HomeMy WebLinkAboutAgenda - 03-03-2009 - 5a ORANGE COUNTY
BOARD OF COMMISSIONERS
ACTION AGENDA ITEM ABSTRACT
Meeting Date: March 3, 2009
Action Agenda
Item No. 5 -
SUBJECT: Public Hearing on the Issuance of Alternative Financing for Capital Projects and
Equipment and Adoption of Resolution
DEPARTMENT: Finance PUBLIC HEARING: (Y/N) Yes
ATTACHMENT(S): INFORMATION CONTACT:
Resolution Gary Humphreys, 919-245-2453
Robert Jessup, 919-933-9891
PURPOSE: To conduct a public hearing on the proposed issuance of up to $33,617,000 in
alternative financing for capital projects and equipment and to adopt a resolution supporting an
application to the Local Government Commission for approval of the financing arrangements.
BACKGROUND: The Orange County Board of Commissioners has previously approved the
following capital projects:
• Acquisition and equipping of the County portion of the Gateway Center, County Office
Building, and Library— $25,000,000
• Parks and Open Space Projects — $5,500,000
• Affordable Housing Projects —$1,400,000
• Solid Waste Equipment— $217,000
• Property Management Information System (PIMS) — $1,500,000
In addition the Board made a preliminary determination to finance costs for these projects by the
use of an installment contract as authorized under Section 160A-20 of the North Carolina
General Statutes in an amount not to exceed $33,617,000.
The next step in the process is for the Board to conduct a public hearing on the proposed
alternative financing. After receiving public input the Board is required to consider making
certain findings of fact. These findings of fact are set forth in the attached resolution for the
projects and the proposed financing as prescribed under the guidelines of the North Carolina
Local Government Commission. The debt service cost of the financing will be known when the
financing proposals are received on March 2, 2009 and a final decision on the financing is
proposed for consideration by the Board at its March 17, 2009 meeting. Pending Board
approval, the Local Government Commission would subsequently consider approval of the
financing arrangements at its April 7, 2009 meeting.
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It is worth noting the American Recovery and Reinvestment Act of 2009 (ARRA) has increased
the small issuer exemption for tax exempt bonds from $10 million to $30 million for calendar
years 2009 and 2010. The proposed County financing package detailed above could qualify
under this exemption if 1) the amount of the financing was reduced to an amount less than $30
million and 2) no other tax exempt financings were pursued by the County during calendar year
2009. In addition, financial institutions will generally offer lower interest rates when the issuer
qualifies for this exemption (known as a bank qualified financing).
In anticipation of the final ARRA retaining the exemption increase, the request for proposals
(RFP) the County sent to banks requested responses for both bank qualified and non-bank
qualified financing. In order for the financing to meet the bank qualified limit, the County would
need to defer at least $3,617,000 of the project financing until next calendar year. A staff
recommendation on this deferral based on the potential interest savings will be made at the
Board's March 17, 2009 meeting.
FINANCIAL IMPACT: There is no financial impact related to holding the public hearing and
adoption of the resolution. However, there will be a financial impact in proceeding with the
financing. A preliminary conservative estimate of maximum debt service would require $2.14
million in FY 2009-10. A conservative estimate of the tax rate equivalent for FY 2009-10 is 1.39
cents. The highest debt service payment of $3.73 million would occur in FY 2010-11 with a tax
rate equivalent conservatively estimated to be 2.33 cents.
RECOMMENDATION(S): The Manager recommends the Board:
1) open the public hearing and receive any comments from the public;
2) close the public hearing;
3) make the findings of fact as set forth in the attached resolution for the projects
and the proposed financing as prescribed under the guidelines of the North
Carolina Local Government Commission; and
4) adopt the resolution supporting the application to the Local Government
Commission for approval of the financing arrangements.
