To: Honorable Mayor and Members of Town Council
Through: David L. Corliss, Town Manager
From: Michael J. Hyman, Town Attorney
Trish Muller, CPA Finance Director
Title
Ordinance Concerning the Financing of the Acquisition and Construction of a Fire Station Facility with Associated Amenities and Supporting Public Improvements, and in Connection Therewith Authorizing the Execution and Delivery by the Town of a Site Lease Agreement, a Lease Purchase Agreement, and Other Documents Related Thereto; and Providing Other Matters Related Thereto (First Reading)
Body
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Executive Summary
The proposed ordinance approves the parameters of the tax-exempt lease-backed financing for the construction of Fire Station 156 and the Castle Rock Fire and Rescue Department (CRFRD) Logistics Center (collectively, the “Fire Station 156 Facility Project”).
History of Past Town Council, Boards & Commissions, or Other Discussions
On September 3, 2024, the Town Council voted unanimously to adopt Resolution 2024-097 approving a services agreement with RS&H, Inc., for architectural design and engineering services related to the Fire Station 156 Facility Project.
Discussion
The proposed ordinance sets forth the parameters of a tax-exempt lease-backed structure for financing the costs associated with the acquisition and construction of the Fire Station 156 Facility Project. The Town, as lessor, will enter into a Site Lease Agreement (the “Site Lease”) with the Trustee, UMB Bank, as lessee, whereby the Town will lease the Leased Property to the Trustee. In turn, the Trustee, as lessor, will enter into a Lease Purchase Agreement (the “Lease”) with the Town, as lessee, whereby the Trustee will lease the Leased Property, inclusive of all improvements to be constructed thereon, back to the Town.
The Trustee will execute and deliver an Indenture of Trust, pursuant to which the Trustee will issue certain certificates of participation (the “2025 Certificates”) evidencing proportionate interests in the right to receive rentals under the Lease (the “Base Rentals”). The Trustee will then enter into a Certificate Purchase Agreement with the Underwriter, Stifel, Nicolaus & Company, who will offer the 2025 Certificates for sale to the public. The net proceeds from the sale of the 2025 Certificates shall be used by the Town to finance the Fire Station 156 Facility Project.
Per the ordinance, the Town Council is electing to the apply the provisions of the Supplemental Public Securities Act, Title 11, Article 57, Part 2, C.R.S. (the “Supplemental Act”), to this transaction. Pursuant to the Supplemental Act, the Town Council is delegating to the Town Manager and Finance Director the authority to approve the final terms of the financing, subject to the following parameters:
(a) the Site Lease termination date shall be no later than December 31, 2065;
(b) the Lease term shall not extend beyond December 31, 2056;
(c) the aggregate principal amount of the Base Rentals payable by the Town pursuant to the Lease shall not exceed $8,300,000;
(d) the maximum annual repayment amount of Base Rentals payable by the Town pursuant to the Lease shall not exceed $725,000;
(e) the maximum total repayment amount of Base Rentals payable by the Town pursuant to the Lease shall not exceed $17,000,000;
(f) the Lease shall be subject to prepayment at the option of the Town, without penalty, no later than December 1, 2036; and
(g) the maximum net effective interest rate on the interest component of the Base Rentals relating to the 2025 Certificates shall not exceed 5.25%.
In addition, the ordinance authorizes the execution and delivery of the following documents in relation to the financing:
(a) the Site Lease Agreement;
(b) the Lease Purchase Agreement;
(c) the Continuing Disclosure Certificate;
(d) the Preliminary Official Statement; and
(e) the Certificate Purchase Agreement.
The ordinance further approves the form of the above documents, subject to such revisions as deemed necessary or appropriate by the Town Manager, in consultation with the Town Attorney. The Town Manager and the Finance Director are independently authorized to deem the Preliminary Official Statement as final for purposes of Rule 15c2-12 of the Securities and Exchange Commission.
It should be noted that nothing in the ordinance either creates or constitutes a general obligation or other indebtedness or multiple fiscal year financial obligation of the Town within the meaning of any constitutional, statutory or Charter provision, or a mandatory charge or requirement against the Town in any ensuing fiscal year beyond the then current fiscal year. Accordingly, the Town is not obligated to make any payments under the Lease beyond those budgeted and appropriated by the Town Council for the Town’s then current fiscal year.
Budget Impact
The Town will be utilizing lease-backed financing to finance a maximum of $8,300,000 of costs for the construction of the sports development center and associated public infrastructure. The maximum total repayment amount will not exceed $17,000,000, while the maximum annual repayment amount will not exceed $725,000.
Staff Recommendation
Town staff recommends that the Town Council adopt the ordinance.
Proposed Motion
“I move to approve the Ordinance on first reading as introduced by title.”
Attachments
Attachment A - Ordinance
Attachment B - Site Lease
Attachment C - Lease
Attachment D - Indenture
Attachment E - Certificate Purchase Agreement
Attachment F - Continuing Disclosure Certificate
Attachment G - Presentation