. guitar solo Thank you. Thank you. Thank you. Thank you. Welcome. Yes, sir. All right. First, today... All right. First, today we have a special council meeting. And so I will open that session and we will have the council meeting and then we will have our regular work session following the special meeting of the council. So I'll declare the meeting of the council open and ask the clerk to please call the roll. Ms. Massadi? Here. Mr. Myers? Yes. Ms. Scutchfield? Here. Mr. Stennett? Yes, ma'am. Ms. Akers? Here. Mr. Beard? Present. Mr. Clark? Mr. Ellinger? Here. Mr. Farmer? Here. Mr. Ford? Here. Ms. Gordon? Here. Ms. Henson? Here. Mr. Kay? Here. Mr. Lane? Here. And Ms. Lawless. Here. Thank you. All right. Thank you, Madam Clerk. We have a quorum. This meeting is called to discuss issues related to the Centerpoint Project bonding. And we have a number of representatives from different parties here today to guide us along if there is a motion. and during discussion of the motion. So, as chair, I'll ask for a motion for a walk-on and then for discussion. Council Member Lawless. Thank you, Mayor. First of all, I want to thank the administration, KLC, the developers, and lots of consultants, et cetera, that worked hard hammering this out and coming to something that I think is going to be very good for our community. So first, and this is hot off the press, just got it, so I'm sorry to council members that you didn't get it earlier. I didn't either. So I moved place on the docket for today's special council meeting. I can't see very well, sorry. pertaining to amendments relating to the Phoenix Park Courthouse Development Area and the corresponding agreements, all in conjunction with the and to facilitate our request to the Kentucky Development Bond Corporation to issue bonds payable from TIF revenue for the cost of the parking structure at the Phoenix Park Courthouse Centerpoint Project. So moved. Second. Motion by Council Member Lawless and a second by Council Member Farmer. I'll now open the floor for discussion. And I'll also ask that our city's chief development officer, Kevin Atkins, can sort of be the conductor. And he can also introduce the representatives from Kentucky League of Cities, the Dinsmore Law Firm, the Taft Firm, and Miller and Wells. Bingham Greenbaum Dahl and is John Ferris here as well? John's here. Okay. So Kevin, you can have that role, but first well actually, why don't you do that first? So the council knows who is representing what institutions. Thank you. Thank you, Mayor. When we were here last Tuesday, we told you that the developer had brought us an alternative. we wanted to take a look at and begun discussion with. As we emailed you on Friday, the League of Cities, the Kentucky League of Cities, was that group. So here with us today is Temple Jewett, who is the chief operating officer, as well as the general counsel for the Kentucky League of Cities. Roger Peterman, who was sitting beside of me as a partner at Dinsmore in Law. He does bond, he's a bond counsel. Jim Parsons, most of you all know from the workshop. He's at the TAF law firm, does most of the city's TIF work for us. David Kaplan is sitting beside Jim. He's with Miller and Wells. He is Mason Miller's law partner, who, as you all know, Mason's been here doing some TIF work for us as well. Darby Turner from Bingham Greenbaum-Dahl. Darby represents the developer, as well as John Ferris. where John, with Commonwealth Economics, who you all have seen many times, puts together most of the TIF economic analysis for you all. So at this time, Temple, it might be helpful if you'd come up and just talk a little bit about... Welcome. Thanks, Kevin. Good afternoon, everyone. Thanks for allowing us to be here. When the Herald-Leader published about the state refusal or the state decision not to issue the bonds, that immediately sparked a conversation in our office about how we might be able to help in situations like this, cities not only Lexington but cities across the state, help them facilitate these types of economic development projects. projects. In our current program, and we've been doing bonds for cities since the early 90s, so we've been at this for a while. In our current program, most of the credits are general obligation type credits, which are a little different than this type of credit. So we decided what would be the best way to do that. After some conversation, we decided that forming a new entity to issue these bonds, which operates the same or at least similarly to the existing operation that we had, would be the best way to do that. And it would specialize in these types of economic development projects. If you adopt this resolution today, CenterPoint obviously would be the first one to be under that program. What it takes is the creation of a nonprofit corporation to do that. That requires an interlocal agreement between at least two cities. You have the interlocal agreement in front of you. What the resolution is designed to do is to approve that interlocal agreement to authorize that the bonds be issued by the Kentucky Bond Development Corporation and it authorizes the agency, I guess it's the finance department, that to enter into an agreement to pledge the TIF funds to secure payment, repayment of the bonds. What it does not do, and I know this is an important