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Resolution supporting an application to the Local Government Commission
for its approval of alternative financing arrangements for the County
WHEREAS,
The Orange County Board of Commissioners has previously determined to
undertake certain capital projects, as further described below:
Project Approximate Amount To Be Financed
Acquisition and equipping of County $25,000,000
portion of Gateway Center, County
office building and library, and library
development
Parks and open space projects $5,500,000
Affordable housing projects $1,400,000
Solid waste equipment $217,000
Property management information $1,500,000
system
The Board has previously made a preliminary determination to finance costs
for these projects by the use of an installment contract, as authorized under Section
160A-20 of the North Carolina General Statutes.
Under the guidelines of the North Carolina Local Government Commission,
this governing body must make certain findings of fact to support the County's
application for the LGC's approval of the County's proposed financing
arrangements.
BE IT RESOLVED by the Board of Commissioners of Orange County,
North Carolina, that the County confirms its preliminary determination to carry
out and finance the projects described above. The Board will make a final
determination of the projects and amounts to be financed, and make a final
approval of financing terms and conditions, by a subsequent resolution.
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BE IT FURTHER RESOLVED that the Board of Commissioners makes
the following findings of fact:
(1) The proposed projects are necessary and appropriate for the County
under all the circumstances. The Gateway Center, office building and library
projects will provide needed space for County functions in a cost-effective manner.
The parks, open space and affordable housing projects will help carry out County
policies that have been repeatedly approved by the Board. The solid waste and
property management information system projects will provide needed equipment
useful in maintaining and improving the efficiency of County operations.
(2) The proposed installment financing is preferable to a bond issue for
the same purpose under all the circumstances.
The County has no meaningful ability to issue general obligation bonds for
the Gateway Center, office building, library, solid waste equipment or PIM system.
These financings are for discrete facilities and therefore particularly suitable for
installment financing. Although the parks, open space and affordable housing
projects represent projects for which the County's voters have approved general
obligation bonds, it is more cost effective to finance those projects in this larger
installment financing than to proceed with a separate bond financing for the
relatively small amount of authorized bonds.
None of these projects will produce any revenues that could be used to
support a self-liquidating financing. The County has chosen to finance these
projects through installment financing as part of a balanced capital finance
program that includes both installment financings and voter-approved bonds.
(3) The estimated sums to fall due under the proposed financing contract
are adequate and not excessive for the proposed purpose. The County will obtain
competitive lending proposals, and will closely review proposed lending rates
against market rates with guidance from the LGC. Amounts to be financed for each
project will reflect contract prices or other firm costs, except that the amount to be
financed now for the PIM system reflects an estimate of initial financing needs and
may be supplemented.
(4) As confirmed to the Board at this meeting by the County's Finance
Officer, (a) the County's debt management procedures and policies are sound and
in compliance with law, and (b) the County is not in default under any of its debt
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service obligations.
(5) The County estimates that debt service on this financing will have a
maximum tax rate equivalent impact of approximately 2.33 cents. This debt service
impact will be higher in initial years, although the County expects to complete
financing arrangements that reduce debt service payable in the 2009-2010 fiscal
year. This debt service impact is contemplated in the County's existing capital
investment program and is consistent with the Board's previously-approved debt
policies.
(6) The County Attorney is of the opinion that the proposed projects are
authorized by law and are purposes for which public funds of the County may be
expended pursuant to the Constitution and laws of North Carolina.
BE IT FURTHER RESOLVED that all actions of the County's Finance
Officer and other County representatives in filing an application with the LGC for
its approval of the project and the proposed financing arrangements, and otherwise
in furtherance of the completion of the contemplated financing, are ratified,
approved and confirmed, and that this resolution takes effect immediately.
* * * * * * *
I certify that the foregoing resolution was duly adopted at a meeting of the
Board of Commissioners of Orange County, North Carolina, duly called and held
on March 3, 2009, and that a quorum was present and acting throughout such
meeting. Such resolution remains in full effect as of today.
Dated this day of , 2009.
[SEAL]
Donna Baker
Clerk, Board of Commissioners
Orange County, North Carolina