To: Honorable Mayor and Members of Town Council
From: Michael J. Hyman, Town Attorney
Title
Crystal Valley Metropolitan District No. 2 Subdistrict - Review of Proposed Bond Issuance
Body
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Executive Summary
Crystal Valley Metropolitan District No. 2 Subdistrict (the “Subdistrict”) wishes to issue bonds as authorized by its Amended and Restated Consolidated Service Plan, which plan was approved by Town Council on November 21, 2001, and amended on May 6, 2014 and July 21, 2020 (collectively, the “Amended Service Plan”). Specifically, the Subdistrict is proposing the issuance of its Limited Tax General Obligation Bonds in a principal amount not to exceed $3,600,000 (the “2022 Bonds”). The proceeds of the 2022 Bonds will be used primarily to finance the design and construction of a water tank, through the Town of Castle Rock (the “Town”), necessary to serve property within the Subdistrict (the “Water Tank Project”)
The Subdistrict 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 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. Crystal Valley Metropolitan District No. 2 (“District No. 2”) was one of two districts organized pursuant to separate service plans approved by the Town Council in August of 1986. The original service plans were amended and restated in their entirety and replaced by the Amended Service Plan. Among other things, the Amended Service Plan allows for the incurrence of long-term financial obligations by the Subdistrict, which Subdistrict is controlled under the authority of the District No.2 Board.
Under the Amended Service Plan, the Subdistrict has a debt cap of $3,600,000 to finance the Water Tank Project and to pay for organizational and election costs associated with the Subdistrict’s formation. The debt mill levy cap of the Subdistrict is 45.940 mills - the same as the debt mill levy cap of District No. 2 - as adjusted for changes in the residential assessment ratio.
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 Subdistrict that the proposed issuance is authorized by and in compliance with the Amended Service Plan.
Proposed Bonds. The Subdistrict’s current Financing Plan proposes the issuance of its 2022 Bonds in the principal amount of $3,100,000. The principal amount is subject to adjustment as might be required for the final bid amounts on the Water Tank Project, up to a maximum of $3,600,000. The interest rate currently assumed is 7.375% and is based upon a 30-year maturity. It is not anticipated that the Subdistrict will need to finance further capital improvements.
District Submission of Proposed Debt Documents. On May 17, 2022, the Subdistrict submitted various Proposed Debt Documents to the Town, including a draft term sheet and a detailed financial plan, which show that the Subdistrict can repay the 2022 Bonds.
Staff Recommendation
Based on the Proposed Debt Documents that the Subdistrict submitted, 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 Subdistrict be allowed to move forward with the issuance of the 2022 Bonds as proposed.
Attachments
Attachment A: Letter from WBA
Attachment B: Proposed Debt Documents