Loading...
HomeMy WebLinkAbout1994-04-06 EURA MINUTES.. ENGLEWOOD URBAN RENEW AL AUTHORITY APRIL 6, 1994 I. CALL TO ORDER. The regular meeting of the Englewood Urban Renewal Authority was called to order by Chairman Mulhern at 5: 30 P. M. in Conference Room A of Englewood City Hall. Members present: Drew, Havens, Mulhern, Smith, Vormittag, Waggoner Merkel, Executive Director/Executive Secretary Members absent: Richmond Also present: Harold J. Stitt, Planning Administrator Paul C. Benedetti, Englewood Urban Renewal Authority Legal Counsel Larry Fullerton, Project Manager for Cinderella City Walt Kane, Hanifen-Imhoff Il. APPROVAL OF MINUTES. February 2, 1994 Chairman Mulhern asked for a motion on the Minutes of February 2, 1994. Havens moved: Drew seconded: The Minutes of February 2, 1994,be approved as written. AYES: NAYS: ABSENT: ABSTAIN: Havens, Mulhern, Smith, Vormittag, Waggoner, Drew None Richmond None The motion carried. ID. CINDERELLA CITY. Mr. Merkel introduced Larry Fullerton, Project Manager for Cinderella City redevelopment. Mr. Merkel noted that Cinderella City is within the Englewood Urban Renewal Authority dis- trict, that the property tax increments are pledged to the retirement of the bonds, but the sales tax revenues are not. There has been limited discussion of possible involvement of the Authority on redevelopment of the Mall. The City has been involved for at least three years in discussions with the current ownership to encourage redevelopment or sale of the Mall to a new owner interested in redeveloping the site. Mr. Merkel discussed several scenarios that 1 have been considered, including a possible donation of the Mall by the ownership to the City for disposition and/or redevelopment. The City would like to be able to help determine the direction on the redevelopment of the Mall. City Council places a high priority on the issue of the Mall, and a contract employee was approved. Larry Fullerton has been hired and will concentrate his efforts on the project. Mr. Fullerton reviewed his professional background for the Authority, citing his legal, con- struction, and real estate experience. Mr. Fullerton stated that he will be working with the other consultants on the Cinderella City project. He is now reading through old files on the Mall, and trying to learn what the community feel is for redevelopment. He attended the March 10 public forum, and stated that his impression of the comments made by those in at- tendance is positive. Mr. Fullerton stated he is excited to be involved with this project, and cautioned the Authority that this will not be an easy problem to resolve. *********** Mr. Merkel stated that there are several other meetings also scheduled for this evening that staff members are expected to attend. Mr. Stitt will have to leave no later than 6:45 P. M. to get to his next meeting, and Mr. Merkel will go to his second meeting when the URA ad- journs. Mr. Merkel also noted that Mr. Walt Kane of Hanifen-Imhoff has been invited to attend the meeting at 6:00 P.M. to discuss the bond refinancing. *********** IV. REVENUE REPORT Mr. Stitt discussed the revenue report. Sales tax revenues year-to-date are $290,046.93, com- pared to $237,147.94 for the same period in 1993. Property tax revenues are $91,838.22 in 1994 year-to-date, compared to $97 ,828.57 in 1993. Mr. Stitt pointed out that 1993 was a general reassessment year, and suggested this might account for a portion of the lower prop- erty tax revenues. Mr. Kane entered the meeting at 5:55 P.M. Brief discussion of the revenue report followed. V. HISTORY OF ENGLEWOOD URBAN RENEW AL AUTHORITY. Mr. Stitt presented a synopsis of the URA history, which he has updated with recent occur- rences. The Authority was activated to provide a financing tool for a flood control project along Little Dry Creek through downtown Englewood. Redevelopment proposals were re- ceived about the same time, studies were conducted, the Urban Renewal Plan was written, and the projects got underway. The initial developer, Brady Corporation, was unable to fulfill 2 their redevelopment obligations, and was removed from the project in 1986. Requests for proposals for redevelopment were advertised and received, with the resulting developments: 1. Trolley Square by Brady Corporation 2. Englewood Exchange by Osprey 3. Englewood Marketplace by Ross Investment Group 4. Phar-Mor Plaza by Lincor of Colorado The old King Soopers store was on the property eventually developed by Lincor of Colorado; however, before this could occur the Englewood Urban Renewal Authority had to step in and acquire the property from Cindermak because of their refusal to release King Soopers from the lease for their old store to facilitate the grocers' relocation to Trolley Square. This was an unplanned acquisition by URA. The Authority still owns the east side of the 3400 block of South Acoma that could be avail- able for development, along with the 28.5 foot frontage on Broadway at Englewood Parkway. Mr. Stitt responded to questions regarding the construction of the press box at the High School, noting that the athletic field had been lowered and reconstructed as a detention pond to hold overflow waters from Little Dry Creek during flood periods. A new press box was part of the overall project, and was part of an agreement among the City of Englewood, the School District, and