Loading...
HomeMy WebLinkAbout1998-10-19 Redevelopment Authority Minutes.~ SOUTH BEND REDEVELOPMENT AUTHORITY • REGULAR MEETING REVISED MINUTES October 19, 1998 1308 County-City Building 1:30 p.m. 227 West Jefferson Boulevard Presiding: Ms. Carolyn Pfotenhauer South Bend, IN 46601 The October 19, 1998 Regular Meeting of the Redevelopment Authority was called to order at 1:32 p.m. by its President, Carolyn Pfotenhauer. There was a quorum present. 1. ROLL CALL Members Present: Ms. Carolyn Pfotenhauer, President Mr. Matthew Kahn, Vice-President Mr. Jose Alvarez, Secretary Redevelopment Staff: Mrs. Ann Kolata Mrs. Jenny Hullinger, Recording Secretary Mr. Owen Rock Mrs. Michele Bush • 2. APPROVAL OF MINUTES Upon a motion by Jose Alvarez, seconded by Carolyn Pfotenhauer and unanimously carried, the Authority approved the Minutes of the Regular Meeting of September 21, 1998. 3. New Business a. Authority approval requested for Proposal from Baker & Daniels for professional services. Mrs. Kolata stated that the Redevelopment staff recommends refinancing the Blackthorn Golf Course bond. Baker and Daniels has served as bond counsel on several Redevelopment Authority bonds and has made a proposal to serve as bond counsel for this refinancing. Baker and Daniels was the bond counsel for the original Blackthorn Golf Course bond issue and has proposed snot-to-exceed fee of $22,500 and will provide services on an at-risk basis. If the refinancing does not occur, they will not seek reimbursement except for out-of-pocket expenses, such as Federal Express charges, paper, and copying expenses. When Baker and Daniels was originally approached, it was not known whether we would hold a negotiated sale or a public sale. We have now decided to hold a public sale. Baker and Daniels will • H:\WPDATA\AUTHORTY\ 101998.MIN The South Bend Redevelopment Authority • October 19, 1998 Meeting Minutes only charge for their actual time spent on the refinancing, which is expected to cost less than the not-to-exceed fee. The negotiated sale would have been more expensive to prepare for. Upon a motion by Mr. Kahn, seconded by Mr. Alvarez, and unanimously approved, the Authority authorized the proposal from Baker and Daniels for professional services. b. Authority approval requested for proposal from Crowe Chizek & Company LLP for financial advisory services. Mrs. Kolata stated that Crow Chizek has proposed to serve as financial advisor on an actual cost basis, not to exceed $20,000, except for the printing and publication of the official statement. Crow Chizek will bill according to the fees listed in their proposal, and will provide the official financial statement, contact the different rating agencies, and provide all the data that is necessary for the sale. When refinancing a bond issue, an escrow account needs to be established to pay off bonds by a certain date. Crowe Chizek will set up and structure that escrow account. A separate accounting firm will need to be hired to give an opinion that the amount of treasuries purchased is sufficient to meet the payment schedule of the old bond, and Crowe • Chizek will work very closely with them. Crowe Chizek will also work on the bond closing. The Redevelopment staff, bond counsel and the accounting firm will all work together to provide the information necessary in order to have the bond sale. Crowe Chizek has been following interest rates and watching for a good opportunity to refinance the bond. Our first interest rate on the bond was so good that rates have not fallen fax enough to create a net savings until now. The anticipated savings for refinancing at this time are $675,000. The present plan is to have the bond sale on November 10, 1998 and to close on the bond November 24, 1998. The draft of the official statement has been sent to the three rating agencies: Moody's, Fitch and Standard and Poor's. These agencies will evaluate the City's financial position and give South Bend a bond rating. Mrs. Pfotenhauer asked about Crowe Chizek's proposal: why did Crowe Chizek put in their hourly rates if they are having a fixed rate for their services? Mrs. Kolata stated that she thought the proposal was anot-to-exceed $20,000, but as she looked at the proposal more closely, she recognized that it was not clearly stated. Mrs. Kolata then called Crowe Chizek and asked them to clarify their proposal. Crowe