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HomeMy WebLinkAbout1996-02-07 EURA ANNUAL MEETING' ENGLEWOOD URBAN RENEW AL AUTHORITY ANNUAL MEETING February 7, 1996 I. CALL TO ORDER. The annual meeting of the Englewood Urban Renewal Authority was called to order in Con- ference Room A of Englewood City Hall, Chairman Steve Mulhern presiding. Members present: Vormittag , Graebner, Dykes, Havens, Richmond, Smith, Mulhern Members absent: None Also present : Harold J. Stitt, Community Coordinator Mr. Mulhern welcomed Mr. Jeffrey Dykes to the meeting. Mr. Dykes is newly appointed to the Authority. Members of the Authority and staff introduced themselves. II. APPROVAL OF MINUTES. December 20, 1996 January 17, 1996 (study session) Chairman Mulhern asked for consideration of the minutes of the December 20, 1996 meeting. Vormittag moved: Havens seconded: The Minutes of December 20, 1996 be approved as written. The motion carried. Chairman Mulhern then asked for consideration of the record of the January 17, 1996 study session. Richmond moved: Smith seconded: The record of the January 17, 1996 study session be approved as written. The motion carried. III. ELECTION OF OFFICERS. Chair Vice-Chair Designation of Executive Director/Executive Secretary 1 Mr. Mulhern asked for nominations for Chair for 1996 . Vormittag nominated Mr. Mulhern as Chairman. Mr. Richmond seconded the nomination. There were no further nominations for Chair. The nominations were closed, and Mr. Mulhern was elected Chairman of the Authority for 1996. Nominations for the position of Vice-Chair were called. Graebner nominated Darrell Smith as Vice-Chair. Vormittag seconded the nomination. No further nominations were received; the nominations were closed and Mr. Smith was elected Vice-Chair for 1996 . Mr . Mulhern asked if staff had received any information regarding designation of an Executive Director/Executive Secretary for the Authority. Staff indicated that no information has been made available . Chairman Mulhern stated that the designation of an Executive Direc- tor/Executive Secretary will be tabled at this time. He stated he has had some discussion with City Manager Clark regarding the need for an Executive Director, and he will again discuss this issue with Mr. Clark. Mr. Mulhern stated that Ms. Ginny Howsam, legal counsel for the Trustee, has been invited to attend the meeting, and should arrive about 6 : 15 P .M. He urged that Authority members ask questions freely of Ms. Howsam. IV. REVENUE REPORT. Mr. Stitt discussed the latest revenue report. At the time the written report was prepared , no 1996 revenues had been posted by the Finance Department. Mr . Stitt stated that he had checked revenue figures earlier this date ; sales tax figures posted in January were available , and the figures are almost $20 ,000 below the January, 1995 figures. The year-end report was reviewed. The decrease (34 % ) in property tax revenues was noted and discussed. Mr. Mulhern noted that once redevelopment of the Mall begins , and the site is scraped , the property value will drop to land value; it will probably be two years or so before new development generates an increase in property tax revenues. Property is reassessed every two years, the last assessment being done in 1995 . The Mall redevelopment and resulting fi- nancial impact were further discussed. Mr. Stitt discussed the boundaries of the tax increment district and cited the boundaries on a map. Mr. Stitt pointed out that the Mall site is included in the Tax Increment District for property tax revenues only; sales tax revenues were not part of the TID. The possibility of including the redeveloped Mall in the sales tax TID were briefly discussed; Mr. Stitt pointed out that expansion of either the property tax TID or the sales tax TID would require City Council approval. 