issue, and it's very clear in Section 5 of the resolution, It does not place any financial liability on the city of Lexington for the repayment of these bonds. Neither does entering into the interlocal that forms the corporation. All you're doing is authorizing the creation of that program and the corporation. It neither obligates you to participate unless you decide to participate in the future, nor does it obligate you to repay or be liable for any of the obligations issued through that corporation, unless you were to use it for your own purposes and enter into an additional loan agreement in that process. So that's essentially what we're doing, what we're proposing. We're happy to be a part of this. We're happy to be able to help a very valued member. And if there are any questions or desire for more information, I'm happy to try to field them. All right. Thank you, Mr. Jewett. We have some council members who have signed on for comment or question, beginning with Council Member George Myers. Thank you, Mayor. I have a question for you, sir. You said that in order for the interlocal to work, it has to have, it's between two cities. Who's the second city? The second city, we've approached the city of Midway, and they have a history of attempting to help Lexington with these types of projects. And we've talked to them. They have asked for a chance to look at the information, and understandably, they wanted to see where Lexington went first in adopting this. And they have called a special meeting for 8 o'clock on Friday, and we'll be attending that, and they'll be considering it. Okay. Thank you, sir. Thank you, Mayor. Temple, it might be worthwhile. It's my understanding that this allows the city of Midway to initiate projects that it might be interested in. And so there is a benefit to the city of Midway. Is that correct? That's absolutely correct. And thank you for bringing that up because I do want to make that clear. This is something that even absent the Centerpoint deal, we would be pursuing at this point. This got us thinking about it, but what we realized is there is a need out there. and what we will be doing is offering this to all cities across the state whenever they have TIF-type financing or conduit-type financings that they want to do. So it will benefit all of our members. I was just wondering as a follow-up to that, that if you were going to do that, because I know that we're involved with BEAM and Louisville, and I was wondering if Louisville was going to be a part of it as well. Well, there are members, so they certainly could be. Okay. Thank you. Thank you, Council Member Myers. Council Member Massadi. Thank you, Mayor. Mr. Jewett? Yes. Hi. You stated that we may, LFUCG may opt to participate down the road later. In what way? I'm sorry, say that again? You stated in your presentation that the government may opt to participate down the road if we so chose. Can you tell me in what way? Well, in our programs, what we do is it's a pooling type of program. So what we offer is an alternative issuer to issue bonds on behalf of any city that might have maybe a deal that doesn't necessarily, in and of itself, standing alone, warrant the cost that might be connected to a bond issue. And we have a double A- rating in our bond pools, or the one we currently have going. The new one obviously won't be rated at this point. But a lot of times for cities that can't get ratings or have a lower rating, they can go through that program and essentially borrow that rating to get better costs on their financing. And that's open to the city of Lexington, Louisville, and the smallest city in Kentucky. So can you give me an example? Well, any type of projects, like a water project or a sewer project, all types of infrastructure, buildings, any types of purchases where you're going to do bond financing, tax-exempt financing, this would be an option. This is an option, I'm assuming. Yes. Okay, that's what I need to know. Thank you. Yes. Thank you, Council Member Sidi. Council Member Lane. Yes, I just wanted to congratulate you on the initiative that the Kentucky League of Cities has shown on this particular issue, your leadership, and you're also fulfilling your mission to serving the cities throughout the state. And this has been a major crisis as far as I'm concerned. Our construction is on hold here in the middle of downtown Lexington, and many of our tenants and users of the property might not even be able to hang around any longer with any substantial delay. So I want to just thank you very much on behalf of the citizens of Lexington. I think this has been a great initiative, and I appreciate it very much, and I'm sure our citizens also do. So thank you. Thank you. Besides being a membership organization, we're also a downtown resident and property owner, and we actually sit right across the street from Center Point. So that's, you know, we realize how important this is. So thank you. You'll even have additional parking available if you need it. That's right. Council Member Stennett. Thank you, Mayor. So is this the first time you all have done this type of bond issue for TIF? For TIF, yes. Have you designed a program around this concept, and is there a threshold? the maximum you can go on amount of bonds? We do not have a maximum on the amount that we can offer. I