via electronic and u.s. mail re: proposed first amendment
TRANSCRIPT
2154 E. Commons Ave., Ste. 2000 | Centennial , CO 80122 | P 303.858.1800 F 303.858.1801 | WhiteBearAnkele.com
GARY R. WHITE KRISTEN D. BEAR WILLIAM P. ANKELE, JR. JENNIFER GRUBER TANAKA CLINT C. WALDRON KRISTIN BOWERS TOMPKINS ROBERT G. ROGERS
SEAN ALLEN GEORGE M. ROWLEY
NEIL RUTLEDGE ZACHARY P. WHITE
SILVIA FEJKA MEGAN L. TAGGART
MATTHEW T. ASHLEY CASEY K. LEKAHAL
July 14, 2015
VIA ELECTRONIC AND U.S. MAIL
Mark Geyer, Project Manager Jack Bajorek, Asst. City Attorney Office of Development Assistance City Attorney’s Office City of Aurora City of Aurora 15151 E. Alameda Parkway, Suite 5200 15151 E. Alameda Parkway, Suite 5300 Aurora, Colorado 80012 Aurora, Colorado 80012 [email protected] [email protected]
RE: Proposed First Amendment to Amended and Restated Service Plan for Wheatlands Metropolitan District
Dear Mr. Geyer and Mr. Bajorek,
Our office serves as general counsel to the Wheatlands Metropolitan District (the “District”) in the City of Aurora (the “City”), Colorado. We are writing on behalf of the District’s Board of Directors (the “Board”) to formally request that the City Council adopt a resolution amending the District’s Service Plan (the “Service Plan”) in order to allow the District to issue one or more series of unlimited mill levy bonds or other debt obligations which are not subject to the Maximum Debt Mill Levy (as defined in the Service Plan), for the purpose of refunding or refinancing the District’s Outstanding Debt (as defined below) and any future refinancings of the Outstanding Debt.
Proposed Debt Refinancing
The District is a quasi-municipal corporation and political subdivision of the State of Colorado organized pursuant to and in accordance with the provisions of §§ 32-1-101, et seq., C.R.S. for the purpose of constructing, financing, operating and maintaining certain public facilities and improvements for itself, its taxpayers, residents and users. The Board of the District is an elected body comprised entirely of resident taxpayers within the District. For your reference, a map of the District’s boundaries is attached hereto as Exhibit A.
In order to finance the public improvements necessary for the Wheatlands development,
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the District issued several series of bonds and obligations as follows:
• On September 28, 2005, the District issued $21,650,000 in Limited TaxConvertible to Unlimited Tax General Obligation Bonds, Series 2005 (the “2005 Bonds”). The 2005 Bonds are term bonds maturing on December 1, 2025 and December 1, 2035 and are subject to mandatory sinking fund redemption. The bonds have an interest rate of 6.000% and 6.125%, respectively, paid semi-annually on June 1 and December 1. $11,818,000 in principal is currently outstanding.
• On September 10, 2008, the District issued $12,245,000 in Subordinate GeneralObligation Bonds, Limited Tax Convertible to Unlimited Tax, Series 2008 (the “2008 Bonds”). The 2008 Bonds were issued as fixed rate, current interest bonds, at a coupon rate of 8.25%. Interest is payable annually on December 15, commencing on December 15, 2008. Annual principal payments are due on December 15 of each year beginning in 2015, with a final maturity on December 15, 2035. $12,245,000 in principal is currently outstanding.
• In addition, during 2011, the developer of the Wheatlands project (the“Developer”) advanced $4,000,000 to the District’s debt service guaranty fund associated with the 2008 Bonds. The maximum amount payable by the District to the Developer is $2,755,000 (the “Guaranty Agreement”). An interest rate of 8.25% per annum applies to the $2,755,000 repayment obligation. $2,755,000 in principal is currently outstanding.
The District and its underwriter, D.A. Davidson & Co., have been evaluating options for refinancing the District’s 2005 Bonds, 2008 Bonds and Guaranty Agreement (collectively the “Outstanding Debt”) to lower the interest rate and reduce the total amount of principal due on the Outstanding Debt, which in turn will decrease annual debt-service property tax payments owed by residents and taxpayers within the District pledged to repayment of the Outstanding Debt.
