To: Honorable Mayor and Members of Town Council
From: Michael J. Hyman, Town Attorney
Title
Castleview Metropolitan District No. 1 Proposed Issuance of Limited Tax Senior Cash Flow General Obligation Bonds, Series 2021 A(3)
Body
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Executive Summary
Castleview Metropolitan District No 1 (the “District”) wishes to issue debt as authorized by its Consolidated Amended and Restated Service Plan approved by Town Council on August 21, 2018 (the “Amended Service Plan”). The District desires to issue Limited Tax Senior Cash Flow General Obligation Bonds in the approximate principal amount of $18,817,000 (the “Bonds”) to fund public improvement costs authorized by the Amended Service Plan.
The District has submitted documentation to the Town Manager, Town Attorney and Director of Finance showing that the District will be able to repay the Bonds, while remaining within the debt and mill levy caps 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 District was organized in 2007, following the Town’s approval of the original Service Plan. The District currently operates pursuant to its Amended Service Plan, which imposes a debt cap of $45,000,000, a debt mill levy cap of 64.044 mills, as adjusted for changes in the residential assessment ratio, and a maximum debt maturity of 35 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 District that the proposed refinancing is authorized by and in compliance with the Service Plan.
The District’s Outstanding Debt. The debt cap under the Amended Service Plan is an aggregate cap that also covers Castleview Metropolitan District No. 2 (“District No. 2”). District No. 2 issued $3,709,000 principal amount of its bonds in 2020. Accordingly, issuance of the Bonds will leave $22,474,000 in remaining general obligation debt authorization for both Districts under the Service Plan.
Proposed Bonds. The District proposes the issuance of 30-year Senior Lien Bonds. These Bonds are cash flow bonds, which means that bondholders receive payment when funds are available from the collection of the District’s Mill Levy. Payment of principal and interest on these Senior Lien Bonds must also be made prior to the payment of principal and interest on any subordinate bonds issued by the District. Additionally, this series allows for compounding interest, with initial an estimated initial interest rate of 5.25%. Any outstanding balance, unpaid principal, and compounded interest is discharged on December 2, 2056. The maximum combined tax rate for debt service and operations is 74.600 mills, which puts the District toward the high end of total mills as compared with other districts Town-wide.
District Submission of Proposed Debt Documents. On July 20, 2021, the District 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 District can repay the proposed bond issuance in 30 years.
Staff Recommendation
Based on the Proposed Debt Documents that the District submitted to Town Staff, Town Staff finds that the proposed bond issuance complies with the Service Plan and Section 11.02.110 of the Town Code. Town Staff further recommends that the District be allowed to move forward with the proposed bond issuance with the following general comment from the Town Council:
1. Interest on metropolitan district bonds should not compound.
Attachments
Attachment A: Letter from WBA
Attachment B: Certificate to Town for Bonds
Attachment C: Town Acknowledgement for Bond Issuance