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 Recreation Center 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 (Second Reading - Approved on First Reading on June 3, 2025 by a vote 7-0)
Body
________________________________________________________________________________
Executive Summary
The proposed ordinance approves the parameters of the tax-exempt lease-backed financing for the construction of the Castle Rock Sports Center Project.
History of Past Town Council, Boards & Commissions, or Other Discussions
On February 18, 2025, Town Council voted unanimously to finally adopt Ordinance No. 2025-007 approving the Brickyard Planned Development Plan and Zoning Regulations and Ordinance No. 2025-008 approving the Brickyard Development Agreement.
On March 4, 2025, Town Council voted unanimously to adopt Resolution No. 2025-032 approving the Consolidated Service Plan for Brickyard Metropolitan District Nos. 1-3.
On March 18, 2025, Town Council voted unanimously to adopt Resolution No. 2025-037 approving the letter agreement between CD-Acme, LLC, and the Town regarding the early procurement of trade agreements and materials for the Castle Rock Sports Center Project.
On May 6, 2025, Town Council voted unanimously to adopt Resolution No. 2025-059 expressing the intent of the Town to be reimbursed for certain expenses relating to the construction of the Castle Rock Sports Center Project.
On June 3, 2025, Town Council will consider the adoption of Resolution No. 2025-068 approving the Rec Center Agreement by and between CD-Acme, LLC, and the Town regarding the development and construction of the Castle Rock Sports Center Project.
Discussion
The Town of Castle Rock (the “Town”) has been in negotiations with CD-Acme, LLC (the “Developer”), regarding the redevelopment of the former site of the Acme Brick Company at 401 Prairie Hawk Drive (the “Property”). The Developer is proposing a mixed-use development, with a maximum of 583 multi-family dwelling units consisting of townhomes and apartments, 92,000 square feet of non-residential uses including office, retail, and restaurant, a 99,000-square foot, 125 room hotel with a conference center and an outdoor performance venue (the “Brickyard”). In addition, a 145,177-square foot recreation center and related improvements (the “Sports Development Center”) is planned to be constructed by the Developer for the Town on 10.36 acres of public land (the “SDC Parcel”) to be dedicated by the Developer within the boundaries of the Property (collectively, the Sports Development Center and the SDC Parcel shall be referred to as the “Leased Property”).
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 Sports Development Center. 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 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 Sports Development Center.
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, 2064;
(b) the Lease term shall not extend beyond December 31, 2054;
(c) the aggregate principal amount of the Base Rentals payable by the Town pursuant to the Lease shall not exceed $75,500,000;
(d) the maximum annual repayment amount of Base Rentals payable by the Town pursuant to the Lease shall not exceed $7,400,000;
(e) the maximum total repayment amount of Base Rentals payable by the Town pursuant to the Lease shall not exceed $155,000,000;
(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;
(e) the Certificate Purchase Agreement; and
(f) the final Official Statement.
The ordinance further approves the form of the about documents, subject to such revisions as deemed necessary or appropriate by the Town Manager, in consultation with the Town Attorney.
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 $75,500,000 of costs for the construction of the sports development center and associated public infrastructure. The maximum total repayment amount will not exceed $155,000,000, while the maximum annual repayment amount will not exceed $7,400,000.
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 - 2020 Official Statement (serving as the form of the 2025 Preliminary Official Statement)
Attachment G - Continuing Disclosure Certificate
Attachment H - Presentation