The Board has evaluated the available options with respect to the Outstanding Debt, and has determined it to be in the best interests of the District, its taxpayers and residents to refinance the Outstanding Debt and avail itself of historically low interest rates. However, in order to achieve the maximum interest rate savings, the District needs authorization to issue one or more series of unlimited mill levy bonds or other obligations not subject to the Maximum Debt Mill Levy, for the purpose of refunding or refinancing the debt represented by the Outstanding Debt (the “Refunding Bonds”).
According to scenarios run by the District and D.A. Davidson & Co., the current interest rates on the District’s Outstanding Debt could be reduced from approximately 6.8% to 4.5%, achieving an approximately $5 million present value savings, or about $450,000 in savings per year, for 30 years. At these interest rates, it is anticipated District property taxes could be reduced by as much as 5 mills per year.
Although removing the Maximum Debt Mill Levy on refunding debt presents a risk that property taxes may rise above 50 mills for debt service in the future, this risk is mitigated by the fact that development within the District is expected to be completed within the next couple of years, and the existing base of assessed value is very strong. It would take a drop in assessed
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values of more than 20% over a more than 5 year period to bring the debt service mill levy above the current rate of 50 mills, which would be a more severe drop than was seen during the last housing downturn. Additionally, even if property taxes would rise above 50 mills in the future, total payments would still be $450,000 lower on average per year.
Proposed Service Plan Amendment to Remove Maximum Debt Mill Levy and Increase the Total Debt Issuance Limitation
The District currently operates under an Amended and Restated Consolidated Service Plan for Wheatlands Metropolitan District No. 1 and No. 2 and Service Plan for Wheatlands Metropolitan District No. 3, approved by the City on August 30, 2004. Subsequent to the approval of the Service Plan, Wheatlands Metropolitan District No. 1 filed with the Division of Local Government a Notice of Inactive Status pursuant to Section 32-1-104(3)(a), C.R.S., and as of the date of this letter, remains in inactive status; Wheatlands Metropolitan District No. 2 changed its name to Wheatlands Metropolitan District pursuant to an Order of the Arapahoe County District Court, dated January 31, 2013, and recorded at Reception No. D3013778; and Wheatlands Metropolitan District No. 3 was dissolved pursuant to an Order of the Arapahoe County District Court dated October 22, 2007 and recorded at Reception No. B7139905. Therefore, the proposed First Amendment to the Service Plan constitutes an amendment to certain provisions of the Service Plan applicable to the Wheatlands Metropolitan District.
In the Service Plan, the Maximum Debt Mill Levy, as defined in Sec. VII.C. of the Service Plan is 50 mills. For 2015, the District’s total current certified mill levy is 76 mills, with 50 mills imposed for debt service.
Attached to this correspondence as Exhibit B is a draft of the proposed First Amendment to the Service Plan (“First Amendment”) as well as a draft of the proposed resolution of approval of the City for the First Amendment (the “Resolution”) and a draft of the proposed First Amendment to the IGA (the “IGA Amendment”). Although the District does not at this time anticipate issuing any additional new money debt, under the proposed First Amendment, the Maximum Debt Mill Levy would remain in place with respect to the issuance of new money debt obligations. The District’s request, however, is to remove the Maximum Debt Mill Levy applicable solely to the refunding of existing debt and, specifically, the Outstanding Debt. Thus, the District would be able to pledge an unlimited mill levy to the repayment of refunding or refinancing debt originally represented by the District’s current Outstanding Debt to obtain favorable interest rates and financing terms given current market conditions. The First Amendment will not otherwise affect the Maximum Debt Mill Levy with respect to any debt the District may or may not issue in the future.
