and contract
with one another to provide any function, service or facility lawfully authorized to each
governmental entity; and
WHEREAS, the City Council of the City (the “City Council”) by Resolution No.
2004-152 approved and adopted on December 21, 2004 has authorized and approved the
“North College Urban Renewal Plan” as an urban renewal plan under the Act (the “Plan”) for
the area described therein (the “Plan Area”), and the urban renewal projects described therein
(collectively, the “Project”); and
WHEREAS, the Project is being undertaken to facilitate the elimination and
prevention of blighted areas and to promote redevelopment, conservation and rehabilitation of
the Plan Area; and
WHEREAS, pursuant to section 31-25-112, C.R.S., the City is specifically authorized
to do all things necessary to aid and cooperate with the Authority in connection with the
planning or undertaking of any urban renewal plans, projects, programs, works, operations, or
activities of the Authority, to enter into agreements with the Authority respecting such actions
to be taken by the City, and appropriating funds and making such expenditures of its funds to
aid and cooperate with the Authority in undertaking the Project and carrying out the Plan; and
WHEREAS, the Authority is issuing its Fort Collins Urban Renewal Authority, Tax
Increment Revenue Refunding Bonds (North College Avenue Project), Series 2013 (the
“Series 2013 Bonds”) for the purpose of refinancing certain obligations owing by the
Authority to the City that financed certain urban renewal projects in the Plan Area; and
WHEREAS, the City Council has adopted a Resolution declaring its nonbinding intent
and expectation that it will appropriate any funds requested, within the limits of available
funds and revenues, in a sufficient amount to replenish the Reserve Fund to the Reserve Fund
EXHIBIT A
2
Requirement or to repay the provider of any reserve fund insurance policy in the event of a
draw thereunder (the “Replenishment Resolution”) as defined in the Indenture of Trust (the
“Indenture”), between the Authority and U.S. Bank National Association, as trustee (the
“Trustee”); and
WHEREAS, capitalized terms used herein and not otherwise defined shall have the
meanings set forth in the Indenture.
NOW, THEREFORE, in consideration of the mutual promises set forth below, the
City and the Authority agree as follows:
1. LOAN. If the City Council appropriates funds pursuant to the
Replenishment Resolution, such funds shall be a loan from the City to the Authority to be
repaid as provided herein.
2. PAYMENT. (a) All amounts payable by the Authority to the City hereunder
shall constitute “Subordinate Debt” for purposes of the Indenture. The Authority shall cause
such amounts to be paid from and to the extent of Pledged Revenue (as defined in the
Indenture) available for the payment of Subordinate Debt in accordance with the terms of the
Indenture including, in particular, Section 4.04(c) thereof.
(b) The Authority agrees to pay the City interest on the principal balance of
any amounts designated as a loan hereunder at a rate to be determined based upon applicable
City policies in effect at the time of any such loan.
3. FURTHER COOPERATION. (a) The City shall continue to make
available such employees of the City as may be necessary and appropriate to assist the
Authority in carrying out any authorized duty or activity of the Authority pursuant to the
Urban Renewal Law, the Plan, or any other lawfully authorized duty or activity of the
Authority.
(b) The City agrees to assist the Authority and the Trustee by pursuing all
lawful procedures and remedies available to it to collect and transfer to the Authority on a
timely basis all Pledged Revenues for deposit into the Revenue Fund. To the extent lawfully
possible, the City will take no action that would have the effect of reducing tax collections
that constitute Pledged Revenues.
(c) The City agrees to pay to the Authority any Pledged Property Tax
Revenues when, as and if received by the City, but which are due and owing to the Authority
pursuant to the Plan.
(d) In connection with the issuance of the Series 2013 Bonds, the Authority
agrees that so long as the Series 2013 Bonds are outstanding, the Authority shall submit to the
City Manager by February 15 of each year a report in substantially the form set forth as
Exhibit B to the Indenture. The City Manager agrees to submit such report to the City
Council at its first regular meeting in March in each year. Notwithstanding the foregoing,
3
failure by the Authority to provide the report required by this Section3(d) of this Agreement
and Section 5.13 of the Indenture or failure by the City Manager to submit such report to the
City Council shall not constitute a default under this Agreement or under the Indenture.
4. SUBORDINATION. The Authority’s obligation under this Agreement to
repay the City for the loan referred to in Section 1 hereof is subordinate to the Authority’s
obligations for the repayment of the Series 2013 Bonds, any Additional Bonds and any other
obligations or indebtedness that is secured or payable in whole or in part by the Pledged
Revenues on a parity with the Series 2013 Bonds.
5. GENERAL PROVISIONS.
(a) Separate Entities. Nothing in this Agreement shall be interpreted in any
manner as constituting the City or its officials, representatives, consultants, or employees as
the agents of the Authority, nor as constituting the Authority or its officials, representatives,
consultants, or employees as agents of the City. Each entity shall remain a separate legal
entity pursuant to applicable law. Neither party shall be deemed hereby to have assumed the
debts, obligations, or liabilities of the other.
(b) Third Parties. Neither the City nor the Authority shall be obligated or
liable under the terms of this Agreement to any person or entity not a party hereto, other than
the Trustee.
(c) Modifications. No modification or change of any provision in this
Agreement shall be made, or construed to have been made, unless such modification is
mutually agreed to in writing by both parties and incorporated as a written amendment to this
Agreement. Memoranda of understanding and correspondence shall not be construed as
amendments to the Agreement.
(d) Entire Agreement. This Agreement shall represent the entire agreement
between the parties with respect to the subject matter hereof and shall supersede all prior
negotiations, representations, or agreements, either written or oral, between the parties
relating to the subject matter of this Agreement and shall be independent of and have no effect
upon any other contracts.
(e) Severability. If any provision of this Agreement is held to be invalid,
illegal or unenforceable, the validity, legality and enforceability of the remaining provisions
shall not in any way be affected or impaired.
(f) Assignment. Except for the pledge under the Indenture, this Agreement
shall not be assigned, in whole or in part, by either party without the written consent of the
other and of the Bank.
(g) Waiver. No waiver of a breach of any provision of this Agreement by
either party shall constitute a waiver of any other breach or of such provision. Failure of
either party to enforce at any time, or from time to time, any provision of this Agreement shall
4
PUBFIN/1637930.4
not be construed as a waiver thereof. The remedies reserved in this Agreement shall be
cumulative and additional to any other remedies in law or in equity.
IN WITNESS HEREOF, the parties have caused this Agreement to be executed by their
duly authorized officers on the date above.
CITY OF FORT COLLINS, COLORADO
Mayor
(SEAL)
ATTESTED:
City Clerk
FORT COLLINS URBAN RENEWAL
AUTHORITY
[SEAL]
By
Chairperson, Board of Commissioners
Attest:
By
Executive Director