The URL can be used to link to this page

Home My WebLink AboutAgenda - 12-15-2009 - 4kORANGE COUNTY BOARD OF COMMISSIONERS ACTION AGENDA ITEM ABSTRACT Meeting Date: December 15, 2009 Action Agenda Item No. 4 - K SUBJECT: Adoption of Final Bond Resolution Authorizing General Obligation Refunding Bonds in the Maximum Amount of $27,000,000 to Refund Public Improvement Bonds Issued in 2001 and 2003 DEPARTMENT: Financial Services Department PUBLIC HEARING: (YIN) No ATTACHMENT(S): Resolution Preliminary Draft Official Statement INFORMATION CONTACT: Gary Humphreys 919-245-2453 Bob Jessup 919-933-9891 PURPOSE: To adopt a final bond resolution authorizing the sale of Genera! Obligation Refunding Bonds in the maximum amount of $27,000,000 to refund Public Improvement Bonds issued in 2001 and 2003. BACKGROUND: At the October 6, 2009 meeting the Board of County Commissioners authorized application to the Local Government Commission for approval to issue General Obligation Refunding Bonds in an amount not to exceed $27 million and authorized staff to proceed with those actions necessary to proceed with the refunding. The Board adopted the bond order to issue the bonds at the October 20, 2009 board meeting. The Bond Order was published November 6, 2009. Market rates rose which appeared to reduce the potential savings from the refunding to a level below the 3% minimum required by the Local Government Commission to proceed with the sale. The County's Financial Advisor prepared a recent analysis which showed that the required 3% savings can be achieved on at least a portion of the refunding. The savings achieved will be positively or negatively impacted by future market changes. A new sale date of January 12, 2010 has been set. In order to proceed with the refunding, the Board of County Commissioners must adopt a Resolution for the Sale of Refunding Bonds (attached). FINANCIAL IMPACT: The resulting financial impact of this action is a saving in future debt service costs which will be determined when the bonds are sold. RECOMMENDATION(S): The Manager recommends that the Board adopt the Resolution for Sale of Refunding Bonds. ~~~ -aoo~-- 088 2 RESOLUTION FOR THE SALE OF REFUNDING BONDS WHEREAS: The Board of Commissioners has previously authorized the issuance of up to $27,000,000 in County general obligation refunding bonds (the "Bonds") to refund public improvement bonds issued in 2001 and 2003. This resolution provides for the issuance of a portion of these Bonds and takes related action, such as approving the form of the disclosure document that will be used in connection with the offering and sale of the Bonds. BE IT THEREFORE RESOLVED by the Board of Commissioners of Orange County, North Carolina, as follows: 1. Determination To Sell Refunding Bonds -The County will issue and sell the Bonds for their authorized purpose. Z. Payment Provisions. The Bonds will bear interest at the rates determined at the time of their sale by the Local Government Commission (currently scheduled for January 12, 2010). The principal of the Bonds will be payable in annual installments as the Finance Officer may determine after consultation with the LGC, except that the final maturity for the Bonds must not extend beyond December 31, 2021. 3. Pledge of Faith, Credit and Taxing Power -- The County's full faith and credit are hereby irrevocably pledged for the payment of the principal of and interest on the Bonds. Unless other funds are lawfully available and appropriated for timely payment of the Bonds, the County will levy and collect an annual ad valorem tax, without restriction as to rate or amount, on all locally taxable property in the County sufficient to pay the principal of and interest on the Bonds as the same become due. 4. Approval of Official Statement for Offering -There has been made available to each member of the Board the form of an official statement (the "Official Statement") relating to the Bonds, pursuant to which the Bonds will be offered for sale. The Official Statement remains subject to completion and amendment. The Official Statement is approved as the form of official statement pursuant to which the Bonds will be offered for sale. The actions of the Finance Officer, in collaboration with the LGC, in preparing the text of the Official Statement are ratified, approved and confirmed. The Board ratifies and approves the LGC's distribution of the Official Statement, in substantially the form presented, to prospective purchasers of the Bonds. 3 The Board acknowledges that it is the County's responsibility, and ultimately the Board's responsibility, to ensure that the Official Statement in its final form neither contains an untrue statement of a material fact nor omits to state a material fact required to be included therein for the purpose for which such Official Statement is to be used or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. By the adoption of this resolution, the Board members approve the Official Statement as materially correct and complete, and further acknowledge and accept their own responsibility for causing the County to fulfill these responsibilities for the Official Statement. S. Prepayment Provisions- -- The Bonds will be subject to prepayment and redemption prior to maturity, or not, upon such terms and conditions as the Finance Officer, upon advice from the LGC, may determine. The Finance Officer shall execute a certificate prior to the initial delivery of the Bonds designating redemption terms and conditions, and this certificate will be conclusive evidence of the Finance Officer's approval and determination of such terms and conditions. 6. Form of Bonds; Payment .Details -- The Bonds will be designated "General Obligation Refunding Bonds, Series 2010," and will be in substantially the form set out in Exhibit A. The Bonds will be dated the date of their initial issuance, will be in fully registered form, in denominations of $5,000 and integral multiples thereof, and will be numbered R-1 upward. The Bonds must be signed by the manual or facsimile signature of the Chair of this Board or the County Manager, must be countersigned by the manual or facsimile signature of the Clerk to this Board or any Assistant Clerk, and the County's seal must be affixed thereto or a facsimile thereof printed thereon. No Bond will be valid unless at least one of the signatures appearing on such Bond (which may be the signature of the LGC's representative required by law} is manually applied or until such Bond has been authenticated by the manual signature of an authorized officer or employee of a bond registrar selected by the County. Interest on each Bond will be payable semiannually (a) from its date, if it is authenticated prior to the first interest payment date, or (b) otherwise from the interest payment date that is, or immediately precedes, the date on which it is authenticated (unless payment of interest thereon is in default, in which case such Bonds will bear interest from the date to which interest has been paid). Principal and interest will be payable in lawful money of the United States of America. The Finance Officer will execute a certificate prior to the initial delivery of the Bonds designating the final aggregate principal amount of the Bonds (up to the maximum authorized amount of $27,000,000) and the principal and interest payment schedule for 2 4 the Bonds. This certificate will be conclusive evidence of the Finance Officer's approval and determination of such matters. 7. Finance Officer as Registrar; Payments to Registered Owners -- The Finance Officer is appointed Registrar for the Bonds. As Registrar, the Finance Officer will maintain appropriate books and records of the ownership of the Bonds. The County will treat the registered owner of each Bond as the person exclusively entitled to payment of principal and interest and the exercise of all rights and powers of the owner, except that interest payments will be made to the person shown as owner on the registration books at the end of the day on the 15th day of the month preceding each interest payment date (whether or not such 15~' day is a business day). 8. Advertising Bonds for Sale -- The Finance Officer, in collaboration with the LGC, is authorized and directed to take all proper steps to advertise the Bonds for sale in accordance with customary LGC procedures, including through the use of one or more "Notice of Sale" documents in the LGC's customary form. All prior steps toward this end are hereby ratified and approved. 9. LGC To Sell Bonds; Provisions for Delayed Sale - (a) The County asks the LGC to sell the Bonds, to receive and evaluate bids and to award the Bonds on the basis of the best bid received. (b) If market conditions at the time of the proposed sale of the Bonds do not allow the Bonds to be sold at interest rates and prices that make the refunding of all or any portion of the prior bonds economical, as determined by the Finance Officer and in accordance with LGC guidelines, the Finance Officer is authorized to decline the sale of the Bonds, in whole or in part. The Finance Officer is further authorized to provide for additional attempts to sell the Bonds, or any portion of the Bonds, if such offrcer determines that market conditions have changed such that a successful sale of the Bonds (or any portion) may be possible. The Finance Officer may provide for one or more additional sales until March 1, 2010, without further advance approval from the Board. These additional sales may make use of the previously-approved official statement, with the Finance Officer's approval, and pursuant to such advertisement for sale as the Finance Officer may approve. 10. Completing Official Statement after Sale -- After bids have been received and the LGC has awarded the Bonds to the successful purchaser, the Finance Officer is authorized and directed to prepare, in collaboration with the LGC, a final Official Statement containing, among such other matters as may be appropriate, information required pursuant to Rule 15c2-12 ("Rule 15c2-12") promulgated by the United States Securities and Exchange Commission under the United States Securities Act of 1934, as amended. The County, together with the LGC, will arrange for the delivery within seven business days of the date the Bonds are sold of a reasonable number of copies of the final 3 5 Official Statement to the .successful bidder on the Bonds for delivery to each potential investor requesting a copy of the final Official Statement and to each person to which such bidder and members of the bidding group initially sell the Bonds. 1l. Finance Officer To Complete Bond Closing -After the sale of the Bonds, the Finance Officer and all other County officers and employees are authorized and directed to take all proper steps to have the Bonds prepared and executed in accordance with their terms and to deliver the Bonds to the purchaser upon payment for the Bonds. The Finance Officer is authorized and directed to hold the executed Bonds, and any other documents authorized or permitted by this resolution, in escrow on the County's behalf until the conditions for the delivery of the Bonds and other documents have been completed to the Finance Officer's satisfaction, and thereupon to release the executed Bonds and other documents for delivery to the appropriate persons or organizations. Without limiting the generality of the foregoing, this authorization and direction is specifically extended to authorize the Finance Officer (a) to enter into such agreements or take such other actions as such officer may deem appropriate in connection with obtaining bond insurance for the Bonds, (b) to approve agreements appropriate to carry out the refunding contemplated by this resolution, including agreements for the custody of Bond proceeds and agreements for appropriate professional services, and (c) to approve changes to any documents or closing certifications previously signed by County officers or employees, provided that the Bonds must be in substantially the form approved by this resolution and that any such changes must not substantially alter the intent of such certificates from that expressed in the forms of such certificates as executed by such officers or employees. The Finance Officer's authorization of the release of any such document for delivery will constitute conclusive evidence of such officer's approval of any such changes. In addition, the Finance Officer is authorized and directed to take all appropriate steps for the efficient and convenient carrying out of the County's on-going responsibilities with respect to .the Bonds. This authorization includes, without limitation, contracting with third parties for reports and calculations that may be required under the Bonds, this resolution or otherwise with respect to the Bonds. 12. Undertaking for Continuing Disclosure -- The County undertakes, for the benefit of the beneficial owners of the Bonds, to provide continuing disclosure with respect to the Bonds as described in Exhibit B. The Board designates the Finance Officer as the County officer to be primarily responsible for the County's compliance with its undertakings .for continuing disclosure provided for in this resolution. The Finance Officer will provide for the filings and 4 6 reports (including the reports of material events) constituting the continuing disclosure provided for in this resolution. 