In addition, the Service Plan provides that the total Debt that the District shall be permitted to issue shall not exceed $55,000,000 (the “Total Debt Issuance Limitation”). As discussed above, the District has issued debt subject to the Total Debt Issuance Limitation in the amount of $37,800,000. As the Refunding Bonds will be considered new debt, the Total Debt Issuance Limitation will need to be sufficient to include both the Outstanding Debt ($37,800,000) and the Refunding Bonds (approximately $30,000,000). As the remaining authorization of $17,200,000 under the Total Debt Issuance Limitation ($55,000,000 -
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$37,800,000) is insufficient to allow for issuance of the Refunding Bonds, and as the Service Plan does not contain a “carve-out” for refunding debt, the Total Debt Issuance Limitation will need to be increased to allow for the refinancing to occur. In order to allow for this refinancing, the District is requesting an increase in the Total Debt Issuance Limitation from $55,000,000 to $85,000,000.
District Outreach
In an effort to have a community-wide discussion relative to the pros, cons and merits and risks of refunding the Outstanding Debt and removing the Maximum Debt Mill Levy, the Board has attempted to provide avenues for all members of the District and general public to inform themselves of the discussion, ask questions, and have a civil debate on how this proposal impacts the District and the individual taxpayers within the District. In addition to the discussions on this topic that have occurred at regular board meetings over the past year, recent opportunities for public involvement include the following:
• May 14, 2015: The Board conducted a Regular Meeting at 6:00 pm at theWheatlands Clubhouse, located within the District. Zach Bishop of D.A. Davidson & Co. gave a presentation regarding potential bond refinancing options. Notice of the Regular Meeting, including a copy of the agenda identifying debt refinancing as a discussion item, was posted at three locations within the boundaries of the District at least 72-hours prior to the meeting, as well as on the District’s website and in the office of the Arapahoe County Clerk & Recorder.
• June 11, 2015: The Board conducted a Work Session and Special Meeting at 6:00pm at the Wheatlands Clubhouse, located within the District at which a community meeting was held to discuss potential bond refinancing, the proposed First Amendment and to obtain homeowner feedback. Notice of the Work Session and Special Meeting, including a copy of the agenda identifying a community meeting regarding debt refinancing, was posted at three locations within the boundaries of the District at least 72-hours prior to the meeting, as well as on the District’s website and in the office of the Arapahoe County Clerk & Recorder. Notice of the community meeting was mailed via postcard to all property owners within the District and was also distributed via a constant contact email blast. There were approximately 50 non-Board member District residents in attendance, and the majority of those present were in favor of moving forward with the proposed bond refinancing plan. Attached hereto as Exhibit C is the notice mailed to all property owners as well as the materials handed out and reviewed at the community meeting.
• June 11, 2015: Following the Board’s Work Session and Special Meeting, theBoard conducted a Regular Meeting at 6:30 pm at the Wheatlands Clubhouse, located within the District. An update on Debt Refinancing and Proposed Schedule was provided to the Board. Notice of the Regular Meeting, including a copy of the agenda identifying an update debt refinancing as a discussion item, was posted at three locations within the boundaries of the District at least 72-hours prior to the meeting, as well as on the District’s website and in the office of the Arapahoe County Clerk & Recorder.
• June 11, 2015 to Present: District taxpayers were offered an opportunity to
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provide comments regarding the proposed bond refinancing plan to the District’s general counsel via phone or email following the community meeting. To date, no comments have been received.
As the interest rate environment and market conditions are continually in flux, the Board would like to move forward with refinancing the Outstanding Debt as quickly as possible, in order to achieve the maximum savings possible for the taxpayers and residents of the District. However, as the District is unable to price the refunding debt on the market until the proposed First Amendment is approved, the Board respectfully requests the City’s consideration of approval of the First Amendment.
As always, we appreciate the City’s time and attention to this matter, and would be happy to answer any questions you may have.
