It is 7:04 PM so we will get our town of Frederick Board
of Trustees meeting going.
Would you please take the roll for us, Trish.
Mayor Crites, present.
Trustee Mahan, here.
Trustee TeVelde, here.
Trustee March, here.
Trustee Lamach.
Mayor Pro Brown, present
Trustee
Padia, here.
Mayor, you have quorum.
Wonderful. Thank you.
All right, let's stand and join each other in the Pledge
of Allegiance, please.
I pledge allegiance to the flag of the United States of America
and to the Republic for which it stands.
One nation under God, indivisible,
with liberty and justice for all.
Thank you.
All right.
Do we have any changes to our agenda tonight.
No changes.
Mayor no changes and no special presentations.
Correct? Correct.
All right.
Thank you.
We'll move into our public comment.
This portion of our agenda is provided
to allow members of our audience to provide comments
to the Board of Trustees.
Please sign in and you will be called.
If your comments or concerns require
an action on that item, or items will be moved to a later agenda.
Please limit the time of your comments to three minutes.
No sign-ups tonight.
Thank you.
So we'll move swiftly into our staff reports.
We've got Bryan's town manager report.
Any questions.
Comments Bryan, would you like to share anything regarding
your town manager report.
Yes I'm mayor.
Members of the board.
Just a couple of items.
On the report.
The first one is, we do have for the scholarship,
the school is putting on, and it's
a little bit different this year.
But it's a wonderful opportunity.
On April 30, it's a dinner at 6 o'clock PM, I know.
Emily sent out an email.
Just send, if you're available to go,
that would be great, and we'll make sure
that you're registered for it.
We will have town representation there,
so we'll certainly represent Frederick in support of the kids
for Frederick high school.
That's on April 30 at 6PM.
The other key item is we are in, I think
this is the fourth round, on Thursday
of Public Works/Engineering Director interviews.
Certainly, I know Mayor is going to be able to help
out a little bit with that.
The team has vetted four strong finalists.
We had HR Advantage do a head hunt on this.
And so we've got four finalists that all have PEs.
So we're pretty excited.
And we'll run them through the gauntlet on Thursday
as vetting it out with the organization-
a huge step forward.
And hopefully we have some good news in the next couple
of weeks in regards to that.
And then the final item is just an item
that's in the Admin Report.
Just some great work that was done with the Police Department
in solving a murder case, as mentioned in communications,
that happened,
I think it was about 15- plus years ago, 2007.
Yeah, so that was a really cool thing.
We applaud the team for the great work
that they had done on that and bringing some resolution
to that which was powerful.
So grateful for them.
With that, I'm happy to take any questions.
Questions for Bryan?
Very helpful report.
Thank you.
Appreciate that.
No other questions.
All right.
We'll move into our consent agenda.
Our consent agenda items are considered to be routine
and will be enacted by one motion and vote.
There will be no separate discussion of our consent agenda
items unless a board member.
So requests, in which case that item
will be removed from the consent agenda
and considered at the end of the consent agenda.
You have three items under consideration tonight.
Would anyone like to remove any or provide some direction
on our consent agenda, please.
Madam Mayor, I move that we approve the consent
agenda as presented.
Second Motion and a second.
Thank you, Trustee Mahan.
Yes trustee
TeVelde yes.
Trustee March.
Yes Mayor Pro Brown.
Yes trustee.
Padia yes.
Motion passes 5 to 0.
Thank you.
All right.
We have one action agenda item, ordinance number 1404,
for clarity tonight.
Is this just a reading or are you looking for direction
from the board this evening.
So this would be direction on first reading for the board
this evening.
OK thank you.
And Mayor, to introduce this Item, for the first reading
for the execution of the delivery of a site
lease or lease purchase agreement, for the certificate
purchase agreement authorizing the sale of certificate
of participation.
This is something that as part of the great work that the team
has done over the last two years in
regards to the public works facility,
we had an update at the last,
I think it was in last month's board meeting on the project.
This is just the financing mechanism of how we're
going to proceed with that.
I want to introduce just a couple of team members.
First, Kurtis Adams, who's our Finance Director.
I know Anthony Bixby is here.
They'll be key team members and helping
us continually move this project forward from the town side.
And then obviously we have Maddie from Hilltop Securities,
who's a senior vice president.
That's just going to run through a quick, short presentation.
Just in general, from the understanding
of what a certificate of participation is.
And then certainly if there's any questions
in relation to that, we're happy to answer that.
Maddie.
Thank you.
Good evening.
Thank you for having me.
