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20120822 - Village at Avon Settlement Financial Q&A

20120822 - Village at Avon Settlement Financial Q&A

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Published by: vaildaily on Sep 26, 2012
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 Page 1 of 18
Village
 
(at 
 
 Avon)
 
Litigation
 
Settlement 
 
Financial
 
Questions
 
and
 
 Answers
 
Prepared by the Town of AvonThe Town of Avon is currently a party to two lawsuits concerning the Village (at Avon),including a lawsuit filed by the Town of Avon against Traer Creek Metropolitan District inOctober, 2008 and a lawsuit filed by Traer Creek LLC against the Town of Avon in April, 2010.The parties to the lawsuits negotiated and executed a Settlement Term Sheet in October, 2011.The Settlement Term Sheet requires the parties to negotiate to amend the original 1998  Annexation and Development Agreement, as amended (“
existing Annexation Agreement
”) and negotiate to amend the 1998 Planned Unit Development documents in order to implement thesettlement. Significant financial terms include issuance of $9 million of bonds to construct aWater Storage Tank (which is required as a condition to serving any additional development inthe Village (at Avon)), reissuance and restructuring of $52 million of bonds issued by Traer Creek Metropolitan District in 2002 and 2004, imposition of an additional fee on retail sales inthe Village (at Avon) in the amount of .75% to generate an additional dedicated source of revenue for the Town of Avon, and the release of the obligation of Traer Creek Metropolitan District to make certain payments to the Town of Avon under the existing Annexation Agreement.The existing Annexation Agreement is to be amended by the Consolidated, Amended and  Restated Annexation and Development Agreement (“
CARADA
”). The existing Annexation Agreement and the proposed CARADA are both complex legal documents which set forthcomplicated financial obligations and rights of the parties. For the purposes of this document,Traer Creek LLC and all affiliated entities associated with Traer Creek LLC are referred to asthe “
 Developer
”.There are several dozen complex legal claims asserted in the two lawsuits. Any statements,answers and expectations provided by the Town of Avon in this document are not intended to bea complete statement of the Town of Avon’s legal position on any particular legal claim in the pending litigation, and nothing in this document is intended to alter or modify the existing legal position that Town has taken in its pleadings.
The following questions were sent to Town Council on Tuesday, August 7, 2012 by Laurie Adler and Joe Walker on behalf of interested citizens.
1.
 
What is a District Impact Fee?
Metropolitan districts have general legal authority toimpose fees for public services and funding of public infrastructure and facilities.The Traer Creek Metropolitan District and Village Metropolitan District currentlydo not impose any impact fees with the Village (at Avon) Project area.
 
2.
 
What is a PIF and an Add-On PIF?
“PIF” is an acronym for Public Improvement Fee.The Village (at Avon) is currently subject to declarations and covenants whichestablish both a Commercial PIC (“Public Improvement Company”) and a Mixed-Use PIC. Under the existing Annexation Agreement, the PICs impose a 4% RetailSales Fee and the Town provides a Tax Credit in the amount of the Retail Sales Feeactually collected by the PIC. The Settlement Term Sheet requires the Developer
 
Town of Avon answers to Financial Questions related to the Village (at Avon) Settlement Term Sheet and Consolidated, Amended and Restated Annexation and Development Agreement (“CARADA”) 8/22/2012
Page 2 of 18
and the PICs to adopt, impose, collect and remit to the Town an additional .75%Retail Sales Fee which is referred to as the Add-On PIF in the Settlement TermSheet and is referred to as the Add-On RSF (Retail Sales Fee) in the CARADA.
 
3.
 
What is Credit PIF Revenue? 
Credit PIF Revenue refers to all revenue generated bythe various PIC fees for which the Town is obligated to provide a commensurateTax Credit. Credit PIF Revenues specifically include the revenues generated from a4% Retail Sales Fee, a 4% Accommodations Fee and a 2% Real Estate TransferFee. If the Town were to ever adopt a use tax on building materials, then the CreditPIF Revenue would also include a Use Fee and the Town would provide a TaxCredit for the Use Fee imposed and actually collected by the PICs.4.
 