13. Resolutions As To Tax Matters -- The County will not take or omit to take any action the taking or omission of which will cause the Bonds to be "arbitrage bonds," within the meaning of Section 148 of the "Code" (as defined below), or "private activity bonds" within the meaning of Code Section 141, or otherwise cause interest on the Bonds to be includable in gross income for federal income tax purposes. Without limiting the generality of the foregoing, the County will comply with any Code provision that may require the County at any time to pay to the United States any part of the earnings derived from the investment of the proceeds of the Bonds, and the County will pay any such required rebate from its general funds. For this resolution, "Code" means the United States Internal Revenue Code of 1986, as amended, including applicable Treasury regulations. 14. Bonds Are "Bank-Qualified" Obligations -- The County designates the Bonds as "qualified tax-exempt obligations" for the purpose of Code Section 265(b)(3), which provides certain tax advantages for financial institutions that own the Bonds. IS. Book-Entry System for Bond Registration -- The Bonds will be issued by means of a book-entry system, with one bond certificate for each maturity immobilized at The Depository Trust Company, New York, New York ("DTC"), and not available for distribution to the public. The book-entry system for registration will operate as described in the Official Statement. Therefore, (a) the County will pay principal and interest on the Bonds to DTC or its nominee as registered owner of the Bonds, (b) the County will not be responsible or liable for any transfer of payments to parties other than DTC or for maintaining, supervising or reviewing the records maintained by DTC or any other person related to the Bonds, and (c) the County will not mail redemption notices (or any other notices related to the Bonds) to anyone other than DTC or its nominee so long as the book-entry system of registration. with. DTC is in effect. The County may elect to discontinue the book-entry system with DTC by resolution of the Board. The Finance Officer is authorized and directed to enter into any agreements such officer deems appropriate to put into place and maintain the book-entry system with DTC. 16. Call of Prior Bonds for Redemption -The Board authorizes and directs the Finance Officer to make, on the County's behalf, an irrevocable call for redemption of such of the County's General Obligation Public Improvement Bonds, Series 2001 and Series 2003, as the Finance Officer (after consultation with the LGC) deems beneficial to the County. The Finance Officer will make this call for redemption by the execution and delivery of an appropriate certificate in connection with the original delivery of the Bonds. 5 7 17. Miscellaneous Provisions -- All County officers and employees are authorized and directed to take all such further action as they may consider necessary or desirable in connection with the furtherance of the purposes of this resolution. All such prior actions of County officers and employees are ratified, approved and confirmed. Upon the absence, unavailability or refusal to act of the Chair, the County Manager or the Finance Officer, any of such officers may assume any responsibility or carry out any function assigned to another officer in this resolution. All other resolutions, or parts thereof, in conflict with this resolution are repealed, to the extent of the conflict. This resolution takes effect immediately. I certify that the foregoing resolution (including the attached Exhibits A .and B) was duly adopted at a meeting of the Board of Commissioners of Orange County, North Carolina, duly called and held on December 7, 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 December, 2009. [SEAL] Donna S. Baker Clerk, Board of Commissioners Orange County, North Carolina 6 8 EXHIBIT A -Form of Bonds REGISTERED REGISTERED Number R-X UNITED STATES OF AMERICA STATE OF NORTH CAROLINA ORANGE COUNTY General Obligation Refunding Bond, Series 2010 INTEREST RATE MATURITY DATE DATED DATE CUSIP February 1, 20XX , 2010 684 609 XXX REGISTERED OWNER: *****CEDE & CO.***** PRINCIPAL AMOUNT: * * * * THOUSAND DOLLARS ($ ,000)*** ORANGE COUNTY, NORTH CAROLINA (the "County"), for value received, promises to pay to the registered owner hereof, or registered assigns or legal representative, the principal amount stated above on the maturity date stated above, subject to prior, redemption as described herein, and to pay interest on this Bond semiannually on each February 1 and August 1, beginning August 1, 2010, at the annual rate stated above. Interest is payable (a) from the dated date stated above, if this Bond is authenticated prior to August 1, 2010, or (b) otherwise from the February 1 or August 1 that is, or immediately precedes, the .date on which this Bond is authenticated (unless payment of interest hereon is in default, in which case this Bond will bear interest from the date to which interest has been paid). Principal and interest are payable in lawful money of the United States of America. This Bond is one of an issue of the County's $ General Obligation Refunding Bonds, Series 2010 (the "Bonds"), of like date and tenor, except as to number, denomination, rate of interest, privilege of redemption and maturity. The Bonds are issued pursuant to a resolution adopted by the County's governing Board of 9 Commissioners on December 7, 2009, and the Constitution and laws of the State of North Carolina, including the Local Government Bond Act. The County's full faith and credit are pledged for the payment of principal of and interest on this Bond. The Bonds are issued by means of a book-entry system, with one bond certificate for each maturity immobilized at The Depository Trust Company, New York, New York ("DTC"), and not available for distribution to the public. Transfer of beneficial ownership interests in the Bonds in the principal amount of $5,000 or any integral multiple thereof will be effected on the records of DTC and its participants pursuant to rules and procedures established by DTC and its participants. Principal and interest on the Bonds are payable by the County to DTC or its nominee as registered owner of the Bonds. The County is not responsible or liable for such transfer of ownership or payments or for maintaining, supervising or reviewing the records maintained by DTC, its participants or persons acting through such participants. Bonds maturing prior to February 1, 2020, are not subject to redemption prior to maturity. Bonds maturing on February 1, 2020, and thereafter are redeemable, at the County's option, from any moneys that may be made available for such purpose, in whole or in part on any date not earlier than February 1, 2019, at a redemption price of 100% of the principal amount to be redeemed, plus interest accrued to the redemption date, without premium. If less than all of the Bonds stated to mature on different dates are called for redemption, the Bonds to be redeemed will be selected in such manner as the County may determine. If less than all of the Bonds of any one maturity are called for redemption, the particular Bonds or portions of Bonds of such maturity to be redeemed will be selected by lot in such manner as the County in its discretion may determine; provided, however, that the portion of each Bond to be redeemed will be in the principal amount of $5,000 or some integral multiple thereof, and that, in selecting Bonds for redemption, each Bond will be considered as representing that number of Bonds which is obtained by dividing the principal amount of such Bond by $5,000. Notwithstanding the foregoing, so long as a book-entry system with DTC is used for determining beneficial ownership of Bonds, if less than all of the Bonds within a maturity are to be redeemed, DTC and its participants will determine which of the Bonds within any such maturity are to be redeemed. If a portion of a Bond is called for redemption, a new Bond in principal amount equal to the unredeemed portion thereof will be issued to the registered owner upon the surrender thereof. The County will give notice of redemption by certified or registered mail to DTC or its nominee as the registered owner of the Bonds. The County will mail such notice not more than 60 days and not less than 30 days prior to the date fixed for redemption. The s 10 County is not responsible for sending notices of redemption to anyone other than DTC or its nominee. If (a) DTC determines not to continue to act as securities depository for the Bonds or (b) the County so elects, the County will discontinue the book-entry system with DTC. If the County fails to identify another qualified securities depository to replace DTC, the County will deliver replacement Bonds in the form of fully-registered certificates. The County's Finance Officer has been appointed Registrar for the Bonds. As Registrar, the Finance Officer will maintain appropriate books and records indicating ownership of the Bonds. The County will treat the registered owner of this Bond as the person exclusively entitled to payment of principal and interest and the exercise of all other rights and powers of the owner, except that interest payments will be made to the person shown as owner on the County's registration books at the end of the day on the 15th day of the month preceding each interest payment date (whether or not such 15~' day is a business day). The County has designated the Bonds as "qualified tax-exempt obligations" for the purposes of Section 265(b)(3) of the Internal Revenue Code of 1986, as amended. The Bonds are issued with the intent that North Carolina law will govern their terms. All acts, conditions and things required by the Constitution and laws of the State of North Carolina to happen, exist or be performed precedent to and in the issuance of this Bond have happened, exist and have been performed, and the issue of Bonds of which this Bond is one, together with all other indebtedness of the County, is within every debt and other limit prescribed by the Constitution and laws of the State of North Carolina. IN WITNESS WHEREOF, Orange County, North Carolina, has caused this Bond to signed by the Chair of its Board of Commissioners, to be countersigned by the Clerk to such Board, the County's seal to be affixed hereto and this Bond to be dated , 2010. COUNTERSIGNED: (SEAL) Sample only - do not sign] Sample only - do not sign) Clerk, Board of Commissioners Oran e County, North Carolina Chair, Board of Commissioners Orange County, North Carolina 9 11 The Bonds have been approved by the North Carolina Local Government Commission in accordance with the Local Government Bond Act. [Sample only - do not si~n1 T. Vance Holloman Secretary, Local Government Commission io 12 ASSIGNMENT FOR VALUE RECEIVED the undersigned hereby sell(s), assign(s) and transfer(s) unto (Please print or type transferee's name and address, including zip code) PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OR TRANSFEREE: the within bond and all rights thereunder, hereby irrevocably constituting and appointing Attorney, to transfer said bond on the books kept for the registration thereof, with full power of substitution in the premises. Dated: Signature Guaranteed: NOTICE: Signature(s) must be guaranteed by a participant in the Securities Transfer Agent Medallion Program ("STAMP") or similar program (Signature of Registered Owner) NOTICE: The signature above must correspond with the name of the registered owner as it appears on the front of this bond in every particular without alteration or enlargement or any change whatsoever. l~ 13 Exhibit B -- Undertaking for Continuing Disclosure The County undertakes, for the benefit of the beneficial owners of the Bonds, to provide the following: (a) by not later than seven months from the end of each of the County's. fiscal years, to the Municipal Securities Rulemaking Board ("MSRB"), audited County financial statements for such fiscal year, if available, prepared in accordance with Section 159-34 of the General Statutes of North Carolina, as it may be amended from time to time, or any successor statute, or, if such audited financial statements are not available by seven months from the end of any fiscal year, unaudited County financial statements for such fiscal year, to be replaced subsequently by audited County financial statements to be delivered within 15 days after such audited financial statements become available for distribution; (b) by not later than seven months from the end of each of the County's fiscal years, to the MSRB, (i) the financial and statistical data as of a date not earlier than the end of the preceding fiscal year (which data will be prepared at least annually, will specify the date as to which