TOWN OF SOUTH WINDSOR
SPECIAL WORK SESSION MINUTES
TOWN COUNCIL MONDAY, NOVEMBER 8, 2010
COUNCIL CHAMBERS TIME: 7:00 P.M.
1. Call Meeting to Order
Mayor Pelkey called the meeting to order at 7:06 p.m.
2. Roll Call
Members Present: Mayor John Pelkey
Councillor Gary Bazzano
Councillor Tom Delnicki
Councillor Kathryn Hale
Councillor Kevin McCann
Councillor Cary Prague
Councillor Keith Yagaloff
Members Absent: Deputy Mayor Edward Havens
Councillor Favreau
Also Present: Matthew Galligan, Town Manager
3. Public Participation
Mr. Don Gonsalves, 40 Bayberry Trail stated that he is not against the project but is against the financing that is being proposed for this project. The numbers keep changing and how does anyone comment when it really is not known what the numbers are. Mr. Gonsalves stated he would like to know the scope of this project. There is no financial risk assuming that the Town does a good job with the underwriting, but the Town’s reputation is on the line.
4. Communications
Mayor Pelkey informed the Council members and the public that the American Legion will be holding a ceremony at Veterans’ Memorial Park on December 11, 2010 at 12:00 p.m. The ceremony will honor the men and women who have served our nation. There will also be a wreath laying ceremony.
Mayor Pelkey then stated that at tonight’s meeting there will be nothing voted on but there will be a presentation and discussion regarding Connecticut Studios. A public hearing will be held and TIF Financing will be voted on in December.
ITEM:
5. Town Manager’s Report
Mr. Galligan reported that there will be two public hearings regarding TIF Financing. One asking the public if they are in support of TIF Financing and then another public hearing asking the public if they are in support of the amount being bonded for TIF Financing. Mr. Galligan explained the process that the Town will be following as the Connecticut Studios Project progresses and then stated that Mr. Dan Marsh is present tonight to discuss the Connecticut Studios Project.
6. Items for Discussion
A. Connecticut Studios
Mr. Dan Marsh from the National Development Council came before the Town Council and explained that tonight there will be discussions held about the project, but more specifically regarding budgets, phasing of the project, TIF structure, the taxes expected to be generated, the debt service that will have to be paid, certain elements of the TIF procedures and the Special Service and how is will operate. The project is a studio, hotel and commercial project that will be basically in two phases and will include a phase 1A because the hotel is an intricate part of supporting the studio and will have to be built fairly quickly. Mr. Marsh went on with the presentation of the Connecticut Studios LLC Project & Public Infrastructure Financing Presentation as shown in attached Exhibit A.
Mr. Ramiro Albarran from Stone & Youngberg came before the Town Council. Mr. Albarran first wanted to address a little bit of what Mr. Marsh was talking about in terms of the amount of tax increment revenues pledged to the bonds and what that means for the bond market. The intent here is not to change a business deal but it is really to represent the best credit that we can present to the bond market with the objective of getting the very best rates that we can for the overall bonds. Eight percent has been used as a preforma number, the current market is better than that and to the extent that we can create the tightest package which would include a pledge of 100% of the tax increment revenues that will make for a better bond deal. The better bond deals are getting the best attention in the
marketplace today so that is one of the objectives in terms of guidance that Stone & Youngberg is trying to provide overall on the transaction. Mr. Albarran stated that the Town of South Windsor is not alone and gave an example of a transaction that was previously done in January of 2010. Stone & Youngberg was established in 1931 in California. The firm is the leader in Tax Increment Financing and Special Assessments Financing and is a National Firm. Mr. Albarran explained to the Town Council the process that would take place with this project.
ITEM:
7. Executives Session
At 8:10 p.m. Mayor Pelkey made a motion to go into Executive Session to discuss commercial and financial information provided to the Town in confidence by Connecticut Studios. Councillor Delnicki seconded the motion; and it was approved, unanimously.
The following individuals went into Executives Session: Mayor Pelkey, Councillor Bazzano, Councillor Delnicki, Councillor Favreau, Councillor Hale, Councillor McCann, Councillor Prague, Councillor Yagaloff, Town Manager Matthew B. Galligan, Town Attorney Dwight Johnson, Dan Marsh, Bond Counsel and Craig Stevenson Economic Development Coordinator.
At 8:38 p.m. Councillor Yagaloff made a motion to adjourn the Executive Session. Councillor Hale seconded the motion; and it was approved, unanimously.
6. A. Connecticut Studios (Continued)
Answering questions from the Council, Mr. Marsh explained that the completion of the project could occur in 2012 and the tax status is expected to be fully on the rolls by February 2012.
Mr. Stevenson explained to the Council that some of the roads that are envisioned in this project do not meet Town standards for a public road but they can be a private road with a public easement on them.
Councillor Yagaloff voiced concern if the property was in foreclosure and being seized by creditors could the Town still use the road in the project to bring traffic into the corner without any issues? Town Attorney Dwight Johnson stated he believes if the Town has a perpetual easement, that easement would survive a bankruptcy so the Town would still have control of the property, but would check further into this matter and come back to the Town Council.
Mr. Galligan explained that the public parking lot that is being proposed can be used like any other parking lot in Town. The Town will have control over the parking lot.
