HomeMy WebLinkAbout02/06/1996 MEDC
MINUTES OF THE MUNICIPAL ECONOMIC
DEVELOPMENT CORPORATION
HELD ON
FEBRUARY 6, 1996
A meeting of the Municipal Economic Development Corporation Board of Directors for the City
of The Colony, Texas was called to order at 7:00 p.m. on the 6th day of February, 1996, at The
Colony City Hall. The following persons were in attendance:
Gary McClure, President
David Stanwick, Vice President
Ronnie Fischer, Treasurer
Tommy Thompson, Executive Vice President
Mary Watts, Executive Vice President
Lori Harlan, City Staff Liaison, Director of Economic Development
Secretary Jerry Sebastian arrived at 8:45 p.m.
1. GOLF COURSE PROJECT UPDATE
President Gary McClure provided a brief overview of the meetings held earlier in the day. The
financial partners briefed EDC and city staff concerning financing options for the project, and the
design team met with staff to discuss project budgets and determine decisions that must be made
in order to proceed with the project.
President McClure introduced Rich Grossman with Mark Pressman Associates, the project
underwriter. Mr.Grossman presented the three financing options discussed earlier in the day.
Options include straight revenue bonds issued by the EDC, certificates of obligation issued by the
city, and variable rate demand note revenue bonds. Because certificates of obligation would
require the city to become involved and offer the pledge of city taxes to cover any shortfalls, that
option was immediately dropped from consideration. Mr. Grossman recommended variable rate
revenue bonds because they offer the lowest available interest rate. City financial adviser Boyd
London further explained that the initial funding would be straight revenue bonds with a fixed
interest rate. Immediately upon funding, those bonds would be swapped for short term variable
rate bonds for a set period, approximately 5 - 7 years. At the end of the swap period, the EDC
could revert to its set rate, initiate a second swap, or refinance altogether depending on project
performance and the state of the financial inarket. The process of fixing a point in time at which
the EDC will convert to a fixed interest rate is termed hedging. It assures the EDC that if short
term interest rates skyrocket, after a period of time, a low fixed interest rate will be available. Mr.
Grossman provided several hand-outs to further explain that concept to the board.
Board members then asked questions about the financing options. Answers were provided by city
bond attorney, Mr. Leroy Grawunder, Mr. Grossman, and Mr. London. Clarification was first
given on the liability of the city in this type of transaction. The EDC will issue the bonds. The
bonds will be payable only with the revenue from the golf course project. The city will have no
responsibility to step in if revenues are not sufficient to cover the debt service. Mr. London
further clarified that unless there is bad faith shown by the city in working with the golf course
project, i.e. refusal to raise fees in order to cover debt, it is unlikely the city's bond rating would
be affected by project default. However, the best way to protect against that possibility is to plan
appropriately in this phase of the project to ensure - as much as is possible - that revenues will
cover all expenses.
Board members also questioned how the financing will become available. Mr. Grossman explained
that the EDC will have to obtain a letter of credit from a AA rated bank. The EDC will purchase
the letter of credit as a part of the financing. The letter of credit will be issued based on the
financial health of the city and the EDC because the EDC is an entity of the city. The letter of
credit is an assurance that if something goes wrong with the project, the bank will purchase the
entire issue. The board questioned the ability to find a bank to issue the letter of credit. Mr.
Grossman felt certain there would be several banks that would make an offer. A second factor in
obtaining the financing and the letter of credit is the fact that there is a good feasibility study for
the project done by a well respected firm.
Mr. Grawunder discussed the fact that this type of financing is not unusual. It is however unusual
in a golf course project. He stated he would discuss the project once again with the Attorney
General's Office to verify there are no problems utilizing this financing structure. He will also
prepare a second notice of intent to undertake a project to be enacted at an upcoming City
Council meeting. The existing notice was published in late 1994 and may be outdated. At the
same time the notice is enacted, he also recommended a date be set for the required public hearing
on the project. Finally, Mr. Grawunder explained the importance of maintaining the legal
distinction between the city and the EDC. This will ensure that the city has no responsibility in this
transaction. The EDC will sign the letter of credit and the bonds. In fact, future decisions of the
EDC should be made independently of the City Council and taken to the Council only for
authorization to move forward.
Project partners felt it would be necessary to conduct a half day work session with the City
Council to explain project financing and review the EDC's ultimate financing decision. Saturday,
February 24, was tentatively scheduled with the City Secretary's Office. Ms. Harlan will notify the
parties as soon as the date is finalized.
President McClure then gave a brief overview of the afternoon meeting between staff, project
architects, Matthews Southwest, and financial advisers. At that meeting a brief outline was
determined for the City Council presentation. Ms. Harlan will work with various parties in
assembling the information, and the EDC will meet several times prior to the work session to
finalize the presentation. A brief discussion was held concerning using the architectural
consultants, Tripp Davis and Finger Dye Spann, as the lead consultants for the project. This
would alleviate concerns that the EDC does not have the expertise nor availability to prepare
detailed request for qualifications/proposals, etc. As lead consultant, the architectural groups
would prepare those documents and assist the EDC in determining parties to whom they should
be distributed. The lead consultant would also assist in review of proposals and advise the EDC
on decision concerning clubhouse architects, constructions managers, management groups, and all
other secondary service providers.
The desired outcome from the City Council presentation on February 24 will be Council
authorization to move forward at its meeting on Monday, February 26. Also on the February 26
agenda, the notice of intent to undertake a project will be addressed as well as the date for the
public hearing.
President McClure asked for final questions and then offered a break after which board members
were asked to return to resolve final issues concerning the private sector proposal to construct the
golf course project.
2. DECISION ON PENINSULA GOLF ESCROW DEPOSIT
President McClure reminded board members of the January correspondence from Peninsula Golf
"demanding" the return of the escrow deposit given to the city. Ms. Harlan further clarified that
the board must make a decision on whether they will simply return the $50,000 deposit or require
Peninsula to submit invoices for reimbursement as per the escrow deposit agreement.
After a brief discussion, a motion was made to terminate any relationship between the EDC and
Peninsula Golf and release both parties from any liability associated with any agreement. The
EDC will return the $50,000 escrow deposit. In return, Peninsula Golf will release CURA from
the environmental assessment contract, and the EDC will retain the portion of the study
completed to date as the basis for our environmental assessment. Unanimous approval was given.
The board also discussed drafting a letter to the City Manager's Office expressing concern about
the actions of the City Attorney in the negotiation process with Peninsula Golf. No final decision
was made on that item.
The next meeting of the Economic Development Corporation will be Tuesday, February 13, 1996.
The meeting was adjourned at 9:35 p.m.
Lori Harlan, Director of Economic Development