such information was prepared and will be delivered with any subsequent material events notices specified in subparagraph (c) below) for the type of information included under heading "'The County -Debt Information" and "- Tax Information" in the final Official Statement (excluding any information on overlapping or underlying units), and (ii) the combined budget of the County for the current fiscal year, to the extent such items are not included in the audited financial statements referred to in (a) above; (c) in a timely manner, to the MSRB, notice of any of the following events with respect to the Bonds, if material: (1) principal and interest payment delinquencies; (2) non-payment related defaults; (3) unscheduled draws on debt service reserves reflecting financial difficulties; (4) unscheduled draws on any credit enhancements reflecting financial difficulties; (5) substitution of credit or liquidity providers, or their failure to perform; (6) adverse tax opinions or events affecting the tax-exempt status of the Bonds; (7) modifications to rights of the beneficial owners of the Bonds; 12 14 (8) Bond calls; (9) defeasances; (10) release, substitution or sale of any property securing repayment of the Bonds; and (11) rating changes; and (d) in a timely manner, to the MSRB, notice of a failure of the County to provide required annual financial information described in (a) or (b) above on or before the date specified. If the County fails to comply with the undertaking described above, any beneficial owner of the Bonds may take action to protect and enforce the rights of all beneficial owners with respect to such undertaking, including an action for specific performance; provided, however, that failure to comply with such undertaking will not be an event of default and will not result in any acceleration of payment of the Bonds. All actions will be instituted, had and maintained in the manner provided in this paragraph for the benefit of all beneficial owners of the Bonds. The County shall provide the documents referred to above to the MSRB in an electronic format as prescribed by the MSRB and accompanied by identifying information as prescribed by the MSRB. The County may discharge its undertaking as set forth in this resolution by providing such information in any manner that the United States Securities and Exchange Commission subsequently authorizes in lieu of the manner described above. The County reserves the right to modify from time to time the information to be provided to the extent necessary or appropriate in the County's judgment, provided that: (a) any such modification may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of the County; (b) the information to be provided, as modified, would have complied with the requirements of Rule 15c2-12 as of the date of the final Official Statement, after taking into account any amendments or interpretations of Rule 15c2-12, as well as any changes in circumstances; and 13 15 (c) any such modification does not materially impair the interests of the beneficial owners, as determined either by parties unaffiliated with the County or by the approving vote of the registered owners of a majority in principal amount of the Bonds pursuant to the terms of the bond resolution, as it may be amended from time to time, at the time of the amendment. Any annual financial information containing modified operating data or financial information will explain, in narrative form, the reasons for the modification and the impact of the change in the type of operating data or financial information being provided. 14 R~ U (Q O ;~ d y U 6 ' u W d d d y 3y ~. ,. o o ~, .g a~ 'O T u ~ dd U 'Q R d A ~ a .a R F m o ~. d 0 7 ~ R t6 y 51 d G° o b~ R.: goo ~ ~" U O :b O w C. .~r+ ~ ~~ •~ C ,y. F W ~ ~d~ ~yw 0 " ,~ 0 V ~ y ~ d „_ ~WW ~3~' N F y E ~ ~ o~ d dyy -o a m ~ ~b d ~ c 7 ~o~ o~o O O' V ~~ a :' ~ ~~~ ~~~ .. o y~c 0 V O ~ d ~ a cam. ~ ~ .~ c m ~ _~ =' ~~~y ~ ~ .. .~ w o d.m~" ~ ~ a ~ .-. w C ~ ~ R ap -J O N •^~• ki t~4 ? o +~ 'o ~a E 'o o .~ d ~ U ~, .r O ~ d ~ o N .b ~ o ~~ ~ C ~ci O ~ y ~w~ ~ .~ U V .D ~ d O ~ ~ ,b 3 .Sm~ ~ ~ o a ~~ ~ ~ ,m c. F v~ .~, 1Y4t1Ilg$. Moody's: 5&P: Fitch: (See "Ratings" herein) PRELIMINARY OFFICIAL STATEMENT DATED NOVEMBER 30, 2009 NEW ISSUE-Book-Entry Only This Official Statement has been prepared by the Local Government Commission of North Carolina and the County of Orange, North Carolina to provide information in connection with the sale and issuance of the Bonds described herein. Selected infor- mation is presented on this cover page for the convenience of the user. To make an informed decision regarding the Bonds, a prospective investor should read this Official Statement in its entirety. Unless indicated, capitalized terms used on this cover page have the meanings given in this Official Statement. $9,760,000* County of Orange, North Carolina General Obligation Refunding Bonds, Series 2009 Dated• Date of Delivery Due: As shown on inside cover page Tax Exemption In the opinion of Bond Counsel and subject to the qualifications de- scribed herein, interest on the Bonds is not includable in gross income for federal income tax purposes and is exempt from existing State of North Carolina income taxation. See "Tax Exemption" herein for additional information regarding tax consequences arising from own- ership or receipt of interest on the Bonds. The Bonds will not be "qualified tax-exempt obligations" within the meaning of Internal Revenue Code Section 265(b)(3). Redemption The Bonds are subject to optional redemption at the times and prices as set forth herein. Security The Bonds constitute general obligations of the County, secured by a pledge of the faith and credit and taxing power of the County. Interest Payment Dates February 1 and August 1, commencing February 1, 2010 Denominations $5,000 or any integral multiple thereof Expected Closing/Settlement December 21, 2009 Bond Counsel Sanford Holshouser LLP Financial Advisor BB&T Capital Markets Sale Date December 8, 2009 Sale of Bonds Pursuant to sealed bids in accordance with the Notice of Sale The date of this Off cial Statement is December _, 2009 *Preliminary, subject to change. 16 17 MATURITY SCHEDULE $9,760,000* General Obligation Refunding Bonds, Series 2009 Due February 1 of the Year Indicated Year of Principal Interest Price Year of Principal Interest Price Maturity AmountY Rate or Yield' Maturity Amount* Rate or yields 2010 $ 160,000 2016 $950,000 2011 95,000 2017 935,000 2012 1,020,000 2018 930,000 2013 995,000 2019 925,000 2014 980,000 2020 910,000 2015 960,000 2021 900,000 *Preliminary; subject to change. lInformation obtained from underwriters of the Bonds. 18 COUNTY OF ORANGE, NORTH CAROLINA BOARD OF COMMISSIONERS Valerie Foushee ....................................................................................................................................Chair Bernadette Pelissier .................................................................................................................... Vice-Chair Alice M. Gordon Pam Hemminger Barry Jacobs Mike Nelson Steve Yuhasz COUNTY SfiAFF Frank Clifton . ...............................................................................••----••------•--.....---...----.... County Manager Gary Humphreys ............................................................................................. Financial Services Director John Roberts .....................•--.....................................................................---...----..............: County Attorney FINANCIAL ADVISOR BB&T Capital Markets Winston-Salem, North Cazolina BOND COUNSEL Sanford Holshouser LLP Carrboro, North Carolina i 19 TABLE OF CONTENTS Page Introduction ...................... ................................................................................................................... The Local Government Commission of North Carolina ............. . ................... The Bonds ......................................... ............................................................................... ..................... escription ............................................................... . ........................................................................ Redemption Provisions .............................................. . ..................................................................... Authorizations and Purposes ......................................................... . ....... ......................................... ecurity ............................................................................... . ............................................................. The Refunding Plan ...................................................................... . ....................................................... The County .................................................................................... . ....................................................... General Description .......................................................................... . . . . .......................................... Demographic Characteristics .........................................•--...... . ..........................;............................. Commercial, Industrial and Institutional Profile .......................... ................................................ Employment .............................................................................. ........................................................ Government and Major Services ...................................................:..... . . .......................................... Government Structure ........................................................ ......................................................... Education ....................................................... ............................................................................... Transportation ....................................................................................... ...................................... Human Services ............................................................. . . . . .......................................................... Parks, Recreation and Open Space ........................................................................ ..................... Public Service Enterprises ............................................................................ . .. ........................... Other Public Service Enterprises ........................................................................... .................... Other Services ......................................................... .............................•---••-----......---..............-•---• Debt Information ....................................................................... .............••-----...------..............----........ Legal Debt Limit ................................................................................. ......................................... Outstanding General Obligation Debt ...............................................•----............ .........----.....----- General Obligation Debt Ratios .................................................. .............•-------••--------...----...--•---- General Obligation Debt Service Requirements and Maturity Schedule ................................ General Obligation Bonds Authorized and Unissued .................................. . . ........................... General Obligation Debt Information for Underlying Units .................................................... Other Long-Term Commitments ............................................................... ....................•--.......... Debt Outlook .......................................................... . ....... .............................................................. Tax Information ........................................................................ ....................................................... General Information ............................................................ .............................•--•-•--.............---... Tax Collections ...................................................................... ..................•-•----•-••----•----•--•----...-----• Ten Largest Taxpayers ..........................................................................•--•• ----.....-•---.....------...----- 2009-10 Budget Commentary ............................................................................ .............................. Pension Plans ............................................................ ....................................................................... Contingent Liabilities ........................................................................... ........................................... Continuing Disclosure ............................................................................... ........................................... Approval of Legal Proceedings ....................:......................................:....................... ......................... Ratings :............................................................................... ....................... ..................................:....... . Tax Treatment ............................................................. ......................................................................... Financial Advisor ............................................................. ..................................................................... Verification of Mathematical Computations ........................................................... ........................... Underwriting ............................................................................................. . . ......................................... Miscellaneous .............................................................. ............................................. ... .......................... A -The North Carolina Local Government Commission ............................................................ A-1 B -Certain Constitutional, Statutory, and Administrative Provisions Governing or Relevant to the Insurrence of General Obligation Bonded Indebtedness by Units of Local Government of the State of North Carolina ...................................................................... B-1 C -Management Discussion and Analysis ....................................................•--....---.................... C-1 D -Financial Information .................................................................•-••-•---...-•----...---•---....---......... E -Proposed Form of Legal Opinion ..................................................•-•-•-----.....---......---............... D-1 E-1 F -Description of Book-Entry Only System ................................................................................ F-1 n s~~a,,~ ~ rm~ s ~.Q~~ State of North Carolina Department of State Treasurer JANET cowErt. State and Local Government Finance Division TREASURER and the Local Government Commission INTRODUCTION T. VANCE HOLLOMAN DEPUTY TREASURER This Official Statement, including the cover page and the appendices hereto, is intended to fur- nish information in connection with the public invitation for bids for the purchase of $9,760,000* General Obligation Refunding Bonds, Series 2009 (the "Bonds"), of the County of Orange, North Carolina (the "County"). The information furnished herein includes a brief description of the County and its economic conditions, government, debt management, tax structure, financial operations, budget, pension plans and contingent liabilities. The County has assisted the Local Government Commission of North Carolina (the "Commission") in gathering and assembling the information contained herein. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy any securities other than the Bonds offered hereby, nor shall there be any offer or solicitation of such offer or sale of the Bonds in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. Neither the delivery of this Official Statement nor the sale of any of the Bonds implies that the information herein is correct as of any date subsequent to the date hereof. The information contained herein is subject to change after the date of this Official Statement, and this Official Statement speaks only as of~its date. This Official Statement is deemed to be a final official statement with respect to the Bonds within the meaning of Rule 15c2-12 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended (the "Rule"), except, when it is in preliminary form, for the omission of certain pricing and other information to be made available by the successful bid- der or bidders for the Bonds to the Commission. In accordance with the requirements of such Rule, the County will agree in a resolution to be adopted by the Board of Commissioners of the County prior to the sale of the Bonds to certain continuing disclosure obligations. See the caption "Continu- ing Disclosure" herein. THE LOCAL GOVERNMENT COMMISSION OF NORTH CAROLINA The Commission, a division of the Department of State Treasurer, State of North Carolina (the "State"), is a State agency that supervises the issuance of the bonded indebtedness of all units of lo- cal government and assists these units in the area of fiscal management. Appendix A to this Official Statement contains additional information concerning the Commission and its functions. 20 *Preliminary, subject to change. 21 THE BONDS Description The Bonds will be dated as of their date of delivery and will bear interest from their date. In- terest on the Bonds will be payable semiannually on each February 1 and August 1, commencing February 1, 2010. The Bonds will mature, subject to the optional redemption provisions set forth below, on the dates set forth on the inside cover page of this Official Statement. The Bonds will be issuable as fully registered bonds in a book-entry system under which The Depository Trust Company ("DTC") will act as securities depository nominee for the Bonds. Pur- chases and transfers of the Bonds may be made only in authorized denominations of $5,000 and in accordance with the practices and procedures of DTC. See Appendix E hereto for a description of DTC and its book-entry system. Redemption Provisions The Bonds maturing prior to February 1, 2020 will not be subject to redemption prior to matur- ity. The Bonds maturing on February 1, 2020 and thereafter will be redeemable, at the option of the County, from any moneys that may be made available for such purpose, either in whole or in pazt on any date not earlier than February 1, 2019, at a redemption price equal to 100% of the principal amount of the Bonds to be redeemed, plus interest accrued to the date fixed for redemption. If less than all of the Bonds of any one maturity shall be called for redemption, the particular Bonds or portions of Bonds of such maturity to be redeemed shall be selected by lot in such manner as the County in its discretion may determine; provided, however, that the portion of any Bond to be redeemed shall be in the principal amount of $5,000 or any integral multiple thereof and that, in selecting Bonds for redemption, each Bond shall be considered as representing that number of Bonds which is obtained by dividing the principal amount of such bond by $5,000 and, further, that so long as a book-entry system with DTC is used for determining beneficial ownership of bonds, if less than all of the Bonds within a maturity are to be redeemed, DTC shall determine by lot the amount of interest of each Direct Participant in the Bonds to be redeemed. If less than all of the Bonds then subject to redemption shall be called for redemption, the particular maturities and amounts of the Bonds or portions of Bonds to be redeemed shall be determined by the County. Notice of redemption shall be given by certified or registered mail to Cede & Co., DTC's nomi- nee, as the registered owner of the Bonds. Such notice shall be mailed not more than 60 days nor less than the 30 days prior to the date fixed for redemption. The County will not be responsible for mailing notices of redemption to anyone other than Cede "& Co. On the date fixed for redemption, notice having been given as hereinabove provided, the Bonds or portions thereof called for redemption shall be due and payable at the redemption price provided therefor, plus accrued interest to such date. If moneys sufficient to pay the redemption price of the Bonds or portions thereof to be redeemed plus accrued interest thereon to the date fixed for redemp- tion have been deposited by the County to be held in trust for the registered owners of the Bonds or portions thereof to be redeemed, interest on the Bonds or portions thereof called for redemption shall cease to accrue, and the registered owner of such Bonds or portions thereof shall have no rights in respect thereof except to receive payment of the redemption price thereof, including accrued interest to the date of redemption, and, if a portion of a Bond shall have been selected for redemption, a new Bond or Bonds of the same maturity, of any authorized denomination or denominations and bearing interest at the same rate for the unredeemed portion of the principal amount of such Bonds. 22 Authorization and Purpose The Bonds are being issued pursuant to the provisions of The Local Government Bond Act, as amended, Article 7, as amended, of Chapter 159 of the General Statutes of North Carolina, a bond order duly adopted by the Board of Commissioners of the County, and a resolution duly passed by said Board of Commissioners. Security The Bonds are general obligations of the County. The County is authorized and required by law to levy on all property taxable by the County such ad valorem taxes, without limitation as to rate or amount, as may be necessary to pay the Bonds and the interest thereon. THE REFUNDING PLAN The Bonds are being issued for the purpose of redeeming on February 1, 2011 (1) the $9,190,000 principal amount of the County's Public Improvement Bonds, Series 2001, dated August 1, 2001, maturing on February 1, 2012 to 2021, inclusive (the "2001 Bonds"), and redeeming on March 1, 2013 (2) $6,525,000 principal amount of the County's Public Improvement Bonds, Series 2003, dated April 1, 2003, maturing on March 1, 2015 to 2019, inclusive (the "2003 Bonds", and col- lectively, the "Bonds to be Refunded"). The following tables set forth. the years, maturity amounts and interest rates for the Bonds to be Refunded. 2001 Bonds Year unt Rate Year Amount Rate 2012 $920,000 4.50% 2017 $920,000 4.50% 2013 920,000 4.50 2018 920,000 4.50 2014 920,000 4.50 2019 920,000 4.50 2015 920,000 4.50 2020 915,000 4.60 2016 920,000 4.50 2021 915,000 4.70 2003 Bonds Year Amount Rate Year Amount Rate 2015 $1,075,000 4.00% 2018 $1,100,000 4.00% 2016 1,075,000 4.00 2019 2,200,000 4.00 2017 1,075,000 4.00 The proceeds to be received from the sale of the Bonds, together with any contribution from the County, are sufficient to pay when due all principal of and premium and interest on the Bonds to be Refunded to and including their date of redemption and to pay certain expenses of the County related to the issuance of the Bonds. The proceeds will be held in trust by Wells Fargo Bank, Jack- sonville, Florida, (the "Escrow Agent") pursuant to an escrow deposit agreement between the County and the Escrow Agent. The Escrow Agent will purchase certain obligations of the United States of America ("Government Obligations") with the proceeds. The Government Obligations will mature at such times and in such amounts, and will bear interest payable at such times and in such amounts, so that sufficient moneys will be available to pay when due all principal of and premium and interest on the Bonds to be Refunded to and including their respective dates of redemption. The Escrow Agent will apply the maturing principal of and the interest on the Government Obligations, together with other moneys held uninvested by the Escrow Agent, for such purpose, and will trans- fer any surplus to the County for payment of interest on the Bonds. The Escrow Agent has been ir- 3 23 revocably instructed to redeem the 2001 Bonds on February 1, 2011 and the 2003 Bonds on March 1, 2013. THE COUNTY General Description The County, founded in 1752, is located in the north-central portion of the State on the Pied- mont Plateau. Bisected from east to west by Interstate Highway 85, the County lies approximately midway between the cities of Atlanta, Georgia and Washington, D.C. The County is part of the Raleigh-Durham Metropolitan Statistical Area, which also includes the Research Triangle Park, a major complex of research and research-oriented manufacturing facil- ities. There are four municipalities in the County: the towns of Chapel Hill and Carrboro in the sou- theastern part of the County and the Town of Hillsborough and the City of Mebane in the central corridor of the County along Interstate Highway 85 and Interstate Highway 40. Population esti- mates by the North Carolina Office of State Budget and Management for the year 2008 are: Chapel Hill - 55,616, Carrboro - 19,479, Hillsborough - 6,660 and Mebane - 9,848. 