Chizek stated that the proposal was intended to read: not to exceed $20,000. They will send a clarified proposal in the mail. Baker and Daniel's attorney, Mr. Rompola, stated that the purpose of Resolution No. • 2 H:\WPDATA\AUTHORTY\ 101998.MIN The South Bend Redevelopment Authority • October 19, 1998 Meeting Minutes 129 is to advance refund the outstanding bond indebtedness that was used to finance the construction of Blackthorn Golf Course. The bonds were issued in 1992 for $5,860,000, and the principal on the bonds will begin to be paid in March 1999. Since 1994 rates have been dropping dramatically, and Crowe Chizek has been watching to see when it would be advantageous to refinance the bonds. Many of the other City bonds have already been refinanced. This refunding is very similar to refinancing a mortgage, except that the old indebtedness cannot be paid off until March 1, 2001 because of the call protection for investors who buy long-term debts for an investment that will mature in 2005. When Advance Refunding Bonds are issued, an escrow agreement must be in place, and from that date forward the interest and principal on the 1992 bonds will be paid solely from that escrow account. In 2001 the balance will be large enough to pay off the 1992 bonds, which will leave only the 1998 bonds outstanding. As of the date of issuance of the 1998 bonds the Redevelopment Authority, the City of South Bend, and the Redevelopment Commission will be free of obligation for the 1992 bonds. It is important to have an escrow verification report in place, signed by an accountant, stating that semiannually on the interest payment dates, and annually on the principal dates, to the year 2001, the funds in the escrow account are sufficient to pay off the 1992 bonds at the appointed time. • Mr. Alvarez asked if the 1992 bonds would be paid by the issue or would the proceeds be used to escrow the amount. Mr. Rompola stated that the proceeds will be used to escrow the amount to pay the 1992 bonds. Through September 1998 only interest payments have been made on the 1992 bonds, but beginning in March 1999 principal payments will be made. The savings from the refinancing will come in two places: lower interest rates and escrowed securities that will generate interest. Mr. Alvarez asked what the interest rates are for the 1992 bonds. Mr. Rompola stated that the interest rate is anot-to-exceed 7%, and rates are presently ranging from 6.2- 6.3%, which is considerably higher than what the 1998 bond rates will be. To make the 1998 bonds worth purchasing they need to be in the 3.2 to 4.7% range. They will be sold to mature on the same term as the 1992 bonds: March 1, 1999 to 2015. By Federal tax law, the term of the bonds cannot be longer, but can be shorter. Mr. Kahn asked if the new bonds will have the same underwriter as the original bonds. Mr. Rompola stated that Crowe Chizek is recommending this bond be sold publicly, as the 1992 bonds were, because of the present market. Because of the complexity of the escrow and the timing of the sale, many bonds axe sold publicly. Both the 1992 and 1998 bonds have tax exempt rates. Crowe Chizek expects the Redevelopment Authority of the City of South Bend to get a "AA" rating from Fitch and Standard and Poor's, and an "A" rating from Moody's, which may bring an even lower interest rate. Moody's was the only company that rated the 1992 bonds. • 3 H:\ W PDATAW UTHORTY\ 101998. MIN The South Bend Redevelopment Authority • October 19, 1998 Meeting Minutes Mr. Rompola stated that the underlying financing mechanism for the 1998 bond issue is the same as the 1992 bond issue: a lease between the South Bend Redevelopment Commission and the Redevelopment Authority. The Commission has the ability to levy a tax upon the redevelopment district to pay lease rentals to the Redevelopment Authority. Mrs. Kolata stated that the Commission has not yet needed to levy this tax, but that a guarantee secures a better bond rating and lower interest rates. At present, the lease rentals are being paid through the Blackthorn Golf Course revenues. Mr. Rompola stated that every year the Redevelopment Commission evaluates the revenues to see if a tax levy is needed or not. The lease rental will stay in place, and after the refunding bonds are sold the lease rentals will be reduced because of the lower interest rates for the 