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HomeMy WebLinkAbout1990-11-07 EURA MINUTESENGLEWOOD URBAN RENEWAL AUTHORITY November 7, 1990 I. CALL TO ORDER. D R A F T The regular meeting of the Englewood Urban Renewal Authority was ca 11 ed to order by Chairman Jim Totton in Conference Room A of Englewood City Hall at 5:40 P.M. Members present: Minnick, Schmidt, Totton, Bullock, Voth Wanush, Executive Director/Executive Secretary Members absent: Byrne Daugherty, Alternate Member Also present: Paul C. Benedetti, Legal Counsel Harold J. Stitt, Planner Jim Kreidle, The Kirchner Group II. APPROVAL OF MINUTES September 12, 1990 Chairman Totton stated that the Minutes of September 12, 1990 were to be con- sidered for approval. Schmidt moved: Bullock seconded: The Minutes of September 12, 1990 be approved as written. AYES: NAYS: ABSENT: ABSTAIN: Schmidt, Totton, Bullock, Voth, Minnick None Byrne None The motion carried. Ill. REVENUE REPORT Mr. Stitt stated that revenues are slightly ahead of the same time last year , and projections are that the sales tax ~evenues for the rema i nder of the year should be fairly close to those collected last year. Year-to-date revenues are $505,239.88 in ·property tax revenues, and $1,193,300.87 in sales tax revenues. If revenues for the remainder of the year meet projections , there should be a carry-over in the Reserve Fund to be used for the Ju ne 1, 1991 payment. Mr. Wanush stated that with the 1 a test revenues that have come in, the Au- thority is now able to meet the full December 1 payment . Mr. Wanush pointed out that the sales tax revenues in 1990 are basically even with the revenues from last year, even though the Buyer's Club has not produced revenue this year. Mr. Wanush stated that c opies of the revenue report ar e sent to the underwriters of the bond issue e ve ry month. - 1 - Minnick moved: Schmidt seconded: The Revenue Report dated November 1, 1990 be accepted. AYES: Tot ton, None Byrne None Bullock, Voth, Schmidt, Minnick NAYS: ABSENT: ABSTAIN: The motion carried. IV. REVIEW OF NOVEMBER 1 MEETING Mr. Wanush distributed copies of Minutes of the November 1, 1990 meeting which were not available for inclusion in the packets mailed on November 2, 1990. Mr. Wanush stated that the Authority is not expected to approve these Minutes at this time, but the Minutes will be considered at the meeting on December 5, 1990. Mr. Wanush stated that he felt there were two major themes voiced by the bondholders at the meeting of November 1, those themes being that (1) the City should do something to prevent the default of the bonds; and (2) that the bondholders are in favor of a restructuring of the bonds to a lower interest rate to enable the repayment of their principal investment. The Authority agreed to investigate the possibility of restructuring the bonds. Mr. Wanush suggested that options the Authority may consider could be the restructuring to a very low interest rate to preserve the principal, or restructure the bonds to provide an interest rate lower than the present 11% but the bondholder could lose some percentage of the principal. Mr. Wanush suggested that the investors who own large blocks of bonds may consider restructuring from a different perspective than some of the investors in attendance on November 1. Mr. Bullock stated that the frustration and helplessness that the bondholders feel was evident at the meeting. In his opinion, if the bondholders felt that their suggestions were considered and they had some "control", they would feel better about the situation. Mr. Bullock suggested the development of a one or two page fact sheet setting forth different scenarios and the pros and cons of each that might be pursued, and mailing this to all the bondholders with a request for their choice of option. Mr. Bullock agreed that it is important to contact "significant'' bondholders to gain their perspective. Mr. Totton stated he is concerned because the Authority does have an obliga- tion to the bondholders, and they should have input in the final determina- tion. Mr. Totton stated that he would like to see the Authority remain a vi- able entity, which will not be possible if there is a default on the bonds. Mr. Wanush pointed out that 100% of the bondholders are required to restruc- ture the issue, and further emphasized the care that must be exercised in making offers so that trading on the bonds is not inadvertently affected, or SEC regulations are not violated. Mr. Kreidle suggested that if a high level of bondholders agreed to restruc- turing, this would place the Authority in a better position to force accep- tance of a plan through the bankruptcy proceedings. Mr. Kreidle cautioned that there are other problems in this option. - 2 - Mr. Benedetti cautioned against asking bondholders for a "straw vote" on any