So yes, as Bryan just mentioned, I'm just going
to I have a few slides here.
I'm not going to read them in detail,
but just to provide a bit of information about what a COP is,
what we're doing here, and then a little bit of a market update.
Although I did this like a week and a half ago.
And as if anybody that's been paying
attention to the market over the last week, it has changed.
So what I am going to talk about a little bit today
is the overview of your finance team.
You've brought in several consultants
to help get this across the finish line.
A high level overview of what the legal structure is here.
A brief description of the authorizing ordinance.
I know it's a lot of words, but some of the key
highlights of what we deem to be relevant
and what you all should probably be caring about.
And then big picture financing timeline and that market update.
So for a financing team perspective, the town hired us,
I think, a year or so ago.
As you all were starting to go down this path of getting
ready to finance this project, Hilltop Security
serves as the town's municipal advisor.
We have a fiduciary duty to the town
and are required to act in your best interest.
So we essentially help guide the transaction along
and oversee the issuance and pricing process.
Kutak rock is serving as Bond and disclosure counsel.
You have a representative here this evening.
They are the ones that got to draft those lovely documents
that are in front of you and will obviously
be giving legal opinions as it relates
to the issuance of the COPs.
Stifel was selected through a brief RFP process
to serve as underwriter for this transaction.
They are locally based in Denver,
and I know I believe actually, Alan had been up here previously
to help through thinking through some capital needs of the town.
And then UMB bank as trustee, which is
more so important in the legal structure of things.
But they operate more so behind the scenes.
So there's a lot of words on here.
But the big picture perspective is
that COPs are a very common financing technique or tool used
by Colorado local governments.
It's essentially creating a lease structure
by which a property that you already
own or are going to build is leased to a trustee.
And then you are leasing it back.
Your annual payments, which loosely are called debt service,
but we legally would like to call them base rental payments
are subject to annual appropriation
that you're making as part of your budget process.
From a TABOR perspective, it is not
considered a multi fiscal year obligation because
of that annual appropriation nature
rather than a revenue pledge.
After going through that slide a number of times
with many different organizations,
I decided that a picture was a little bit easier to understand
what's happening here.
So that building in the middle, although it looks like a school,
it says government on it, I promise.
So that is meant to represent your leased property.
So in this instance that would to be constructed
public works facility.
You are leasing that to the trustee.
They are giving you an upfront payment, which in this instance
is your project fund.
So our targeted $46 million of proceeds.
And then you are leasing it back from them.
And those annual base rental payments
are then what goes to certificate holders
to repay that obligation.
So that's essentially what's represented
there but described on the prior slide. Bit of the credit detail,
So from a lease property perspective
you're not required to use the project that you are
building as the lease property.
You can use an alternate project or alternate facility.
That said, in this instance, it works very well because we'd
like to find something that's approximately equal in value
of what you're borrowing.
And if it's $46 million that we're borrowing
and that's how much it costs to build the facility.
That's a pretty good one to one ratio,
but we can look alternatively, and other entities
do so from time to time from a perspective.
These will be rated, so we expect them to have
an investment grade rating.
We will be using standard and Poor's or S&P for rating
of these certificates.
Typically, they will do their analysis
and they'll assign you essentially an issuer credit
rating, which is the equivalent of a general obligation bond
rating.
And then our COP rating is one notch below that.
But so as an example, if your issuer
credit rating or rating is AA, then
your COP rating is AA minus.
That obviously does result in a slightly higher interest rate
than if you're at the AA and the AA rating.
But usually we say it's about five
basis points for every notch.
So in the grand scheme of things, actually relatively
immaterial your actual cost of the project.
And obviously given what's happening currently and as far
as tariffs or inflation, those are actually much more impactful
to your overall repayment and borrowing costs
than your credit rating.
So this evening you are considering on first reading
the authorizing ordinance, which is what actually gives
the permission for the town to go execute
the certificates of participation
so long as we stay within a box.
And that's what those parameters create is.
So as long as we're able to meet those parameters,
then that gives the authorization
to the designated officials to issue the COP essentially
on behalf of the town.
In addition to that ordinance, you also
have several other documents that
are being approved as to form that again, just
create that legal structure.
You have several attorneys in the room that can
speak to that in more detail.
So I will not bore you with that,
but you feel free to ask questions.
And then the other piece is the preliminary official statement,
that is the disclosure document that
will be used by Stifel to go market these certificates
to investors.
And that really just has a lot of information about the town.
So your financials, historical operations, revenues,
fund balances, et cetera to really paint
the rosiest picture, so to speak, of the town,
to then be able to communicate the credit
worthiness of the town to potential investors
that would buy those COPs.