mean, I guess that's going to be up to, you know, whatever the deal is. I mean, it just depends on what's going on. Yeah, I can just see us using this another couple of times down the road here. Yes, absolutely. So who actually, Midway is actually issuing the bonds? No. The Kentucky Bond Development Corporation is formed pursuant to a Kentucky statute that allows cities to go together and enter into an interlocal agreement to create this kind of corporation solely for the purpose of issuing bonds. And Midway's benefit is they can participate in the program. Absolutely. And they're talking about a TIF right now. Okay. And do we know what rate, based on your else credit rating, they would be expected to pay? I think that would be when the bonds go to sale is when you would know the answer to that. Roger, you want to? Yeah, Roger Peterman. Make sure there's two different programs. The one that Temple was referring to that has the rating is a credit that would be, you know, for city true obligations. These bonds are totally separate, no obligation of the city. And so each project, as opposed to their existing program, in this program, each project would have a separate credit analysis, separate rating. They're not, it's just not like the other program. And has that analysis been done so you can take it to market or does it have to be done after this is passed? Well, yeah, there is an underwriter for these bonds that has been retained. And, you know, they're familiar with the structure. And we're, you know, assuming these things pass, passes here, passes midway, prepared to put together the offering information. But we've been assured that the underwriters assured us there's a market for these bonds. Okay, that's my next question. We're confident there's a market and things will be sold in October, I think it is. Is the anticipated sell date October? Well, mid-October is what people are talking about. my experience is that would be pretty fast. So, you know, but we're on a path. I mean, we've been on conference calls this week establishing the schedule as this thing has come into focus. And as soon as part of this deal with the council, will, as a government, get a schedule of what the payments are, the difference in the increment making the payment? Oh, absolutely. The council, this isn't the last time, actually, the council is going to see this. there is a specific agreement, you already have entered into agreements as to what to do with the TIF revenues. Right. So it doesn't change that. But that money, we have to enter into an agreement so that the money will go directly to the bond trustee to pay the bondholders. So there's one more agreement that will come before council. It will be a pretty short agreement, but very important because it does have to direct the revenues to the payment of the bond. Right. I'm just trying to figure out when we'll start seeing revenue from the TIF increment above what the debt service is. Oh, yeah, that's a financial question. Yeah, I was going to say, John, you may want to jump in there. But what's the current projection? Because I don't think we've seen that yet. And officially, I know you had it with you at our last. Yeah, we have it. And we can supply that to you in short order. You know, the schedule, we're working on the structure of the bonds. and we expect there to be a few things. One, capitalized interest, debt service reserve fund, and then to pay off the bonds. And usually there's a 10-year call on the bonds. So if the project is more successful, then perhaps after 10 years the bonds could be called, and then we would have a situation where funds would start to flow back to the LFUCG under the TIF agreement. But there is a scenario where the bonds could take upwards of 15 to 20 years to pay off. Okay, so no immediate, not in the next five to 10 years, would we see any additional on-top-of-debt service? That's 20% in the schools as well. Yeah, Darby reminds me. One thing to always keep in mind about TIF projects is 80% of the local revenue is pledged. So you will see the 20%. In addition, the school, as well as other special districts, are exempted out. So you have those property taxes. Those will start flowing immediately. Yeah, I'm just more concerned about the local. I understand. Can you send us that schedule and that projection? We will send the schedule to you most likely tomorrow. Let us get with the underwriter as well, and then we'll make sure that everyone has a copy of the scheduled structure. Okay, very good. Thank you. The structure is still a little bit fluid and quite complex, depending on the marketplace, but we think we have it nailed down to enough where we can put together the offering statement and the official statement and get you guys a copy of the schedule. Very good. Thank you. Thank you, Mayor. Vice Mayor Gordon. Thank you, Mayor. First, I want to thank the Kentucky League of Cities for moving forward on this. Mr. Peterman, I believe you said that the underwriters are fairly confident these bonds will sell. I was curious, though, in thinking forward, is there a scenario after this one if there is a problem selling them? Since they won't actually know until they're put out. No, that's correct. that far. Yeah, no, I mean, the bonds will be offered in the market, and so, you know, we don't know