HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 06/05/2018 - SECOND READING OF ORDINANCE NO. 066, 2018, AUTHORIAgenda Item 3
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AGENDA ITEM SUMMARY June 5, 2018
City Council
STAFF
Matt Robenalt, Executive Director
Kristy Klenk, Financial Coordinator
Travis Storin, Accounting Director
Carrie M. Daggett, Legal
SUBJECT
Second Reading of Ordinance No. 066, 2018, Authorizing the Establishment of a Revolving Line of Credit to
be Paid Solely with Downtown Development Authority Tax Increment Funds for a Six-Year Period in the
Amount of up to Five Million Dollars Per Draw to Finance Downtown Development Authority Projects and
Programs in Accordance with the Downtown Development Authority Plan of Development and Approving
Related Documents.
EXECUTIVE SUMMARY
This Ordinance, unanimously adopted on First Reading on May 15, 2018, renews the current Line of Credit
(LOC) established in 2012 by the City on behalf of the Downtown Development Authority (DDA), which is
scheduled to expire at the end of 2018. The Board of Directors of the Downtown Development Authority
believes it would be financially beneficial for the DDA and the community as a whole to renew the Line of
Credit with First National Bank for a six-year period through adoption of Ordinance No. 066, 2018. The Line of
Credit will be used to finance DDA projects and programs.
The Ordinance has been amended between first and second reading to make the Ordinance recitals
correspond to those in Resolution 2018-046.
STAFF RECOMMENDATION
Staff recommends adoption of the Ordinance on Second Reading.
ATTACHMENTS
1. Copy of First Reading Agenda Item Summary, May 15, 2018 (w/o attachments) (PDF)
Agenda Item 7
Item # 7 Page 1
AGENDA ITEM SUMMARY May 15, 2018
City Council
STAFF
Matt Robenalt, Executive Director
Kristy Klenk, Financial Coordinator
Travis Storin, Accounting Director
Carrie M. Daggett, Legal
SUBJECT
Items Relating to the Downtown Development Authority Line of Credit Finance for 2019-2024.
EXECUTIVE SUMMARY
A. Resolution 2018-046 Approving an Intergovernmental Agreement Between the City of Fort Collins and the
Fort Collins Downtown Development Authority Governing the Use of a Line of Credit.
B. First Reading of Ordinance No. 066, 2018, Authorizing the Establishment of a Revolving Line of Credit to be
Paid Solely with Downtown Development Authority Tax Increment Funds for a Six-Year Period in the Amount
of up to Five Million Dollars Per Draw to Finance Downtown Development Authority Projects and Programs
in Accordance with the Downtown Development Authority Plan of Development and Approving Related
Documents.
The purpose of this item is to renew the current Line of Credit (LOC) established in 2012 by the City on behalf
of the Downtown Development Authority (DDA), which is scheduled to expire at the end of 2018. The City and
DDA began taking steps earlier this year to renew this debt instrument with First National Bank for another six-
year term, as it will be needed by the DDA to execute its projects and programs beginning in budget year 2019.
The Board of Directors of the Downtown Development Authority believes it would be financially beneficial for the
DDA and the community as a whole to renew the Line of Credit with First National Bank for a six-year period
through adoption of Ordinance No. 066, 2018. The Line of Credit will be used to finance DDA projects and
programs. Adoption of Resolution 2018-046 will approve the Second Intergovernmental Agreement (IGA), which
provides the process steps by which the City and DDA engage the LOC.
STAFF RECOMMENDATION
Staff recommends adoption of the Resolution and Ordinance on First Reading.
BACKGROUND / DISCUSSION
The DDA Act (C.R.S. 31-25-801, as amended) has inherent processes that require the City and the DDA to work
collaboratively to achieve the purpose of the legislation. Among these expected collaborations is the process
for financing DDA activities. In 2012, Council adopted Ordinance No. 089, 2012 and the City and DDA
established a line of credit (LOC) with First National Bank to satisfy the statutory requirement to generate
proceeds from debt to be used by the DDA to execute its projects and programs and implement the DDA’s Plan
of Development. The tax increment revenues created each year by the private investment that has occurred
downtown is used to pay off the debt.
ATTACHMENT 1
Agenda Item 7
Item # 7 Page 2
A line of credit is also issued by municipalities in the jurisdictions of Colorado Springs, Castle Rock, Longmont
and Greeley on behalf of their Downtown Development Authorities.
The current LOC is scheduled to expire at the end of 2018. The City and DDA began taking steps earlier this
year to renew this debt instrument with First National Bank for another six-year term, as it will be needed by the
DDA to execute its projects and programs beginning in budget year 2019.
