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HomeMy WebLinkAbout01/17/1995 MEDC MINUTES OF THE MUNICIPAL ECONOMIC DEVELOPMENT CORPORATION HELD ON JANUARY 17, 1995 A meeting of the Municipal Economic Development Corporation Board of Directors for the City of The Colony, Texas was called to order at 7:05 p.m. on the 17th day of January, 1995, at the Chamber of Commerce. The following persons were in attendance: Dean Kindy, President Jerry Sebastian, Vice-President Gary McClure, Treasurer Tommy Thompson, Executive Vice-President Leroy Grawunder, Hutchison, Boyle, Brooks and Fisher Boyd London, First Southwest Company Robert Stone, ONTRA, Inc. Lori Harlan, Staff Liaison, Economic Development Coordinator Mr. Grawunder, Mr. London and Mr. Stone introduced themselves and the role of their firms in the bond financing issue for the Wynnewood Peninsula Golf Course. Mr. Grawunder is the bond counsel for the project, and Mr. London is the city's financial adviser. Mr. Stone is a local representative for the Champions Golf Development group working on Corps of Engineers and environmental issues which much be addressed before the course can be constructed. 1. PRESENTATION OF BOND FINANCING ISSUE Mr. Grawunder provided a history of the corporation's development. He clarified that a non-profit entity was necessary for the financing issue, but this particular type of corporation is beneficial to the city because the EDC can not only construct and operate the golf course facility, it also has economic development powers. The structure of the proposed financing for the golf course on Wynnewood Peninsula has several key elements. The EDC will lease the Corps property and some Matthews Southwest property upon which to construct the course. The EDC will then issue tax-exempt revenue bonds to finance construction costs. Those bonds are repayable solely from course revenue. After the course is completed, the EDC will likely employ a course manager for the daily operation of the facility. Because the bonds are tax-exempt, there are limitations on the length of the management contract (3 or 5 years) as well as the structure of compensation in the management contract. The EDC will own and operate the course through a management contract on behalf of the city. The EDC cannot be dissolved as long as the debt is outstanding. At such point the debt is paid and the EDC is dissolved, its assets must be turned over to the city. Once Rauscher Pierce determines the financing is viable, there remains a great deal of background work which must be completed prior to the bond issue. The EDC must hold a public hearing on the project. The lease arrangement must be finalized between the city and the Corps of Engineers and the EDC and the developer. Once those details are in place, the bond issue itself must be structured. The EDC must authorize the issuance of the bonds, the City Council must approve the action, and the Attorney General's Office must also give approval. The bonds must be issued approximately one month before construction begins. 2, QUESTION AND ANSWER ON BOND FINANCING Mr. Kindy questioned the leasing of the private land on Wynnewood Peninsula for a portion of the course as an expense of the EDC. Mr. London clarified that the expense of leasing the land as well as all other golf course related expenses will be paid from the revenues generated by the course. Mr. London also addressed the repayment structure of the bonds. The time frame for repayment will likely be 25 years. Group members also questioned the existing Corps of Engineers lease. This lease must be extended to the length of the bond issue - 25 years. Mr. London spoke about golf course financing in general, particularly certain courses in Texas which have been experiencing financial difficulty. Their financing is similar to that which the EDC is considering - bonds issued by a non-profit and backed by course revenue. However, in one instance the non-profit declared bankruptcy and the city chose not to step in for bond repayment because it was not legally obligated to do so. Moody's Investor Service then lowered the city's general obligation bond rating. This incidence and others have required recent revenue backed bond sales to offer an exorbitant rate of interest. Such examples have prompted Rauscher Pierce to extreme caution in this project. Not only must the feasibility study in this project be thorough, it must expand the scope of studies conducted elsewhere to ensure this project will be successful. This is the responsibility of the developer. Mr. Stone assured the EDC that Champions Golf and Matthews Southwest will be working on the type of feasibility study necessary to make Rauscher Pierce comfortable with this project. The developer believes there are two major differences between the Wynnewood Peninsula project and the failed projects which create an advantage for this course. First, the land costs for Wynnewood Peninsula are nominal because the majority of the property will be leased from the Corps of Engineers. Second, the cost for irrigating the course will be low because a pump permit can be obtained to utilize Lake Lewisville water. There are several issues which must be addressed before funding for the project is possible. First, the underwriter must become comfortable with the feasibility study. This study will be produced and paid for by the developer under the direction of Rauscher Pierce. Additional important details are the property issues. The board expressed concern about the amount of time necessary to negotiate a Corps of Engineers lease. However, a new lease for Wynnewood Peninsula will not be negotiated. Instead, amendments to the existing lease that can be approved locally will be requested. The length of the lease must be greater than the term of the bonds. Board members suggested addressing the property issue simultaneously with the feasibility study to ensure the land will be available when the financing is finalized. The City of the Colony is the party in the lease with the Corps of Engineers. City Manager Johnny Smith and Mr. Stone have both spoken to the Corps about an extension of the Wynnewood Peninsula lease and received verbal agreement. However, more detail is needed before a revised lease agreement can be finalized. Because the feasibility study must be reworked prior to Rauscher Pierce's decision on the bond issue, the time frame for the project may be significantly lengthened. The work that must be completed during this time is required from the developer, not the EDC. Therefore, there is little assistance the EDC can provide to speed the process. Mr. London suggested the group be provided periodic updates on the feasibility study process to determine the progress of the program. The next meeting of the EDC board will be economic and business development training at TU Electric in Dallas on February 9, 1995. The meeting was adjourned at 8:50 p.m, Respectfully submitted, - rl~' lz?~~ Lori arlan, EDC ordinator