anything for sure until an actual agreement to purchase the bonds is signed. However, in conversation on the phone a couple of days ago, I asked the underwriter whether or not they were going to place the bonds or underwrite the bonds. If you place the bonds, you just identify purchasers and then place them with those purchasers. If you underwrite the bonds, the underwriter will actually buy the bonds and then resell them. Buying the bonds and reselling is a much stronger commitment, and they indicated they wanted to do this as an underwriting, not as a placement. Okay, so they're pretty confident in this, and we're not thinking anything will go awry along the way. I've been doing this too long to make any predictions about that. Okay, well, I appreciate that very much. Thank you. Thank you, Mayor. Thank you, Vice Mayor. Council Member Farmer. Thank you, Mayor. Mr. Jewett, I want to thank you specifically and John Steiner, who runs the Kentucky League of Cities, for stepping up on behalf of all of us and creating a conduit that did not exist and a leadership opportunity for you all and a great help for the city of Lexington. And it's a lot of work between last Tuesday and this Tuesday, and we're all very appreciative. And I know there's one motion, and I think there's a couple things to follow, but if you all hadn't been there to begin the conversation and to help us, we couldn't be sitting here now, and I appreciate it personally very much. Thank you, sir. Thank you, Mayor. Thank you, Councilman Farmer. Councilman McKay. Thank you, Mayor. I'm not sure who to address the question, a couple questions to, so I'll ask the first one. I think it's hard for ordinary citizens to understand how these complex financing deals work. But I think there's one question that they always want to know, and that is, should the project not be successful, who then is responsible for paying off the bonds? And you've said it's not the city, which is great. I appreciate that. How does this work? Right. Good question. I know this question has come up. and it will be very clear in the documents that the bondholders can only look to the specific revenues that are pledged to repayment. So there will be bonds outstanding in the name of the Kentucky Bond Development Corporation, and the offering document will make it very clear that the only source of payment will be, I'll just call them the TIF revenues. And again, those agreements are more or less in place. It's just a matter of now directing the revenues to the right place. And that's why with John's firm, they're putting together these very specific projections on anticipated revenues. And that's why the revenues can't just show a 100% coverage of the debt service payment. In other words, if your debt service is a million dollars, we can't just show a million dollars of revenue available. We have to show some much higher coverage of that. So we're thinking that the projections will have to be in the range of 160 to 180 percent of anticipated debt service in order for an investor to be willing to take the risk that, in fact, those revenues will be available to pay the debt service. So, in other words, that means the projections will show that to take the low end, there will be 160% of the money that's needed to pay debt service that will, in fact, be generated. The timing will be set up to make sure that the cash flows work properly. We have already been through this with the city of Bowling Green. Money is coming from the state. There's a timing aspect to that. So all of those things are done to assure the bondholders that they'll get paid. But at the end of the day, these are sophisticated investors. They understand how the transaction works. And, you know, now, clearly, the city, if Lexington barred on its general obligation basis, the rate would be much lower. But these are investors that want a higher yield. And so they're willing to analyze more difficult credits like this and make investment decisions based on that type of analysis. Okay. So from the investor's standpoint, because this is a relatively reliable revenue stream, they're willing to take some risk. And from the other side of it, should that risk turn out to be a bad idea, it's the bondholders themselves who will suffer a loss. Correct. Okay. Thank you very much. Thank you, Mayor. Council Member Lawless. Thank you. There are actually two pieces to this. There's the ordinance and another motion for the resolution, which has to be passed first. So I just wanted to say the motion I made was on the ordinance and after we get through this. There'll be another motion. There'll be another motion before we vote. All right. All right. That's what is Keith. Keith, is that that's what you were advising? All right. All right. The motion that was read is actually the legislation. Right. All right. OK. So we'll come back to the to the docket motion. All right. Council Member Beard. Thank you, Mayor. Mr. Peterman, let me ask you one more question. a little peel back the onion layer or two. How do the funds actually flow? The TIF funds actually flow, and where are they collected and controlled? How does that process work? That's a good question, and that's something we're going to have to take some care in explaining this very specifically to the investors in these bonds. as you may be