STRATEGIC PRIORITY: Fiscally Sound
AGENDA DATE: June 11, 2025
COUNCIL DISTRICT(S): N/A
DEPARTMENT: City Controller’s Office
EXECUTIVE: Jack Ireland
______________________________________________________________________
SUBJECT
Title
An ordinance (1) approving and authorizing the Second Supplemental Indenture establishing the Senior Lien Special Tax Revenue Notes, Series A (Kay Bailey Hutchison Convention Center Dallas Venue Project) bridge loan in an amount not to exceed $1,000,000,000; (2) approving the execution and delivery of one or more Note Purchase Agreements with DNT Asset Trust, a wholly owned affiliate of JPMorgan Chase Bank, N.A., and the issuance of Notes pursuant thereto; and (3) resolving other matters related thereto - Financing: Convention Center Construction Fund ($1,055,181, upfront closing costs plus annual fees of $4,168,000 for a total cost of $5,223,181; with additional interest costs as accrued) (subject to annual appropriations)
Body
BACKGROUND
In coordination with the Kay Bailey Hutchison Convention Center Dallas (KBHCCD) Master Plan (the “Master Plan”), the City previously established a revenue financing system under its Master Indenture of Trust authorizing City of Dallas, Texas Special Tax and Revenue Obligations, (Kay Bailey Hutchison Convention Center Dallas Venue Project), dated as of October 3, 2023 (the “Master Indenture”). The primary source of funds for the Master Plan is revenue bonds backed by pledged revenue, including local Hotel Occupancy Tax (HOT), 2 percent Brimer HOT increase, and designated Project Financing Zone (PFZ) collections.
To move the project forward and begin enabling works in preparation for construction, the City, with advisement from the City’s co-financial advisors, Hilltop Securities, Inc. and Estrada Hinojosa & Co., has determined that it is in the best interest of the City to utilize a bridge loan in an amount up to $1,000,000,000 with DNT Asset Trust, a wholly owned affiliate of JPMorgan Chase Bank, N.A., to issue revenue notes as short-term financing under the Master Indenture in order to facilitate contracting and provide a source of interim financing and refinancing for the KBHCCD Venue Project obligations. Issuing revenue notes requires the adoption of a Second Supplemental Indenture to establish the “City of Dallas, Texas Senior Lien Special Tax Revenue Notes Program, Series A (Kay Bailey Hutchison Convention Center Dallas Venue Project), including taxable and tax-exempt notes (the “Notes”).
The Notes to be issued under the Master Indenture and any Supplemental Indenture (as defined in the Master Indenture) are being authorized and issued pursuant to the Constitution and laws of the State, including particularly Chapter 334, Chapter 351, and Chapter 1371, (all as defined in the Master Indenture), and Chapter 1207, Texas Government Code, as amended, and other applicable law (collectively, the “Act”).
The Notes are a special obligation of the City, payable from and secured by first and senior liens on pledged revenues, including project financing zone (PFZ) revenue, Chapter 351 hotel tax, and Chapter 334 (Brimer) hotel tax collections. The Notes function as a revolving note program used as short-term liquidity to fund capital projects in the interim in anticipation of the issuance of long-term bonds for the KBHCCD Venue Project. Per the Note Purchase Agreement, a condition of the Notes requires the refunding of the Series 2023 Bonds. Additionally, the notes have a maturity date of June 30, 2026, in which the City must refund the Notes with long-term debt or request an extension.
S&P Global Ratings (S&P) assigned its ‘SP-1’ short-term rating on the Notes, the second highest of the rating scale for short-term notes. The outlook is stable. Pending the approval of the ordinance, the Notes are scheduled to close in July 2025.
ESTIMATED SCHEDULE OF PROJECT
Briefing to City Council May 2025
Approval of Ordinance June 2025
Effective Date of Amended Agreements July 2025
Closing July 2025
PRIOR ACTION/REVIEW (COUNCIL, BOARDS, COMMISSIONS)
On June 14, 2023, City Council authorized the preparation of plans and the payment of potential future costs and expenses for the issuance of Special Tax and Revenue Bonds (Convention Center Venue Project), Series 2023 in a principal amount not to exceed $172,000,000; and Special Tax Bonds (Fair Park Venue Project), Series 2023 in a principal amount not to exceed $51,000,000 by Resolution No. 23-0769.
On September 27, 2023, City Council authorized an ordinance approving and authorizing the issuance and sale of City of Dallas, Texas, Special Tax Revenue Obligations (Kay Bailey Hutchison Convention Center Venue Project), Series 2023 in a principal amount not to exceed $172,000,000; a Master Indenture of Trust and a First Supplemental Indenture of Trust; making findings with respect to the issuance of such obligations; and providing an effective date by Ordinance No. 32559.
The City Council was briefed on “Kay Bailey Hutchison Convention Center Dallas Master Plan - Convention Center Component Update” on May 21, 2025.
The City Council was briefed by memorandum regarding this matter on June 6, 2025.
The Government Performance and Financial Management Committee will be briefed by memorandum regarding this matter on June 10, 2025.
FISCAL INFORMATION
|
Fund |
FY 2025 |
FY 2026 |
Future Years |
|
Convention Center Construction Fund |
$1,794,280.00 |
$3,428,902.00 |
$0.00 |
See Schedule I for estimated cost of issuance and commitment fees.
The Notes are a special obligation of the City, payable from and secured by first and senior liens on pledged revenues, including project financing zone (PFZ) revenue, Chapter 351 hotel tax, and Chapter 334 (Brimer) hotel tax collections. The Notes serve as a bridge loan and will be refunded with long-term bonds in 2026.
Proceeds of the Notes will be used to provide interim financing for the proposed KBHCCD Venue Project expansion, to refund the Series 2023 Special Tax Revenue Bonds, and to pay cost of issuance associated with the notes.
The bridge loan costs consist of cost of issuance fees associated with the Notes at closing, a commitment fee for the life of the Notes assessed against the average monthly balance of the undrawn amount paid monthly in arrears at a rate of 57.5 basis points, and interest accrued on outstanding Notes drawn. Cost of issuance fees at closing are estimated at $1,055,181, plus annual paying agent and rating fees of $28,000. Based on projected facility draw schedules, the estimated commitment fee is approximately $4,140,000 and estimated interest costs are approximately $31,295,000.