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HomeMy WebLinkAbout1996-06-05 EURA MINUTES'' • • • ENGLEWOOD URBAN RENEW AL AUTHORITY June S, 1996 I. CALL TO ORDER The regular meeting of the Englewood Urban Renewal Authority was called to order at 5:40 P.M. by Chairman Mulhern. Members present: Mulhern, Smith, Graebner, Vormittag Executive Director Gryglewicz Members absent: Richmond, Havens, Dykes Also present: Harold J. Stitt, Community Coordinator II. APPROVAL OF MINUTES February 7, 1996 Chairman Mulhern asked for consideration of the Minutes of February 7, 1996 . Smith moved: Vormittag seconded : The Minutes of February 7, 1996 be approved as written. AYES: NAYS: ABSTAIN: ABSENT: Smith, Graebner, Vormittag, Mulhern None None Richmond, Havens, Dykes The motion carried. III. RATIFICATION OF APPOINTMENT Executive Director/Executive Secretary Chairman Mulhern stated that the Authority needs to ratify the telephone poll designating Mr. Frank Gryglewicz as the Executive Director/Executive Secretary of the Authority. Smith moved: Vormittag seconded: The Authority ratify the appointment of Mr. Frank Gryglewicz as the Executive Director/Executive Secretary for the Authority . AYES: Graebner, Smith, Vormittag, Mulhern 1 NAYS: ABSTAIN: ABSENT: None None Havens, Richmond, Dykes The motion carried. IV. REVENUE REPORT Mr. Gryglewicz and Mr. Stitt reviewed the latest revenue report. Sales tax revenues as of the end of May , 1996, are up 16.593 over the same period in 1995; however, property tax reve- nues decreased 1. 42 % from 1995. It was noted that property tax revenues are erratic-some months reflect high collections, other months reflect a decrease in collections. Discussion en- sued. The revenue report was accepted as presented . V. RFP RESPONSES George K. Baum Piper Jaffray Kirkpatrick Pettis Newman & Associates l ' • Mr. Mulhern briefly reviewed the meeting of February 7 , 1996, at which time Mr. Dalmy and • Ms. Howsam , representatives of the Trustee , were in attendance. Staff prepared a "Request for Proposals " (RFP), which was mailed to nine investment houses. Written responses from George K. Baum, Piper Jaffray, and Kirkpatrick Pettis were received, as well as correspon- dence from Newman & Associates declining to present a proposal. Staff also met with repre- sentatives of Bigelow & Company, but no written proposal was received. Mr. Mulhern stated that the three investment houses which responded are very reputable firms . Mr. Mulhern em- phasized the need for the Authority to determine the task the investment houses would be asked to address , and determine where we go from here . The Authority could choose one of three courses of action: • The Authority can say thanks, but we aren't going to do anything. • The Authority can sit down with the individual respondents and ask the trustee to join us . • The Authority can choose a specific proposal to pursue . Mr . Vormittag asked whether staff had a recommendation . Mr . Stitt pointed out that the three responses all say basically the same thing; however , if there is an approach the Authority wants to pursue based on the proposals as submitted , then it would be advantageous to ask these responding firms to meet with the members of the Authority. Mr. Mulhern stated that he had talked to Mr. Zarlengo from Newman & Associates. It has been made clear to the companies to whom the RFP was sent that the Authority has no money • to pay for up-front costs. Any proposed restructuring of the bond issue will require the firm to 2 • • • convince the Trustee and the Authority that the restructuring will work, and then approach the City. The Trustee may then agree to pay for the work done by the firm. If the Trustee deter- mines that the proposal will not work, it could lead to litigation. In that event, however, it could be pointed out that the Authority made an effort to resolve the issue, and the Trustee did not approve it, therefore the bondholders might sue the Trustee. Mr. Mulhern indicated that he had also spoken to Mr. Bishop from Kirkpatrick Pettis, who indicated it was better if the investment house worked for the Authority rather than for the Trustee. Discussion ensued . Mr. Smith expressed his view that the City of Englewood does have an obligation to provide assistance in the restructuring of the bonds, and that if this issue does re- sult in litigation it may cost the City twice as much. Even if the URA is dissolved in 2005, the debt will remain, and the City will be