To: Honorable Mayor and Members of Town Council
Through: David L. Corliss, Town Manager
From: Mark Marlowe, Director of Castle Rock Water
Nichol Bussey, Business Solutions Manager
Paul Remeter, Enterprise Fund Analyst
Title
Ordinance Authorizing the Issuance and Sale of Water and Sewer Enterprise Revenue Bonds, or Revenue Refunding Bonds, or both, Payable Solely Out of the Net Pledged Revenues to be Derived from the Operation of the Town’s Water and Sewer Enterprise; Providing Other Details Concerning the Bonds, Including, Without Limitation, Covenants and Agreements in Connection therewith; Providing Other Matters Relating Thereto and Repealing Ordinance No. 2025-029 Finally Adopted on August 19, 2025, Relating to 2025 Bonds (First Reading)
Body
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Executive Summary
The purpose of this memorandum is to seek Town Council approval on first reading of an Ordinance authorizing the issuance and sale of Water and Sewer Enterprise Revenue Bonds, Revenue Refunding Bonds, or both (see Attachment A). The Ordinance delegates to the Mayor, Town Manager and Finance Director the authority to finalize a bond sale within the financial parameters established by Town Council. Any Sale Certificate must be dated and delivered no more than one year from the date of final adoption of the Ordinance.
Town Council previously approved Ordinance No. 2025-029 on August 19, 2025, providing a one-year shelf registration period in which Castle Rock Water (CRW) could issue bonds when market conditions and project timing were favorable. CRW did not take the bonds to market before that authorization period expired. The proposed 2026 Ordinance repeals and replaces Ordinance No. 2025-029 and provides a new one-year authorization period. Approval of the Ordinance does not require CRW to issue debt; it preserves the ability to proceed if market conditions, capital cash-flow needs and project schedules support an issuance during the renewed authorization period.
The proposed Ordinance establishes the following principal parameters:
• Improvement Project - with CWCB Loan: If the Town finances a portion of the Improvement Project through a Colorado Water Conservation Board (CWCB) loan, the aggregate principal amount of bonds issued for the Improvement Project may not exceed $36 million. The net effective interest rate may not exceed 5.00%, annual principal may not exceed $5 million, total repayment costs may not exceed $64 million, and final maturity may not extend beyond December 1, 2046.
• Improvement Project - without CWCB Loan: If the Town does not use a CWCB loan, the aggregate principal amount of bonds issued for the Improvement Project may not exceed $66 million. The net effective interest rate may not exceed 5.00%, annual principal may not exceed $5.1 million, total repayment costs may not exceed $104 million, and final maturity may not extend beyond December 1, 2046.
• Refunding Bonds: The Ordinance also authorizes refunding of all or a portion of the existing Parity Bonds. Refunding bonds may not exceed the principal amount of the bonds being refunded, may not bear a net effective interest rate greater than 3.60%, and may not mature later than the final maturity of the bonds being refunded.
• Purchase Price and Redemption: Improvement Project bonds must be sold for not less than 98% of aggregate principal and may include optional redemption prior to maturity at a price not to exceed 100%. Refunding bonds must be sold for not less than 100% of aggregate principal.
• Sale: The bonds will be sold through a negotiated sale to Stifel, Nicolaus & Company, Incorporated.
• Parity Lien: The bonds will be issued on parity with the Town’s outstanding Water and Sewer Enterprise Parity Bonds and will be payable solely from Net Pledged Revenues of the System.
• Reserve Fund and Bond Insurance: The existence and amount of any Reserve Fund, and whether bond insurance or a Reserve Fund Insurance Policy will be used, will be determined at the time of sale and documented in the Sale Certificate.
• Use of Proceeds: Proceeds from bonds issued for the Improvement Project will be used for capital improvements to the Water and Sewer System and related issuance costs. Proceeds from any refunding bonds will be deposited to an escrow account and used to refund the applicable outstanding Parity Bonds.
The specific capital improvements CRW anticipates may be funded from Improvement Project bond proceeds include project costs associated with the Water Infrastructure Supply Efficiency (WISE) project for construction of a desalinization facility or alternate facilities to meet total dissolved solids concentration requirements by 2030; pipeline, pump station, well and treatment infrastructure associated with the Box Elder project; the Plum Creek Central Pipeline; the Liggett Road Pipeline; the Plum Creek to Rueter Hess Reservoir Pipeline and Pump Stations; capacity in the Rueter Hess Water Purification Facility; storage in the Chatfield Storage Reallocation Project; the Chatfield Pump Back Project; and/or the Plum Creek Diversion Project.
Budget Impact
There is no immediate debt-service budget impact from approval of the Ordinance alone. Debt issuance is included in the proposed 2027 budget and several debt issuances are included in the five- year balanced financial plan. If CRW proceeds with bond issuance as shown in the budget, the impacts include:
Annual debt service: Improvement Project bonds are subject to the maximum annual principal and interest requirements established in the Ordinance.
Debt repayment: Principal and interest payments will be made from Net Pledged Revenues of the Water and Sewer Enterprise and incorporated into CRW’s long-term financial plan.
CWCB financing: If CRW obtains a CWCB loan for a portion of the Improvement Project, the amount of bonds issued will be reduced to account for the amount financed through the CWCB loan.
Rate and revenue requirements: CRW must continue to maintain rates and charges sufficient to meet the debt-service coverage requirements established in the Ordinance.
Refunding opportunities: If refunding bonds are issued, the transaction may reduce future debt-service costs depending on market conditions at the time of issuance. The budget impact will only occur if and when CRW moves forward with an actual bond issuance or refunding transaction. The Ordinance will provide one year from final adoption to determine the appropriate financing structure and exact borrowing need, subject to the maximum principal amounts, interest rates, repayment limits and other parameters established by Town Council. Any debt-service costs or savings resulting from a future transaction will be incorporated into CRW’s financial plan and annual budget process going forward.
Staff recommends approval of the resolution as introduced.
Proposed Motion
“I move to approve the Resolution as introduced by title.”
Alternative Motions
“I move to approve the Resolution as introduced by title, with the following conditions: (list conditions).
“I move to continue this item to the Town Council meeting on _____ date to allow additional time to (list information needed).”
Attachments
Attachment A: Ordinance
Attachment B: Paying Agent Agreement
Attachment C: Continuing Disclosure Certificate
Attachment D: Escrow Agreement