And this next slide, we just have the parameters
which are again, the important piece
here from the box perspective.
So we're essentially saying that the term of the COPs
shall not be longer than it's technically 29 years as
opposed to 30 just because of some legal requirements
within statute.
So essentially the final maturity potentially here
would be in 2054 that an up front payment from the trustee
shall not be less than $46 million.
So that's your project fund.
So we're making sure that you're getting exactly what
you need to build the facility.
Our maximum annual repayment amount
is we're capping that at $4 million per year,
and then our maximum principal amount of COPs that you're
issuing is 47 million.
The difference between the 46 and 47
has to do with other cost of issuance
and things, in addition to that 46 million project fund.
We actually expect those to be far less than $1 million,
but we'd just like to have a little bit of cushion
depending on how market changes.
So next steps obviously starting at the top,
we are here in front of you all this evening for first reading.
This will be considered your next meeting on second reading.
And then we'll really go through the heavy lift,
I guess I'd say of the financing process
as far as town staff time.
So we'll have that rating call with S&P. We'll be working
with Stigel and Kutak to finalize that disclosure
document, the preliminary official statement,
and get that ready to post and allow Stifel to go market
the transaction to investors.
We're currently targeting a pricing date of May 28
and closing on June 10.
That said, this is not set in stone,
and the same is true for the authorizing ordinance.
It is allowing you to do so.
It's not requiring you to do so.
So obviously, as things change and market volatility
depending if it calms down or continues,
we are not obligated to stay on this timeline.
The ordinance does allow for reimbursement.
So if the town needed to proceed with the project,
but we were not in a place to issue certificates yet,
you can use available funds of the town
and then reimburse yourself with proceeds once we actually
go to do that issuance.
And then sitting here where we are today.
So I think we're still working through the actual term
of the financing with the town.
The parameters were built to give you flexibility to do up
to that 29 year term, but also potentially
as short as a 20 year term.
Obviously, this is a long term facility
that you're constructing that has a long, useful life.
It really usually comes down to a budgetary perspective of what
that annual payment needs to look like,
so we'll continue to work through that.
That's not something that needs to be decided today.
We'll continue to evaluate that as the market moves forward.
I will note that interest rates from this date
are up about 25 basis points just given,
rates went down last week and now are back up
over these last two trading days and hopefully reach
some consensus here moving forward.
It's been a little hectic.
So we are anticipating a rating of AA minus for these cops.
So essentially an issuer credit rating or a rating of AA.
The town does have sales tax bonds
outstanding that are rated by S&P
and are rated at that AA category.
And then these COPs will have a call date, unlike your mortgage,
where you can go back to a bank and refinance
at any point in time.
Municipal bonds are typically issued with essentially a 10
year lock out provision where you can't refund in that period
or refinance or prepay, but any time on or after that date
you can do so.
And so that will be structured into this transaction.
So that hopefully 10 years from now interest rates
are lower or potentially you've accumulated some cash
to be able to pay off or refinance these COPs.
I think that's it.
Yes any questions.
I mean, I have a question for Kurtis most likely,
but just on what we're thinking on the rate on the was it
4.65 or 4.95.
Is that what I saw.
Oh the.
Yes our current.
Yes So yes.
So the currently are the 20 year option here is at a 450
basically that on the left.
Our option on the right.
That 465 is that 29 year term.
So the difference of that final maturity between 2045 and 54.
Those are not our only options.
You really can do anything in between there.
But obviously you can see it impacts that annual payment
at roughly 3.5 million on the shorter term
that a 20 year term and then a little under 3 million
under the longer term, but obviously then costs
you more money in the long run.
So we have not had any conversations yet
with the town about preference.
We're just leaving the options open.
But I don't know if Kurtis has anything he wants to add.
Yeah, I would say just kind of recently being looped
into this overall project.
My suggestion is that with Bryan and any other senior leadership
members, have a discussion as to what
the current operational load of the general fund.
I'm going to suggest more in line with the option two.
I know that's a slightly higher interest rate,
but in light of the general FTE growth of the town.
That's going to be my suggestion,
but I want to have those necessary conversations with
Bryan and Maddie and teams.
Yeah I appreciate that.
Well, I think we've talked about maybe
this is part of our retreat is just overall how
many large financing projects we have over the next 20, 30 years.
And we really need to have that as a more holistic conversation.
This is an important piece.
But I don't think we can pick option 1, 2, 3, 4, 5, 6 until we
understand the brevity of all of the financial components
that we're considering.
