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2019 10 17 MDD Minutes, SpecialMINUTES OF THE SPECIAL MEETING OF THE BOARD OF DIRECTORS OF THE BAYTOWN MUNICIPAL DEVELOPMENT DISTRICT October 17, 2019 The Board of Directors of the Baytown Municipal Development District (MDD) met in a Special Meeting on Thursday, October 17, 2019, at 4:10 P.M., in the Council Chamber of the Baytown City Hall, 2401 Market Street, Baytown, Texas with the following in attendance: Brandon Capetillo President Chris Presley Vice President Laura Alvarado Secretary Suhey Rios -Alvarez Director Charles Johnson Director Heather Betancourth Director David Himsel Director David P. Jirrels Director Gary Englert Director Rick Davis General Manager Ignacio Ramirez, Sr. General Counsel Leticia Brysch Assistant Secretary President Brandon Capetillo convened the October 17, 2019, MDD Board Special Meeting with a quorum present at 4:10 P.M., all members were present with the exception of Directors Robert C. Hoskins and Mary Hernandez who were absent. 1. DISCUSSION a. Discuss the Baytown Hotel/Convention Center Budget. Representative from Garfield Public/Private gave an overview of the updated hotel design to include upgraded lobby, food service area, rooms and fixtures and noted that these upgrades are due to the change in the brand associated with the hotel. These changes have increased the budget by an estimated $5.259 million for a new total of an estimated $62 million. Ms. Titiana Renzo, Citigroup, Inc., who is the bond underwriter for this project, stated that she has been working with this team for over a year in order to structure the bonds, and as previously noted, the costs of the project did increase; however, it is also important to note that the revenue projections associated with this project also increased. Ms. Renzo noted that because of this, the impact to the City and the District did not materially change since their last presentation. Ms. Renzo stated that her focus for the presentation relates to the Hotel Bonds, which are structured to be re -paid with hotel revenues and not with tax -payer dollars. She further noted that if their projections are correct, the hotel will perform at a degree that will result in net -revenue. She noted that the 2019 C-Bonds and Junior C-Bonds are designed to be paid with hotel revenues, but they have a back -stop by the MDD. Ms. Renzo stated that the debt service for the bonds has MDD Board Special Meeting Minutes October 17, 2019 Page 2 of 3 only increased by $200,000 a year with a coverage of a minimum of $1.2 million, meaning that, they have designed it to where the hotel revenues cover the costs of those bonds by 120%. MDD still has the same protections, all of the same reserves, food, equipment and other items that are necessary to maintain the hotel and to pay debt service. Ms. Renzo noted that the net impact to the City was an estimated at $41 million and with the changes that net impact is about $42 million at the end of the 30 years. She summarized by saying that the increase in cost for this project is really offset by the increase in revenues, so the structure remains very much the same; they are excited about selling these bonds as they are going to be very well received in the market. Mr. Chris Jennings, representative from Hilltop Securities noted that he is an investment banker that has been with the project in its last and current iteration and noted that his job is to show the MDD where their risks are and if they are reasonable as they take on this debt. Mr. Jennings noted that in his analysis of the MDD current and projected sales tax revenues, hotel revenues, debt obligation and operational costs, and other phases that may be included; such as the convention center and parking garage, that this project is feasible. He noted that the City has a contribution of $350,000 per year in HOT Rinds and now that the State has committed to allow for the City to use the state contributions associated with the HOT and sales tax revenue; this change in the law only helps this project and change the projected MDD payments, so they have more coverage. Further, Mr. Jennings noted that even with the stress test and worse case scenarios, the risk to the MDD is reasonable. President Brandon Capetillo thanked the representatives for the overview and opened the floor for questions from the Board. Ms. Renzo, in response to a question from Director Himsel regarding maintenance cost for the hotel, particularly as it is on the coast, that the maintenance costs for the hotel are included in their model and while it is not broken down in extreme details, it is included in the budget that MDD was provided. She further noted that as a part of the net revenues, 40.0 maintenance reserves have already been set aside to deal specifically with the hotel maintenance issues, which is standard in the hotel industry and that of the interested brand. Vice President Chris Presley stated that he was very satisfied with the financial advisor, the stress test and the modeling that has been done for this project. He noted that the theme of this project is that it is a higher end product, which results in higher rates and revenues; however, studies and aspirations on rates do not always line-up with reality, so he is happy that possible issues and hiccups have been accounted for and considered in their modeling. Director Heather Betancourth stated that there was a move recently for the convention center to be owned by the City and the hotel by MDD, who is going to be responsible for the marketing and public relations of this project. EDF representative, Ron Bottoms stated that the marketing and promotion of this project would be a combined effort between the brand and the City. President Capetillo thanked everyone for their comments and noted that he is looking forward to seeing this project come to Tuition. MDD Board Special Meeting Minutes October 17, 2019 Page 3 of 3 2. ADJOURN With there being no further business to discuss, President Brandon Capetillo adjourned the October 17, 2019, MDD Board Special Meeting at 4:10 P.M. Leticia Brysch, E City of Baytown