Sincerely,
WHITE BEAR ANKELE TANAKA & WALDRON Attorneys at Law
Clint C. Waldron
cc: Wheatlands Metropolitan District, Board of Directors Irene Borisov, District Manager Marchetti & Weaver, LLC, District Accountants Zach Bishop, D.A. Davidson & Co. Vinessa Irvin, Manager of Office of Development Assistance
Enclosures
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EXHIBIT A District Boundary Map
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EXHIBIT B Proposed First Amendment to
Amended and Restated Consolidated Service Plan for Wheatlands Metropolitan District
and
Proposed Resolution Approving the First Amendment to the
Service Plan and Authorizing the Execution of the First Amendment to the IGA
and
Proposed First Amendment to the Intergovernmental
Agreement Between the City of Aurora and the Wheatlands Metropolitan District
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FIRST AMENDMENT TO THE
AMENDED AND RESTATED SERVICE PLAN
FOR
WHEATLANDS METROPLITAN DISTRICT
CITY OF AURORA, COLORADO
Prepared by:
WHITE BEAR ANKELE TANAKA & WALDRON Professional Corporation
2154 East Commons Avenue, Suite 2000 Centennial, Colorado 80122
As approved by the City of Aurora on
_____________ ____, 2015
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I. INTRODUCTION
The Amended and Restated Consolidated Service Plan for Wheatlands Metropolitan District No. 1 and No. 2 and Service Plan for Wheatlands Metropolitan District No. 3 (the “Service Plan”), dated as of August 6, 2004, was approved by the City Council of the City of Aurora (the “City”) on August 30, 2004.
Subsequent to the approval of the Service Plan, Wheatlands Metropolitan District No. 1 filed with the Division of Local Government a Notice of Inactive Status pursuant to Section 32-1-104(3)(a), C.R.S., and as of the date of this Amendment, remains in inactive status; Wheatlands Metropolitan District No. 2 changed its name to Wheatlands Metropolitan District pursuant to an Order of the Arapahoe County District Court, dated January 31, 2013, and recorded at Reception No. D3013778; and Wheatlands Metropolitan District No. 3 was dissolved pursuant to an Order of the Arapahoe County District Court dated October 22, 2007 and recorded at Reception No. B7139905
This First Amendment (“First Amendment”) to the Service Plan constitutes an amendment to certain provisions of the Service Plan applicable to the Wheatlands Metropolitan District (the “District”).
In order to finance the public improvements necessary for the Wheatlands development, the District issued several series of bonds and obligations as follows:
On September 28, 2005, the District issued $21,650,000 in Limited Tax Convertible to Unlimited Tax General Obligation Bonds, Series 2005 (the “2005 Bonds”). The 2005 Bonds are term bonds maturing on December 1, 2025 and December 1, 2035 and are subject to mandatory sinking fund redemption. The bonds have an interest rate of 6.000% and 6.125%, respectively, paid semi-annually on June 1 and December 1.
On September 10, 2008, the District issued $12,245,000 in Subordinate General Obligation Bonds, Limited Tax Convertible to Unlimited Tax, Series 2008 (the “2008 Bonds”). The 2008 Bonds were issued as fixed rate, current interest bonds, at a coupon rate of 8.25%. Interest is payable annually on December 15, commencing on December 15, 2008. Annual principal payments are due on December 15 of each year beginning in 2015, with a final maturity on December 15, 2035.
In addition, during 2011, the developer of the Wheatlands project (the “Developer”) advanced $4,000,000 to the District’s debt service guaranty fund associated with the 2008 Bonds. The maximum amount payable by the District to the Developer is $2,755,000 (the “Guaranty Agreement”). An interest rate of 8.25% per annum applies to the $2,755,000 repayment obligation.
The 2005 Bonds, 2008 Bonds and Guaranty Agreement remain outstanding and are referred to in this First Amendment collectively as the “Outstanding Debt”.
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Due to the current interest rate environment and market conditions, the District will be able to refinance the Outstanding Debt with favorable interest rates and financing terms, if the District is able to eliminate the “Maximum Debt Mill Levy” provision contained in the Service Plan with respect to such refinancing and any future refinancings of the Outstanding Debt, and increase the “Total Debt Issuance Limitation” to accommodate the refinancing.
