City Council

Agenda Request

Agenda Of:

may 20, 2008

Agenda Request No:

VI-A

Initiated By:

razeeda boochoon

senior budget analyst

Responsible Department:

fiscal services

Presented By:

Julie Peak, Sr. Vice President

First Southwest Company

Department Head:

linda symank

director of fiscal services

 

 

Additional Department. Head (s):

 

Subject / Proceeding:

consideration and approval of fort bend county MUD district no. 137 issuance of $7,980,000 unlimited tax bonds, series 2008

Exhibits:

Staff memorandum

debt schedule

preliminary official statement

Clearances

Approval

Legal:

n/a

Executive Director:

n/a

Purchasing:

n/a

Asst. City Manager:

Karen Daly

Budget:

n/a

City Manager:

Allen Bogard

Budget

Expenditure Required:  $

n/A

Current Budget:  $

n/a

Additional Funding:  $

n/a

Recommended Action

Consideration and approval for issuance of $7,980,000 Unlimited Tax Bonds, Series 2008 for Fort Bend County Municipal Utility District No. 137.

Executive Summary

Fort Bend County Municipal Utility District No.137 is wholly incorporated within the City limits.  The District is proposing to issue its second installment of $81,800,000 in bond authorization approved by the voters of the District.  The second issue is planned for $7,980,000.  The District’s proposed bond issuance complies with applicable articles of Chapter 5 of the City’s Code of Ordinances. 

 

The District is one of the four municipal utility district established within the 2,018 acre Telfair development.  Home construction began in the District in 2006.  The District consists of 816 acres of which 272 acres are developed.  As of April 1, 2008 there were 515 homes completed, 95 homes under construction or continue to be owned by a builder and 257 lots available for construction.  Home prices range from $275,000 to $600,000.

 

The issuance of debt is to be used for $5.826 million costs associated with the construction of water, wastewater, and drainage projects, $1.4 million in connection fees, and engineering costs.  The issue will also fund $2.154 million in non-construction costs, including 12 months of capitalized interest, legal fees, issuance cost, developer interest and interest on bond anticipation note.

 

The proposed term of the debt issuance is 25 years with level principal and interest payments. The initial debt service schedule buys down principal beginning in 2009 with a payment of $165,000 increasing to $590,000 in 2032.  The proceeds of the bonds will fund twelve months of capitalized interest.  Preliminary debt service schedules show an average annual debt service requirement of $996,017 with a maximum debt service requirement of $1,041,125 in 2032 for both 2007 and 2008 Bond Proceeds.   

 

TCEQ recommends that the District levy a minimum debt service tax rate of $0.45 per $100 AV in the first year after the debt is issued, which would be the 2008 tax levy.    The District 2007 total tax rate is $0.63, with $0.10 for maintenance and $0.53 for debt service.  The estimated taxable assessed valuation at March 2008 is $186,857,540.

 

At this time, the District is requesting City Council approval of the proposed debt issue which they plan to sell on May 27, 2008.

 

 

Exhibits

 

 

 

 

 

 

MEMORANDUM

 

TO:                  Allen Bogard, City Manager

 

FROM:           Jennifer Brown, Assistant Fiscal Services Director

 

DATE:            May 13, 2008

 

SUBJECT:     Fort Bend County Municipal Utility District No. 137

                        $7,980,000 Unlimited Tax Bonds, Series 2008                           

Fort Bend County Municipal Utility District, a wholly incorporated District within the City limits is presenting to the Mayor and City Council for consideration and approval of the proposed sale of $7,980,000 of Unlimited Tax Bonds, Series 2008.  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

 

April 1, 2005 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

 

816 acres

Developers of the District

 

NNP-Telfair LP (“NNP” or the “Developer”), a Delaware limited partnership, is the developer of the District.  The general partner of the Developer is Newland National Partners, LP., a California limited partnership and the general partner of Newland National Partners, L.P. is American Newland LLC. American Newland LLC is a planned community developer in the United States. 