2 Condemnation of properties was brought up. Mr. Stitt pointed out that the Authority would have to have funds to support condemnation proceedings before such action can be begun. Mr. Stitt pointed out that for the Authority to have any role in the Mall redevelopment, the bond default must be cured. Restructuring the bond issue is not something that can be accomplished easily or quickly. Mr. Havens asked if new bonds could be issued. Mr. Stitt stated that new bonds could not be issued within the existing district . A new district would have to be devel- oped. Discussion ensued. Mr. Dykes asked what entity has power to increase taxes within the district, and whether the bondholders could bring pressure to increase the taxes. Mr . Stitt stated that only the City Council can levy a tax increase; the Authority cannot levy taxes . Mr. Stitt emphasized that the bond issue is the obligation of the Authority only; there is no obligation for repayment on the part of the City. Mr. Dykes asked if the bondholders have made any demand of the Trustee to do anything other than handle the revenues that are turned over to them. What can the bondholders do to get their initial investment back. The possibility of suit by bondholders, bankruptcy, and restruc- turing the bond issue were discussed at length. If the Authority were to file for bankruptcy, approval of the Trustee would be required. Mr. Mulhern pointed out that nobody knows what will happen after 2005 when the bonds were to be paid off; furthermore, it is our understand- ing the IRS has refused to rule whether payments being made are to be credited to principal, or interest. Mr. Stitt pointed out that restructuring will cost money, and the Trustee would have to approve use of revenues presently paid to bondholders to finance the restructuring. V. RESTRUCTURE OF BOND ISSUE. Ms. Ginny Howsam and Mr. Adam Dalmy entered the meeting at 6:25 P.M. Ms. Howsam is legal counsel to the Trustee, and Mr. Dalmy is an officer with the Colorado National Bank, the Trustee. Mr. Mulhern expressed the appreciation of the Authority membership to Ms. Howsam and Mr. Dalmy for their attendance. Mr. Mulhern provided a synopsis of a meeting called by City Manager Clark in December, 1995, which Clark, Howsam and Mulhern at- tended. The purpose of the meeting was to discuss options facing the Authority and the City regarding the default, and the possibility of bond restructuring. Mr. Dalmy stated that the Trustee would like to see some resolution to the default. The out- standing debt is mounting because interest is being paid on unpaid interest as well as on the outstanding principal. There is a question whether the revenues being paid to bondholders now actually end in 2005, or continue indefinitely. Mr. Greg Fulton, a broker with Cohig & Asso- ciates, allegedly represents or controls 403 of the outstanding bonds and is very interested in a resolution of the default. Mr . Fulton has proposed a "tender offer" to restructure the bonds, but the feasibility of the proposal has been questioned. Mr . Dalmy suggested that the Author- ity should meet with Mr. Fulton, and further suggested the Authority enter into a "confidential agreement" prior to that meeting to assure there can be no " trading" on any information im- parted in the meeting . Mr. Dalmy also suggested the Authority should talk to local underwrit- ers to determine if there is interest in restructuring the bond issue . Mr. Dalmy advised the 3 Authority that Chapter 9 bankruptcy is not an avenue of cure, nor is Chapter 11. Ms. Howsam discussed recent legislation prohibiting special districts and urban renewal authorities from fil-e ing for Bankruptcy. There can be no "forgiveness of debt" unless all bondholders agree. Mr. Dalmy emphasized that the role of the Trustee is not to restructure bond issues; however, they would provide assistance in reviewing proposals and submitting proposals to the bondholders. Ms . Howsam agreed that all restructuring proposals or default cures must be initiated by the Authority, and the Trustee will review the proposals. Mr. Mulhern asked if either Mr. Dalmy or Ms. Howsam had participated in restructuring of bond issues in Colorado . Both answered affirmatively . Further discussion ensued. Mr. Dalmy reiterated his opinion that there are local bond houses that could be interested in restructuring, and might be willing to make proposals without re- quiring financing up-front. Mr. V ormittag excused himself from the meeting . Mr. Stitt asked the current status of the indebtedness. Ms. Howsam estimated it is now in the $33 to $34 million range. The possibility of pursuing new or amended legislation to allow bankruptcy filing by authori- ties was discussed. Ms. Howsam stated that if Chapter 9 bankruptcy were to be allowed, bondholders could be "bound" and "debt forgiveness" possible. The bankruptcy court would determine the disposition and settlement each bondholder received. Mr. Smith