plan, because of possible SEC violations and litigation. Mr. Bullock pointed out that if the Authority went through bankruptcy proceed- ings there would be protection from the Courts , but also additional expense. Discussion ensued. Mr. Kreidle suggested the possibility that his firm could call some of the larger bondholders to inquire what they might suggest the Authority do. He did not feel this would be a violation of any regulations, and could provide feedback to the Authority. Mr. Kreidle discussed his per- ceptions of the November 1 meeting, and stated that he had started to prepare a letter on the restructuring, which ended up being a questionnaire on restructuring. Mr. Kreidle suggested the possibility of the bondholders form- ing a committee with representatives to discuss means of resolving the problem with the Authority. Mr. Kreidle stated that this is a typical means to reach a resolution, and the bondholders wou l d feel that they have someone on their side to present their case. The Authority agreed that they are all interested in some mechanism to get input from the bondholders and to explore the different avenues that may be available to reach a resolution on repayment of the bonds. Mr. Bullock sug- gested that Mr. Benedetti be asked to research two or three avenues available to the Authority and bondholders, and prepare a summary of this research that could be made available to the bondholders. Mr. Bullock suggested that cour- ses of action could include default, restructuring, payment on i nterest only, principal only, and others that may be explored . Mr. Wanush supported Mr. Bullock 's suggestion, and further suggested that Mr. Benedetti be asked to have this research and summarization ready for the next meeting of the Au- thority in December. The objectives of the additional research and communication with the bondholders was discussed. Mr. Wanush pointed out that the Authority chose the default option because this option returned the most revenue to the bondholders, and did not require an expenditure for bankruptcy proceedings or restructuring efforts with no guarantee of success . Mr. Bullock emphasized that the bondholders in attendance on November 1 were overwhelmingly in favor of restructuring the bonds. If this could be accomplished, there could be a secondary market for the bonds for those individuals who wanted to sell. Mr. Wanush suggested that when the actual figures are prepared and made available to bondholders, they may change their minds on the merits of restructuring. Ms. Daugherty entered the meeting and took her chair with the mem bers of the Authority. Mr. Totton pointed out that members of the audience at the November 1 meeting were discussing an intere s t rate in the 7% to 8% range . If the restructuring can be accomplished, it will probably be at a much lower interest rate. He did agree that a secondary market could be created for the bonds with restructuring. Mr. Kreidle suggested that there is a market for the bonds today, but it is a "speculative" market, and the market would not be dollar for dollar. If the bonds are restructured, and a "coverage factor" is included it could provide increased value of the bonds. Mr. Kreidle distributed a work sheet that he had prepared using a 2. 3% interest rate, and assuming 1% increased assessed value per year. This work sheet was discussed. Mr. Kreidle suggested the - 3 - coverage factor be at least 1.35; this would increase the value on the bonds for a secondary market after about two years. Financial ramifications of this scenario were discussed. Mr. Kreidle discussed the factors that could be "built into" a restructuring, but acknowledged that the more that is built in, the more complicated it becomes. The responsibility of the Authority to the bondholders was discussed. Ms. Daugherty pointed out that the bonds were high risk bonds, unrated and unin- sured. Mr. Bullock stated that the Authority does have a fiduciary respon- sibility to the bondholders. Discussion ensued. Mr. Benedetti asked for a ballpark figure on the cost of restructuring. Mr. Kreidle estimated a minimum of $270,000, and if the Authority had to go through bankruptcy court, it could cost at least another $100,000. Mr. Krei- dl e suggested that the Authority could ask the bankruptcy attorney and the bond company working on the restructuring if they would work on a "contingency basis" --getting no money unless the workout were successful. Ms. Schmidt asked where the money would come from to pay for the restructur- ing. Mr. Kreidle stated that ultimately it would come from the bondholders, and would come off the top of the restructured issue. Mr. Totton referred to Mr. Kreidle's work sheet, and asked if the revenue fac- tors were based on inflation rate only. Mr. Kreidle stated that this is the case. If the vacant spaces