Additionally, in 2012, Council approved Resolution 2012-081 and the DDA and City created an
intergovernmental agreement (“IGA”) that established the process by which the two organizations would:
initiate requests for a draw from the LOC
verify tax increment revenue cash available to repay the debt
account for the loan proceeds released from the LOC, and
execute repayment with tax increment within 7 days of the initial LOC draw
The Second IGA Governing a Line of Credit for Financing Downtown Development Authority Projects and
Programs is also requested for approval by City Council to reflect the terms of the renewed LOC.
Terms of LOC Renewal
The renewed LOC will function and operate identically to the LOC established in 2012 in the following ways:
For the seven (7) day maximum period when there may be outstanding debt, the interest rate is set at
Wall Street Journal (WSJ) Prime, which is currently 4.5%
Annual fee $750
The changes or differences with the renewed LOC are:
Maximum draw amount increased to $5,000,000, which is an increase over the maximum draw amount
of $1,000,000 in the 2012 LOC. The City desires this increased amount as it will reduce the number of
draws required to support DDA activities, and eliminate redundancy for City, DDA and bank staff to
execute multiple draws.\
Minimum finance charge increased to $350 per draw, which is an increase from the minimum charge of
$250 in the 2012 LOC.
Maturity date is December 31, 2024, for an effective LOC operating period of six (6) years.
The Promissory Note and Agreement from First National Bank is attached as Exhibit A to Ordinance No. 066,
2018. The draft Second IGA Governing a Line of Credit for Financing Downtown Development Authority Projects
and Programs is attached to Resolution 2018-046 as Exhibit A.
Benefits and Impacts of the LOC
When the DDA and City began using the LOC financing approach in 2012, it provided benefits and positive
impacts over the much more expensive forms of financing such as issuance of traditional revenue bonds or
private-placement financing with banks and other investors. Using the LOC approach to finance DDA projects
and programs results in a significantly shorter period of time in which the City debt incurs interest. This means
that more funding is available to invest directly into projects and programs in the downtown, and less is spent on
finance fees and interest expenses.
Staff analyzed the savings from this approach during the term 2012-2018 of the original LOC against that of the
other forms of traditional financing used by the City and DDA during the same time period. The financial savings
is significant, as the total annual charges for draws against the credit line range from $1,000 to $1,750 depending
on the number of draws initiated.
Agenda Item 7
Item # 7 Page 3
Since 2012, the LOC total interest and financing fees for $8,700,887 of principal debt was $7,250. In contrast,
the total interest and finance fees for the City/DDA traditional financing approach using certificates of participation
and private placement bonds for $15,279,063 of principal debt was $3,412,065.
Other benefits and positive impacts using the LOC include:
Strong expression of fiduciary stewardship of public funds
Recognition that investment of tax increment funds, derived from property tax assessments of
overlapping tax entities, creates positive growth in assessed value and thereby increased the value of
the property tax base for all overlapping entities. (83% of the DDA tax increment comes from tax entities
other than the City such as Larimer County and Poudre School District)
Funding partnerships of the DDA undertaken with the City and private sector have no cost of capital
charges assessed to the projects
Every draw made on the LOC is paid off within seven (7) days, which means no effect at the end of the
calendar year on the City’s fund balance or City Comprehensive Annual Financial Report.
CITY FINANCIAL IMPACTS
As mentioned previously, every draw made on the LOC is paid off within seven (7) days, which means no effect
at the end of the calendar year on the City’s fund balance or City Comprehensive Annual Financial Report.
BOARD / COMMISSION RECOMMENDATION
On April 16, 2018, DDA staff presented information to the City Council Finance Committee, demonstrating the
benefit of renewing the Line of Credit Financing for various projects. The Committee requested clarification on
how lenders are selected and that the renewal of the LOC with First National Bank was consistent with City
Purchasing Policies for supplier selection. A response memo from Finance and Purchasing staff is provided as
Attachment 5, describing lender selection and specifically the approach for this LOC. The Council Finance and
Audit Committee had no objections to moving forward with the renewal of the Line of Credit financing tool.
DDA Board
At its regular meeting on April 12, 2018, the DDA Board of Directors adopted Resolution 2018-02, recommending
to the Fort Collins City Council the renewal of a Line of Credit with First National Bank for a six (6) year period
with a maximum per-draw limit of five million dollars ($5,000,000) to be placed in the Downtown Development
Authority’s Financing Activity Fund for expenditure on certain projects and programs in accordance with the
Downtown Development Authority Plan of Development and the approval of the Intergovernmental Agreement
governing the Line of Credit.
PUBLIC OUTREACH
Both the DDA Board of Directors regular meeting of April 12, 2018 and the Council Finance Committee meeting
of April 16, 2018 were duly posted public meetings.
