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MEETING

AUGUST 8, 2012

AGENDA

Date:

August 8, 2012

To:

Commissioners of the Urban Renewal Authority

From:

Susan K. Wood-Ellis, Chair

Subject:

Special Meeting, August 8, 11:00 a.m.

City Hall – Pikes Peak Room

107 N. Nevada Ave., Second Floor

Colorado Springs, Colorado 80903

Agenda:

1.

Consideration of Vineyard Redevelopment and Reimbursement Agreement – Vince Colarelli

2.

Other Matters

3.

Adjournment

MINUTES OF THE REGULAR MEETING OF THE

URBAN RENEWAL AUTHORITY

OF THE CITY OF COLORADO SPRINGS

HELD ON WEDNESDAY AUGUST 8, 2012

On the 8th day of August, 2012 at 11:00 a.m., the Commissioners of the Urban Renewal Authority of the City of Colorado Springs met in Special Session at 107 N. Nevada Avenue, at City Hall in the Pikes Peak Conference Room, Colorado Springs, Colorado.

In attendance were:

COMMISSIONERS:

Michael Collins

Scott Hente

David Neville

Judy Noyes

Wynne Palermo

Jim Raughton

Robert Shonkwiler

Rosemarie Venezia

Susan Wood-Ellis

ABSENT:

Also in attendance:

Bob Cope

City Economic Vitality

Vince Colarelli

Vineyard Developer

Paul Benedetti

Developer Attorney

Arne Ray

CSURA Financial Analyst

Fred Crowley

Crowley’s Consulting, Inc.

Mary Jo Daugherty

McGeady Sisneros, PC

John Davis

Management Consulting

Stan Kensinger

Olive Real Estate Group

David White

Chamber/Econ Dev Corp

Rich Laden

Gazette

Dan Hughes

CSURA Legal Counsel

Mary-K. Burnett

CSURA Staff

Chuck Miller

CSURA Staff

Jim Rees

CSURA Staff

Chairman Wood-Ellis called the meeting to order at 11:15 a.m.

Mr. David White, Chamber/Economic Development Corporation, asked if he could make a statement concerning the Vineyard Data Center Park as he had another obligation and could not stay for the entire meeting. Mr. White stated that the Chamber and Economic Development Corporation fully endorse and support the Vineyard project. The project will be a great benefit to Colorado Springs. The EDC/Chamber is presently working with several large companies interested in the project as there is a great demand for all that a large data center has to offer. Already there are four companies who have requested an additional 100,000 square feet of space each within a data center. He felt the location was ideal for this type of use. The underground utilities and telecom to the area increase the level of benefit for uninterrupted service which is vital to data center users. He felt the project would be an economic engine toward bringing new jobs and additional companies to the region.

Item #1 – Consideration of Vineyard Redevelopment and Reimbursement Agreement – Vince Colarelli

Mr. Colarelli introduced a PowerPoint presentation reviewing the history of the project stating that he had been working on the project for six years and that the Urban Renewal Plan had been approved by the Colorado Springs City Council in 2011. He showed a flow chart of events for the development of the project along with images of other data centers across the country. He explained that it took 17 months to find and negotiate a partnership with his Capital Partner, Iron Point Partners. Five other firms were also considered.

Iron Point Partners is a private equity fund that has a focus on data centers and senior living; two of the largest growing markets in the United States. As part of the partnership, T5 Data Centers is also in the mix. They own and operate similar data center parks in Atlanta, Dallas, Charlotte, Los Angeles along with another location currently under contract. The vast knowledge and experience of T5 brings credibility to the Vineyard project. It also shows national brand recognition and awareness to other potential clients. Mr. Colarelli has his team in place; the necessary resources are committed and is asking for the approval of the Urban Renewal Authority on the Redevelopment and Reimbursement Agreement for the Vineyard Data Center Park project.

Mr. Colarelli supported his request with some interesting data on current data centers from an annual survey by the Uptime Institute. The survey results showed that out of 1100 data centers 55% of them have budgeted for increase users in 2012, 30% of the users will run out of space in 2012 and 76% of the centers will need to expand within the next 36 months. The four most important factors in the expansion of a data center are as follows: upfront costs, operating costs, speed of delivery and reliability. The Colorado Springs site meets all the priority factors, is supported by Colorado Springs Utilities with one of the most reliable grid systems in the country, has community support, is free from natural and man-made disasters and has multiple funding incentives from within the project and from CSURA, if approved.

