To: Honorable Mayor and Members of Town Council
From: David L. Corliss, Town Manager
Robert J. Slentz, Town Attorney
Bill Detweiler, Director of Development Services
Trish Muller, Finance Director
Title
Ordinance Approving a Public Finance Agreement between the Town of Castle Rock, Citadel Development, LLC, the Miller’s Landing Business Improvement District and the Castle Rock Urban Renewal Authority [Northwest corner of Plum Creek and I-25] (Second Reading) (Continued from the March 7, 2017 Town Council Meeting)
Body
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The Ordinance was approved on First Reading on February 21, 2017 by a vote of 4-1.
Second Reading Revisions to Public Finance Agreement
Text changes to the Public Finance Agreement made between first and second reading are highlighted. Please note the following more significant changes:
• Page 5 - Eligible Improvements definition - surface parking lots serving retail development may not be funded with Bond proceeds.
• Page 7 - Based on recommendation of District bond counsel, flexibility as to the application of Add-On PIF Revenue is added in order to assure Bonds are issued tax-exempt, however the Town retains the right to assure the appropriate Add-On PIF Revenue is pledged through Town review and approval of Bond documents.
• Page 9 - Restricted Grocery Store threshold reduced from 27,000 sf to 10,000 sf.
• Page 12 - Added acknowledgement of the priority of the Prairie Hawk Extension project.
• Page 18 - Property Tax Increment pledge terminates when Bonds are retired.
• Page 20 - Added requirement that prior to Bond issuance, there be demonstration of the hotel operator’s financial ability to undertake development of the hotel.
• Exhibit B -Eligible Improvements are broken out by category
• Exhibit G - Updated to include retailers over 10,000 sf.
Executive Summary
This Public Finance Agreement (“PFA”) serves two principal functions. It provides the financial tools for the Miller’s Landing Business Improvement District (“BID”) to issue bonds (“Bonds”) to finance the remediation of the existing landfill and the construction of the bulk of the public improvements for the proposed Miller’s Landing project (“Project”). Repayment of the Bonds will be supported by (i) a 2.4% public improvement fee (“Credit PIF”) on taxable retail transactions within the Project, (ii) a 50-mill levy on real property within the Project imposed by the BID, (iii) capture of the incremental property tax generated by the Project as authorized in the Citadel Station - Castle Meadows Urban Renewal Plan, and (iv) imposition of a surcharge on taxable transactions (“Add-On PIF”). Secondly, the PFA prescribes development limitations in order to assure the remediation and to incentivize development of a full service hotel and conference facilities and office space within the 900,000 square foot (sf) Project. No existing Town revenues or funds are committed to the Project.
Project
The Project is proposed for 900,000 sf of mixed use commercial/light industrial but no residential on 65 acres in the northwest quadrant of Plum Creek Parkway and I-25 (“Property”). The Project is within the Interchange Overlay Zoning District which encourages the innovative siting of complimentary land uses and enhanced development standards. No specific development plan or end users for the Project are known at this time, and the PFA does not guarantee that any particular end user will in fact locate at the Project. Rather the PFA limits the amount of retail development to 100,000 sf until a 250-room full service hotel with 10,000 sf of meeting space is opened and further limits retail development to a total of 250,000 sf until at least 150,000 sf of office space is constructed. These provisions will encourage the Project developer to make best efforts to secure the hotel and office for the Project. Either limitation is subject to review and relaxation by a future Town Council taking into account the then current development and market conditions.
Remediation of the abandoned landfill on the property must be completed with the initial phase of development of the Project. This was one of the principal goals of incorporating the Property into a designated urban renewal area. The projected cost of the remediation is $11 million. The cost of the remediation and construction of the public improvements to service the entirety of the Project (referred to as “Eligible Improvements” in the PFA) are estimated at $65 million. This cost will be financed principally with the proceeds of Bonds discussed in the following section.
To discourage existing large retailers to relocate an existing store to the Project, the Credit PIF may not be collected on such relocations. In addition, any grocery store locating on the Project will similarly not generate Credit PIF. The existing Safeway center is a significant contributor to the sales tax increment captured by the Downtown Development Authority.
BID Bonds
Last year the Town Council approved formation of the BID for the 65 acres encompassing the Project. The BID will issue tax exempt Bonds yielding approximately the projected cost of the Eligible Improvements. The PFA commits four funding sources for repayment of the Bonds:
• Property tax of 50 mills imposed on the Project through the BID.
• Property tax increment generated from the Project as a qualified URA project for the statutory maximum of 23 years. The total mill levy for all taxing jurisdictions (including the Town) is currently 66 mills. The Project is estimated to generate $65 million in property tax increment.
• Credit PIF at 2.4% on taxable transactions limited to a total of $56 million but in any event, ending after 25 years or when the Bonds are paid.
• Add-On PIF which may be imposed by the developer as a surcharge on taxable transactions in an amount not to exceed 1.25%.
The PFA authorizes the Town to review and approve Bond documents prior to issuance. The first Bond issuance is projected by year-end.
The Council must also consider and approve a financial Operations Plan for 2017 for the BID which will be presented with second reading.
URA
The Castle Rock Urban Renewal Authority (“Authority”) will consider the PFA to coincide with second reading of this Ordinance. Approval of the PFA by the Authority will be by Board Resolution finding that the Project is an eligible urban renewal project under the approved Citadel/Castle Meadows URA Plan and URA statute, inasmuch as the Project directly mitigates the blight conditions identified in the Plan. With PFA approval by the Board the property tax increment will be secured for application by the Authority in accordance with the PFA.
Conditions
The Developer which is the signatory to the PFA has not yet closed on the Property. The Developer must complete that acquisition by year-end. The PFA does not take effect until that closing occurs. In addition the remediation of the landfill must be commenced by June 30, 2020 or the PFA terminates.
Economic & Planning Systems Report
The Town has retained Economic & Planning Systems to provide a review and analysis of the project. Their report is included in the attachments and they will be present to present at the Council meeting.
Staff Recommendation
Staff recommends approval of the Ordinance as presented on second reading.
Proposed Motion
“I move to approve Ordinance 2017-002 as introduced by title on second and final reading”
Attachments
Attachment A: Ordinance
Exhibit 1: Public Finance Agreement
Attachment B: Economic & Planning Systems Executive Summary and Report
Attachment C: Fact Sheet