The Board of Directors of the District therefore respectfully requests pursuant to this First Amendment to the Amended and Restated Service Plan for Wheatlands Metropolitan District (the “Amendment”) that the Maximum Debt Mill Levy contained in the Service Plan not apply to any refinancing of the Outstanding Debt, the Total Debt Issuance Limitation be increased, and the following amendment be made to the Service Plan:
II. AMENDMENT
A. Section V.A.9 of the Amended and Restated Service Plan for Wheatlands Metropolitan District is hereby amended and restated as follows:
9. Total Debt Issuance Limitation. The Districts shall not issue Debt inexcess of $85,000,000.
B. The third sentence of Section VII.A. of the Amended and Restated Service Plan for Wheatlands Metropolitan District is hereby amended and restated as follows:
A. General. The total Debt that the Districts shall be permitted to issue shall not exceed $85,000,000 and shall be permitted to be issued on a schedule and in such year or years as the Districts determine shall meet the needs of the Financial Plan referenced above and shall be phased to serve development as it occurs.
C. Section VII.C. of the Amended and Restated Service Plan for Wheatlands Metropolitan District is hereby amended by the addition of the following paragraph 4:
4. Notwithstanding the foregoing or anything in this Service Plan to thecontrary, but subject to the last sentence of this Section VII.C.4, the District is authorized to issue one or more series of unlimited mill levy Bonds or other Debt or obligations which are not subject to the Maximum Debt Mill Levy, for the purpose of refunding or refinancing the Debt represented by the Outstanding Debt (as that term is defined in this Amendment) (the “Refunding Bonds”). The District may pledge to the payment of such Refunding Bonds such revenues as it may determine, including the revenues from a mill levy to be imposed on all taxable property within the District without limitation as to rate and in such amounts as are sufficient to pay the Refunding Bonds as they come due. Such Refunding Bonds may be issued at one time or from time to time, and may themselves be refunded or refinanced through future unlimited mill levy Bonds or other obligations which are not subject to the Maximum Debt Mill Levy, so long as such future unlimited mill levy Bonds or other obligations are for the purpose of refunding or refinancing the Debt represented by the Outstanding Debt. The Refunding Bonds may be issued in such principal amount as may be determined by the District’s Board, in its sole
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discretion, and may include amounts sufficient to pay all fees, costs and expenses in connection with the Refunding Bonds. This Section VII.C.4 shall take effect immediately; provided that if the District does not issue the Refunding Bonds on or before December 31, 2016, this Section VII.C.4 shall be deemed repealed and of no further force or effect.
D. Except as specifically amended as set forth above, all other provisions of the Service Plan shall remain in full force and effect.
WBA Draft July 14, 2015
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FIRST AMENDMENT TO THE INTERGOVERNMENTAL AGREEMENT BETWEEN
THE CITY OF AURORA, COLORADO AND
WHEATLANDS METROPOLITAN DISTRICT _______________________________
THIS FIRST AMENDMENT TO THE INTERGOVERNMENTAL AGREEMENT, (the “Amendment”) is made and entered into as of this ___ day of _________, 2015, by and between the CITY OF AURORA, a home-rule municipal corporation of the State of Colorado (the “City”), and WHEATLANDS METROPOLITAN DISTRICT, a quasi-municipal corporation and political subdivision of the State of Colorado (the “District”). The City and the District are collectively referred to as the Parties.
