08-08-2018 RMIC RPT 01 - Laserfiche WebLink

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Finance Committee—Ca1PERS Update - Page 2 DISCUSSION: In 2004, the City formed Community Facilities District No. 2004-1 (the CFD) which consists of the land within the Galleria at Tyler Mall. Under the terms of an Agreement Regarding Financing & Construction of Parking Facility and Other Public Improvements, as amended (the Funding Agreement), by and between the City and Tyler, Special Taxes collected from within the CFD have been used to reimburse the City for its debt service payments on the 2006 COPs. By way of an amendment to the Funding Agreement that will be executed in connection with the issuance of the Lease Revenue Refunding Bonds, Series 2018A Federally Taxable (Bonds), the Funding Agreement will continue in existence after the refinancing of the 2006 COPs to be prepaid and all Special Taxes collected within the CFD will be used to reimburse the City for its debt service payments on the Bonds and the $5,000 of 2006 COPs that will remain outstanding. Debt service payments on the 2006 COPs are secured by lease payments made by the City from its General Fund as rent for certain property in and around the Galleria at Tyler Mall in which the City has either an ownership or leasehold interest. The leasehold interests in the underlying property were obtained through various leases entered into with Tyler and J.C. Penney. Under the terms of these leases, the City's leasehold interest was to terminate upon the refinancing of the 2006 COPs. Certain public improvements financed by the 2006 COPs lie on land that is owned in part by Tyler and in part by JC Penney. If the 2006 COPs are refinanced in their entirety, and the underlying leases terminate, these public improvements will be split between Tyler and JC Penney, which is an outcome that Tyler would like to avoid. As a result, the financing plan will refinance all of the 2006 COPs except for a $5,000 portion that will mature in 2036. This will give Tyler and JC Penney approximately 18 years to resolve the underlying land issue. Leaving the remaining $5,000 in bonds outstanding necessitates action and approval by the Municipal Improvements Corporation to facilitate the transaction. Debt service payments on the Bonds will be secured by lease payments made by the City from its General Fund as rent for the parking structure located next to the Nordstrom department store and the adjacent surface parking lots (collectively, the Leased Assets). The parking structure located next to the Nordstrom department store was leased in connection with the 2006 COPs and will be released from that 2006 lease in order to be leased in connection with the Bonds. The remainder of the property securing the 2006 COPs will continue to be leased in connection with the still outstanding portion of the 2006 COPs, though amendments to the 2006 leases will need to be executed in order to effect the release of the parking structure located next to the Nordstrom department store. The City will also need to enter into two Operating Agreements with Tyler: one to operate the Leased Assets through the life of the Bonds and a second to operate the Hughes Alley Parking Structure and the Addition thereto through the final maturity of the remaining portion of the 2006 COPs. Additionally, the City will enter into an agreement with Tyler in which the property owner agrees to subordinate interests in the Leased Assets and the assets leased in connection with the remaining portion of the 2006 COPs in favor of the owners of the Bonds and such 2006 COPs. Though the City's General Fund is the ultimate source of security for the debt service payments on the 2006 COPs, and will continue to be the sole source of security for the debt service payments on the Bonds, the City is reimbursed for such payments from a special tax collected from Tyler. Under the Funding Agreement, such reimbursements may be offset in the future if sales taxes at the Galleria exceed $3.36 million. Sales taxes at the Galleria in the fiscal year