responsible for payment of that debt. Mr . Gryglewicz commented that with the TABOR amendment in place, it may be determined the City cannot assume the debt without a vote of the citizenry. The bonded debt is specifically a debt of the Authority. Mr. Gryglewicz further commented that the bonds were non-rated, uninsured, and were for an untested project; purchasers took the risk knowing it was not a debt of the City of Englewood. Conversely, Mr. Gryglewicz suggested it could be argued that this debt was in- curred prior to the TABOR amendment, and that this amendment would not apply . Mr. Mul- hern asked what happens to the debt at termination of the Tax Increment District in 2007 if re- structuring is not accomplished. He pointed out that the Authority is staffed by City represen- tatives, and a City Council representative has always been a member of the URA. The City does not have an "arm's length" relationship with the Authority . Mr. Graebner opined that the citizens are not going to vote to assume the debt. Mr. Mulhern commented that the Authority is trying to reconcile the bonded indebtedness; if the URA suggests a plan that can accomplish this and it goes to the Trustee, the Trustee might find it difficult to tum the plan down. Restructuring the debt and lengthening the time for pay-off at a lower interest rate was dis- cussed. Mr. Gryglewicz noted that the school district and other taxing entities are involved in the restructuring also, and may not approve lengthening the pay-off time on the bonds. Incre- ments from property tax revenues over the base amount are pledged to pay off the bonds, and to extend this time period would impact those other taxing entities. Litigation issues were briefly discussed . Mr . Stitt expressed the need for a legal opinion on several issues, among them what happens to the TID and URA in 2007. Also, the Authority is "building a defense" in the event of future litigation. Financial obligation for legal consulta- tion was also discussed. Mr. Steve Clark, Piper Jaffray, was welcomed to the meeting at 6:15 P.M. Mr. Clark gave a brief background of the Piper Jaffray firm, noting the firm is headquartered in Minneapolis and opened the Denver bond division in 1990. This firm led in underwriting general obligation bonds in the State of Colorado in 1995 . Mr. Clark stated that he has reviewed the RFP, and talked with Trustee representative Dalmy, former URA legal advisor Michael Johnson, Mr. Stitt, and Ms. Jeannie Vanda, the City's financial advisor from Public Financial Management, Inc . Mr. Clark stated that from his preliminary analysis and discussions there appears to be nothing improper with the way the bonds were marketed . 3 Mr. Mulhern emphasized to Mr. Clark that the Authority has no funds, and asked how much time he or members of his firm would be willing to devote to this project to determine if a re - structuring of the bonds is feasible without remuneration. Mr . Clark stated that from his dis- cussions with Mr . Dalmy , it is his impression that the Trustee may be willing to communicate with bondholders, suggest financing an analysis of restructuring possibilities , and set a defined time period for this to be accomplished . The Trustee might also be willing to pay for an analysis of restructuring . Today 's market on rated , insured bonds yields .05% -.07% of the amount of the issue to the underwriters . Interest rates payable to bondholders on today 's mar- ket range from 7 .5 % to 8 % on non-rated bonds. Mr. Clark suggested that they might be will- ing to put in a month 's work to do the analysis with no remuneration up-front. Mr. Mulhern asked the difference in perspective if the analyst works for the Trustee or if they work for the URA . Mr. Clark stated that agents must act for and on behalf of the client; the question is who is the client: the bondholder, or the URA. Mr. Clark recommended that there be a meeting scheduled with the Trustee, their attorney , City representatives , and the URA and their legal counsel, to talk this issue through . Further discussion ensued. Mr. Mulhern noted that the Trustee must approve any steps to restructure the bond issue , but will not initiate any action to accomplish the restructuring. Mr. Clark reiterated the need to get everyone "around the table ", and that the URA would have to facilitate the meeting. He did caution the mem- bers, however, there must be reasonable expectations and the members must be cognizant that there may be no