Answering further questions, Mr. Marsh stated that all of the public improvements are completed in phase I so all of these funds, both capital and soft costs will be totally utilized during phase I construction, although the capitalized interest may overlap into phase II because it runs for 24 months.
Council members discussed in length the Special Services District.
Mr. Marsh explained that 100% of the taxes pledged came into play when Municap and Stone & Youngberg became more involved with this project. It is a way to be able to market the bonds in a difficult marketplace.
ITEM:
6. A. Connecticut Studios (Continued)
Councillor Yagaloff stated that he feels this deal has shifted away from all of the advantages that were previously discussed such as the Town is giving up 100% of our tax revenues, creating a special tax district, and getting perpetual easements rather than owning the property outright.
Mr. Galligan explained that the deal is being constructed in this manner in order to make the bonds as attractive as possible. The project is presently being calculated at 8% interest rate, but if the project is really at 6% interest rate then the Town will get an 80/20 deal. This deal has to be constructed what the market calls for in order to work.
Councilor Hale questioned if the deal is at 8% when will the cross over point happen where the Town can get in more income than is necessary to pay the bonds? Mr. Marsh answered that the cross over date is in 2014. Based upon the projections in the last run, by 10 years into the project, the Town will reach 100% of the amount of the bonds. That money is going to be used to pay debt service and fund the reserves.
Answering questions from the Council, Mr. Stevenson explained that a sales tax rebate is actually a program that is run through the Connecticut Development Authority. When there is a major construction project that is going to create jobs and economic development, the State of Connecticut offers the developer a sales tax rebate on the construction items that are purchased for that certain project that are subject to Connecticut sales tax. The State does not give it to the developer in one lump sum for the entire project, but up to a certain point as an incentive.
Mr. Galligan explained that any leased equipment on site will be taxed by the Town. Mr. Danna, the Town Assessor and his staff monitor the equipment on site and there will be something in the agreement stating that items leased must stay on the site until they are no longer used on a regular basis.
Council members discussed briefly the amount the State is pledging toward this project.
Mr. Galligan felt that it would probably be around March when the bonds are settled because there is a still a lot of things that need to be done. A development agreement and feasibility study are just two items that need to be complete. Mr. Galligan then explained the process in which bonds get sold.
ITEM:
6. A. Connecticut Studios (Continued)
Councillor Delnicki questioned if the proposed hotel would be looking for a tax abatement? Mr. Galligan explained that the Town can either offer a tax abatement or TIF, but not both. Mr. Stevenson added that the hotel that is being developed, although there will be a partner with a major name that will be associated with it; it is still Connecticut Studios principles that will be developing the hotel. In essence the Town is giving them their incentive well in advance of their development.
Councillor Delnicki reviewed the concept for the Special Services District and then questioned if the developer defaulted on this if the Town would be liable to the bond holders because the Special Services District was created by the Town? Attorney Panico explained that the taxes that are levied by the Special Services District are treated the same as the municipal taxes. If the bond holders are not paid, the trustees would be directed to foreclose on those taxes that are assessed on the properties. Attorney Panico explained that in the resolution there will be language explaining what the Town is not responsible for. Items brought up tonight such as a Special Services District and 100% pledge are measures brought about in order to lower the interest rate on the bonds and to make the bonds more
secure.
Answering questions from Mayor Pelkey, Mr. Galligan stated that it was not the developers who proposed the Special Tax District. This was just a matter of trying to enhance the bonds and the credibility of the bonds.
Attorney Panico stated that the Special Tax District would actually be an incentive for the developer to complete all phases of this project because their goal is to have someone else pay the taxes such as the hotel owner through their revenue stream.
Answering questions, Mr. Galligan explained that he has a problem with the development fee because in his mind, usually the developer fee is given to someone who is not going to wind up wit the end product. In this project, the developers are part of the owners and it is in their best interest to get this project done.
Councillor McCann felt that the success of this project hinges on this project being built out. Councillor McCann requested that the Town Manager follow up with Senator LeBeau regarding the railroad crossing.
Answering further questions, Attorney Panico stated that the project is contingent on all phases being built which will be in the sales agreement. Ten million dollars will be put into a fund with the trustees. That money stays in the account until the public infrastructure is built.
Councillor Hale made a motion to go back to Public Participation. Mayor Pelkey seconded the motion; and it was approved, unanimously.
ITEM:
3. Public Participation
Mr. Steve Luckingham of 48 Paper Chase came before the Town Council and stated that he heard this project would produce 4,500 jobs, what is the basis of these jobs and how specific are these jobs to the studio? Mr. Galligan explained that most of the jobs are from a regional standpoint. A report will be placed on the website for public view. Mr. Galligan then explained that there have been discussions with Community Colleges in the area regarding training for different studio positions and it is hopeful to build a job base here so others will not have to be transported to Connecticut.
A resident from 135 Silver Lane, East Hartford, Connecticut came before the Town Council. She stated she has worked on films previously and would like to have the ability for the jobs to stay within Connecticut.
8. Adjournment
At 11:00 p.m. Councillor Delnicki made a motion to adjourn the Work Session. Councillor Hale seconded the motion; and it was approved, unanimously.
Respectfully submitted,
Deborah W. Reid
Recording Secretary
Attachments:
Connecticut Studios LLC Project & Public Infrastructure Financing Presentation – Exhibit A
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