4 24 The Town of Chapel Hill, home of the University of North Carolina at Chapel Hill, is the larg- est municipality in the County, and its population plus that of the adjacent Town of Carrboro com- prises 56% of the total estimated County population of 129,296. The Town of Hillsborough, the County seat, and surrounding area are expected to experience accelerated growth, because of their location adjacent to Interstate Highways 85 and 40. Interstate Highway 40 connects the County directly with the Research Triangle Park and Ra- leigh-Durham International Airport. The City of Mebane, home of most of the County's major manu- facturing employers, is on the westernmost boundary of the County. A major portion of the City of Mebane lies in neighboring Alamance County. North of Interstate Highway 85, the County is mostly rural, with a mixture of farming, residential and light industrial and commercial uses. The County is approximately 401 square miles in area, of which approximately 177 square miles are unincorporated, 39 square miles are farmland, 132 square miles are forested, and 53 square miles are urbanized. New York, New York 438 Miles Atlanta, Georgia 351 Miles 25 Demographic Characteristics The United States Department of Commerce, Bureau of the Census, has recorded the County's population to be as follows: 9~ $Q 1990 2000 77,055 93, 662 115, 537 More recent population estimates are as follows: 2p05' 20 1 2 0 1 20pg' 121,991 123,766 127,344 129,296 lEstimate of North Carolina Office of State Budget and Management. Per capita income figures for the County and the State are presented in the following table: Year ount tate 2003 $33,282 $27,942 2004 37, 225 29, 440 2005 39,363 31,002 2006 41,162 32,271 2007 43, 844 33, 735 Source: United States Department of Commerce, Bureau of Economic Analysis (most recent data available). Commercial, Industrial and Institutional Profile The County's economy is characterized by a high degree of institutional and public-sector activ- ity, plus office, commercial and service-oriented business. Manufacturing and agriculture are small- er portions of the County's economy. The University of North Carolina at Chapel Hill and University Hospitals in the Town of Cha- pel Hill and their associated service, teaching and research programs. have a reputation for excel- lence in the educational and medical fields. The County is also the place of residence for many technical, professional and executive people who work in the Research Triangle Park and neighbor- ing cities of Durham, Raleigh, and Burlington. The Research Triangle refers to an area located among three municipalities: Chapel Hill, Dur- ham and Raleigh. In addition to the University of North Carolina at Chapel Hill, universities located in these municipalities include Duke University and North Carolina Central University in the City of Durham and North Carolina State University in the City of Raleigh. The proximity of these uni- versities makes the Research Triangle area well-suited to many types of research activities. The Research Triangle Park (the "Park"), located 10 miles east of the County, contains 7,000 acres of land which has been reserved for research and research-oriented manufacturing. Since its inception in the 1950's, over 170 private and governmental organizations have located facilities in the Park. According to the Research Triangle Foundation, the Park represents a capital investment exceeding $2.8 billion. Approximately 42,000 people (52,000 including contract employees) were em- ployed at the Park with an annual payroll of approximately $2.7 billion with an average salary of $56,000. Approximately 80% of the employees in the Park work for multinational corporations. Be- 6 26 cause of its close proximity to the County and the fact that many of the Parks' employees reside in the County, the impact of the Park on the County's economy is significant. An industrial strip along Interstate highway 85 in the western portion of the County is the lo- cation of several manufacturing firms. This area is the projected location for future growth of indus- trial and commercial concerns. In addition to this area, the County designated over 2,450 acres in three strategically placed areas along Interstates 85 and 40 as Economic Development Districts. The County's location, midway between the Piedmont Triad and Research Triangle metropolitan areas, makes these sites extremely attractive. The districts offer development potential for light industrial, warehouselflex space, office, retail and business service. Numerous tracts, ranging in size from 20 to 100 acres or more, are available. Utility extension development is another economic development initiative undertaken by the County. This project encourages economic development in the County by providing funds to finance utility extension development for commercial entities. Using the monies in this fund, the County provides a portion of the upfront water/sewer infrastructure costs for businesses. As the various projects are completed, some portion of the resultant increased property tax revenue is used to repay the fund. These funds then "revolve" to address water/sewer needs of other commercial development projects. 27 The following table lists the 25 largest major commercial, industrial, and institutional employ- ers in the County: Comvanv or Institution University of North Carolina at Chapel Hill UNC Hospitals Blue CrossBlue Shield of North Carolina Chapel Hi1UCarrboro City Schools Orange County Board of Education Orange County Government Town of Chapel Hill Harris Teeter, Inc. General Electric Co., Inc. Sports Endeavors Wal-Mart Stores, Inc. #1191 Aramark Services PHE, Inc. Orange-Person-Chatham Mental Health A Southern Season Magnolia Gardens Mebane Packaging Group Whole Foods Market U.S. Post Office Kenan Transport Carol Woods Retirement Center Lowe's Food Weaver Street Market, Inc. Performance Chevrolet UPS Service or Product Public University Medical Center Insurance Company Public School System Public School System County Government Municipal Government Food Store Electrical Equipment Manufacturer Mail Order Retail Retail Store Food Service Mail Order Retail Mental Health Agency Retail Specialty Foods Retirement Community Corrugated Carton Manufacturer Food Store Postal Service Trucking Retirement Community Food Store Retail Natural Foods Retail Auto Sales/Service Parcel Distribution Center Source: Orange County Economic Development Commission as of October 2009. Approximate Number of Emulovees 15, 000-20, 000 5, 000-10, 000 3, 000-5, 000 1, 000-3, 000 1,000-3,000 500-999 500-999 500-999 250-499 250-499 250-499 250-499 250-499 250-499 250-499 250-499 250-499 250-499 250-499 100-249 100-249 100-249 100-249 100-249 100-249 Construction activity in the County is indicated by the number and construction value of build- ing permits as set forth in the following table: Fiscal Year Itesideatial Commercial Ended Number of Value Value Total Value un 30 Building Permits (Ia Thousands) lIn Thousands) (In Thousands) 2005 2,153 $201,810 $ 54,899 $256,709 2006 2,643 204,086 66,864 270,950 2007 2,841 177,072 81,109 258,182 2008 3,072 165,285 156,180 321,465 2009 2,247 126,962 77,875 204,837 Source: Inspection divisions of the Town of Chapel Hill and Carrboro and of the County. 8 28 Total taxable retail sales in the County for the past four fiscal years are shown in the following table: Fiscal Year Ended Total Taxable Increase (Decrease) Ju e 0 Retail Sales Over Previous Ye 2006 $907,564,371 _ °~ 2007 948, 302,963 4.5 2008 971,591,672 2.5 2009 926, 654, 246 (4.6) Source: North Carolina Department of Revenue, Sales and Use Tax Division Note: Information for yeazs ended prior to June 30, 205, are not comparable due to a change in the State's method of reporting local sales information. Employment The County enjoys a consistently low unemployment rate. The unemployment rate estimated by the North Carolina Employment Security Commission for August 2009 was 6.8%, one of the low- est in the State. (State average was 10.8% in August 2009.) The North Carolina Employment Security Commission has estimated the percentage of unem- ployment in the County to be as follows: 2006 2007 2008 2009 2006 2007 2008 2009 January 3.2% 3.2% 3.4% 5.8% July 3.9% 3.7% 4.8% 7.1% February 3.6 3.4 3.6 6.5 August 3.6 3.3 4.3 6.8 March 3.1 3.0 3.3 6.1 September 3.0 3.0 4.0 6.3 April 3.0 3.0 3.2 5.8 October 3.0 3.1 4.0 N/A May 3.3 3.1 4.0 6.7 November 3.2 3.2 4.4 N/A June 3.8 3.8 4.5 7.0 December 2.9 3.1 4.7 Government and Major Services GOVERNMENT STRUCTURE The County has acommission-manager form of government with aseven-member Board of Commissioners comprising the governing body. The commissioners are elected on a partisan basis for staggered four-year terms. The County manager is appointed by and serves at the pleasure of the Board of Commissioners. The Board of Commissioners annually adopts a balanced budget and estab- lishes atax rate for the support of the County's programs. The County Manager has the responsibili- ty of administering these programs in accordance with the policies and the annual budget adopted by the Board of Commissioners. EDUCATION Two separate school administrative units, Chapel Hill-Carrboro City Schools ("CHCCS") and Orange County Schools ("OCS"), provide public education in the County. CHCCS serves the Towns of Chapel Hill and Carrboro and a small area outside the Towns, and OCS serves the remainder of the County. Non-partisan elected boards of education administer both units. 9 29 The State provides the basic minimum education program for each school administrative unit. Funding for this basic program is provided by appropriations from the State Public School Fund. Additional funding is provided by special State and Federal Grants. The County also appropriates funds to each school system, which provides for program expansions beyond the state basic mini- mum. The County ranked number one in the State in per pupil funding in 2009. A special school dis- trict tax is levied in a special school district that comprises the CHCCS system. This tax is a significant revenue source for the CHCCS system. (See the section "Tax Information" below.) The major sources of school funding in each school administrative unit budgeted for the fiscal year ended June 30, 2009 are outlined in the chart below. Q~S % of Total H C % of Total State $37,262,986 55 % $ 63,848,216 50 Federal 2,582,182 4 5,200,000 5 Local 28.147.013 41 59.538.474 45 Total $67,992,181 100 % $128,586,690 100 The building of public school facilities has been a joint State/County effort with the County playing the major role. Local financial support is provided by the County primarily through the use of one-half cent local option sales and use taxes, bond proceeds, installment financing and impact fees. Large portions of the one-half cent local option sales and use taxes authorized by the General Assembly in 1983 and 1986 are a major funding source for public school facilities. These taxes are used in accordance with County Capital Policies and the County's ten-year Capital Investment Plan to fund construction as well as debt service for both school and County facilities. The County re- ceived $10.05 million from one-half cent sales taxes in the fiscal year ended June 30, 2009. Of this amount, approximately $6.1 million has been allocated to school construction and debt retirement. In 1987 the General Assembly adopted special legislation on behalf of the County which autho- rized the County to establish a system of impact fees on new residential development. Revenues generated by these fees are to be used toward additional school facilities necessitated by the new development. The Board of County Commissioners in December of 2008 adopted the most recent amendment. This amendment established impact fees effective January 1, 2009* as follows: Orange County Schools Single Family Detached - $3,000 per unit Single Family Attached - $930 Manufactured Homes - $1,428 Chapel Hill Carrboro City Schools Single Family Detached - $6,092 per unit Single Family Attached - $3,525 Multifamily - $686 Manufactured Homes - $2,634 *The amendment increases the above impact fees each year effective January 1, 2010-2012. Impact fees have generated over $30.6 million since implementation in 1993. Impact Fees gen- erated $1.23 million in the fiscal year ended June 30, 2009. Revenues received by the County from the sources mentioned above are expected by the County to be sufficient to fund a significant portion of school capital improvements over the next 10 years. 