Englewood Urban Renewal Authority to allow usage of the athletic fields for de- tention purposes. Mr. Merkel responded to questions regarding the status of Trolley Square. A prospective pur- chaser is negotiating with the FDIC and an agreement will, hopefully, be reached by June. Mr. Merkel noted that King Soopers is the key tenant of the Trolley Square development, and it is hoped the new owner will be interested in extending their lease and provide for their ex- pansion into the adjacent buildings on the south. Other tenants of Trolley Square were briefly discussed. Mr. Merkel commented on the design of the Broadway frontage, and stated that there have been inquiries from retailers interested in the lower level, which has been difficult to rent. VI. TAX INCREMENT BONDS Mr. Merkel introduced Mr. Walt Kane of Hanifen-Imhoff. Mr. Kane has a background in City administration and finance, served as City Manager of Lakewood on two occasions in addition to other City Manager positions, and is now with Hanifen-Imhoff. The tax increment bonds issued by the Authority carry an interest between 9 % to 11 % ; these bonds were unrated, uninsured and high risk. The Authority went into default on repayment of the bond issue in June, 1991, and since that time the Trustee has made payments on the principal and a small amount of interest. Mr. Vormittag excused himself from the meeting to attend a City Council Executive Session. 3 Mr. Merkel noted that in 1992, a proposal was put forth in the State Legislature that would allow urban renewal authorities to extend the term of indebtedness--in this case, longer than the 25 year term of the bonds. The City Council opposed this proposal. A similar Bill to al- low debt extension by urban renewal authorities was approved in 1993. Mr. Kane distributed some information to members of the Authority as a basis for his discus- sion. He suggested three alternatives to the present status for consideration: 1. Take no action. 2. Negotiate settlement with current bondholders to pay off bonds. 3. Tender and exchange bonds using longer maturity zero coupons and extension of tax in- crement longer than 2005. Discussion of the repayment policy on the bonds ensued. Mr. Benedetti stated that under the Trust Indenture, the Trustee could have continued paying only interest, but elected to call all the bonds due; no distinction was made on the amount paid on principal vs. that paid on inter- est. At the time of the default, the Authority did urge the Trustee to make such a determina- tion. Mr. Stitt stated that he understood the Trustee has asked the IRS for a ruling, but the IRS has declined to issue such a ruling. Mr. Kane stated that the sales tax revenues coming in to the Authority and Trustee are not from Cinderella City, but it is clear that the majority of people do not understand this. Tax Increment Financing was explained by Mr. Kane. The base year of revenues from prop- erty taxes and sales taxes was established and revenues over and above this base year level were pledged to repayment of the bonds. In the case of the Mall, the property tax increments were pledged to repay the bonds, but the sales tax revenues were not--these revenues continued to come to the General Fund of the City. Mr. Kane stated that the issued bonds were unrated, high interest bearing, high risk, and uninsured. Mr. Kane stated he was not aware of any legal action taken by any of the bondholders against the Authority. Mr. Benedetti confirmed that no legal action has been taken to-date. Mr. Benedetti discussed the efforts the Authority has exerted to keep a good relationship with the bondholders. The Authority did approach the City Council suggesting a possible pledge of additional revenue from the City, and extension of the term on the bonds; it was the determination of the City Council that they could not accommodate the requests of the Authority . Mr. Benedetti pointed out that there are over 300 bondholders on this issue. Mr. Kane agreed that it does appear the Authority disclosed all the facts to the bondholders . Mr. Kane stated that the URA bonds cannot be traded; he had tried earlier on this date to get a quote on the bonds, and could not do so. Mr. Kane suggested that if the Authority chooses the "take no action" proposal, in his opinion sooner or later there could be a problem of potential Ii tigation. 4 Mr. Kane discussed the possibility of negotiated settlements with bondholders, such as tender- ing an offer to buy back the bonds on a deeply discounted basis; this would allow the bond- holders to take a tax write-off that they are not able to do at the present time. Mr. Kane em- phasized that with over 300 bondholders, this will be a problem. Any resolution will be diffi- cult with this volume of bondholders. The extension of the payoff on the bonds past the year 2005 is also a possibility; however, the City will have to agree to this extension. He asked if the issue was by a vote of the Council or of the electorate. Mr. Benedetti stated it was by a vote of Council. The "tender and exchange" approach was discussed. Mr. Kane stated that a "tender agent" could be appointed, who could offer to buy the bonds and exchange them for new bonds that have a longer maturity. Mr. Kane described the use of zero coupon bonds in this procedure; the bondholders would receive a zero coupon bond in return for