To: Honorable Mayor and Members of Town Council
From: Trish Muller, Finance Director
Title
Resolution: Concerning the Town of Castle Rock Golf Course Activity Enterprise and Golf Course Revenue Refunding Bonds Series 2015, of Said Enterprise, Authorizing and Directing Actions by the Town Manager With Respect to the Preparation of Requests to the Council for Appropriation of Funds for the Replenishment of the Reserve Fund Pertaining Thereto
Body
________________________________________________________________________________
Executive Summary
This Resolution is a “moral obligation” resolution similar to what is already in place for the Enterprise’s 2005 Golf Course Revenue Refunding Bonds, Series 2005 and what was previously in place with respect to the 1997 Bonds.
Under the terms of Ordinance No. 2015-40 which is scheduled for second reading on October 6, 2015, relating to the refunding of the Enterprise’s 2005 Bonds (the “2015 Bonds”), the Enterprise shall fund a Reserve Fund in the expected amount of $507,440 from the proceeds of the 2015 Bonds. If the Enterprise ever draws on the Reserve Fund to make a payment of principal of or interest on the 2015 Bonds, this Resolution allows the Finance Director to notify the Town Manager, and the Town may, but is not required to, advance funds to the Enterprise to replenish that Reserve Fund to its Reserve Fund Requirement. This Resolution is the Town’s non-binding statement of its intent to ensure that the Reserve Fund is always funded in the amount of the Reserve Fund Requirement.
This Resolution also approves a form of Loan Agreement, again similar to what is currently in place for the 2005 Bonds. The form of Loan Agreement is attached. If the
Town loans funds to the Enterprise pursuant to the Replenishment Resolution, the Loan Agreement establishes the manner in which the Enterprise will repay the Town.
Discussion
The Town has approved on first reading Ordinance 2015-40 which authorizes the 2015 Bonds. The Town has reviewed a proposal from a local bank (NBH Bank, N.A.) to privately purchase the 2015 Bonds at an interest rate to be determined on October 7, 2015, but which cannot exceed 3.30% pursuant to the Ordinance. Under the terms of the proposal submitted by NBH Bank, the Bank and the Ordinance require that the Town continue the moral obligation pledge with respect to the reserve fund established for the 2015 Bonds. The Town made the same moral obligation and funded a supplemental reserve fund in 1997 and 2005. The supplemental reserve fund is no longer required and is being released, giving the Town an approximately $546,500 in revenue that has previously been restricted. However, the Ordinance requires that a reserve fund be established with respect to the 2015 Bonds in an anticipated amount of $507,440. That amount is already in the Reserve Fund for the 2005 Bonds and will be transferred to the Reserve Fund for the 2015 Bonds. As stated above, if the Enterprise ever draws on the reserve fund to make the payment of principal of or interest on the 2015 Bonds, the Town would continue its non-binding obligation to fund that reserve fund back to its reserve fund requirement established in the Ordinance.
Budget Considerations
In the event that there is a draw on the reserve fund for the 2015 Bonds, the Town would consider appropriating funds, on an annual basis, to replenish that reserve fund.
Staff Recommendation
Staff recommends that Town Council approve the Resolution as written.
Proposed Motion
“I move to Approve the Resolution of The Town of Castle Rock, Colorado, Concerning the Golf Course Enterprise Revenue Refunding Bonds, Series 2015, Authorizing and Directing Actions by the Town Manager with Respect to the Preparation of Requests to the Council for Appropriation of Funds for the Replenishment of the Reserve Fund Pertaining Thereto.”
Attachments
Attachment A: Resolution
Exhibit 1: Loan Agreement