ATTACHMENTS
1. Downtown Development Authority Boundary Map (PDF)
2. Downtown Development Authority Board Meeting minutes, April 12, 2018 (draft) (PDF)
3. Downtown Development Authority Resolution 2018-02 Renewal of Line of Credit (PDF)
4. Council Finance Committee minutes, April 16, 2018 (draft) (PDF)
5. Memo-Procurement of Lending Services for City Debt, May 10, 2018 (PDF)
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ORDINANCE NO. 066, 2018
OF THE COUNCIL OF THE CITY OF FORT COLLINS
AUTHORIZING THE ESTABLISHMENT OF A REVOLVING LINE OF CREDIT
TO BE PAID SOLELY WITH DOWNTOWN DEVELOPMENT AUTHORITY
TAX INCREMENT FUNDS FOR A SIX YEAR PERIOD IN THE AMOUNT
OF UP TO FIVE MILLION DOLLARS PER DRAW TO FINANCE DOWNTOWN
DEVELOPMENT AUTHORITY PROJECTS AND PROGRAMS IN ACCORDANCE
WITH THE DOWNTOWN DEVELOPMENT AUTHORITY PLAN OF
DEVELOPMENT AND APPROVING RELATED DOCUMENTS
WHEREAS, on April 21, 1981, the City Council adopted Ordinance No. 046, 1981, establishing
the Fort Collins, Colorado, Downtown Development Authority (“DDA”); and
WHEREAS, C.R.S. 31-25-807 (3) (a) (II) provides that DDA tax increment funds may only be
used to pay some form of indebtedness incurred by the City; and
WHEREAS, the establishment of a line of credit with a banking institution would qualify as debt
within the meaning of C.R.S. 31-25-807 (3) (a) (II); and
WHEREAS, at the November 7, 2006, general election, a City-initiated measure to
authorize the issuance of bonds for DDA projects through debt of up to $150,000,000, with a
repayment cost of up to $250,000,000, was approved by the votersqualified electors as provided
in C.R.S. Title 31, Article 25, Part 8; and
WHEREAS, in 2012, the Board of Directors of the DDA recommended to the City
Council through the adoption of Resolution 2012-02, the establishment of a revolving line of
credit for a six-year period in the amount of one million dollars annually to finance DDA
projects and programs in accordance with its approved Plan of Development, the Downtown
Plan and the Downtown Strategic Plan; and
WHEREAS, in 2012, the City Council adopted Resolution 2012-081, approving an
intergovernmental agreement between the City and the DDA to govern the use of the DDA line
of credit, and Ordinance No. 089, 2012, authorizing the establishment of a revolving line of
credit, as described above; and
WHEREAS, the City and the DDA entered into that intergovernmental agreement, and
implemented its terms, and the line of credit arrangement established in 2012 is scheduled to
expire at the end of 2018; and
WHEREAS, in order to renew and update the line of credit arrangement, staff of the City
and the DDA have negotiated a new instrument and related documents that would renew the line
of credit for a six-year period, and increase the limit on the line of credit limit to a maximum
draw of five million dollars to reduce the number of draws required to support DDA activities,
thus reducing the inefficiencies in the original arrangement; and
WHEREAS, the Board of Directors of the DDA has recommended to the City Council
through the adoption of Resolution 2018-02, the establishment of a revolving line of credit for a
six-year period in the maximum amount of five million dollars per draw (“Line of Credit”), with
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such other terms and conditions as are set forth in the financing documents, a copy of which are
on file in the office of the City Clerk and available for public inspection (the “LOC
Documents”), to finance DDA projects and programs in accordance with its approved Plan of
Development, the Downtown Plan and the Downtown Strategic Plan; and
WHEREAS, the establishment of the Line of Credit for such purpose would be financially
beneficial for the downtown business area and for properties in the DDA area and the community as a
whole; and
WHEREAS, the City Council has also approvedadopted Resolution 2018-046, approving an
intergovernmental agreement between the City and the DDA to govern the use of the Line of
Credit.
NOW, THEREFORE, BE IT ORDAINED BY THE COUNCIL OF THE CITY OF FORT
COLLINS as follows:
Section 1. That the City Council hereby makes and adopts the determinations and
findings contained in the recitals set forth above.
Section 2. That the City Manager is hereby authorized to establish the Line of Credit
as described in this Ordinance and to execute the LOC Documents therefor in substantially the
forms on file in the office of the City Clerk, together with such additional terms and conditions
as the City Manager, in consultation with the Chief Financial Officer and the City Attorney,
deem necessary and appropriate to protect the interests of the City or effectuate the purpose of
this Ordinance.
Introduced, considered favorably on first reading, and ordered published this 15th day of
May, A.D. 2018, and to be presented for final passage on the 5th day of June, A.D. 2018.
__________________________________
Mayor Pro Tem
ATTEST:
_______________________________
City Clerk
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Passed and adopted on final reading on the 5th day of June, A.D. 2018.
__________________________________
Mayor Pro Tem
ATTEST:
_______________________________
City Clerk