10 30 The following table reflects average daily membership and the number of schools for both the OCS and CHCCS for afive-year period. Chapel Hill-Carrboro City Schools Elementary Intermediate Secondary Grades (H-5) Grades ( 6-8) Grade s (9-12) No. of No. of No. of Total School Year Schools AD~YI Schools ADM cS hoofs ADM t~M 2004-05 9 4,693 4 2,566 2 3,462 10,721 2005-06 9 4,851 4 2,563 2 3,527 10,938 2006-07 9 4,959 4 2,592 2 3,528 11,079 2007-08 9 5,141 4 2,617 3 3,669 11,427 2008-09 10 5,268 4 2,688 3 3,674 11,630 Orange County Schools Elementary Intermediate Secondary Grades B-6) Grades ( 6-8) Grade s (9-12) No. of No. of - No. of Total School Xear ch of ADM Schools A M Schools ADM ADM 2004-05 7 3,081 2 1,612 2 2,118 6,811 2005-06 7 3,005 2 1,590 2 2,121 6,716 2006-07 7 3,081 3 1,576 2 2,194 6,851 2007-08 7 3,147 3 1,631 2 2,195 6,973 2008-09 7 3,175 3 1,613 2 2,243 7,031 iADM or average daily membership, determined by actual records at the schools, is computed by the North Carolina Department of Public Education on a uniform basis for all public school units in the State. The ADM computations are used as a basis for teacher allotments. Source: Orange County Board of Education, and the Chapel Hill Carrboro City Schools Board of Education, Finance Offices. The University of North Carolina at Chapel Hill provides post-secondary educational opportun- ities to the residents of the County. Durham Technical Community College, Piedmont Technical In- stitute and Alamance Community College are post-secondary institutions located within a 20-mile radius of the County and are members of the State system of community colleges and technical insti- tutes. Durham Technical Community College opened an Orange County Campus in 2008. The Coun- ty is contributing $545,000 toward operating expenses in the fiscal year ending June 30, 2010. TRANSPORTATION Major expansion and maintenance of primary and secondary highways within the County are primarily the responsibility of the State. Municipalities within the County bear the responsibility for local street systems. The County has no responsibility for the construction or maintenance of streets or highways. The County is served by two interstate highways, which merge in the center of the County. In- terstate Highway 85 connects the County to the cities of Greensboro, Charlotte and Atlanta to the south and west and the cities of Durham, Richmond and Washington, D.C. to the north and east. 11 31 Interstate Highway 40 connects the County to the cities of Winston-Salem and Asheville to the north and west and the Research Triangle Park and the City of Raleigh to the south and east. Other major highways include U.S. highways 15-501 and 70 and N.C. highways 54, 57 and 86. Inter-city bus service is provided by Carolina Trailways and the Town of Chapel Hill operates a local bus system which serves a substantial portion of the population in the Towns of Chapel Hill and Carrboro. The County operates specialized transport services for human services delivery. One coordinated system, run by the County, serves a variety of human service departments and agencies throughout the County. In addition, Triangle Transit Authority operates a bus system that provides commuter services to County residents. Air transportation is provided by various major, commuter and commercial airlines at the Raleigh-Durham International Airport ("R,DU"), approximately 10 miles from the County. Commer- cial air service is provided by Air Canada, Air Trans American Airlines, Continental, Del- ta/Northwest, Jet Blue, Southwest, United, and US Airways. In addition, 6 carriers provide commuter service. The total economic impact of RDU to the Triangle economy is more than $2 billion per year according to North Carolina Department of Transportation figures. In 2008, RDU had 187 daily departures and served approximately 9.7 million passengers. In addition to the services provided by Raleigh-Durham International Airport, the University of North Carolina at Chapel Hill operates a general aviation airfield located in the Town of Chapel Hill. Railway freight service is provided by Norfolk Southern Railway. Railway passenger service is provided by Amtrak through its terminals located in the cities of Durham and Raleigh. HUMAN SERVICES Social Services Programs -Social Services programs are provided for by a combination of fed- eral, state and local funds. Among the programs provided are: Work First, Temporary Aid to Needy Families Child Protective Services, Daycare, Foster Care, Energy Assistance, Medicaid, Child Sup- port Enforcement and programs for the elderly. Health Programs-The County provides environmental, sanitation, family planning, dental and nursing services throughout the County. Clinics are offered in the towns of Hillsborough and Chapel Hill and in the public schools. The County has access to the services of the schools of medicine, den- tistry, nursing and public health at University of North Carolina at Chapel Hill and the University Hospitals, as well as Duke University Medical Center and a U.S. Veterans Administration Hospital within five miles of the County. No County investment in hospital or major medical facilities is an- ticipated. Mental Health Programs-The County currently contributes annually to a tri-county Mental Health Agency that provides extensive services within the County. A sheltered workshop and clinics in the towns of Chapel Hill and Hillsborough are provided. Services to the public schools are also provided. Under a new State proposal to reform mental health statewide, a local management entity has been created that will serve to transition the current method of service provision. Other Human Services-In addition to social service, health and mental health programs, the County provides agricultural services, housing and community development services, library servic- es and support to various private non-profit agencies located within the County. 12 32 PARKS, RECREATION AND OPEN SPACE Recreational programs throughout the County are provided by the County's Parks and Recreation Department along with the parks and recreation departments of the towns of Chapel Hill and Carrboro. Organized leisure programs ranging from athletics to fine arts are regularly offered to citizens of all ages at several park sites and community centers. Numerous programs and special events for senior citizens and the mentally and physically impaired are also offered. During the past several years the County developed aggressive plans for park development and open space acquisi- tion. PUBLIC SERVICE ENTERPRISES Water and Sewer Services--Water and sewer services are provided to the majority of the popu- lation of the County by the Orange Water and Sewer Authority (the "Authority"). The Authority was created in 1975 by the Board of Commissioners for the County and the boards of aldermen of the towns of Chapel Hill and Carrboro for the purpose of acquiring, consolidating, improving, and oper- ating the existing water and sewer systems in the southern portion of the County. Prior to the for- mation of the Authority, water service was provided by the University of North Carolina at Chapel Hill and the Town of Carrboro and sewer service was provided by the towns of Chapel Hill and Carrboro in conjunction with the University. The Authority began utilities operations in 1977 when the towns of Chapel Hill and Carrboro and the University of North Carolina at Chapel Hill conveyed their water and sewer facilities to the Authority. Under the terms of the transfer, the Authority provides and maintains sewage collection and treatment facilities and water supply, treatment and distribution facilities. The Town of Hillsborough and the City of Mebane, which is partly located within the corporate limits of the County, also own and operate water and sanitary sewer systems. The County issued water and sanitary sewer bonds in the late 1960s to finance the construction of the Lake Orange re- servoir, which serves the water system of the Town of Hillsborough, and the construction of im- provements which serve the water and sanitary sewer systems of the City of Mebane. In addition, the Orange Alamance Water System, a private corporation, utilizes Lake Orange and provides water service to a part of the west central portion of the County. The County's water supply has been supplemented by the addition of the Cane Creek Reser- voir, which was built by the Authority in 1989. Increased water supply has also resulted from the renovations to the dam at Lake Orange, which is owned by the County. Sanitary Landfill -The County owns and operates a sanitary landfill serving County resi- dents. The landfill was owned jointly by the County and the Towns of Carrboro and Chapel Hill. Ownership and operation of the landfill became the County's sole responsibility in May 2000. The operation of the landfill is self-supporting from landfill charges and is expected to be usable through the year 2010. The County has been able to extend the expected life of its existing landfill by several years through aggressive recycling efforts in the County. In fact, the County lead the State in 2003 in its waste reduction efforts. These efforts have led to an actual decline over the past several years in the annual amount of solid waste being delivered to the landfill. In the 2004-2005 fiscal year the County implemented a waste reduction recycling fee to offset the costs of the recycling program which has been subsidized over the years by the tipping fees. The new fee will generate $3.56 million to offset the cost of recycling operations in 2008-2009. The County has begun to consider its options for further solid waste disposal. OTHER PUBLIC SERVICE ENTERPRISES Telephone service in the County is provided by Sprint, BellSouth, Mebtel and Verizon Commu- nication. Electric service is provided by Duke Power Company, Piedmont Electric Membership Cor- poration and Progress Energy. Gas service is provided by Public Service Gas Company. OTHER SERVICES 13 33 Fire and police protection are provided by the towns of Chapel Hill, Carrboro and Hillsborough within their respective jurisdictions. In the unincorporated areas of the County fire protection is provided in 12 fire districts pursuant to contracts between the County, the municipalities and vari- ous fire departments. Police protection in the unincorporated areas of the County is provided by the County Sheriffs Department. The County's Emergency Services Department provides four general areas of countywide emer- gency assistance: emergency communications (911), emergency medical services, fire marshall and emergency management. Volunteer rescue squads work jointly with the County to provide a signifi- cant amount of such services. Debt Information LEGAL DEBT LIMIT In accordance with the provisions of the State Constitution and The Local Government Bond Act, as amended, the County had the statutory capacity to incur additional net debt in an approx- imate amount of $1,070,000,000 as of October 31, 2009. For a summary of certain constitutional, sta- tutory and administrative provisions governing or relating to the incurrence of debt by units of local government of the State, see Appendix B. 14 34 OUTSTANDING GENERAL OBLIGATION DEBT Principal Outstand' a as of June 30, Juae 30, June 30, October 31, General Obligation Bonds 2007 2008 Zoos Zoos School Bonds $ 53,388,345 $ 51,112,944 $ 48,837,544 $ 48,837,5441 Refunding Bonds 53,695,000 49,540,000 45,435,000 45,435,000 Sanitary Sewer Bonds 1,114,048 1,071,068 1,028,088 1,028,088 Other Bonds 31.017,607 28.565.988 26.114.368 26.114.368 1 Total General Obligation Debt Outstanding $139,215,0002 $130,290,000 2 $121,415,000 2 $ 121,415,000 2 Latest Bonds Issued: 2005-06 $29,185,000 General Obligation Public Improvement Bonds, Series 2005A, 12.56 years average maturity, 4.1459% true interest cost. $29,365,000 General Obligation Refunding Bonds, Series 2005B, 9.76 years average maturity, 3.8806% true interest cost. lA portion of these bonds will be paid and refunded with the proceeds of the Bonds now being of- fered. See "the Refunding Plan" herein. 2This amount does not include refunded bonds with respect to which an escrow agent holds in trust certain obligations of, or obligations the principal of and interest on which are unconditionally guar- anteed by, the United States of America, which mature at such times and in such amounts and bear interest payable at such times and in such amounts so that sufficient moneys will be available, to- gether with cash deposited with such escrow agent, to pay when due all principal of and interest and any premium on the refunded bonds to and including their respective maturities or dates of redemp- tion. GENERAL OBLIGATION DEBT RATIOS Total GO Debt Total Total Assessed to Assessed GO Debt t ul 1 GO Debt' Valuation Valuation Population= Per Capita 2005 $125,810,000 $10,075,972,003 1.25% 121,991 $1,031.31 2006 148,175, 000 12,330, 315,189 1.20 123, 766 1,197.22 2007 139,215,000 12,581,220,079 1.11 127,344. 1,093.22 2008 130, 290,000 12, 833, 591, 710 1.02 129, 296 1,007.69 2009 121,415,000 15,369,119,201 .79 129,296 939.05 After Bonds now offered are issued $ 3.4 $15,369,119,201 % 129,296 $ 1Does not include refunded bonds as described under "Outstanding General Obligation Debt" above. 2Estimate of North Carolina Office of State Budget and Management. 3Does not include the Bonds to be Refunded as described under "The Refunding Plan" herein. 4The principal amount of the Refunding Bonds now being offered is subject to change as described in the Notice of Sale. 15 GENERAL OBLIGATION DEBT SERVICE REQUIREMENTS AND MATURITY SCHEDULE AS OF JUNE 30, 2009 UTILITY OTHER Exi ti t Existine Debt Fiscal Principal Principal Year Princinal & Interest Princinal ~c Interest 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 TOTAL Existing Debt~~$ Bonds Principal Now Princinal & Interest r da $ 8,835,000 8,880,000 8,825,000 8, 765, 000 8, 900, 000 8, 740, 000 8,675,000 8,675,000 8,640,000 8,575,000 8, 615, 000 8, 615, 000 8,550,000 5,440,000 2.685.000 $ 121,415,000 $ 14,149,283.76 13,780,883.76 13,360,696.26 12,911,396.26 12,669,263.76 12,130, 351.26 11, 710, 776.24 11,299,061.24 10,842,326.24 10, 415, 751.24 10,103, 776.24 9, 743,186.24 9,288,056.24 5,780,868.74 2.795.756.24 $ 160,971,423.72 1This amount excludes refunded bonds as described under "Outstanding General Obligation Debt" above. 2Includes the Bonds to be Refunded in connection with the issuance of the Refunding Bonds now being offered. See "The Refunding Plan" herein. 