1998 bonds. Mrs. Kolata stated that she did a payment comparison and found that in the first two years the projected savings are minimal, but after 2001 or 2002 the savings will be around $50,000 to $60,000 a year. The savings will depend on the date of the sale and the actual interest rate. Mr. Rompola stated that the 1998 bonds will be sold publicly in the same manner the 1992 bonds were. Crowe Chizek will prepare an official statement, distribute it to the underwriting firms that bid on bonds in Indiana, and the notice of the sale will be published in the newspaper. Upon 24-hour notice, Crowe Chizek and the City of • South Bend will determine the date of the sale, which is tentatively set for November 10, 1998. The market rates will determine the actual day of the sale, and Crowe Chizek will determine the best bidder. If rates suddenly go up and it is no longer profitable to sell the bonds, the sale will be postponed until the rates are favorable. Mr. Alvarez asked about the payment to Baker and Daniels if the bonds are not sold. Mr. Rompola stated that Baker and Daniels is only paid from the proceeds of the bonds. Mr. Alvarez noted that Crowe Chizek's proposal stated that they expect payment whether the bonds are sold or not. Mrs. Kolata stated that Crowe Chizek has already put in a considerable amount of time preparing for this sale and does expect payment for their time and out-of-pocket expenses, which are not to exceed $20,000. Baker and Daniels is only asking for their out-of-pocket expenses if the bonds are not sold. Mr. Alvarez asked about Crowe Chizek's proposal for hourly rates and out-of-pocket expenses, and asked that Crowe Chizek clarify their proposal. Mrs. Kolata stated that the only costs that would go over the $20,000 would be for the printing of the official statement, which is usually $1,500 to $2,000. Ms. Pfotenhauer requested that Crowe Chizek rewrite their proposal to clarify their costs, and Mrs. Kolata stated that they would. Upon a motion by Mr. Alvarez, seconded by Mr. Kahn, and unanimously carried, the Authority approved the proposal from Crowe Chizek for financial advisory services, with the clarifications requested. • 4 H:\WPDATA\AUTHORTY\ 101998.MIN The South Bend Redevelopment Authority • October 19, 1998 Meeting Minutes c. Authority approval requested for Resolution No. 129 indicating its intent to issue Redevelopment Authority Lease Rental Revenue Refunding bonds and that certain preliminary costs be reimbursed from the proceeds of said bonds. Mr. Rompola stated that the actions to accomplish the refunding are fairly simple: Resolution No. 129 establishes the intent to issue the bonds. The Redevelopment Authority is authorizing any expenses that occur prior to the issuance of the bonds to be paid out of the proceeds of the bonds. Upon a motion by a motion by Mr. Kahn, seconded by Mr. Alvarez, and unanimously carried, the Authority approved Resolution No. 129 indicating its intent to issue Redevelopment Authority Lease Rental Revenue Refunding bonds and that certain preliminary costs be reimbursed from the proceeds of said bonds. d. Authority approval requested for Resolution No. 130 authorizing the issuance of the South Bend Redevelopment Authority Lease Rental Revenue Refunding Bonds of 1998 (Blackthorn Golf Course Project) and other related matters. Mr. Rompola stated that Resolution No. 130 authorizes the issuance of the bonds and approves the forms of the documents. The "whereas" clauses explain the • issuance of the 1992 bonds to finance the construction of the Blackthorn Golf Course, and that the Authority is authorizing the issuance of the bonds not to exceed $7 million, with the interest rate not to exceed 7%. If interest rates go up to 7% the refunding will not occur because there will be no savings. The rest of the "whereas" clauses recite the litany of documents: the Trust Agreement forms the contract with the bond holders once the bonds are issued, the Official Statement (draft) that Crowe Chizek prepared, the Escrow Agreement explaining that the proceeds are deposited with the Escrow Trustee, and the Continuing Disclosure Agreement, a Securities and Exchange Commission requirement, to make certain annual information is available to bond holders because the City has issued bonds in excess of $10 million. This bond issue is less than $10 million, but because