Telfair

 

The District is part of the master planned community of Telfair and one of four municipal utility districts, collectively consisting of approximately 2,317 acres of land.  In addition, Fort Bend Levee Improvement District No. 17 was formed to cover 2,317 acres of land.  Approximately 1,525 singe-family residential lots have been constructed or under construction in Telfair, including 658 in the District.  Recreational amenities within Telfair include a 2,200 square foot visitors center and central sales office, a lake system, a greenbelt system, over three miles landscaped trails, six neighborhood parks each with open space and playground and a recreation center with a pool, sand volleyball court and playground.

 

Status of District Development

 

 

 

The District is being developed as a master-planned community known as Telfair.  Home construction began in 2006.  As of April 1, 2008, 867 single-family residential lots on approximately 272 acres has been completed, 516 homes were completed, 95 homes under construction or continue to be owned by a builder and 257 vacant developed lots were available for home construction.

Approximately 478 additional developable acres currently within the District have not been provided with water distribution, wastewater collection and storm drainage facilities and approximately 66 acres are not developable (rights-of-way, detention, open spaces, easements and utility sites).

Prices of the homes range from $275,000 to $600,000.

Water and Wastewater Utilities

All of the land in the District is located within the corporate limits of Sugar Land.  The City and the District have entered into a utility agreement, dated August 8, 2005. Under the utility agreement the District will acquire, construct, and extend water, sanitary sewer and drainage facilities to serve the land in the District and when completed in accordance with approved plans and specifications, the District is required to convey title to the System in the City.  The City then operates and maintains the System, and is responsible for establishing water and sewer rates and billing and collecting for such services. 

The Utility Agreement provides that the District retain a security interest in the System to secure the City’s performance under the Agreement until the District’s bonds have been fully paid.  The District will then execute a release of such security interest and the City will own the System.  The Utility Agreement further requires the District to pay the City a capital recovery fee to purchase water supply and wastewater treatment capacity in the City’s existing system.  The City Connection Charge is set by the City and may be amended without the District’s consent at anytime.

Total Bonds Authorized

 

$81,800,000 for Facilities

$53,100,000 for Refunding Bonds

$19,500,000 for Road Purposes

   

Bonds Outstanding

$ 13,495,000 after Series 2008

Remaining Authorization

$68,305,000 for Facilities

$53,100,000 for Refunding Bonds

$19,500,000 for Road Purposes

 

Source of Payment

 

 

The principal and interest on the bonds are payable from the proceeds of a continuing, direct, annual ad valorem tax levied, without legal limitation as to rate or amount, levied against taxable property located in the District.

 

Bond Rating and Insurance

 

 

 

 

 

 

The District has not applied for an underlying rating nor is it expected that the District would have received an investment grade rating has such an application been made.  The purchase of the municipal bond insurance, if available, will be at the option and expense of the Underwriter.

 

2007 Tax Rate 

(Per $100 Valuation)

$ .53 Debt Service

$ .10 O & M

$ .63  Total

 

 

Unlimited Tax Bonds, Series 2008

 

Interest payments begin in 2008 at $114,712.50 and principal payment begin in 2009 for $165,000 increasing to $590,000 through maturity in 2032. 

Proceeds of the bonds include one year worth of capitalized interest.  Term of series is 25 years.

 

Maximum Annual P & I (2032)      

 

$1,041,125 for all outstanding Bonds

 

Average Annual P & I  (2009-2032)

$996,017 for all outstanding Bonds

Use of Proceeds from Bonds

Proceeds of the Bonds will be used to fund construction costs of $5.826 million (including $1.4 million in City connection fees) and non-construction costs of $2.154 million including 12 months capitalized interest, developer interest, redemption of a 2007 Bond Anticipation Note, and issuance costs.

2008 Estimated Valuation

$ 186,857,540 at 3/1/2008

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 $0.59/$100 of the 2008 Estimated Valuation and the required tax rate for the Average Debt Service payment on the bonds is $0.57/$100 of the 2008 Estimated Valuation assuming a 95% collection rate and no City rebate.

 

 

DISTRICT DEBT

Debt Service Requirement Schedule

The following schedule sets forth the debt service on the Outstanding Bonds and estimated debt service on the Bonds at an estimated interest rate per annum of 5.75%.  This schedule does not reflect the fact that an a amount equal to twenty-four (24) months of interest was capitalized from Outstanding Bond proceeds in July 2007 and twelve (12) months of interest will be capitalized from Bond proceeds.