were leased up and revenue coming in from this source, the total revenue would be higher. Mr. Krei dl e summarized the position of the Authority: The Authority has no control over the amount of revenue coming in; the Authority has no assets; the Authority has one class of creditors, and all revenues that do come in are pledged to repayment of the bonds. Mr. Wanush emphasized the need to contact the holders of large blocks of bonds after Mr. Benedetti has reviewed all th~ ramifications of contact by the Au- thority. Mr. Voth asked if the Trustee could contact those bondholders. Mr. Kreidle suggested that in many cases the Trustee has different interests than the Authority. Ms. Daugherty noted that at the meeting of November 1, one of the bondholders indicated a willingness to forego the December 1 interest payment to facili- tate the restructuring of the bonds. She asked if this would be a possibili- ty. Mr. Benedetti suggested that if the interest was not paid , the Authority would automatically be in default, and suggested that if restructuring is pur- sued the Authority should go through the bankruptcy proceedings if the 100% agreement by bondholders cannot be reached. Brief discussion ensued . Bullock moved: Minnick seconded: The Authority direct Mr. Benedetti to capsulize the discus- sion at this meeting, review SEC regulations relating to disclosure and restructuring offers, and develop a fact sheet with several scenarios as an advisory report to the Authority; this fact sheet and scenarios could be sent to the bondholders. This document is requested to be avail- able at the next meeting of December 5, 1990. - 4 - AYES: Bullock, None Byrne None Minnick, Schmidt, Totton, Voth NAYS: ABSENT: ABSTAIN: The motion carried. Brief discussion ensued on obtaining the names of individual bondholders. V. OLD BUSINESS. Mr. Wanush stated that the Authority has received the latest assessed valua- tion on property from Arapahoe County. The assessed valuation has again been decreased, from $7 mi 11 ion to $4 mi 11 ion. Mr. Wanush stated that he has called the Assessor's Office in an attempt to determine how this figu r e was arrived at, and has been unsuccessful to date in obtaining the information. Mr. Benedetti stated that the suit against the County Assessor has been drawn, and will be filed within this next week. Mr. Benedetti stated that he and Mr. Wanush are trying to set a meeting date with the Assessor to discuss this problem, and expressed his appreciation to Mr. Bullock for his assistance in contacting Assessor-elect Reeves and Mr. Effland. Mr. Benedetti stated that he has talked to Mr. Effland and he seems very understanding of the problem. Mr. Benedetti emphasized that he wi 11 proceed with the fi 1 i ng of the com- plaint, and will continue to pursue other means of resolution. Mr. Benedetti pointed out that a restructuring of the bonds will be affected by the resolu- tion or lack thereof on the assessment problem. Mr. Totton stated that he had also had occasion to talk to Assessor-elect Reeves, and that he does seem very understanding of the problem. Mr. Bullock and Mr. Benedetti discussed the issue of filing suit vs. ad- ministrative remedies. Mr. Bullock stated he did not want to see the com- plaint remanded to the Authority with the directive that further administra- tive solutions should have been pursued. Mr. Benedetti questioned whether there are administrative remedies to the issue. He stated that a declaratory judgment is needed, and further pointed out that he is active in a state-wide organization that is meeting and will be lobbying for a change in legislation. He stated that it is apparent that there are inequities throughout the state in the application of assessment abatements as applied to tax increment dis- tricts, but none have been as blatant as that experienced by Englewood. Mr. Benedetti stated that the L ittl et on Riverfront Authority has indicated they may want to join in the suit against the Arapahoe County Assessor. Mr. Benedetti stated that the Col or ado Municipal League has been of great ass is- tance in forming the state-wide group; however, before CML will lend assis- tance before the legislature, they want to be certain that there is City Coun- cil support for the issue, and they want to hear from the various City Coun- cils. Mr. Benedetti stated that he would like to see this issue addressed in the next session of the legislature. Brief discussion followed. VI. COMMISSIONER'S CHOICE. There was nothing brought up under Commissioner's choice. -5 - Mr. Kreidle commented that the Authority's decision to opt for default on the bonds over other options offered was not a bad decision. In his opinion, the bondholders will have a better deal under default. The meeting was adjourned at 7:00 P. M. Gertrude G. Welty Recording Secretary - 6 -