aware, there is both state tax revenue and local TIF revenue that is going to be used for the repayment. So two different sources. Under the existing agreement, and this part of it's not going to be, the existing TIF agreement's not to be, and this won't be modified, the Lexington Finance Department will be the collector of those revenues. Now, obviously the state, for the state portion of it, they'll collect their money through the normal revenue process that the state has for the collection of state revenues. At the end of the calendar year, an analysis will be done as to how much of that money needs to be then forwarded to the Lexington Finance Department. Again, having been through this, and this was anticipated at the time, It's not clear how long it will take the state to make that payment, but it's pretty clear that they need to do it by the end of their fiscal year, June 30. And so sometime between December, and this was actually the experience in Bowling Green, between December 31 and the following June 30, payment will be transferred to the Lexington Finance Department. That will be combined with the revenue that's collected here locally, and then that money will be transferred directly to the bond trustee to pay the bondholders. So the payments on the bonds will be set up to accommodate that schedule of payments. If there is any problem, there are reserve funds that will be funded with these bonds to provide for a cash reserve, to make payments in case there's any interruption. It's a demand of investors in these types of bonds. So that money will be there as well. But, in fact, the intent is to meet the timing that we anticipate mostly from the state. I mean, we think, you know, locally that's fairly clear. Well, you know, we have ebbs and flows of activities, and activities are tied to the revenue generated. And so, you know, my question involves where the concern, and it's not a concern to me, but it might be to the public, whether we have a low span of time where we aren't quite attaining what we need to attain and then we come back and it can be either way now, obviously. And who actually manages that? Would it be our finance department? Yeah, I answer that's a cash flow question. So, you know, a lot of revenues generated in the early years, and maybe John could address this too because of the construction and the high volume of revenues. Right. And so there's cash that's up front. And remember, we have 100, let's just say 150% debt service coverage ratio. That means after you pay 100% of the revenues to pay debt service in one year, you still have 50%, if the projections are correct, of revenues left over that could be paid to the next payment. And that will continue to accumulate until the bonds are paid off. Unless there's a spiral. Unless there's a spiral. And in that case, there is a borrowed debt service reserve fund, so there will be a cash reserve to take care of that eventuality. Okay. Thank you very much. Yes, sir. Just one of the things to point on that, your agency, which is the Department of Finance, is the holder of the revenues. Those will then be paid over to the trustee in this particular situation. There is a provision in the tax incentive agreement with the state and your agreement with the developer that none of the revenues will flow to the structure until the minimum capital investment has been achieved, which is so at the front end, that's why you need to capitalize interest in things. until the $150 million has been expended, none of the state revenues will flow. They'll be due, but once you've met that requirement, then all those revenues would flow to the project, and then annually thereafter they'll flow. There's also provisions in the agreements for the developer to assist the Department of Finance in the records that are needed to certify the revenues and all the costs associated with the project so we'll be able to better account for the capital cost and also the incremental revenues that will be generated at the local level in the state. Well, they've got to operate, somehow operate the parking garage, and that in and of itself is going to cost some money off the top. Thank you very much, gentlemen. Thank you, Mayor. All right. Thank you, Council Member Beard. It looks like that's all the council members who have signed on to speak. I need to ask our counsel, Keith Horn. Keith, I believe you have alerted us that we have, I believe, two motions. And Council Member Lawless has read the motion related to the amendment to the district and the agreements that go along with the district. There's also a resolution to authorize the interlocal cooperation agreement, which has not yet been walked on. All right. So procedurally, are we able to go ahead and vote then on what the motion and the second? Which is to place the ordinance on the docket? Right. Yes. All right. And then go to the resolution amendment, right? Okay. And then place your resolution on the docket is, I presume, what you're planning to do. All right. All right, just hang close by because you may need to keep our navigation clear. All right. All right, if there's no further discussion, then we can take a vote on the motion. All in favor, please indicate by saying aye and voting electronically. Aye. Aye. Opposed, no. All right, the motion carries. All right, Council