asked what percentage of the payments bondholders receive are credited to interest versus principal. Mr. Dalmy stated that the IRS doesn't want the bondholders to write off the bonds, so Form 1099 must be sent which indicates repayment of principal. However, the Trustee does keep records which indicate a breakdown of the payments. Mr. Mulhern inquired if the Trustee would be amenable to paying for a study to determine new options to offer bondholders . Mr. Dalmy replied that the Trustee would not provide funds for such a study. He reiterated that the Authority should approach various underwriters and re- quest proposals. Mr. Dalmy stated that the duty of the Trustee is to the bondholders; it is in the best interest of the bondholders to restructure the bond issue. Financing restructuring was further discussed. Extension of time to repay the bonds was brought up for discussion. Mr. Stitt stated that re- cent legislation has been enacted to provide for an extended repayment time; however, the Authority would have to amend the Redevelopment Plan, and this amendment would have to be approved by City Council in order to extend the repayment period. There are other taxing entities, such as the School District, who would lose revenues were the repayment time to be extended. 4 Mr. Smith asked what the market value of the bonds are today . Neither Mr. Dalmy nor Ms. Howsam knew the market value; however Ms . Howsam stated that there is some trade activity on the bonds . Mr. Dalmy expressed the opinion that bondholders would be willing to "give something to get something ", and that the restructuring might be easier to accomplish than an- ticipated . Ms . Howsam recalled a meeting of bondholders hosted by the Authority in late 1990 ; she estimated approximately 150 people were in attendance , the majority of which were elderly. Mr. Dykes asked if the Authority filed for Chapter 9 bankruptcy, and if there was no objection raised by bondholders, could the Court rule the Authority ineligible because of the legislation. Ms . Howsam stated that this is a definite possibility ; furthermore , bondholders could take the position they were not "bound" by any decision of the Courts if it did get through because of the legislation. Mr. Mulhern asked what the cost is for bankruptcy filings and proceedings. Ms. Howsam stated that the local improvement districts she has handled proceedings for paid approximately $35,000. Mr. Dykes stated that bankruptcy would be the best way to gain debt forgiveness. The life of the bond repayments and the "life of the Authority " were discussed. Mr. Stitt noted that on a couple of occasions, it has been indicated that the "Authority" ceases to exist in 2005, but that the term for bond repayment has no closure. Ms. Howsam stated that her impression is that the Authority will go out of existence, but that the transfer of funds will continue. Ms. Howsam referenced an "opinion" that someone in her office had written to that effect. Mr. Stitt asked for a copy of that "opinion." Ms . Howsam stated she cannot release this "opinion", but that she will send a copy of information previously given to City Attorney Brotzman. The impact of restructuring and possible conflict with the TABOR amendment was discussed. Ms. Howsam stated there would have to be an election to authorize extension of bond pay- ments. Ms. Howsam emphasized it is her opinion, and the opinion of the Trustee, that the bond repayment period will have to be extended beyond 2005. This will require both an Amendment #1 election, and approval from the City Council. Mr. Smith further discussed a tender offer, and commented that there would have to be some "set-aside" funds to pay bondholders who refuse to go along with the tender offer. Would those bondholders be paid at the market value today, or bond value when they purchased the bonds . Mr . Dalmy suggested the possibility that increment re venues might be used as "set aside funds" if a majority of the bondholders approved a tender offer. Mr . Dykes asked how records of revenues transmitted to the Trustee are kept. Mr. Stitt stated that Finance Department has a record of transmittals , and statements are received from the Trustee. Mr. Mulhern asked for suggested underwriters that might submit proposals for restructuring without requ iring financing up-front. Ms. Howsam suggested Kirkpatrick & Pettis, Newman & Associates , J. Uran Moody of Minneapolis , and George K. Baum. 5 ' Mr. Richmond asked if the Authority talked to the various underwriters, and they would agree e to develop a restructuring proposal, would the Trustee be willing to review the proposals. Mr. Mulhern stated that the Authority would have to go through the proposals and recommend what they felt was most feasible. Mr. Dalmy stated that the Trustee would be willing to view the proposal submitted by the Authority, and transmit it to bondholders. Mr. Dykes com- mented that the TABOR election would be a big problem to gain approval to extend the bond repayment beyond 2005. Mr. Stitt commented that the "district" exists until 2007, but the bonds were structured to be repaid off in 2005. Ms. Howsam questioned the possibility of including the redevelopment on the Mall site in the sales tax increment district. Mr. Mulhern stated that the City of Englewood has been very clearly opposed to that suggestion. Mr. Dalmy asked if bonds were to be issued on the mall redevelopment. Mr. Mulhern stated that he thought this possibility has been discussed, but the Authority has not been approached. Mr. Smith asked what interest rate is accruing on the unpaid interest. Ms. Howsam stated the interest rate is the same rate as on the bonds --it varies from 9 3 to 11 3. Mr. Dykes asked if the Trustee was receiving any pressure from bondholders to cure the default. Ms. Howsam stated that Mr. Fulton is applying pressure to get the default cured. Mr. Dalmy stated that he doesn't have a "feel for the mood" of the bondholders, but is of the opinion they would like a cure of the default. Mr. Mulhern asked if there were further questions or comments. He thanked Ms. Howsam and Mr. Dalmy for attending the meeting. Ms. Howsam and Mr. Dalmy excused themselves from the meeting. Mr. Mulhern asked for comments and discussion. Mr. Stitt commented on the issue of the Authority versus the District ceasing beyond 2005. The Authority was created in the early 1970's but did not become active until 1981. The Authority could have other projects to deal with separate and distinct from this issue were the bonds not in default; therefore, he ques- tioned the statement from Ms. Howsam that the Authority ceases to exist in 2005. The District was created for a given period of time --creation of the Authority was not limited to one proj- ect or one period of time. Furthermore, if the Authority is deactivated after 2005, who as- sumes the obligation to pay the debt if it continues. It was also pointed out that the Trustee receives fees for administering the payment of the bonds, so it is in their interest if the repay- ment period is extended. Further discussion ensued. It was the consensus that Legal Counsel Benedetti must be consulted, and the Authority must contact investment bankers. Once a clear course of action and a feasible proposal is developed, the Authority can approach the City, the Trustee, and the bondholders. Mr. Stitt suggested that an approach might also be made to the Colorado Community Revitalization Association (CCRA) for support to seek legislative relief regarding bankruptcy for authorities. Such an action would benefit more than Englewood. 6 The financial impact on the City of a redeveloped , revitalized shopping area, plus the change from non-profit to for-profit of Swedish Medical Center , was discussed. Were the City to be willing to extend the sales tax district for the Authority; this could eliminate a possible viola- tion of the TABOR amendment on the part of the City. Mr. Mulhern stated he would contact Legal Council Benedetti, contact some of the underwrit- ers suggested by Ms . Howsam , and possibly others that were not suggested . He will try to get this information to report to the Authority at their next meeting. The Authority determined to meet next on March 6, 1996, at the hour of 5:30 P .M. VI. DIRECTOR'S CHOICE. Mr. Stitt summarized the press conference regarding Cinderella City which was held on Janu- ary 31. There are still some issues remaining to resolve, but the transfer of property should take place in the very near future . Demolition will begin by the end of the year, and a pro- jected opening date is estimated for late 1997 or early 1998. Brief discussion ensued. The meeting was declared adjourned at 7:45 P .M. Gertrude G . Welty, Recording Secreta h:\gro up \boards\ura\uram0296 7