To: Honorable Mayor and Members of Town Council
From: Michael J. Hyman, Town Attorney
Title
Hillside at Castle Rock Metropolitan District - Review of Proposed Bond Issuance
Body
________________________________________________________________________________
Executive Summary
Hillside at Castle Rock Metropolitan District (the “District”) wishes to issue bonds as authorized by its Service Plan, which plan was approved by Town Council on May 3, 2016, and amended on July 17, 2018 (collectively, the “Service Plan”). Specifically, the District is proposing to issue Limited Tax General Obligation Bonds in a total maximum principal amount of $6,441,000 (the “2022 Bonds”).
Although the Service Plan was approved six (6) years ago, development within the District is just now commencing. There are no residents in the District and no district general obligation debt is currently outstanding. The proceeds of the 2022 Bonds will be used to finance various water, sanitary and storm sewer, street, park and recreation, and other public improvements needed to serve the development.
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 2022 Bonds, while remaining 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 was organized pursuant to a service plan approved by the Town Council in May 2016 and amended in July 2018. The amendment increased the anticipated debt issuance of the District and the estimated costs of the public improvements to be financed. Under the Service Plan, the District has a debt mill levy cap of 50.000 mills, as adjusted for changes in the residential assessment ratio. Applying the legislative adjustment to the debt mill levy cap, the debt service mill levy is anticipated in the proposed financing plan to be 55.664 mills.
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, and the amount of the mill levy pledged (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 2022 Bonds in the principal amount of $6,441,000. It is anticipated that the 2022 Bonds will consist of approximately $5,080,000 in senior bonds and $1,361,000 in subordinate bonds. The interest rate currently assumed is 5.75% for the senior bonds and 9.00% for the subordinate, each of which is based upon a 30-year maturity. It is not anticipated that the District will need to finance further capital improvements.
District Submission of Proposed Debt Documents. On June 3, 2022, the District submitted various Proposed Debt Documents to the Town, including a detailed financial plan and a certificate of compliance, which show that the District can repay the 2022 Bonds.
Staff Recommendation
Based on the Proposed Debt Documents that the District 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 2022 Bonds as proposed.
Attachments
Attachment A: Letter from Miller & Associates
Attachment B: Proposed Debt Documents