HomeMy WebLinkAbout2003-01-08 - Agendas -Jan 06 03 05:33p
JAMES N. McCORD
flttorney at Law
11 N. WEST AVE.
SUITE #202
FAYETTEVILLE, ARKANSAS 72701
TELEPHONE (479) 695-1134
FACSIMLE (479) 695-1135
iimMOWrdlaw@alltel.net
January 6, 2003
To: Fayetteville Public Facilities Board VIA FACSIMILE
From: James N. McCord, Board Counse�l�
Re: Board Meeting January 8, 2003 $$
The Fayetteville Public Facilities Board will meet on Wednesday, January
8, 2003 at 4:00 p.m. in the conference room of Stephens, Inc at 3425 N. Futrall
Drive, Suite 201 in Fayetteville. The Agenda is:
(1) Consideration of a request from the University of Arkansas for the
Board to adopt a resolution of intent to issue revenue bonds for the
purpose of financing certain student housing facilities: and,
(2) A report from Oppenheim on possible restructuring of the Board's
outstanding housing bond mortgages to generate net funds available
to the Board.
Backup information on the two agenda items is attached.
pc: Don Pederson
Hon. Dan Coody, Mayor
Tom Leggett, Friday, Eldredge & Clark
Bill Blount, Blount Parrish & Company
Heather Woodruff, City Clerk (FOIA Notice to media)
Field Wasson, Oppenheim
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Jan 06 03 05:33p
JAMES N. WCORD
Attorney at Law
11. H. V1(EST AVE.
SUITE #202
FAYETTEVILLE, ARKANSAS 72701
TELEPHONE (479) 695-1134
FACSIMLE (479) 695-1135
jimmocordlawg alltei. net
December 27, 2002
To: Fayetteville Public Facilities Board
From: James N. McCord, Board Counselgov
Re: Request by University of Arkansas for Public Facilities Board to
Issue Tax Exempt Bonds to Finance Student Apartment Project
Enclosed is a memorandum to the Fayetteville Public Facilities Board (the
"Board") from Don Pederson, Vice Chancellor for Finance & Administration at the
University of Arkansas (the ("University") requesting the Board and the City of
Fayetteville (the "City") to undertake the actions necessary for the Board to serve
as a conduit issuer of tax-exempt bonds to finance construction of a student
apartment project, University Terraces Apartments (the "Project"). Also enclosed
is a resolution of intent drafted by University bond counsel for consideration by
the Board.
The proposed financing is authorized by the Arkansas Public Facilities
Boards Act. The Fayetteville City Council would need to amend the local
enabling ordinance for the Board to issue the bonds. An ordinance for this
purpose has been drafted by University bond counsel for submission to the City if
the Board adopts the resolution of intent.
I will contact Board members soon to schedule a meeting for the
University to present its proposal and for the Board to consider the resolution of
intent.
pc: Don Pederson
Hon. Dan Coody, Mayor
Tom Leggett, Friday, Eldredge & Clark
Bill Blount,. Blount Parrish & Company
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Jan 06 03 05:33p
E
UNIVERSITYI?fARKANSAS
Vice Chancellor for Finance and Administration
December 17, 2002
City of Fayetteville
Public Facilities Board
Attn: Mr. Jim McCord
11 N. West Avenue, Suite 202
Fayetteville, AR 72701
Re: University Terraces Apartment Project
Ladies and Gentlemen:
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406 Administration Building
Fayetteville, Arkansas 72701
(501)575.5828
Fax: (501)575.5400
As you are all aware, the growth of the University of Arkansas depends, in part, on our ability
to provide desirable and affordable on -campus and campus operated housing to our students.
Over the past several months, the University has developed a plan under which the University
would utilize a public-private partnership to complete a high quality, Universityadministered
and managed apartment complex that would be In operation by fall of 2003. This project will
mitigate our housing shorta' a and allow for the University's continued growth.
By way of this letter, we respectfully request that the City of Fayetteville (the "City") and the
Public Pacilities Board of the City of Fayetteville (the "Board") undertake the actions necessary
to allow the Board to serve as a conduit issuer of tax-exempt bonds (the "Bonds") to finance
the construction of University Terraces Apartments (the "Project"). When completed, the
Project will consist of approximately 504 apartment units designed to house approximately
1,128 students.
