City Council

Agenda Request

Agenda Of:

10-17-06

Agenda Request No:

IV A

Initiated By:

razeeda boochoon

senior budget analyst

Responsible Department:

fiscal services

Presented By:

jennifer l. brown

assistant fiscal services director

Department Head:

jennifer l. brown

assistant fiscal services director

 

 

Additional Department. Head (s):

 

Subject / Proceeding:

consideration and approval of burney road municipal utility district, issuance of $3,800,000 unlimited tax bonds, series 2006

Exhibits:

Staff memorandum

debt schedule from preliminary offical statement

burney road municipal utility district preliminary official statement

Clearances

Approval

Legal:

n/a

Executive Director:

n/a

Purchasing:

n/a

Asst. City Manager:

david l. ellison

Budget:

n/a

City Manager:

Allen Bogard

Budget

Expenditure Required:  $

n/A

Amount Budgeted/Reallocation:  $

n/a

Additional Appropriation:  $

n/a

Recommended Action

Consideration and approval of $3,800,000 Unlimited Tax Bonds, Series 2006 for Burney Road Municipal Utility District

Executive Summary

Burney Road Municipal Utility District is wholly incorporated within the City limits.  The District’s proposed bond issuance complies with applicable articles of Chapter 5 of the City’s Code of Ordinances.  The Burney Road Municipal Utility District presents for consideration and approval the issuance of $3,800,000 Unlimited Tax Bonds, Series 2006.  The bonds under consideration are the fourth series of bonds issued by the District.  At an election held within the District on August 1985, a total of $14,575,000 in debt authorized by the District’s voters.  The Series 2000 Bonds ($2,700,000) constituted the first issuance of the bonds from such an authorization.  On May 2001, voters of the District authorized a total of $25,000,000 in bonds and the remaining authorization from the August 1985 election was cancelled.  The Series 2001 Bonds ($3,600,000) constituted the second issue and the Series 2004 Bonds ($4,820,000) the third issue. The present issue constitutes the third issuance of bonds authorized at the May 2001 election, leaving the remaining balance of $12,780,000 authorized.  However, as the district will have financed the acquisition of all components of the system to serve the entirety of the district with the proceeds of the outstanding bonds plus the issue, the district does not expect to issue additional bonds in the future to finance any additional components of the system.  The issuance of debt is to be used for costs associated with the construction of water, wastewater, and drainage projects, developer interest costs, administrative and issuance costs.

 

The proposed term of the debt issuance is 20 years with level principal and interest payments.  The initial debt service schedule buys down principal beginning in 2007 with a payment of $155,000 increasing to $260,000 in 2026.  The current repayment schedule has not been extended.  Preliminary debt service schedules show an average of $1,137,897 with a maximum debt service requirement of $1,140,743 in 2019.  The district’s financial advisor will be present to review the proposed bond issue and answer any questions.  The district plans to sell the bonds on October 23rd, 2006.

Exhibits

 

MEMORANDUM

 

TO: Allen Bogard, City Manager

 

FROM:                 Jennifer Brown, Assistant Fiscal Services Director

 

DATE:                  October 6, 2006

 

SUBJECT:           Burney Road Municipal Utility District

                              $3,800,000 Unlimited Tax Bonds, Series 2006                           

 

Burney Road Municipal Utility District, a wholly incorporated District within the City limits is presenting to the Mayor and City Council for consideration and approval the proposed sale of $3,800,000 of Unlimited Tax Bonds Series 2006.  Prior to the sale of these bonds, the District must obtain a letter from the Mayor to the effect that the District is in compliance with appropriate clauses of Chapter 5 of the Code of Ordinances.   In addition, the Mayor must also provide a letter to the Attorney General of the State of Texas approving the form of the resolution or order of the board of directors authorizing the issuance of any bonds of the District absent the interest rates and sales price of the proposed bonds.

 

The rules, regulations and standards as set forth in Chapter 5 of the Code and the creation agreement are summarized as follows:

 

1.      Bonds may be issued by the District only for the purpose of purchasing, constructing, improving, and maintaining water, sanitary sewer and drainage systems within the boundaries of the District.

 

2.      District bonds shall expressly reserve the right of redemption of any bonds on any interest payment date subsequent to the tenth anniversary of the date of issuance.

 

3.      The redemption premium shall not exceed two and one-half percent of par value each year thereafter to par value.

 

4.      Bonds other than refunding bonds and bonds sold to a federal or state agency shall be competitively bid.

 

5.      No bonds shall be sold for less than ninety-five percent of par, provided that the net effective interest rate on the bonds sold, taking into consideration any discount or premium as well as the rate borne by the bonds, shall not exceed two percent above the highest average interest rate reported by the Daily Bond Buyer during the thirty day period preceding the date of the sale of the bonds.

 

6.            Bids will be received not more than forty-five days after notice of sale of the bonds is given.

 

7.            The order or resolution of the District authorizing the issuance of all refunding bonds of the District shall be approved by the Mayor. (N/A in this case.)

 

8.            The District’s resolution authorizing the issuance will contain a provision that the pledge of the revenues from the operation of the District’s water and sewer and/or drainage system to the payment of the District’s bonds will terminate when and if the City or some other City annexes the District, takes over the assets of the District and assumes the obligations of the District. This issuance, under consideration, is bonds payable from annual ad valorem tax. (This part is Not Applicable as the District is wholly and fully incorporated within City limits)

 

9.      The District shall not be permitted to escrow any funds in excess of two years' interest on the bonds which the district issued and shall levy a tax simultaneously with the first installment of such bonds and will continue a tax levy until such bonds are paid in full, unless the revenues of the system are adequate to discharge such bonds.