their interest in existing bonds. If the terms of the bonds were to be extended for a period of time, at some point the bondholder would be "made whole"--not lose money because the bonds are in default. This would create an atmosphere in which the bonds could be sold, and would remove the stigma of "default" from the Authority. Mr. Kane stated that if the Authority were to be involved in any other projects in the City, it could not borrow funds because of the existing default, but if this issue were to be restructured the record would show there was a "prior restructured debt" and the Authority would have the option to proceed on new projects and issue new debt. Mr. Merkel pointed out that not only would the URA and the City of Englewood be affected by an increase in the length of a bond issue, but the School District and other taxing entities are also affected for the length of the term of the tax increment. Mr. Mulhern asked whether the base year figures would be retained, or whether the figures would be adjusted to a new base. Mr. Kane stated that the established base year figures would be retained, because it determines the increment (growth) indicator. Discussion ensued. Mr. Benedetti cautioned that 100% of the over 300 bondholders will have to agree to any re- structuring proposal. Lack of such 100% approval could mean the Authority will have to go through Bankruptcy Court and let the court issue a decree. Mr. Stitt excused himself from the meeting at 6:45 P. M. Mr. Smith discussed the need to get rid of the "default", noting that there are $27,000,000 outstanding on the bonds. Mr. Smith estimated a cost of $8,000,000 to refinance and restruc- ture this issue, but is of the opinion that this is "do-able", and that the "carrot" is Cinderella City. Mr. Smith expressed the opinion that the bondholders want something that is tradable and will be willing to do an exchange on the bonds. Discussion ensued. Mr. Kane emphasized that any restructuring/refinancing procedure will be very difficult when 100% of the bondholder approval is required, and any project considered by the Authority will 5 have to be economically feasible. If the Authority thinks there is need for financing for some project, then it makes sense to try to restructure/refinance. Mr. Kane also emphasized the need for City approval to extend the pledge of repayment beyond 2005. Mr. Benedetti noted that Mr. Greg Fulton, a broker with Prudential Bache at one time, was instrumental in promoting the bill to allow extension of repayment on bond issues. Mr. Fulton was reported to control a large percentage of the bonds issued by the Authority. Mr. Mulhern stated that a rationale can be created on behalf of the bondholders to proceed with the restructuring/refinancing, but what benefit will the Authority realize. Mr. Kane stated that it would remove the default from the Authority's record. Mr. Merkel asked whether the TABOR amendment would have an affect on these procedures. Mr. Kane stated that there are some opinions that Urban Renewal Authorities are enterprise funds, and are not subject to the TABOR provisions. Discussion ensued. Mr. Kane discussed the public/private efforts of the City of Lakewood on the Westland Shop- ping Center, and suggested that some similar effort might be explored regarding the Cinderella City Mall. Mr. Kane emphasized that in Lakewood, the city money was used only on public improvements. Mr. Havens expressed the opinion that something should be done if possible; he asked Mr. Kane's opinion on the chances of floating replacement bonds. Mr. Kane stated the only way this could be done is by the tender and exchange route with the existing bond holders. Further discussion ensued. Mr. Havens asked about the market timing on reissuance of the bonds. Mr. Kane stated that any exchange would have to have some relevance to today's bond mar- ket. Mr. Benedetti questioned whether there might be some way the City could address the use of public purpose funds through the economic development division; this would be targeting a "blighted area" (the Mall). Mr. Benedetti suggested that the public/private partnership could use public funds on improvements such as the parking deck. Other possible options were considered, including Chapter 9 Bankruptcy. Also brought up for discussion was a possible "piggy-backing" of existing debt onto a new issue for a Mall project. Mr. Kane emphasized that existing debt has to be satisfied first. Mr. Benedetti asked Mr. Fullerton what kind of redevelopment he envisioned for the Mall site. Mr. Fullerton stated that he and Byrne & Associates, another consulting firm, are still trying to determine the uses best suited in the current retail market, and for this site; in his opinion there should be a good portion devoted to retail use. Mr. Benedetti suggested a bond attorney be asked to render an opinion on the restructur- ing/ refinancing proposals. Further contact with bondholders was briefly discussed. Mr. Mer- kel commented that unless there is another project, the City's position has been that just 6 "cleaning up the bonds" is not a reason to incur additional expense and debt. Brief discussion ensued. Mr. Mulhern asked if there was anything else to be discussed. Nothing further was raised for discussion. The meeting was declared adjourned at 7:25 P.M. Gertrude G. Welty, Recording Secretary 7