Our working group has developed a full set of draft documents on this structure and we have
already had discussions with attorneys for both the City and the Board. In summary, the Board
will issue the Bonds in the amount of approximately $42 million to acquire and construct the
Project which will, in turn, be leased to the University_ The Bonds will be secured by a lease
agreement with the University. Upon completion, University Housing will have full management
and leasing responsibuity.-
Under the proposed structure, the Board is being asked to serve merely as a conduit issuer. The
Bonds will be special limited obligations of the Board secured Qj]y by the lease of the Project to
the University. The Bonds will .not obligate.the Board or the City and neither the revenues nor
the borrowing capacity of the Board or the City will be impacted by this issuance. The Board
will hold title to the land and buildings until the Bonds are paid, at which time title will then be
transferred to the University.
We appreciate very much your willingness to consider this request and welcome your questions
and comments as they arise.
Sincerely,
0 0 ,70191—P R yZ W a
_- 0
Don Pederson
Vice Chancellor for Finance& Administration
The University of Arkansas is an equal oprwitinity/offinnative Action institution.
Jan 06 03 05:33p
.RESOLUTION
A RESOLUTION OF UgENTTO ISSUE REVTNUE BONDS FOR
THE PURPOSB OF FINANCING CERTAIN STUDENT HOUSING
FACILrM- S; AND PRESCRIBING OTHER MATTERS
RELATING THERETO.
WHEREAS, The FaYetteville Public Facilities Board (the "Board" j is a duly organized and
existing public facilities board under the haws otthe State of Arkansa� and is authorizod by the laws
of the State of Arkansas, including particularly Title 14, Chapter i 37 of the Arkansas Code of 1987
Annotated (the "Act"), to issue revenue bonds for the purpose of financing residential housing
facilities and educational facilities; and
WHEREAS, the University of Arkansas (the "Univemiry'') is in need of additional housing
to serve the students attending the Fayetteville campus of the University; and
WHEREAS, it is proMod that the Board issue its revenue bonds under the Act for the
purpose of financing the coq.6f such housing; and
WHEREAS, the ordinances under which the Board is organized do not presently authorize
the Board to issue its bonds for such purpose; and
WHEREAS, the Board is otherwise willing.to proceed with the issuance of such bonds as
and when requested by the University, subject to compliance with 411 conditions set.forth in the Act;
NOW, THEREFORE, BE IT RESOLVED by The Fayetteville Public Facilities Board:
Sr&tim 1. The Board hemby;tates its intention to assist in the fineaeing.proposed by the
University and at such time as it rttay be properl� callod _upon to do so to issue its revettue bonds,
under the provisions of the Act, subject to.tfto fo lowing:
(a) That the bonds willbe %mial_obligations only ofthe Board, and in no event will they
constitute an indebtedness for which thefaith and credit of the City of Faycttevijle or any of its
revenues are pledged; . .. . . .
(b) That the Board will not be called upon to pay any costs or expenses incurred in
connection with the authorization and issuinca of the bonds, and all such costs and expenats will
be paid out of the proceeds of the bonds or by the University; and
(c) That the City Council of the City of Fayetteville authorize the Board to issue revenue
bonds for the purpose of financing student bousing facilities.
Section 2. The proposed icsuauco of bonds shall, subject to tha oonditions set forth
herein, be considered for approval at i' mccdng.call . for that putpoae at the request of the
University. Upon adviGaof-cotmsel, in the event A ublic:heariAg aballlbc roquired to be held•prtor
to the approval of the issuance of the bo;tds by the Board, -'the publication of notice as may be
required by law is hereby authorized.
Sectign This Resolut►oa is -k4 u*l as,official actionor intent toward the issuance of
the bonds as tray be required by the Irate .0 Aovenue Code of 1986, as amended, and applicable
rulings and ro:%sons thereunder..
Section 4. This Resolution shall be effeotive immediately upon its adoption. .
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ADOPTED: -January .2003.
ATTEST:
Secretary
(SEAL)
APPROVED:
Chairman
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Jan 06 03 05:34p
NOV-05-01 11:55 FROM-OPPENHEIM 501-22T-3201 T-361 P 01/03 F-160
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OPPENHEIM.
