Title
A resolution of the City Council of the City of Colorado Springs, Colorado approving the issuance of Ridge at Sand Creek Metropolitan District Limited Tax General Obligation Bonds, Series 2023 in the amount not to exceed $2,590,000 and related bond documents, for a district located in the east central area of Colorado Springs
Presenter:
Mike Tassi, Assistant Director, Planning and Community Development Department
Peter Wysocki, Planning and Community Development Director
Body
Summary:
The attached resolution will approve the issuance by the Ridge at Sand Creek Metropolitan District (“the District”) of Limited Tax General Obligation Bonds, Series 2023 in an amount not to exceed $2,590,000 and the related bond documents. These bonds will be privately placed with the developer with a coupon interest rate of 4.125%, and they are planned to be tax-exempt.
The City’s Special District Policy requires that City Council approval be obtained prior to issuing of any formal debt for metropolitan districts. Copies of the bond documents and associated supporting materials are attached.
This agenda item was reviewed by the City Council Budget Committee on April 11, 2023, and reviewed by City Council at the 5/8/23 work session.
This property is located in City Council District No. 5.
Background:
Metropolitan districts are created under Colorado Statute and City Policy to finance and/or maintain certain public improvements in commercial and residential areas primarily utilizing a property tax mill levy as the revenue source. These districts are a separate legal entity from the City, with independently elected boards.
This residential metropolitan district was created in 2020.
The public improvements to be financed by these 2023 Bonds consist of a portion of eligible street, water, sewer, stormwater, and park and recreation improvements. A detailed summary of these costs is provided as an attachment.
This will be the first and presumably final developer-related issuance of debt by this metropolitan district. The Council-imposed $3,325,000 limit on the aggregate total principal debt amount allowable for the District, which will not be exceeded. The 2023 Bonds will be repaid by a mill levy that will not exceed 33.398 mills per year, subject to additional Gallagher adjustments as described in the draft Bond Resolution. The 2023 Bonds will bear interest at 4.125% and are structured to finally mature on December 1, 2057.
Development in the District is substantially complete. Applicable public improvements have been completed, with costs certified.
Present and future property owners within the District will not be burdened with debt service mill levies of the District higher than the limited debt service mill levy set forth in the Service Plan. The Service Plan contains a “Gallagher adjusted” maximum debt service mill levy cap 30 mills, which is being adjusted due to a change in the rate of assessment for residential property as allowed in the Service Plan.
Financial Implications:
Pursuant to the District service plan, the City Special District Policy, and the bond documents themselves, the issuance of these bonds does not constitute a financial obligation of the City. The bond documents contain the limitations required by the City’s Special District Policy.
A draft opinion has been provided by the bond counsel for this metropolitan district that the bond documents are consistent with the approved service plan and with the City Special District Policy. Because these bonds will be privately placed, and therefore not subject to competitive marketing, a letter has also been provided by an external advisor with an opinion that the tax-exempt interest rate of 4.125% and other terms are reasonable. The City’s Special District Policy limits the interest rate on these related party privately placed bonds to no more than 400 basis points (4%) above a defined “index rate”. In this case the coupon rate will be well below that threshold rate.
Consistent with the Special District Policy these bonds privately placed bonds are structured to have an optional call date within five (5) years (December 1, 2028), after which date the District board of directors would have the option of refinancing these bonds if conditions were favorable.
Because residential metropolitan districts also have an associated Maximum Debt Service Mill Levy Imposition Term of no longer than forty (40) years, the draft Council resolution also includes a final discharge date of no later than 2060.
City Charter Section 7-100 provides that the total debt of any special district may not exceed ten percent (10%) of the total assessed valuation of the taxable property within the district unless such debt is approved by at least a two-thirds vote of the entire Council.
Board/Commission Recommendation:
N/A
Stakeholder Process:
The staff-level Special District Committee has been provided with the materials associated with this request. As of the date of this staff report no comments have been received.
Previous Council Action:
Council approved a service plan for the Ridge at Sand Creek Metropolitan District on December 10, 2019 (Resolution 151-19).
Alternatives:
City Council could choose to approve, not approve, or modify the proposed resolution.
Recommended Action
Proposed Motion:
Adopt a resolution the issuance of Ridge at Sand Creek Metropolitan District Limited Tax General Obligation Bonds, Series 2023 in the amount not to exceed $2,590,000 and related bond documents, for a district located in the east central area of Colorado Springs
Summary of Ordinance Language
N/A