agreement on a course of action . Mr. Clark stated that another question to be resolved is whether the City and other taxing entities would agree to extend the repayment pe- riod for five to ten years. Mr. Smith asked if the URA default hurts the City 's ability to sell bonds on other projects . Mr. Clark and Mr. Gryglewicz both stated that the City has sold bonds for special districts . Mr. Gryglewicz stated that the City recently refinanced general obligation bonds , and that Standard & Poor never asked about the default. Mr . Graebner asked Mr. Clark whether the City would become responsible for remaining debt if the Authority were dissolved after 2005. Mr . Clark suggested that at some point before the Authority "expires", the Trustee would sue to determine whether the increment is collectable. Mr . Clark stated that the interest rate right now is low , but there may be a desire on the part of bondholders to have some liquidity in the bonds and they would support a restructuring. Present activity on the bonds was briefly discussed . Mr. Clark stated that some bonds that have gone through their firm have traded at fifty cents on the dollar . He stated that there are people in Florida that are collecting defaulted bonds . Mr. Mulhern stated that it is important that the Authority have a voice in the process of re- structuring; he asked Mr. Clark if he would feel more, or less comfortable , if the Trustee were to be included in a discussion session with all respondents to the RFP . Brief discussion en- sued . Mr. Clark pointed out that bond underwriting is a very competitive business. Mr. Mulhern thanked Mr. Clark for his attendance and perspective. Mr. Clark excused him- • • self and left the meeting . • 4 • • • • • Discussion ensued. Mr. Mulhern suggested the Authority recommend meeting with all re- spondents to the RFP . Mr. Vormittag suggested that representatives of George K. Baum and Kirkpatrick Pettis will be very much along the general lines voiced by Mr. Clark. He sug- gested that Executive Director Gryglewicz and Mr . Stitt meet with the representatives and re- port back to the Authority. Mr. Mulhern disagreed with this approach, noting that the Authority would be breaching their responsibility and placing two City employees in a very tenuous position. Mr. Graebner agreed that the Authority members need to meet with all three responding firms . Smith moved: Graebner seconded: The Urban Renewal Authority schedule interviews with the three firms who responded to the RFP; the interviews will be conducted by the full board of the URA and staff advisors. The purpose of the interviews will be to gather information to assist the Authority to develop a proposal to restructure the bonds. AYES: NAYS: ABSTAIN: ABSENT: Graebner, Smith, Vormittag, Mulhern None None Havens, Dykes, Richmond The motion carried . Mr. Graebner suggested that there be an outline of questions to be posed to all applicants, thereby providing a better basis for judging responses. All members agreed this is advisable. Mr . Mulhern stated that he would be in touch with Mr. Gryglewicz and Mr. Stitt to develop the questionnaire. Mr. Stitt suggested that if members of the Authority have specific questions they want included on the questionnaire, to please call either Mr. Gryglewicz or him so it may be included. Mr. Graebner stated that one question he is interested in is "who they will work for -the URA or the Trustee". Mr. Vormittag suggested that it must be made clear the analyst will be working for the Authority, not the Trustee. Mr. Smith noted that if the bonds are trading at 50% of value in today's market, and if the bondholders are willing to restructure the bonds for a lower interest rate to gain liquidity, might they also be willing to write off 50 % of the unpaid debt. Brief discussion ensued. Mr. Mulhern asked staff to determine whether Board members could meet on either June 27 or July 11, and to secure a meeting room. He will initiate a conference call with Legal Counsel Benedetti, staff, and himself to discuss procedures . 5 VI. ANNUAL FINANCIAL REPORT Mr. Gryglewicz presented the Authority with a draft copy of the 1995 Annual Financial Re- port . He stated that this report needs to be reviewed and accepted before the end of the month. Brief dis~ussion ensued. There being no further business to come before the Authority, the meeting was declared ad- journed. Gertrude G. Welty, Recording Secreta h :\group\boards\ura\uram0696 .doc 6 • • • • •