3The principal amount of Refunding Bonds now being offered is subject to change as described in the Notice of Sale. 42,980.25 42, 980.25 42, 980.25 42, 980.25 42, 980.25 42, 980.25 42, 980.25 42,980.25 42,980.25 143,267.50 143,267.50 143,267.50 143,267.50 68,195.33 $1,028,087.58 88,062.23 85, 805.77 83,549.31 81, 292.85 79, 358.73 77,639.53 7b,920.31 74,201.11 72,481.89 171, 049.94 165,140.14 159,061.28 152, 783.32 71,264.11 $1,437,600.52 $ 8,792,019.75 8,837,019.75 8, 782, 019.75 8, 722, 019.75 8, 857, 019.75 8,697,019.75 8,632,019.75 8,632,019.75 8,b97,019.75 8,431,732.50 8, 471, 732.50 8,471,732.50 8,406,732.50 5,371,804.67 2.685.000.00 $ 120,386,912.42 $ 14,061,221.53 13,695,077.99 13,267,146.95 12,830,103.41 12,589,905.03 12,052,711.73 11,634,856.93 11,224,850.13 10, 769, 844.35 10, 244, 701.30 9, 938, 636.10 9,584,134.96 9,135, 272.92 5,709,604.63 2.795.756.24 $159,533,823.20 w 36 GENERAL OBLIGATION BONDS AUTHORIZED AND UNISSUED Date Authorized Bonds Purpose Aouroved and Unissued Now Offered Ba Parks and Open Space 11/06/2001 $ 5,500,000 $ - $ 5,500,000 Housing 11/06/2001 1,400,000 - 1,400,000 Refilnding 06/23/2005 4,000,000 - 4,000,000 Refunding 10/20/2009 27.000.000 9.760.0001 17.240.000 2 $37,900,000 $ 9,760,000 $ 28,140,000 1Subject to change as described in the Notice of Sale 2The County does not intend to issue the remaining authorized and unissued bonds. GENERAL OBLIGATION DEBT INFORMATION FOR UNDERLYING UNITS AS OF OCTOBER 31, 2009 Bonds Authorized Total Total 2008 Assessed Tax state and Unissued GO Debts GO Debt ait Povulationl Valuation Per $100Y Utili ther Utility Other der Capita Carrboro 19,479 $1,430,312,905 $.6537 $ - $ 4,600,000 $ - $ 2,616,107 $134.30 Chapel Hill 55,616 5,640,522,787 .522 - 20,410,000 - 17,415,000 313.13 Hillsborough (County Seat) 6,660 626,401,231 .691 - - 122,000 - 18.32 Mebane 9,848 4 1,149,864,403 .50 - - 980,000 - 99.51 lEstimates of North Carolina Office of State Budget and Management. zRates are for the fiscal year ended June 30, 2008. 3Does not include installment financing agreements, revolving loans and revenue bonds as these ob- ligations are not general obligations. 49% reside in Orange. County and 91% reside in Alamance County 18 37 OTHER LONG-TERM COMMITMENTS The County currently has a variety of short-term financing agreements for vehicles and other equipment. In addition, the County has financed school and public buildings through installment financing agreements and the current debt service requirements of these other financing agreements are as follows: Fiscal Principal Year Principal and Interest 2009-10 $ 9,228,814.01 $ 13,387,697.50 2010-11 10,554, 872.50 16,041, 767.65 2011-12 9,539,468.81 13,819,059.64 2012-13 7, 775, 042.90 11, 700, 414.74 2013-14 7, 750, 542.90 11,370,581.61 2014-15 7, 512, 215.30 10,828, 598.02 2015-16 7,168,815.30 10,193,922.72 2016-17 7,000, 315.30 9, 743, 353.26 2017-18 6,880,487.90 9,334,684.32 2018-19 6,980,160.14 9,149, 959.48 2019-20 6,980,160.14 8,863,507.48 2020-21 6,980,160.14 8,577,055.47 2021-22 6,980,160.14 8,290,603.48 2022-23 6,375,160.14 7,399,151.49 2023-24 6,099,298.04 6,863,427.87 2024-25 5,819,936.00 6,344,993.93 2025-26 3, 787, 936.00 4,115, 637.39 2026-27 2, 773,022.00 2,943,667.68 2027-28 2.502,850.00 2.553,220.00 $128,689, 417.66 -$171, 521, 303.73 DEBT OUTLOOK The County has an extensive ten-year capital improvement program underway to provide go- vernmental offices, judicial facilities, school facilities, parks and open space and affordable housing. Some of these facilities will require the incurrence of debt by the County. The County currently has $6,900,000 in voter approved bonds authorized and unissued. In addition to the use of bond proceeds, the ten-year capital plan calls for the combined use. of pay-as-you-go funds and installment purchases to fund capital. During the next two years the Coun- ty plans to issue Alternative Financing (direct bank placement or Certificates of Participation) under the Qualified School Construction Bond (QSCB) Program as well as other Alternative Financing and loans. The total amount is estimated to be between $54-56.5 million. The issuance of $4.1 million of QSCB financing is scheduled for December to construct a High School Arts Wing for the Chapel Hill Carrboro City School System. Additional financings include up to $1.5 million for technology and communications projects, $2.7 million for Parks and Open Space, $8-10 million for a land fill trans- fer station, $3.3 million for a Middle School Auditorium for the Orange County School System and $31 million for a new elementary school for the Chapel Hill Carrboro City School System. Debt ser- vice on the landfill transfer station financing would be paid from enterprise fund revenue. In addi- tion the County plans to seek a State loan of $3.5 million for sewer system construction which would be repaid from general revenue of the County. 19 38 Taz Information GENERAL INFORMATION Fiscal Year Ended or Endine June 30 2007 Assessed Valuation: Assessment Ratios Real Property Personal Property Public Service Companiesz Total Assessed Valuation3 Tax Rate per $1004 Levy 100% $10,936,261,416 1,214,967,577 218.479.438 $12, 369, 708,431 .9030 $ 111,171,556 2008 100% $11,183,241,007 1,219,216,812 218.549.070 $12,621,006,889 .95 $ 119,467,330 1Percentage of appraised value has been established by statute. 2009 100% $11,385,947,548 1,221,364,482 226.279.680 $12,833,591, 710 .998 $ 128,079,245 20106 100% $14,021, 668, 763 1,144, 855, 450 202.594.988 $15,369,119,201 .858 $ 131,867,043 ZVauuation of railroads, telephone companies and other utilities as determined by the North Caroli- na Property Tax Commission. 3Revaluation of real property became effective with the 2010 tax levy. The County revalues property every 4 years. 4In addition to the County-wide rate shown, all taxable property within the Chapel Hill-Carrboro City School Administrative Unit is subject to a special school district tax and parts of the rural area of the County are subject to special fire district taxes. Such special districts and their respective tax rates per $100 assessed valuation are as follows: SEstimated. Special School District 2007 2008 2009 2.010 Chapel Hill-Carrboro City Schools $.19 $.20 $.23 $.1884 Special Fire Districts Cedar Grove Fire District .073 .073 .073 .066 Chapel Hill Fire District .020 .020 .049 .022 Damascus Fire District .040 .050 .060 .050 Efland Fire District .042 .042 .052 .047 Eno Fire District .057 .057 .057 .060 Little River Fire District .046 .046 .046 .041 New Hope Fire District .068 .068 .068 .057 Orange Rural Fire District .056 .056 .063 .054 Orange Grove Fire District .039 .039 .042 .036 South Orange Fire District .092 .095 .095 .079 Southern Triangle Fire District .040 .050 .060 .050 White Cross Fire District .042 .050 .060 .060 20 39 The following table shows the County-wide levy and the levies by the County on behalf of the special school districts and the special fire districts for the fiscal years ended or ending June 30: 2007 200 009 2 101 County-wide $109,874,607 Special School District 14,871,669 Special Fire Districts 2,559.638 Total Levy $127,305,914 lEstimated. TAX COLLECTIONS Fiscal Year Eaded Prior Years' or Endine June 30 Levies Collected $119,509,712 $128,249,751 $131,867,043 16,325, 707 18,600,932 18, 721, 785 2.771.387 3.010.335 3,139,248 $138,606,806 $149,861,018 $153,728,076 Percentage of Current Year's Current Year's Total Lew Collected Tot al Lew Collected 2006 $ 954,076 $ 99,271,419 98.90% 2007 1,053,864 110,014,826 98.96 2008 984, 746 117,907,855 98.69 20091 1,061,492 126,650,331 98.75 lUnaudited. TEN LARGEST TAXPAYERS FOR FISCAL YEAR 2008-09 Name Duke Energy Company VAC Limited Partnership US CT LLC Piedmont Electric Membership Corporation Blue Cross and Blue Shield of North Carolina Corium LLC Madison University Mall LLC Bell South Telephone and Telegraph Company Europa Center DDRM Meadowmont 2009-10 Budget Commentary Assessed Percentage of Tvpe of Enterprise Valuation Assessed Value Public Utility $ 89,524,645 .70% Apartment Rental 62,702,256 .49 Property Owners Trust 50,120,115 .39 Public Utility 46,539,477 .36 Health Insurance 36,432,449 .28 Health Insurance 32,584,496 25 Retail Outlet 32,336,426 .25 Public Utility 31,052,192 .24 Hotel and Office Rental 27,031,431 .21 RentallResidental 22.577,932 .18 $430,901,419 3.36% Ad valorem tax collections through June 2009 for real property were approximately 98% of the levy which is on target with budget expectations. Motor Vehicle tax collections were coming in under budget estimates. Other revenues came in under budget due to the downturn in the economy. Ex- penditures were slightly lower than normal at approximately 96% of budget. There was million ap- propriated from fund balance in the original budget as well as a significant appropriation of fund balance during the year. The FYE 2009 Unreserved Fund Balance dropped by $4.8 million from the FYE 2008 amount to $21 million which is 11.6% of FYE 2009 expenditures. Since there was no ap- 21 40 propriation of fund balance in the adopted budget for Fiscal Year 2010 the Undesignated Fund Bal- ance for FYE is the same amount as the Unreserved Fund Balance. The adopted 2009-2010 budget included General Fund appropriation of $177.6 million which is a reduction of $5.4 million from prior years original budget. Property was revalued in 2009. The Board adopted a tax revenue neu- tral tax rate of .858 cents per hundred for fiscal 2009-10 which reduced the tax rate to generate the same total tax revenue as the previous fiscal year. The adopted budget for FYE 2010 contains ap- propriations to meet debt service payments on all County debt including projected debt service pay- ments related to these bonds. Pension Plans The County participates in the North Carolina Local Governmental Employees' Retirement System. North Carolina Local Governmental Employees' Retirement System -The North Carolina Lo- cal Governmental Employees' Retirement System is a service agency administered through a board of trustees by the State for public employees of counties, cities, boards, commissions and other simi- lar governmental entities. While the State Treasurer is the custodian of system funds, administra- tive costs are borne by the participating employer governmental entities. The State makes no contributions to the system. The system provides, on a uniform system-wide basis, retirement and, at each employer's op- tion, death benefits from contributions made by employers and employees. Employee members con- tribute six percent of their individual compensation. Each new employer makes a normal contribution plus, where applicable, a contribution to fund any accrued liability over a 24-year pe- riod. The normal contribution rate, uniform for all employers, is currently 4.80 percent of eligible payroll for general employees and 527 percent of eligible payroll for law enforcement officers. The accrued liability contribution rate is determined separately for each employer and covers the liabili- ty of the employer for benefits based on employees' service rendered prior to the date the employer joins the system. Members qualify for a vested deferred benefit at age 50 with at least 20 years of creditable ser- vice;at age 60 after at least five years of creditable service to the unit of local government. Unre- duced benefits are available: at age 65, with at least five years of service; at age 60, with at least 25 years of creditable service; or after 30 years of creditable service, regardless of age. Benefit payments are computed by taking an average of the annual compensation for the four consecutive years of membership service yielding the highest average. This average is then adjusted by a percentage formula, by a total years of service factor, and by an age service factor if the individual is not eligible for unreduced benefits. Contributions to the system are determined on an actuarial basis. For information concerning the County's participation in the North Carolina Local Governmen- tal Employees' Retirement System and the Supplemental Retirement Income Plan of North Carolina see the Notes to the County's Audited Financial Statements in Appendix D. Financial statements and required supplementary information for the North Carolina Local Governmental Employees' Retirement System are included in the Comprehensive Annual Financial Report ("CAFR") for the State. Please refer to the State's CAFR for additional information. Other Post-Employment Benefits Under the County Personnel Ordinance the County administers a single employer defined ben- efit Retiree Healthcare Benefits Plan. This plan provides post employment health care benefits to retirees of the County provided they participate in the North Carolina Local Government Employees Retirement System and have at least ten years of creditable service with the County or either age 65 22 41 or retiring on a disability retirement with five years of creditable service with the County. The County provides 100% of the cost under it employee healthcare plan for employees with ten years of creditable service and 52% of the