What is the Escrow Agreement and its effective date? Where is a copy available?
TheClosing Escrow Agreement is a separate agreement that establishes an escrowaccount to “hold” executed documents until all required documents are finalized,approved by all parties and executed. When all identified documents are finalizedand executed, then all documents will be “released from escrow” and will becomeeffective and binding on all parties. The date of release is the “Effective Date.” If ALL documents are NOT finalized and executed, then ALL documents becomeautomatically null and void (not effective and not legally binding on any party). Theuse of a Closing Escrow Agreement is practical to the extent that the alternative is torequire over a dozen separate agreements to each cross-reference all other requiredagreements, which would then create an even more laborious and extensive draftingprocess to update all agreements as revisions occur. A copy of the Closing EscrowAgreement is expected to be available for public review for the August 28, 2012Town Council meeting.5.
 
Where can we find Town of Avon and Traer Creek Metro District financials?
Town of Avon financials and financial modeling regarding the proposed agreement areavailable on the Town’s website at
 www.avon.org/pendingapplications
; the Town’sbudget information is available on the website at
 www.avon.org/budget
. Traer CreekMetropolitan District and Village Metropolitan District may be obtained bycontacting them directly.
 
6.
 
Is any Town of Avon money owed to Buffalo Ridge?
No, the Town of Avon does notowe any money to Buffalo Ridge.
 
7.
 
Is a Town of Avon referendum needed for the Town to be able to raise taxes on citizens?
Yes. Section 20, Article X of the Colorado Constitution (commonly known as theTaxpayers Bill of Rights or TABOR), state and local governments in Coloradocannot raise tax rates without voter approval.
 
8.
 
What is the Asphalt Overlay Account?
The Settlement Term Sheet required theparties to establish an Asphalt Overlay Account whereby the Town, Traer CreekMetropolitan District and the Developer each contribute amounts to a fund to be
 
Town of Avon answers to Financial Questions related to the Village (at Avon) Settlement Term Sheet and Consolidated, Amended and Restated Annexation and Development Agreement (“CARADA”) 8/22/2012
Page 3 of 18
used exclusively for asphalt overlays of existing roads in the Village (at Avon). Thisprovision was negotiated to establish a dedicated financial fund to perform asphaltoverlays before existing roads in the Village (at Avon) deteriorated to an excessivedegree.
 
9.
 
What is the “Term” of this Agreement? The CARADA expressly defines the Termseparately from the Vesting Term as agreed in the Settlement Term Sheet.
The Termdoes not have a specific date specified, rather, the Term is “for so long as” theTown’s Tax Credit obligation must remain in place to fully satisfy all “DistrictDebts.” District Debts include the existing outstanding bonds (originally $52million, currently approximately $46 million in principal is outstanding), additionalbonds to fund the water storage tank (est. $9 million), repayment of Past DeveloperAdvances (est. $12 million), and payment of Supplemental Bonds to be issued in thefuture (est. $23 million). The total principal obligation of the District Debts forwhich the Town is obligated to maintain the Tax Credit is limited to $96 million.
 
10.
 
Why is BNP Paribas part of the lawsuit?
The Town asserted several claims challengingthe constitutionality of various financial and tax commitments of the Town underthe existing Annexation Agreement as interpreted by the other parties. BNPParibas intervened in the lawsuit to represent its legal interests.
 
11.
 
Who is party to BNP Paribas’ Letter of Credit? How much is it for?
U.S. Bank NationalAssociation as Trustee is the holder of the letter of credit against BNP Paribas in theoriginal amount of $52.1 million.
 
12.
 
What exactly are the financial ramifications if a settlement cannot be reached?
Thefinancial ramifications of a failure to finalize the settlement were presented to theTown Council on August 14, 2012. The “8-14-12 District Debt Presentation” can befound of the Town’s website under CARADA Public Review Materials at
www.avon.org/pendingapplications
. See also the answer to Question 49 below.
 
13.
 
What happens if the developer goes bankrupt?
The Town has no knowledge of thefinancial status of the Developer. As effects the Town, the only payment obligationunder the CARADA directly by the Developer is the contribution of $80,000 peryear for five years (total $400,000). If the Developer is not able to comply with thispayment obligation, then the Developer would be in default of the CARADA.Otherwise, the CARADA does not create any obligation of the Developer to makeadditional payments or contribute capital to the Village (at Avon) Project.
 
14.
 
What is the CARADA?
The CARADA is an acronym for the Consolidated, Amendedand Restated Annexation and Development Agreement, which is an amendment tothe existing Annexation Agreement. The existing Annexation Agreement wasoriginally approved in October 1998, and amended twice thereafter.
 

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