A division of BOSC, Inc.
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Nov'omber 5, 2002
The�ayctteville Public Facilities Board Members
c/oi r. Dennis L. Smith, Chairman
342 N. Futrall Drive, Suite 201
Fayetteville; AR 72703
RE: S7,750,000 The Fayetteville (Arkansas) Public Facilities Board Single Family
Moigage Revenue Refunding Bonds, Series 1993 Restructuring Proposal
t
Ge4lemen:
Pur4pant to the terms of our Engagement, the purpose of this lcner is to out[ ane what we
think the Board can accomplish through a restructuring of the above referenced Bond
issu (the "Bonds'').
Ourl reliminary research and due diligence has led us to believe that (based on current
marker conditions) approximately $100,000 in net funds can be made available to the
BOaH through a restructuring. In addition to making these funds available to the Board,
the roposed restructuring would allow the current rating on the Bonds to be increased
and Iso eliminate any future default risk to the Board.
The;restructuring would be accomplished through the following process. First, we would
do comprehensive review of the entire existing mortgage portfolio (there ere
apploximately $ 904,297 in mortgage loans currently): We feel that a majority of these
loam$ would be eligible to be securitized as FNMA loans. This securitization would
allo' the existing Bonds, as stated above, to receive a higher rating from the rating
agencies (from A to potentially AAA, which is the highest rating available). Also, this
sectiriti2ation would shift any future default risk on the Bonds from the Board to the U. S.
Goletnment. Any loans that could not be securitized would be sold to investors (even
witlq a less than perfect payment history, the value of these non -securitized loans is
gee ' e' now than it ever has been). The net effect of the securitisation and me
ell Ina
of future risk to the Board would be to "free up'` a significant pirri;on of the
funs that are currently being held as additional collateral for the Bonds. 'these are the
funs that would be created and made available to the Board for its current use. In
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Jan 06 03 05:34p
essebce, this securitization takes away any future uncertainty for the Board. Both the risk
of 11r residual value being reduced or eliminated due to poor mortgage loan performance,
as well as the risk that interest rates may increase, are eliminated with this r€structuring,
Wit19 regard to the issue of what funds may be available if the Board elects not to
resttycture the Bonds, the answer is dependent upon several factors. First, the age of
mo;l of these loans probably means that there will not be many prepayments, even
thoh their mortgage rate is substantially above the current marker. This will have the
eff t of keeping your existing Bonds outstanding, we estimate, for another nix years or
long. Furthermore, if interest rates rise, if national or local economic conditions
deteriorate, and/or if loan defaults increase during that time period, the amount of funds
avai able to the Board when the Bonds are paid off will be decreased. In other words,
any... ing that could affect the abibry of the mortgagees to make timely payments on these
loan could reduce the ultimate residual assets (which is there to protect Bondholders).
Giv p all of these variables, it is hard to estimate what the amount of excess funds would
be,td when they will be available, if nothing is done.
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In stem, if the Board chooses to restructure the Bonds, you will be able to take advantage
of a Targe portion of the excess funds now (the restructurino will also leave some of the
exc*s in place, which will also be available when the Bonds are paid off). it will also
eliminate any future risk associated with the Bonds. If the Board chooses nc,t to
resnTtcture, there are several variables beyond the control of the Board that may affect the
U1111 ate residual available upon the final mantrity of the Bonds. It is our opinion that
cur- nt market conditions have combined to increase the value of the mortgs.ge portfolio
(an c the excess collateral) to historically high levels, and that now is an optimum time to
taketadvantage of this situation with a restructuring. It should also be noted that almost
ever Issuer we have contacted (more than 70 in 14 States) in the last year has decided to
take;action and restructure their bond issues due to the favorable market conditions and
our gxpenise in delivering excellent results.
i
We'. cry much appreciate the opporturtity to further elaborate on our proposal, and we
hop' you find this instructive. We will be happy to answer any other questions you may
hav! or provide any additional information you may need. We shall look forward to
dis+sing this further with you.
Vert truly yo
K. Wasson, Jr.
ging Director
aheim, a Division of BOSC, Inc.
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