 

10.    Prior to the sale of any series of District bonds, the district shall secure a letter from the Mayor to the effect that the district is in compliance with Chapter 5.  The Mayor shall address a letter to the Attorney General of Texas approving the form of the resolution or order of the Board of Directors authorizing the issuance of any bonds of the district absent the interest rates on and sales price of the bonds.

 

Presented below is information regarding the District and the proposed bonds as provided in the Notice of Sale and Preliminary Official Statement. 

 

 

 

District Creation

 

September 26, 1984 by the Texas Water  Commission which is now the Texas Commission on Environmental Quality (TCEQ).The District is wholly incorporated within the corporate limits of the City of Sugar Land (City).

 

Acreage

 

445.7 acres

 

Development Status

 

 

 

 

 

 

 

 

 

 

 

There are 1,182 single-family residential lots; currently 1,142 homes including 26 homes under construction.

 

All water, wastewater, storm drain and paving infrastructure has been completed to serve the entirety of developable land within the district.

 

Sizes of homes between 2,800 to 4,200 sq. ft. and prices range from $237,549 to $354,279.

Water and Wastewater Utilities

 

The City and the District have entered into a utility agreement. Under the utility agreement the District will construct water, sanitary sewer and drainage system(s) in staged projects in an economically feasible manner to all land in the District. As each project of the system is completed and is certified by the City as such, the District transfers the completed project to the City. The City is then obligated to operate and maintain the completed project. The City charges customers in the District the same rate as similar users in the City.  

Total Bonds Authorized and Issued

1985- $14,575,000 Authorized

-         $2,700,000 Issued in 2000

-         Remaining Authorization Cancelled

2001 - $25,000,000 Authorized

-         $3,600,000 Issued in 2001

-         $4,820,000 Issued in 2004

 

Bonds Issued

Bonds Issued

$  14,920,000 including Series 2006
A to be issued

Amount Remaining To Be Issued After the 2006 Series

$  12,780,000

The district does not anticipate the issuance of future bonds to finance additional components of the system.

 

Source of Payment

 

 

 

The principal and interest on the bonds are payable from ad valorem taxes without legal limitation as to rate or amount, levied against taxable property.

 

Bond Rating and Insurance

 

 

 

 

 

 

The District has made applications to Ambac Assurance Corporation (AMBAC), Financial Guaranty Insurance Company (FGIC), Financial Security Assurance Inc. (“FSA”) and MBIA Insurance Company (MBIA) to issue a commitment for municipal bond guaranty insurance on the bonds. Standard & Poor’s has assigned an underlying rating of “BBB-” to the District’s credit.

 

2005 Tax Rate 

(Per $100 Valuation)

 

$ .325 Debt Service

$ .030 O & M

$ .355  Total

 

 

Series 2006 Bond Structure

 

Principal payments begin in 2007 at $155,000 increasing to $260,000 through maturity in 2026. Term of Series is 20 years.

 

Maximum Annual P & I to term    

 

$1,140,743 in 2019

 

Average Annual P & I  (2007-2026)

$1,137,897

Use of Proceeds from Bonds

Proceeds from the sale of the Bonds will be used to (i) pay the developer for the cost of underground water distribution, wastewater collection, and storm drainage facilities to serve Ashford Lakes, Sections 7-9, Eldridge Lake, Section 2, Gannoway Lake Estates, Section 2 and The Reserve at Glen Laurel detention pond and construction costs associated with the West Airport Boulevard Waterline Extension and Detention Facilities; (ii) pay engineering fees associated with the design and construction of the aforementioned facilities; and (iii) pay for issuance costs, legal fees, financial advisor fees, a fee to the Texas Commission on Environmental Quality, and to pay administrative and issuance costs.

2006 Estimated Assessed Valuation At 7/1/06, $244,104,359 for Tax Rate Requirement for Maximum and Average Debt Service. (95% collection)

 

The required tax rate for the Maximum Debt Service payment on the bonds is $0.492/$100 of the Estimated Assessed Valuation and the required tax rate for the Average Debt Service payment on the bonds is $0.4906/$100 of the Estimated Assessed Valuation assuming a 95% collection rate and no City rebate.

 

 

DISTRICT DEBT

Debt Service Requirement Schedule

The following schedule sets forth the current total debt service requirements of the District, plus the principal and estimated interest requirements for the Bonds.

           

 

 

The Bonds

Total

 

Outstanding

Principal

 

Debt Service

Years

Bonds

(Due 9-1)

Interest

Requirements

2007

 $         807,539

 $          155,000

 $         174,167

 $      1,136,706

2008

             811,119

              125,000

             200,475

          1,136,594

2009

             808,534

              135,000

             193,600

          1,137,134

2010

             810,034

              140,000

             186,175

          1,136,209

2011

             810,334

              150,000

             178,475

          1,138,809

2012

             811,419

              155,000

             170,225

          1,136,644

2013

             811,374

              165,000

             161,700

          1,138,074

2014

             811,524

              175,000

             152,625

          1,139,149

2015

             816,939

              180,000

             143,000

          1,139,939

2016

             820,824

              185,000

             133,100