RECITALS
WHEREAS, the District was organized on December 12, 2001, for the purpose of providing public improvements to the Wheatlands community, pursuant to its Service Plan and IGA; and
WHEREAS, pursuant to Resolution No. R2004-57, on August 30, 2004 the City Council of the City (the “Council”) approved the Amended and Restated Consolidated Service Plan for Wheatlands Metropolitan District No. 1 and Wheatlands Metropolitan District No. 2 and Service Plan for Wheatlands Metropolitan District No. 3; and
WHEREAS, the Council authorized the execution of an Intergovernmental Agreement between the City and the District on ______ (the “IGA”), pursuant to Resolution No. _______, and as required by the City Code; and
WHEREAS, in order to finance the construction of public improvements to benefit District residents and homeowners, the District has issued the following series of bonds: Limited Tax Convertible to Unlimited Tax General Obligation Bonds, Series 2005, in the original principal amount of $21,650,000 (the “2005 Bonds”) on September 28, 2005; Subordinate General Obligation Bonds, Limited Tax Convertible to Unlimited Tax, Series 2008, in the original principal of $12,245,000 (the “2008 Bonds”) on September 10, 2008; and in 2011 the developer of the Wheatlands project advanced $4,000,000 to the District’s debt service guaranty fund associated with the 2008 bonds, with the maximum amount payable by the District to be $2,755,000 (the “Guaranty Agreement”); and
WHEREAS, the 2005 Bonds, 2008 Bonds and the Guaranty Agreement remain outstanding (collectively, the “Outstanding Debt”), and in evaluating its options for repayment of existing debt the District has determined that a refunding of the Outstanding Debt is the most appropriate course of action; and
WHEREAS, the District has pledged ad valorem tax revenues generated from an annual mill levy of up to fifty (50) mills to payment of the Outstanding Debt; and
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WHEREAS, in order to receive optimal interest rates available in the current market, such refunding requires the District to pledge an unlimited mill levy to repayment of the Outstanding Debt, thereby necessitating an amendment to the District’s Service Plan and IGA; and
WHEREAS, the City adopted Resolution No. R2015-______ on _______ __, 2015, approving a First Amendment to the Service Plan and authorizing the execution of this Amendment.
NOW, THEREFORE, in consideration of the covenants and mutual agreements herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto agree as follows:
AMENDMENT
1. Paragraph 9 of the IGA is hereby amended and restated as follows:
9. Total Debt Issuance. The District shall not issue Debt in excess of$85,000,000.
2. Paragraph 19 of the IGA is hereby amended by the addition of the followingsubsection (d):
(d) Notwithstanding the foregoing or anything in this Agreement to the contrary, but subject to the last sentence of this Paragraph 19(d), the District is authorized to issue one or more series of unlimited mill levy Bonds or other Debt or obligations which are not subject to the Maximum Debt Mill Levy, for the purpose of refunding or refinancing the Debt represented by the Outstanding Debt (as that term is defined in this Amendment) (the “Refunding Bonds”). The District may pledge to the payment of such Refunding Bonds such revenues as it may determine, including the revenues from a mill levy to be imposed on all taxable property within the District without limitation as to rate and in such amounts as are sufficient to pay the Refunding Bonds as they come due. Such Refunding Bonds may be issued at one time or from time to time, and may themselves be refunded or refinanced through future unlimited mill levy Bonds or other obligations which are not subject to the Maximum Debt Mill Levy, so long as such future unlimited mill levy Bonds or other obligations are for the purpose of refunding or refinancing the Debt represented by the Outstanding Debt. The Refunding Bonds may be issued in such principal amount as may be determined by the District’s Board, in its sole discretion, and may include amounts sufficient to pay all fees, costs and expenses in connection with the Refunding Bonds. This Paragraph 19(d) shall take effect immediately; provided that if the District does not issue the Refunding Bonds on or before December 31, 2016, this Paragraph 19(d) shall be deemed repealed and of no further force or effect.
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3. All capitalized terms used herein and not otherwise defined shall have themeanings ascribed to them in the IGA.
4. All language in the IGA not expressly amended by this Amendment shall remainin effect as written.
[Signature page follows].
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IN WITNESS WHEREOF, the Parties have executed this Amendment as of the day and year first set forth above.
WHEATLANDS METROPOLITAN DISTRICT
By: ______________________________________ President
ATTEST:
________________________________ Secretary
APPROVED AS TO FORM:
WHITE BEAR ANKELE TANAKA & WALDRON
________________________________ General Counsel to the District
CITY OF AURORA, COLORADO
By: ______________________________________ Steve Hogan, Mayor
ATTEST:
________________________________
By: _____________________________ Its: _____________________________
APPROVED AS TO FORM:
________________________________
[Signature Page to First Amendment to Intergovernmental Agreement Between the City of Aurora and Wheatlands Metropolitan District].
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EXHIBIT C Notice to Wheatlands Residents
and Informational Materials