To: Honorable Mayor and Members of Town Council
From: Michael J. Hyman, Town Attorney
Title
Castle Pines Commercial Metropolitan District - Review of Proposed Bond Refinancing
Body
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Executive Summary
Castle Pines Commercial Metropolitan District Nos. 1, 3, and 4 (collectively, the “Districts”) wish to refund outstanding bonds as authorized by their Amended and Restated Consolidated Service Plan approved by Town Council on January 6, 2015 (the “Amended Service Plan”). The Districts have proposed the issuance of a tax-exempt refunding loan through NBH Bank in the approximate amount of $5,800,000 (the “Refunding Loan”). The Loan will allow the Districts to refund the outstanding principal amounts of its Limited Tax Supported Revenue Bonds issued in 2015 (the “2015 Bonds”), thereby resulting in a present value savings in excess of $400,000 and a reduction in the anticipated average mill levy for District Nos. 3 and 4 from 21.360 mills to 14.400 mills.
The Districts have submitted documentation to the Town Manager, Town Attorney and Director of Finance showing that the District will be able to repay the Refunding Loan, while remaining within the debt and mill levy parameters authorized by the Amended 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 Districts were organized in 1987, following the Town’s approval of the original Consolidated Service Plan. The Districts currently operate pursuant to their Amended Service Plan, which imposes a debt cap of $12,000,000, a debt mill levy cap of 50.000 mills, as adjusted for changes in the residential assessment ratio, and a maximum debt maturity of 30 years.
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 Districts that the proposed refinancing is authorized by and in compliance with the Amended Service Plan.
The District’s Outstanding Debt. The proceeds of the 2015 Bonds were used to finance capital improvements. Although District No.1 issued the 2015 Bonds, it may not certify any mill levy towards payment of the outstanding debt. Consequently, the pledge of property tax revenues associated with the 2015 Bonds is from District Nos. 3 and 4, which contain commercial property. A recent settlement of a lawsuit filed by District No. 1 against District No. 3 has allowed the Refunding Loan to move forward.
Proposed Bonds. The Districts propose the issuance of a Refunding Loan for the purpose of addressing all outstanding 2015 Bonds and paying expenses associated with the issuance. The interest rate currently assumed is 3.390% and is based upon a 20-year maturity with a 30-year amortization. At year 20, District Nos. 3 and 4 will work to refund the then outstanding principal amounts. It is not anticipated that either District will need to finance further capital improvements.
District Submission of Proposed Debt Documents. On April 4, 2022, the Districts submitted various Proposed Debt Documents to the Town Attorney and Town Manager, including a draft term sheet and a detailed financial plan, which show that the Districts can repay the Refunding Loan.
Staff Recommendation
Based on the Proposed Debt Documents that the Districts submitted to Town Staff, Town Staff finds that the proposed bond issuance complies with the Amended Service Plan and Section 11.02.110 of the Town Code. Town Staff further recommends that the Districts be allowed to move forward with the Refunding Loan as proposed.
Attachments
Attachment A: Letter from WBA
Attachment B: Proposed Debt Documents