of the Morris Civic bond issue, the combined total is more than $10 million. Section 1 of the resolution authorizes the issuance of bonds in an amount not to exceed $7 million, Section 2 identifies the maturity date of Maxch 1, 2013, which is the same as the 1992 bonds, with the maximum interest rate of 7%. Sections 3 and 4 provide the redemption terms, and bond holders are assured that bonds cannot be refunded before 2006. Under current tax law a bond issue can only be advance-refunded one time. Section 5 discusses the Trust Agreement and indicates that the bonds will be issued pursuant to the Trust Agreement. Section 6 describes and approves the Escrow Agreement. Section 7 describes and approves the Continuing Disclosure Agreement. Section 8 authorizes those documents to be placed with the minutes of this meeting. Section 9 describes • 5 H:\WPDATA\AUTHORTY\ 101998.MIN The South Bend Redevelopment Authority • October 19, 1998 Meeting Minutes the process by which the bonds will be sold. Mr. Rompola pointed out that Resolution No. 130 states that the Redevelopment Authority has determined to publish the notice of intent to sell, but is not agreeing to comply with the public sales statutes. In a refunding, a bond seller has the opportunity to negotiate with one underwriter or to publish a notice of intent to sell and sell publicly. Mr. Rompola stated that Baker and Daniels thought it best to have the City sell the bonds publicly, but reserve the right to not have to comply with the public sales statutes in case there is any problem with the notice in the paper, etc. Section 10 authorizes the Redevelopment Authority to secure bond counsel opinion. Section 11 states that the bonds will be sold for not more than $7 million. Section 12 approves the form of the Official Statement. All of the documents are "in the form of so that Baker and Daniels is authorized to make changes and finalize the documents, and to secure signatures at a later time without formal approval. The documents still have many blanks in them which cannot be filled in until the bonds are sold. The attachments to the resolution are the "forms" of the documents. The Trust Agreement is the agreement that secures the bonds. Because Norwest Bank is the current Trustee on the 1992 bonds, the staff thought it wise to keep them • as Trustee on the 1998 bonds. To go to a new Trustee would incur additional expense. Ms. Pfotenhauer noted that there is a Y2K section in the Official Statement. Mr. Rompola stated that the FCC has made requirements for factoring in Y2K. Upon a motion by Mr. Alvarez, seconded by Ms. Pfotenhauer, the Authority approved Resolution No. 130 authorizing the issuance of the South Bend Redevelopment Authority Lease Rental Revenue Refunding Bonds of 1998 (Blackthorn Golf Course Project) and other related matters. e. Authority approval requested for the Eighth Addendum to amended and restated Lease between the South Bend Redevelopment Authority and South Bend Redevelopment Commission dated as of August 1,1990. Mrs. Kolata stated that this lease is for some taxable and tax-exempt bonds in the Blackthorn area that were used to purchase property. The Eighth Addendum takes out certain property that has been sold to Crescent Michiana Properties and Shamrock Development. The money from the sale of the property was used to defease that portion of the bonds. Upon a motion by Mr. Kahn, seconded by Mr. Alvarez, and unanimously carried, the Authority approved the request for the Eighth Addendum to the Amended and Restated • 6 H: \ WPDATA\AUTHORTY\ 10199 8.MIN * R • The South Bend Redevelopment Authority October 19, 1998 Meeting Minutes Lease between the South Bend Redevelopment Authority and South Bend Redevelopment Commission dated as of August 1, 1990. 4. CLAIMS SOUTH BEND CENTRAL DEVELOPMENT AREA, PUBLIC IMPROVEMENT PROJECT -1996A Norwest Bank Indiana, N.A., Annual fee for Lease Rental Revenue Refunding Bonds Series 1996A $2,304.50 Upon a motion by Ms. Pfotenhauer, seconded by Mr. Kahn, and unanimously carried, the Authority approved the claim submitted October 19, 1998. • • 5. NEXT MEETING DATE: November 16, 1998 at 1:30 p.m. 6. ADJOURNMENT There being no further business to come before the Redevelopment Authority, the meeting was adjourned at 2:20 p.m. Carolyn Pfotenh er, Pre ' ent H:\WPDATA\AUTHORTY\ 101998.MIN 7 ~.' e/! Ann Kolata, Director