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410SCBS2. CITY OF WORCESTER, MASSACHUSETTS Auditing Department r- i, ,F722 A y' Robert V.Stearns,CPA City Auditor June 4,2019 TO THE WORCESTER CITY COUNCIL RE: Request City Auditor provide City Council with a report reviewing whether the passage of time taken to develop the Madison Properties will have an impact on the solvency in terms of any payment on any loans or bonds. COLUNCILORS The passage of time taken to develop the Madison Properties would affect the timing of the receipt of revenues required to service Series A bonds. The $70M Series A bonds are to be repaid from new city revenue generated mainly from the Madison property developments in the ballpark district. Development is in two phases with several of the phase 1 developments expected to be completed prior to the opening of the ballpark in 2021. The original proforma assumed that the debt service not including capitalized interest on the Series A bonds would begin in fiscal 2022,thereby requiring that the revenues be available at that time to pay the debt. However, the debt strategy as it relates to the Series A bonds was changed and provides the city with flexibility as to when the Series A bonds are issued and when the first bond payment becomes due. The letter of intent between the city and Madison is non-binding and to serve as a guideline for the negotiations to the final agreement between the parties in the "Development Agreement", currently in progress. The letter of intent set a schedule for several of the properties with an occupancy date of not later than January 1, 2021. This date is relevant because it is when the Assessor will determine the taxable assessed value for fiscal 2022. The parties however acknowledge that this schedule represents a reasonable expectation and the scope and timing is subject to market forces and general economic conditions. If the project falls behind and the properties are not completed by January 1,