Heritage Shores Special Obligation Bonds 09.2014 1
Agenda The Team and Introductions Special Taxing Districts General Overview History of Special Obligation Bonds at Heritage Shores Request for Second Tranche of Bonds Special Tax Calculation Timeline Summary 2
The Team Developer: Bond Counsel: Underwriter: Administrator: Brookfield Residential Washington Region Dottie Harper VP Planned Community Management and Operations Kim Mackmin VP/CFO David Carro Development Director Miles & Stockbridge John Stalfort Stifel, Nicolaus + Company Pamela Holton-Byrd Municap Keenan Rice Emily Metzler 3
Special Taxing Districts General Overview Background Special taxing districts are formed to fund public improvements in a defined district through the issuance of special obligation bonds Special taxes are charged only on properties in the District which derive benefit from the projects financed Bonds are issued to finance capital projects, as well as capitalized interest, reserve funds, and costs of issuance Capital projects financed are owned by a governmental entity Special taxes equal to annual debt service and annual administrative expenses of the District are levied on the properties in the District and collected by the County along with regularly collected real estate taxes Benefits to Town Practical tool to finance development in limited areas No direct burden to the larger community or tax base No use of general fund money Potential to encourage infrastructure development and increase tax base Ensures that growth pays for itself Benefits to Residents High quality improvements and amenities Assessments are disclosed in marketing materials and sales contracts Residents have the option to prepay at anytime without penalty District outlives Developer Stability and collection of assessments Liability for special taxes limited to individual parcels Professionally managed 4
History of Special Obligation Bonds at Heritage Shores In March 2005, the Commissioners of Bridgeville ( Town ) created an area known as the Heritage Shores Development District ( District ) under the provisions of the Delaware Special Development District Act. The Heritage Shores Development District consists of 745 acres of contiguous land within the southern portion of the Town limits (annexed into the Town in October 2001). In July 2005, the Town issued two series of bonds - $19,847,000 (Series A) and $8,600,000 (Series B) to finance certain public improvements for the benefit of the District and the Town. Public improvements included public road, water and sewer improvements, town water management improvements. Included in these bonds was the Commissioners Facilities Fund in the amount of $1.7 million. This included funding for the library, wastewater treatment plant upgrades, street sweeper, police vehicles and other miscellaneous equipment and services. No private improvements were financed. 100% of proceeds of the 2005 bonds have been disbursed for public improvements (approximately $22,000,000). The balance of the proceeds of the 2005 bonds was used to fund capitalized interest, a debt service reserve fund and costs of issuance. Bonds are secured by the proceeds of a special tax levied by the Town of Bridgeville on all taxable parcels of land within the boundaries of the Heritage Shores Development District. Special taxes are not levied on property that is outside of the District. The full faith and credit of the Town is not pledged to the payment of the debt service on the 2005 bonds. 5
History of Special Obligation Bonds at Heritage Shores Bond terms are as follows: Special taxes are paid annually by property owners at the same time and in the same manner as real estate taxes. Principal and interest on the bonds are due semi-annually on January 1 and July 1 each year with principal paid as of July 1. The 2005 bonds mature in 2035 and are subject to annual sinking fund repayments. The 2005 Series A bonds bear interest at 5.45% and the 2005 Series B bonds bear interest at 5.125%. Property owners can prepay their special taxes at any time. Historically, special taxes relating to the Series 2005 B bonds have been prepaid at settlement by the developer with the remaining special tax relating to the Series A 2005 bonds paid by the property owners pursuant to the annual collection process. This has resulted in periodic payments throughout the course of the year on the 2005 bonds. The 2005 bonds were sold to sophisticated institutional investors in a limited public offering. The outstanding principal amount of the 2005 Series A bonds is $18,105,000 as of July 1, 2014. Debt service on the 2005 Series B bonds has been fully repaid by the Developer not the residents. 6