So I think we should put that on the schedule.
May I clarify with you on the 10 year lock out period,
we can start.
We just can't refi in that time.
Can you start making early repayment.
No, no unfortunately not.
No so you obviously could internally,
if you had excess funds available on an annual basis,
you could put some funds aside.
And obviously those would get invested
and you'd have interest earnings and potentially,
that would grow to then be able to create
a surplus of funds that would be available at that 10 year mark.
But unfortunately not.
The one caveat I'll say is that you can refund them
on a taxable basis early in the 2020 2021
frame, when interest rates were at all time lows,
we did see a lot of taxable advance refundings happen.
Obviously, we don't know what the next 10 years hold,
but in theory, if we entered into an environment, market rate
environment like that, again, we would evaluate doing a refunding
to see if it resulted in positive savings that
were worthwhile pursuing at that time.
And I'm not all that familiar with the purchasing
or investment of COPs, but I'm assuming
there's pretty heavy criteria for those
that would invest in our COPs that you can put in place.
Yes yeah.
So yes, there's certain requirements that investors have
to be able to purchase COPs.
That said, I will note that an individual in the town, if they
have the appropriate brokerage account
and all those types of things, they actually can go buy these
cops if they choose to do so.
Unlike what we call a dirt deal, like a metro district deal,
and some things that are a little bit more unsecure
or a little bit riskier, these are actually these
are investment grade rated.
They are fairly secure from an investor perspective.
So yes, there are certain sort of criterias and thresholds
that they have to be able to meet to purchase the COPs.
But there are honestly not all that limiting
just given what the credit is.
They don't typically then resell it to others to buy COPs.
Some may.
It depends on the account.
So there are some types of investors that are buying them
to hold in their account, and they're utilizing them to manage
their overall portfolios.
If you think of the Nuveens and name.
You're kind of larger companies, corporations, they do that.
There are some trading accounts that will buy them.
And then with the intent of selling them, just like you
would see in a day trade type of environment,
if they think they can make a buck off of it, basically
they will.
That said, what we do is work with Stifel pretty closely
to try and have the actual cops allocated
or given to folks, that are going
to buy and hold and be better from a secondary trading
perspective.
They don't want folks that are necessarily
flipping the bonds immediately.
They want to make sure that there is a viable market
for the COPs in the long run, because that
gives you some certainty.
Investors that are buying them.
Yeah great.
Well, you just explained what I was vulnerable about, so thanks.
Thank you.
Any questions, Mr. finance.
That was very helpful.
Thank you, thank you.
Yes do you have other team members, Bryan,
that have other items to present on this item.
No, the only other thing, and I might have Kurtis just
come and mention, just generally it
might be helpful for the current state of the town with debt.
I know we've talked about it during the budget,
but I think it's a good helpful reminder.
The other piece and I just check in with Jason.
We do need to look into this and maybe tomorrow
in the next couple of days.
The second reading is scheduled for April 22.
So given whether or not just the complications of that meeting,
if we have that meeting, let us look into it
and see what the publishing is.
At minimum, we can still hold a meeting if needed.
That has it been published.
I believe it has.
I was just looking at that.
OK, then.
Yes, please.
You can look into that and just let us know.
OK yeah.
It sounds like that schedule is somewhat
flexible, so should be OK.
OK thank you.
I think just holistically, one thing just to note
is so for local municipal government,
the total debt limit for the town
is 3% of the actual value determined
by the County assessor.
So that's not the assessed valuation but the actual value.
And so 3% So the total assessed value I'm sorry.
Actual value for the town is just over 4 billion.
And so our legal debt limit is $122 million.
So what's interesting, and I think this is exceptionally
rare, is that our total bonded debt currently
is just over $1 million.
So our bonded debt is very low with 46 million on the table.
The town has the capacity and still well, with
under the 122,000,003% limit.
So I just wanted to make note of that.
Is it common for municipalities to have multiple projects
with COPs then.
Is that not common.
I've seen it in a couple of jurisdictions I've been in.
Some of them have been COPs that were like five or six years,
and then they'll get another one going.
But yeah, certainly.
So our only remaining bonded debt are sales
and use tax revenue bonds for intersection construction.
And so just over $1 million it's very low.
Yeah agreed.
Yeah it's helpful.
Thank you.
Thank you Maddie.
Appreciate your time.
So, Madam Mayor, if I could also introduce Ryan Jardine,
he's bond counsel.
He was mentioned.
One of the other things that we picked up
on, as you saw a lot of documentation
that was provided to you.
