Title
Approving a Resolution Directing the Publication of Notice of Intention to Issue City of Pflugerville, Texas, Combination Tax and Revenue Certificates of Obligation, and Other Matters Related Thereto. (Taxable Certificates of Obligation for TIRZ, 2016C)
Summary
The Reinvestment Zone #1 of the City of Pflugerville, Falcon Pointe TIRZ (TIRZ) was created in December 2010 with the intent of reimbursing the developer and the City for specific projects constructed within the TIRZ boundary. The approved project plan (as amended) outlined the developer construction projects: Colorado Sand Segment A, South Tract regional pond, South Tract lift station, Lonestar Boulevard, and East Pflugerville Parkway; and City construction projects: Colorado Sand Segment B. To date, all construction projects are complete.
In accordance with the TIRZ financing agreement, a project reimbursement audit was completed by an independent auditor. This audit concluded that as of March 30, 2016, the developer had expended approximately $7.8 million on eligible projects. The financing plan also allows for interest to be paid to the developer on project costs for up to five years. The interest rate is identified in by the financing plan as the rate of debt issuance and since that rate has not yet been determined, the auditor has estimated the interest at $768,933. Therefore, the total reimbursement to the developer at this time is approximately $8.5 million. As of March 30, 2016, the City had expended approximately $2.2 million on eligible projects.
Since the creation of the TIRZ, the ad valorem taxes generated within the zone above a base value (or "increment") have been diverted from the City into the TIRZ funds. At the March 30, 2016 meeting of the TIRZ Board, the Board recommended to Council to issue bonds, in an amount that can be supported by the current increment, in order to reimburse the developer and City for TIRZ related projects. The City's financial advisor, Terrell Palmer of Hilltop Securities (formerly First Southwest), and Finance staff have analyzed the TIRZ funds and determined that a $7.9 million debt issuance is the maximum that the TIRZ can support at this time. The remaining developer and City reimbursements will be issued at a future date when the TIRZ tax base has increased in value, likely FY18 or later.
The attached resolution is the first step in the process of issuing taxable debt to be funded by the TIRZ. The City's portion of the TIRZ reimbursement is being paid through taxable bonds since a reimbursement resolution for TIRZ expenditures was not done. The difference in interest rate is estimated to be .02%. By approving this resolution, the City is not bound to the issuance of bonds. However, if bonds are issued, the total amount cannot exceed $1,600,000, as stated in the attached resolution, prepared by Richard Donoghue, bond counsel. This amount includes project and bond issuance costs related to City projects (i.e. Colorado Sand Drive). A prior agenda item is included for Council to consider approval of tax-exempt certificates of obligation to reimburse the developer project costs.
As noted, Mr. Palmer will be working with the City as the financial advisor for this transaction. Mr. Richard Donoghue, of McCall, Parkhurst, and Horton, will be working with the City as bond counsel. Mr. Donoghue will be at the City Council meeting to answer any questions you may have.
Deadline for City Council Action
In order to close on the bonds and receive the funds by July 27, 2016, this resolution must be approved on May 10, 2016.
Projected Future City Council Action
The next action to be taken by the City Council will be on June 14, 2016, to approve the preliminary official statement and consider authorizing an issuance to refund exisiting certificate of obligation debt.
On June 28, 2016, at its regular meeting, Council will conduct a public hearing and award the sale of the certificates.
A tentative financing schedule is attached to this agenda item.
Fiscal Impact
The payment on these bonds will be made from TIRZ funds and will have no effect on the City's tax rate.
Staff Recommendation
Approve the resolution.
Drafter
Lauri Gillam
Assistant City Manager