In summary, Mr. Colarelli stated that he would be the managing partner and would be involved in the project until it was completed. The Vineyard Data Center will not pull clients from existing local space. The project cannot afford the cost of startup infrastructure without assistance from TIF. The project will bring significant public benefit to many levels of government including the City, County and State. This type of project is the first industry in the country for emerging young professionals. It is estimated that construction for the project will bring in $800 million in revenue. It will provide additional telecom service expansion for as many as a dozen users, some not currently in the region. There will be additional community park space, trails and major intersection improvements as well.

Mr. Colarelli then introduced Fred Crowley, Crowley Consulting, Inc., who shared extensive data supporting the Vineyard Data Center Project. He showed expected trends for jobs higher than our City’s current average income level. He shared statistics concerning the growth rate of telecommunications as a number one ranked industry. He also shared information that supported Mr. Colarelli in the anticipated economic impact for employment, income, sales taxes and utilities with the Vineyard Data Center Park Project. He summarized by showing that there would be a surplus revenue and sales tax on average of $6.6 million per year through the year 2036 based on very conservative projections.

Mr. Arne Ray was next to speak to Authority members. He gave a brief summary on his background including redevelopment project management for both public and private, project feasibility and implementation strategies and negotiation of public and private finance agreements. He also defined his role on behalf of CSURA in the Vineyard project and reviewed the goals of the Vineyard Urban Renewal Plan as adopted by City Council.

Mr. Ray explained the various sources for reimbursement of specific project costs. Some monies will be front-ended by the developer to include administrative fees to CSURA until the project generates enough TIF to cover those expenses. The front ended dollars would be paid back through TIF with interest. There will be other sources for funding for the project such as a metropolitan tax district, a per- square-foot public improvement fee and the possibility of the sale of bonds. The various funding sources have been put in place to protect CSURA financially in this project.

Commissioner Neville asked for clarification on reimbursable expenses listed on Exhibit C concerning to what end the cost of improvements were to be verified by the developer. Extensive discussion ensued with multiple changes to the agreement being considered. The following sections show the major changes to the document:

9.0

AUTHORITY BONDS. The Authority agrees to issue Authority Bonds when(a) the District has issued District Bonds sufficient to constructthe District Public Improvements,(b) the District has no history of payment delinquency with respect to the District Bonds, (c) the PIC Revenue pledged to the District Bonds is sufficient to meet the Minimum Debt Service Requirement for all outstanding District Bonds, (d) the PIC or the Bond Trustee has PIC Revenueon depositto support the first year’s projected debt service revenue for such Authority Bondsas allocated to the Authority pursuant tothe most recent approved Development and Financing Plan and the PIC Operating Agreement, and (e) such Development and Financing Plan projects sufficient PIC Revenue to achieve Minimum Debt Service Requirements for the Authority Bonds, including Bond Requirements in the year of issuance. The Authority may issue the Authority Bonds in phases and, to the extent not required to pay Bond Requirements of District Bonds, shall collect and apply TIF Revenue to payment of the Authority Bonds or to otherwise reimburse the District and Developer Advances until the earlier of payment in full of all Eligible Costs or expiration of the time the Authority shall be eligible to collect TIF Revenue pursuant to the Act. The Reimbursement Obligation of the Authority under this Agreement is limited to payment of the Bonds (including Developer Advances) from TIF Revenue.

9.2

Pledge of TIF Revenue. The Authority hereby irrevocably pledges the TIF Revenue to payment of the Bonds, including Developer Advances.The TIF Revenue, when and as received by the Authority shall be subject to the lien of such pledge without any physical delivery, filing, or further act. The Authority shall transfer the amounts in the special fund to the PIC or, upon agreement in writing by the Parties, as otherwise specified in the Bond Documents. The PIC (or the Bond Trustee, as applicable) shall keep, maintain, and apply such funds as required to payment of the Reimbursement Obligation. After the Authority and the District have approved the first Development and Financing Plan, the Reimbursement Obligation established by this Agreement shall be an obligation of the Authority pursuant to Section 31-25-107(9), C.R.S. Approval of a Development and Financing Plan by the Authority shall mean that the Authority has elected to apply the provisions of Section 11-57-208, C.R.S., to this Agreement. Thereafter, creation, perfection, enforcement and priority of the pledge of the TIF Revenue as provided herein shall be governed by Section 11-57-208, C.R.S. and this Agreement. The lien of such pledge on the TIF Revenue and the obligation to perform the contractual provisions made herein shall have priority over any of all other obligations and liabilities of the Authority with respect to the TIF Revenue.