Member Lawless. What does she do? Do you have another motion? Yes, this is for the resolution, and I knew it needed to be done first, but part of my brain did. The other part, so used to ordinances going first, I read the wrong one. I moved to place on the docket for today's special meeting a resolution approving an interlocal cooperation agreement between the Lexington Fayette Urban County government and other parties thereto regarding the Kentucky Bond Development Corporation and authorizing such corporation to issue bonds payable from TIF revenue for the cost of the parking structure of the Phoenix Park Courthouse Center Point Project. So moved. Motion by Council Member Logos, second by Council Member Farmer. Is there any discussion on the motion? All right. Hearing none, then we can take a vote. All in favor, please say aye. Aye. Opposed, no. Motion carries. All right. I'll now ask for a motion for a first reading. Madam Clerk. They've been placed on the docket so they can have first reading. So go ahead. Ordinance number one, an ordinance relating to the Phoenix Park Courthouse development area. the development area established by Ordinance No. 265-2008 of the Lexington-Fayette Urban County Government, the development area ordinance, amending the boundary of the development area to eliminate any overlap with the 21C Hotel Development Area, approving an amended and restated local participation applicable to the development area, approving an amended and restated master development agreement relating to the Center Point Project under construction within the development area, authorizing the Department of Finance as the agency designated for the development area in the development area ordinance to apply for an amendment of the tax incentive agreement applicable to the development area, authorizing the mayor and other staff of the Lexington Fayette-Urban County government to execute all documents in accordance herewith for the development of the development area consistent with the amended and restated local participation agreement, the amended and restated master development agreement, and any tax incentive agreement applicable to the development area. And resolution number one, a resolution of the Lexington Fayette-Urban County Council approving an interlocal cooperation agreement between the Lexington Fayette Urban County government and other parties thereto regarding the Kentucky Bond Development Corporation and authorizing such corporation to issue bonds payable from TIF revenue to pay costs of the parking structure at the Phoenix Park Courthouse Centerpoint Project. All right. Thank you, Madam Clerk. Is there a motion to suspend the rules for a second reading? All moved. Second. All right. Motion by Council Member Farmer, second by Council Member Beard. Is there any discussion on the motion? No. All right. Hearing none, then, Madam Clerk, please give us a second reading. Ordinance number one for second reading, an ordinance relating to the Phoenix Park Courthouse Development Area, the development area established by Ordinance number 265-2008 of the Lexington Fayette-Urban County Government to the Development Area Ordinance, amending the boundary of the development area to eliminate any overlap with the 21C Hotel Development Area, approving an amended and restated local participation applicable to the development area, approving an amended and restated master development agreement relating to the Centerpoint project under construction within the development area, authorizing the Department of Finance as the agency designated for the development area in the development area ordinance to apply for an amendment of the tax incentive agreement applicable to the development area, authorizing the mayor and other staff of the Lexington, Fayette, Urban County government to execute in all documents in accordance herewith for the development of the development area consistent with the amended and restated local participation agreement, the amended and restated master development agreement, and any tax incentive agreement applicable to the development area. And resolution number one, a resolution of the Lexington-Fayette Urban County Council approving an interlocal cooperation agreement between the Lexington-Fayette Urban County Government and other parties thereto regarding the Kentucky Bond Development Corporation and authorizing such corporation to issue bonds payable from TIF revenue to pay costs of the parking structure at the Phoenix Park Courthouse Centerpoint Project. Move approval. Motion by Vice Mayor Gordon, seconded by Council Member Akers. Is there any discussion on the motion? All right, hearing none, then I'll ask the clerk to please call the roll. Ms. Massadi? Yes. Mr. Myers? Yes. Ms. Scotchfield? Yes. Mr. Stennett? Yes, ma'am. Ms. Akers? Yes. Mr. Beard? Aye. Mr. Clark? Yes. Mr. Ellinger? Yes. Mr. Farmer? Aye. Mr. Ford? Yes. Ms. Gordon? Aye. Ms. Henson? Yes. Mr. Kay? Yes. Mr. Lane? Yes. And Ms. Lawless? Yes. Thank you. Thank you, Madam Clerk. The vote reflects passage of the motion. If there is no further business to come before this special council meeting, so I'll ask for a motion to adjourn the special council meeting. I'll adjourn. Second. Motion by Vice Mayor Gordon, second by Council Member Myers. Pardon. All right. Unless there's an objection.