To: Honorable Mayor and Members of Town Council
From: Michael J. Hyman, Town Attorney
Title
Dawson Ridge Metropolitan District No. 1 - Review of Proposed Bond Issuance
Body
________________________________________________________________________________
Executive Summary
Dawson Ridge Metropolitan District No. 1 (the “District”) intends to issue bonds as authorized by its Amended and Restated Consolidated Service Plan, which plan was approved by Town Council on September 6, 2022 (the “Consolidated Service Plan”). Specifically, the District is proposing the issuance of its Limited Tax General Obligation Convertible Capital Appreciation Bonds, Series 2022, in the approximate principal amount of $85,797,583 (the “2022 Bonds”). The proceeds of the 2022 Bonds will be used primarily to finance public improvement costs authorized by the Consolidated Service Plan, including $50,000,000 for the proposed Crystal Valley Interchange Project.
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 2022 Bonds, while remaining within the debt and mill levy parameters authorized by the Consolidated 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. Dawson Ridge Metropolitan District Nos. 1 through 5 (the “Dawson Ridge Districts”) were organized pursuant to separate service plans approved by the Town Council in 1985. Together with the service plans for Westfield Metropolitan District Nos. 1 and 2 (the “Westfield Districts”), these original service plans were amended and restated in their entirety and replaced by the Consolidated Service Plan. (collectively, the Dawson Ridge and Westfield Districts are referred to as the “Districts”)
Under the Consolidated Service Plan, the Districts have a debt cap of $1,062,390,000. The debt mill levy cap of the Districts is 64.044 mills, subject to future adjustments in assessed valuation in order to prevent the diminution of actual tax revenues.
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 issuance is authorized by and in compliance with the Consolidated Service Plan.
Proposed Bonds. The District’s current Financing Plan proposes the issuance of its 2022 Bonds in the principal amount of $85,797,583. The interest rate currently assumed is 7.5% and is based upon a 30-year maturity. Since this is the first issuance of bonds for the Dawson Trails development, it is anticipated that, collectively, the Districts will need to finance further capital improvements.
District Submission of Proposed Debt Documents. On November 1, 2022, the District submitted various Proposed Debt Documents to the Town, including a draft term sheet and a detailed financial plan, which show that the District can repay the 2022 Bonds.
Staff Recommendation
Based on the Proposed Debt Documents that the District submitted, Town Staff finds that the proposed bond issuance complies with the Consolidated 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 issuance of the 2022 Bonds as proposed.
Attachments
Attachment A Letter from WBA and Proposed Debt Documents