Request for Second Tranche of Bonds The Heritage Shores Development currently has over 400 homes, with ultimate build out of nearly 1,800 homes. Phase Three of the Heritage Shores Development District consists of 274 single-family detached units and 18 multi-family units. The Developer has received all required permits and approvals to construct the next phase of the Development. The documents executed in connection with the 2005 bonds contemplated the Town financing approximately $46.6 million of public improvements issued in multiple series of bonds. 100% of the proceeds from the 2005 bonds has been expended. The Developer is requesting the issuance of not more than $16 million with bond proceeds funding the approximately $11 million of public improvements to fund the next phase of the Development. Public Improvements will include at least the following: Entrance Road at Wilson s Farm Rd Storm water management Offsite sewer and water Storm drains along subdivision roads Onsite main roads Onsite subdivision roads, sidewalks, curb and gutter and related engineering All of these public improvements and the related additional bonds are described in the limited offering memorandum for the 2005 bonds. The remaining public infrastructure will be issued in the future as additional phases of the Development are built out. 7
Special Tax Calculation and Administration Special Tax Methodology With the issuance of the 2005 bonds, a Rate and Method of Apportionment was approved for the District which established the maximum special tax that could be charged to each developed property. As a result of this methodology, the special tax is set for each home. A property owner is responsible only for the special taxes on his or her property regardless of whether or not other property owners pay their special taxes or the bonds go into default. Special taxes are paid by developed parcels for a period of 30 years and are deposited into a trust account that is used to pay debt service on issued and future bond debt. The special tax on existing units already paying the special tax will not increase as a result of the proposed 2014 bonds. Special Tax Amount Pursuant to the approved Rate and Method, the highest special tax amount that may be levied on a parcel of Developed Property is the Maximum Special Tax. The maximum special tax rates for FY 14-15 are as follows: SFD - $3,189 SFA - $2,176 The Rate and Method normally provides for parcels of developed property to pay special taxes at the assigned special tax rates, which are 10% less than the maximum rates. The assigned special tax rates for FY 14-15 are as follows: SFD - $2,899 SFA - $1,979 The additional ten percent in the maximum special tax compared to the assigned special tax provides a contingency and is the maximum increase any home owner could see in their special tax. The maximum and assigned special tax rates for all classes increases by 2% a year from the year in which it was approved (2005). The assigned special tax rates for a portion of the existing units have been partially prepaid by the developer. The FY 14-15 assigned special tax rates after the partial prepayment are as follows: SFD range from $1,195 to $2,011 SFA range from $816 to $1,373 It is undetermined at this time if partial prepayments will be made for future phases of development 8
Special Tax Administration The levy and collection of the special taxes is administered by MuniCap, as the administrator for the District, in conjunction with the Town and Sussex County. Notice of the special taxes is filed in the land records of Sussex County. Notice of the special taxes is included in all purchase contracts between the homebuilders and prospective residents of the District. Delinquent special taxes are collected in the same manner as delinquent ad valorem real property taxes. The special taxes are secured by liens with the same priority for payment as real property tax liens. The costs of the administration of the District are paid for by the special taxes not general funds of the Town. 9
Timeline PHASE I: GOVERNMENTAL APPROVAL Workshop with Town Commissioners (8/13/14) Introduction of bond ordinance (9/8/14) Public hearing; enact bond ordinance Scheduled for 10/9/14 at 6:00 p.m. PHASE II: ISSUANCE OF BONDS Due diligence related to the issuance of bonds to include Market Study, Engineer s Report and Appraisal Drafts of supplemental trust indenture circulated and reviewed Select trustee and receive comments from supplemental trustee on supplemental trust indenture Prepare form of legal opinions and other documents Marketing and closing of bond issue to include preparation of drafts of preliminary offering memorandum (PLOM) Send term sheet to potential investors and prepare short list of target investors. Arrange site visits. Price bonds Prepare final limited offering memorandum Bond closing projected for the end of 2014 10
Summary and Questions We would like to remind you of the new amenities under construction or coming soon at Heritage Shores! We again thank you for your patience during construction. New tennis/pickle ball courts New bocce ball courts Sugar Beet Market Performance Lawn Enhancements to Fitness/Aquatic Center We hope that this process will be fluid and as efficient as possible. We hope that we have your support. 11