To: Honorable Mayor and Members of Town Council
Through: David L. Corliss, Town Manager
From: Michael J. Hyman, Town Attorney
Title
Town Attorney’s Report November 19, 2024 [Lanterns Metropolitan District No. 1 Proposal to Refinance Outstanding Debt]
Body
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Executive Summary
Lanterns Metropolitan District No. 1 (the “District”) intends to issue bonds as authorized by its Service Plan (the “Service Plan”). Specifically, the District is proposing the issuance of its Limited Tax General Obligation Refunding and Improvement Bonds, Series 2024, in the estimated amount of $27,735,000 (the “2024 Bonds”). The proceeds of the 2024 Bonds (along with funds on hand) will be used to:
(a) Finance the construction of public improvements (appx. $6,000,000); and
(b) Refund the following District bonds:
(i) Limited Tax General Obligation Bonds, Series 2019A (outstanding principal - $18,740,000)
(ii) Subordinate Limited Tax General Obligation Bonds, Series 2019B (outstanding principal - $2,051,000)
(iii) Junior Lien Limited Tax General Obligation Bonds, Series 2019C (outstanding principal - $1,329,000).
The District has submitted documentation to the Town Manager, Town Attorney and Director of Finance showing that the District will be able to repay the 2024 Bonds within the debt and mill levy parameters authorized by the Service Plan. Under the Castle Rock Municipal Code (the “Town Code”), the proposed transaction is presented for review and comment by the Town Council, but no formal approval is required or authorized.
Background
Organization and Service Plan. The District is organized pursuant to a service plan approved by the Town Council on October 13, 2002, which plan was amended and restated in its entirety in 2014 and 2018.
Under the Service Plan, the District has a debt mill levy cap which is currently 63.6 mills, subject to future adjustments in assessed valuation in order to prevent the diminution of actual tax revenues. District bonds shall discharge no later than 40 years from the date of issuance.
Section 11.02.110 of the Town Code. Section 11.02.110 of the Town Code provides that metropolitan districts must submit a proposed financing for the issuance or refinancing of debt, including certain information and documents related to the proposed debt, such as the interest rate, financing costs, the type of revenues pledged, the amount of the mill levy pledged, and the offering statement (the “Proposed Debt Documents”), to the Town for review and comment before issuing or refinancing the proposed debt. Such submission must include a certification by the District that the proposed issuance is authorized by and in compliance with the Service Plan.
Proposed Bonds. The District’s current Financing Plan proposes the issuance of its 2024 Bonds in the estimated amount of $27,735,000. The interest rate currently assumed is 4.34% and is based upon a 30-year maturity, with a final maturity date of December 1, 2054.
District Submission of Proposed Debt Documents. The District has submitted various Proposed Debt Documents to the Town, including a draft term sheet and a Preliminary Limited Offering Statement, which show that the District can repay the 2024 Bonds.
Staff Recommendation
Based on the Proposed Debt Documents that the District has submitted, Town Staff finds that the proposed bond issuance complies with the Service Plan and Section 11.02.110 of the Town Code. Town Staff further recommends that the District be allowed to move forward with the issuance of the 2024 Bonds as proposed.
Attachments
Attachment A: Letter Certifying Compliance with District Service Plan (Term Sheet and Preliminary Limited Offering Statement are attached)