0.4

Developer Advances; Interest. The Developer may provide financing for the Eligible Public Improvements by means of the Developer Advances. Developer Advances include (a) Eligible Costs incurred by the Developer for construction by the Developer of Eligible Public Improvements and (b) advances to the District for District Eligible Costs. Developer Advances shall bear interest at the rate of 8% per cent per annum, accruing from the date incurred or advanced and compounded annually on the unpaid balance until paid; provided however, notwithstanding the foregoing, if application of the requirements for issuance of the Authority Bonds described in Section 9.0 hereof shows that a minimum of $10,000,000 in Authority Bonds, including Bond Requirements, can bemarketed and issued at an interest rate of less than Eight Percent (8.0%) per annum, as determined by a nationally recognized bond underwriterto parties other than the Developer, and the Authority fails to issue such Authority Bonds within 120 days after receipt of a notice from the Developer to do so, the interest rate on all unpaid Developer Advances, together with any accrued and unpaid interest on such amounts, shall automatically increase as of such date to 12% per annum and compounded annually until paid in full. After expiration of the period of time for allocation of TIF Revenue to the Authority pursuant to the Act, all remaining outstanding Developer Advances, plus interest, shall be paid from PIF Revenue and District Debt Service Revenue (as to District Public Improvements) until paid in full.

12.6

Accredited Investor Requirements. Notwithstanding any provision in this Agreement to the contrary, the Developer agrees (and any Note described in Section 12.5, above, shall require) that the right to be reimbursed forDeveloper Advances shall not be transferred to any person other than an “accredited investor” as defined in Rule 501(a) under the Securities Act of 1933 and that such accredited investor and any successor accredited investor will execute an investment letter that complies with such requirement. In addition, the Developer and any transferee or assignee agrees to cooperate with the District to obtain all necessary state securities exemptions pursuant to Title 11, Article 59, of the Colorado Revised Statutes (“State Securities Act”).

Exhibit C: Added at bottom of the page:

Actual TIF Revenue is dependent on future property tax assessments, but is estimated that it will fund approximately 25% of the Eligible Costs based on the information that has been provided by the El Paso County Assessor's Office.

Also, the Board requested like a copy of the break out of the costs for the $4.5m UCCS/PPCC funding.

Commissioner Shonkwiler requested verified data from other data center projects to include development costs, profit margins and reassurances that this project would remain in a profitable environment throughout the 25 year life of the Urban Renewal Plan ending in the year 2036.

After extensive discussion Commissioner Judy Noyes stated that she felt that CSURA had been working on this project long enough. The Authority is as well protected as is possible and that it is a solid, worthwhile project that should be approved. She then made the following motion:

RESOLUTION NO. 1769

A RESOLUTION APPROVING THE VINEYARD REDEVELOPMENT AND REIMBURSEMENT AGREEMENT WITH THOSE CHANGES STATED ABOVE

BE IT RESOLVED BY THE COMMISSIONERS OF THE URBAN RENEWAL AUTHORITY OF THE CITY OF COLORADO SPRINGS, COLORADO, THAT:

The Vineyard Redevelopment and Reimbursement Agreement with stated changes is hereby approved.

Motion was made by Commissioner Noyes, seconded by Commissioner Collins, that Resolution #1769 be adopted.

Chairperson Wood-Ellis asked if there was further discussion and requested input from Authority members.

Commissioner Raughton stated he would like to see clarification on the additional details held within the Vineyard Redevelopment and Reimbursement Agreement.

Commissioner Hente remarked that the questions discussed were helpful but he still felt it was time to move forward with the project.

Commissioner Collins felt it was time to get this project moving.

Commissioner Venezia agreed with comments made by Commissioners’ Noyes and Hente.

Commissioner Palermo agreed with all the previous comments. She felt that in a contract situation there are risks but she is prepared to trust the individuals who have prepared and negotiated the agreement and would be supported the project.

Commissioner Neville remarked that he felt it was a great project and that he would be supporting it. He did feel that the documents needed to be tightened up in some areas.

Commissioner Shonkwiler stated that he would not be supporting the project as he felt there were still some unanswered questions that needed verifying.

Upon a Call for the Vote, the following Commissioners voted:

AYES:

Michael Collins

Scott Hente

David Neville

Judy Noyes

Wynne Palermo

Rosemarie Venezia

Susan Wood-Ellis

The following voted:

NAYES:

Jim Raughton

Robert Shonkwiler

The motion was declared carried and the Resolution adopted. CSURA Staff and attorney will work with the development team to make the appropriate revisions as requested by the Board prior to the documents being signed.

Item #2 – Other Matters

A decision on whether to have the regular CSURA meeting on August 22nd will be made at a later date.

Item #3 – Adjournment

There being no further business to come before the Commissioners, motion was made by Commissioner Hente, seconded by Commissioner Venezia to adjourn the meeting. Upon unanimous vote, the meeting was declared adjourned at 1:42 p.m.

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