One of the things that needed a slight change or Amendment
to what was originally presented to you
between first and second reading,
or if we can approve it this evening, to be included
in before next reading, is a slight change in the language
in one of the sections that talks about the deposit
to the project fund under indenture,
as opposed to the way it was worded before,
which is kind of a parenthetical.
So it's really not a huge material change, but just
one of the things that we highlighted,
I don't know if you want to add anything in.
Yeah we needed to modify a little bit of how we phrased one
of the parameters there didn't change the parameter
as much as just reflected that.
The actual security for the COP is the building itself not
a different building, right.
Nor the O&M of the building.
The building.
And that's already included in this language
that the Board would be considering in this ordinance.
No, because this red line came in
after we've published it to you all out in the packet originally
a week and a half ago.
So what I would recommend or suggest is, upon first reading
that motion include the ability to modify that language.
And then we will have that in the second reading as changed
So include the ability to modify the phrasing of parameters
for the indenture language.
That work.
That would be effective to be a part of the second reading.
OK Thank you.
Missing part of it to include the ability
to modify the parameters for phrasing of parameters
for the indenture.
Phrasing the parameters for the indentured language.
And if it's helpful for the transparency to the public,
we can put that red line in the packet for the second reading
and just show this is exactly the red line that was changed
so that what you'll see on second reading
is the final version.
We can have a call out to this particular language,
so please do.
Thank you.
Please do that.
Thank you.
Any other questions, comments, concerns.
I wrote it down too.
So it's ready.
All right.
What's the word before parameters.
That's the word.
I wrote it too tiny.
I was dumb.
prevailing phrase.
Phrase OK.
Phrasing phrasing.
Prasing all right.
Some directions, please, for this and see what happens.
That's all right.
Madam Mayor, I move that we include the ability
to modify the phrasing.
Sorry you'll have to approve the ordinance.
Yeah there we go.
Ordinance scroll up here.
There you go.
Wow, that went really crazy on me.
Scroll up to high.
It went fast and it went nuts.
Here we go.
I move that we approve ordinance number 1404.
With to include the ability to modify phrase
parameters for the indenture language
upon the second reading.
First reading.
It's close.
Second Motion.
And a second.
Thank you.
I gotcha.
Trustee Padia.
Yes Mayor Pro Brown.
Yes trustee.
March yes.
Trustee TeVelde.
Yes trustee.
Mahan yes.
Motion passes 5 to 0.
Thank you.
I should have mentioned this while it was being considered,
but I think communications was working on some big cues
for this project in general.
So maybe even having a finance component
so that this can be shared with our community in layman's terms
would be helpful.
That'd be great.
Thank you.
Great, thanks.
Trustee reports.
Anyone have any items you'd like to address tonight Excuse me.
No, just a mention again of the effort and the success
in finding the person that ended the life of a very young mom
in 2007 over in Prairie Greens.
It was a really dark time for the people
there at Prairie Greens when that happened.
And the longer it went, the more we were sure they were never
going to catch the person.
And to have that come around, there
was a lot of people that were living
back there in Prairie Greens and even some that weren't that saw.
So kudos to our Police Department and the CBI
and all those that were involved.
Great work done.
Yeah agreed.
Work is anyone else.
How about you, Mayor.
I don't have any items other than I
always write down your names.
And then the item that you had for trustee reports.
And right now I just have Dan murder for my notes.
So if anyone else can share some trustee reports for my notes
sake, that would be great.
I like that it's shorthand.
That's all I have for today.
You're going to let me leave it like that.
Yeah all right.
Yeah OK.
We don't have any discussion agenda items today.
We do have two executive sessions.
Jason, are you comfortable with myself recommending
a motion to go into both of those executive sessions
at this time.
Correct as long as if there's any objection
to having both of those approved at the same time.
Otherwise, you can do them as two separate motions,
but that should be fine.
Is there comfort with that Yes All right.
At this time, I would like to recommend a motion to go
into executive session 1 for conference with our town
attorney for the purpose of receiving legal advice
on specific legal questions under CRS section 24-6-402(4)(b)
regarding potential litigation, as well as a second executive
session separately for a conference with the town
attorney for the purpose of receiving
legal advice on specific legal questions under CRS.
Section 24-6-402(4)(b) regarding our employee handbook update.
So moved.
Second Thank you for that.
Trustee Mahan.
Yes trustee.
TeVelde yes.
Trustee Padia.
Yes mayor.
Pro tem Brown yes.
Trustee March.
Yes Motion passes 5 to 0.
Wonderful Thank you.
Let's take a five minute recess and we'll get going.
Thank you.
You got him.