To: Honorable Mayor and Members of Town Council
From: Robert J. Slentz, Town Attorney
Title
Town Attorney’s Report: Castle Oaks Metropolitan District 2015 Refunding
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The Municipal Code requires that a metropolitan district submit a proposed refunding of outstanding debt to the Town for review and comment. The Castle Oaks Metropolitan District (District) proposes to refinance $20 million in general obligation bonds by issuance of a 7-year term loan. Approximately 650 out of the planned 825 residential units in the District will have been built by year end. Consequently the District has a well-developed tax base to support repayment. The District mill levy is capped at approximately 61 mills. District counsel has summarized the purpose and effect of the refunding as follows:
The District is considering issuing its 2015 Loan (“2015 Loan”) to refund its existing General Obligation Limited Tax Refunding and Improvements Bonds, Series 2012 (the “2012 Bonds”). The existing 2012 Bonds have a 5.5% interest rate and require the District to maintain a Surplus Fund and impose a minimum of 46 mills for debt service to fund the Surplus Fund up to the maximum amount set forth in the 2012 Bond documents. As currently projected under the 2012 Bonds, the debt service mill levy would remain at a minimum of 46 mills through the term of the 2015 Bonds. However, the proposed 2015 Loan would be at an expected 3.5% interest rate and would not require the District to maintain a Surplus Fund or minimum mill levy. As such, the District will only be required to impose the mill levy needed to fund each year’s bond payments (interest and principal). The 2015 Loan, assuming a 1% inflation and full build out of the District, would allow the District to reduce the District’s debt service mill levy to 39 mills beginning in 2017 for tax collection year 2018. In addition to refunding the 2012 Bonds, the 2015 Loan would result in repayment to the Developer of all outstanding reimbursement obligations, thereby clearing the District’s balance sheet.
The details of the financing have been reviewed by the Finance Director and my office and the only significant observation we made related to the comparability of the cost of issuance of the Loan which the District has taken under advisement.
We will inform the District representatives of any questions or concerns the Town Council may have with the proposed issuance.