Agenda Date: 11/18/2014
Subject:
Title
Resolution approving the 2015 Operating Plan and Budget for Highline Business Improvement District
Body
Presented By: |
Michael Penny, City Manager |
POLICY QUESTION:
Does the city council approve the 2015 Operating Plan and Budget for Highline Business Improvement District?
BACKGROUND:
The Highline Business Improvement District ( the "District") was organized to provide financing for public improvements and services needed within the Highline Business Area, which is commonly known as the Ridge at SouthPark. The District is governed by a Board of Directors consisting of five (5) electors of the District appointed by city council (the "Directors"). The current Directors will continue to serve through 2015.
STAFF ANALYSIS AND FISCAL INFORMATION:
All capital improvements for which the District was organized have been completed and are in service. No additional improvements are planned for 2015.
The District issued its $3,730,000 Limited Tax General Obligation Refunding and Improvement Bonds, Series 2000B ("Bonds") for a term of 20 years. The proceeds of the Bonds were used to construct the capital improvements for which the District was organized. The District has no plans to issue any new bonds in 2015 but has the authority to refund the Bonds at any time. The District actively investigated the possibility of refunding the bonds in 2010, 2011 and 2012 but the refunding was found to be unfavorable. The District may continue evaluations in the future.
The agreements pursuant to which the Bonds were issued require the District to levy property taxes at the rate of 37 mills and to apply all of the proceeds of the said 37 mills to the Bonds each year until it is current on the annual Bond payments as originally scheduled. The District still has $3,725,000 outstanding in limited tax general obligation bonds. The original amount was $3,730,000. The District made a $5,000 payment to the principal in 2002. Because build-out within the District has been slower than anticipated, the District has not been able to meet its debt service payments as originally scheduled. Nevertheless, the District has fully complied with its covenant to levy 37 mills for debt service and to apply all of the proceeds from that levy to the debt service costs of the Bonds, and it is therefore not in default of its obligations under the Bond documents.
To date, the 37 mills that are levied for the Series 2000B Bonds have not generated sufficient revenue to fully pay the annual payments. The District Board expects that future growth in the District will generate sufficient revenues sometime in the future to make the current payments and repay the unpaid amounts (but the Board makes no representation of when or if the payments can be made.)
As noted in Exhibit C of the 2015 Operating Plan and Budget, the regular annual bond payment is about $381,041 and the maximum annual repayment amount authorized in the election was $460,000. Given the mill levy of 37 mills, the assessed value of taxable property in the District that would be necessary to generate $381,041 would be:
Actual value x 0.29 = assessed value
Assessed value x 0.037 = Tax Revenue
Assessed value = $10,298,405/0.037 = $381,041
The current preliminary reported assessed value of taxable commercial property in the District is $10,249,381 (preliminary as reported by the Arapahoe County Assessor on 8/06/14). Therefore, the value of taxable commercial property would have to increase to make the full regular annual payment.
The assessed value in the District decreased by approximately 1% from 2013 to 2014, believed to be as a result of general economic conditions. The District is substantially behind on its scheduled payments; however, the bond documents require the District to impose 37 mills and pay the proceeds towards the bond fund, and if it does so, the District is not in default on the bonds, regardless of whether 37 mills generates sufficient revenue to make the full payment due on the bonds.
Pursuant to § 31-25-1211, C.R.S., the City is to approve or disapprove the Operating Plan and Budget within 30 days of the receipt (the City received the 2014 Operating Plan and Budget on August 29, 2014). Staff did not present the Operating Plan and Budget to council within the statutory timeframes and has notified the District.
At the October 7, 2014 city council meeting, city council requested additional information from the District on: (1) the dissolution reserve ($25,000) and contingency ($66,043) amounts included on page 2 of the "General Fund 2015 Proposed Budget" (page 16 of the packet), and (2) the money from the Mission Hills Church. The District Manager provided the following information:
· "As stated on the General Fund via the note at the bottom of the page, the Board has determined, beginning with the 2015 Budget, that they would like to set aside funds for the future dissolution (termination) of the District, which is their long term plan."
· "The Mission Hills contract funds are being used at the discretion of the Board for outstanding obligations of the District. Please be advised that District is currently in negotiations with the current bond holder and a bank to re-finance their current bond debt."
STAFF RECOMMENDATION:
Staff recommends that the resolution approving the 2015 Operating Plan and Budget for Highline Business Improvement District be approved.
PROPOSED MOTION:
Proposed Motion
Motion to approve the resolution approving the 2015 Operating Plan and Budget for Highline Business Improvement District.