dependent coverage up to age 65. The County provides 50% of the cost of coverage for employees with five years of service and 26% of the cost of dependent coverage up to age 65. The County does not subsidize the dependent coverage for employees hired after July 1, 2008. The County has chosen to fund the healthcare benefits on a pay as you go basis. The County contributed $845,177 for fiscal year 2008 and $1,005,019 for fiscal year 2009. As of December 31, 2007, the most recent actuarial valuation date, the accrued liability for benefits was $54,382,277. The plan was not funded, therefore, the Unfunded Actuarial Accrued Lia- bility (UAAL) was $54,382,277. The UAAL is 145.6% of covered payroll. The ARC represents the estimated amount needed in a fiscal year to amortize the then-current UAAL over a 30-year period. The following table presents certain information concerning the Coun- ty's ARCs and its actual annual pay-as-you-go funding. The current Annual Required Contribution ("ARC") rate is 13.69% of annual covered payroll. Fiscal Year ended June 30, 2008 June 30, 2009 Percentage of Annual OPEB Annual OPEB Cost ("ARC") Cost Contributed $8, 829, 704 9.57% 5,109,562 19.67 Contingent Liabilities Net OPEB Obligation $7,984,527 4,104,453 The County is not aware of any contingent liabilities which it expects would materially ad- versely affect its ability to meet its financial obligations. CONTINUING DISCLOSURE In a resolution to be adopted by the County prior to the sale of the Bonds, the County will undertake, for the benefit of the beneficial owners of the Bonds, to provide: (a) by not later than seven months from the end of each fiscal year of the County, to the Municipal Securities Rulemaking Board ("MSRB") audited financial statements of the County for such fiscal year, if available; prepared in accordance with Section 159-34 of the General Statutes of North Carolina, as it may be amended from time to time, or any successor statute, or, if such audited financial statements of the County are not available by seven months from the end of such fiscal year, unaudited financial statements of the County for such fiscal year to be replaced subsequently by audited financial statements of the County to be delivered within 15 days after such audited financial statements become available for distribution; (b) by not later than seven months from the end of each fiscal year of the County, to the MSRB (i) the financial and statistical data as of a date not earlier than the end of the preceding fiscal year for the type of information included under heading `The County -Debt Information and - Tax Information" in the Official Statement relating to the Bonds (excluding any information on overlapping or underlying units) and (u) the combined budget of the County for the current fiscal yeaz, to the extent such items are not included in the audited financial statements referred to in (a) above; (c) in a timely manner, to the MSRB, notice of any of the following events with respect to the Bonds, if material: 23 42 (1) Principal and interest payment delinquencies; (2) non-payment related defaults; (3) unscheduled draws on debt service reserves reflecting financial difficulties; (4) unscheduled draws on credit enhancements reflecting financial difficulties; (5) substitution of credit or liquidity providers, or their failure to perform; (6) adverse tax opinions or events affecting the tax-exempt status of the Bonds; ('~ modification to rights of the beneficial owners of the Bonds; (8) Bond calls; (9) defeasances; (10) release, substitution or sale of any property securing repayment of the Bonds and (11) rating changes; and (d) in a timely manner, to the MSRB, notice of a failure of the County to provide required annual financial information described in (a) or (b) above on or before the date specified. The County shall provide the documents referred to above to the MSRB in an electronic format as prescribed by the MSRB and accompanied by identifying information as prescribed by the MSRB. The County may discharge its undertaking described above by providing such information in a manner that the United States Securities and Exchange Commission subsequently authorizes in lieu of the manner described above. At present, Section 159-34 of the General Statutes of North Carolina requires the County's financial statements to be prepared in accordance with generally accepted accounting principles and to be audited in accordance with generally accepted auditing standards. The resolution to be adopted by the County will also provide that if the County fails to comply with the undertaking described above, any beneficial owner of the Bonds then outstanding may take action to protect and enforce the rights of all beneficial owners with respect to such undertaking, including an action for specific performance; provided, however, that failure to comply with such undertaking shall not be an event of default and shall not result in any acceleration of payment of the Bonds. All actions shall be instituted, had and maintained in the manner provided in this paragraph for the benefit of all beneficial owners of the Bonds. Pursuant to such resolution, the County will reserve the right to modify from time to time the information to be provided to the extent necessary or appropriate in the judgment of the County, provided that: (a) any such modification may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of the County; (b) the information to be provided, as modified, would have complied with the requirements of Rule 15c2-12 issued under the Securities Exchange Act of 1934 ("Rule 15c2-12") as of the date 24 43 of this Official Statement, after taking into account any amendments or interpretations of Rule 15c2-12, as well as any changes in circumstances; and (c) any such modification does not materially impair the interests of the beneficial owners, as determined either by parties unaffiliated with the County (such as bond counsel), or by the approving vote of the registered owners of a majority in principal amount of the Bonds then outstanding pursuant to the. terms of such resolution, as it may be amended from time to time, at the time of the amendment. Any annual financial information containing modified operating data or financial information is required to explain, in narrative form, the reasons for the modification and the impact of the change in the type of operating data or financial information being provided. The undertaking described above will terminate upon payment, or provision having been made for payment in a manner consistent with Rule 15c2-12, in full of the principal of and interest on all of the Bonds. The County has not failed to provide any information required to be provided by any undertaking previously made by the County pursuant to the requirements of Rule 15c2-12. APPROVAL OF LEGAL PROCEEDINGS Certain legal matters incident to the authorization and issuance of the Bonds are subject to the approving legal opinion of Sanford Holshouser LLP, Carrboro, North Carolina, Bond Counsel for the County ("Bond Counsel"). Bond Counsel's approving legal opinions will be provided at the County's expense and will be available at the time of the delivery of the Bonds. The proposed forms of Bond Counsel's opinions are attached as Appendix D. Bond Counsel's approving legal opinions express Bond Counsel's professional judgment as to the legal issues explicitly addressed in the opinion. By rendering a legal opinion, an opinion giver does not become an insurer or guarantor of that expression of professional judgment, of the transac- tion opined upon, or of the future performance of parties to the transaction. Additionally, the render- ing of an opinion does not guarantee the outcome of any legal dispute that may arise out of the transaction and a bond opinion is not a statement (either expressly or by implication) concerning the marketability, value or likelihood of payment of the Bonds. Bond Counsel has not been engaged to investigate the County's operations or condition or the County's ability to provide fqr payments on the Bonds. Bond Counsel will express no opinion (1) as to the County's ability to provide for payments on the Bonds, or (2) as to the accuracy, completeness or fairness of any information that may have been relied on by anyone in making a decision to purchase Bonds, including this Official Statement. In this transaction, Bond Counsel will serve only as bond counsel to the County, and will not represent any bidder or the purchaser of the Bonds. RATINGS Moody's Investors Service, Standard & Poor's Ratings Services, Fitch Ratings, and the North Carolina Municipal Council have given the Bonds ratings of ,and respectively. Those ratings reflect only the respective views of such organizations, and an explanation of the significance of each such rating may be obtained only from the respective organi- zation providing such rating. Certain information and materials not included in the Official State- ment were furnished to such organizations. There is no assurance that such ratings will remain in effect for any given period of time or that any or all will not be revised downward or withdrawn en- tirely. Any downward revision or withdrawal of a rating may have an adverse effect on the market prices of the Bonds. 25 44 TAX TREATMENT Opinion of Bond Counsel. In the opinion of Sanford Holshouser LLP, Carrboro, North Caro- lina, Bond Counsel for the County ("Bond Counsel"), under existing law, interest on the Bonds (1) will not be included in gross income for federal income tax purposes, (2) will not be a specific item of tax preference for purposes of the federal alternative minimum income tax imposed on individuals and corporations; however, with respect to corporations (as defined for federal income tax purposes), such interest will be taken into account in determining adjusted current earnings for purposes of computing the alternative minimum income tax on corporations, and (3) will be exempt from exist- ing State of North Carolina income taxation. Bond Counsel will express no other opinion regarding the federal or North Carolina tax consequences of the ownership of or the receipt or accrual of inter- est on the Bonds. Bond Counsel will give its opinion in reliance upon certifications by County representatives and others as to certain facts relevant to the opinion. The County has covenanted to comply with the provisions of the Internal Revenue Code of 1986, as amended (the "Code"), regarding, among other matters, the use, expenditure and investment of the proceeds derived from the sale of the Bonds and the timely payment to the United States of any arbitrage profit with respect to the Bonds. The County's failure to comply with such covenants could cause interest on the Bonds to be included in gross income for federal income tax purposes retroactively to date of issuance of the Bonds. The Bonds will not be designated as "qualified taz-exempt obligation." Other Tag Consequences. In addition to the matters addressed above, prospective purchas- ers of the Bonds should be aware that the ownership of tax-exempt obligations may result in colla- teral federal income tax consequences to certain taxpayers, including without limitation, financial institutions, property and casualty insurance companies, certain S corporations, certain foreign cor- porations subject to the branch profits tax, corporations subject to the environmental tax, recipients of Social Security or Railroad Retirement benefits and taxpayers who may be deemed to have in- curred or continued indebtedness to purchase or carry tax-exempt obligations. Prospective purchas- ers of the Bonds should consult their tax advisors as to the applicability and impact of such consequences. Interest on the Bonds may or may not be subject to state or local taxation in jurisdictions other than North Carolina. Prospective purchasers of the Bonds should consult their own tax advisors as to the status of interest on the Bonds under the tax laws of any such jurisdiction other than North Carolina. Discount Bonds and Premium Bonds as lead underwriter, has advised the Local Government Commission of North Carolina that the initial public offering prices of the Bonds maturing on Feb- ruary 1, to inclusive, (the "Discount Bonds"), are less than the respective amounts payable at maturity. An amount not less than the difference between the initial public of- fering prices of the Discount Bonds and the amounts payable at maturity constitutes original issue discount ("OID"). Owners of Discount Bonds should consult their own tax advisors as to the determi- nation for federal tax purposes of the amount of OID properly accruing each year with respect to the Discount Bonds and as to federal tax consequences and the treatment of OID for State of North Car- olina and local tax purposes. ' as lead underwriter, has also advised the Local Govern- ment Commission of North Carolina that the initial public offering prices of the Bonds maturing on February 1, to .inclusive, (the "Premium Bonds"), are greater than the amounts payable 26 45 at maturity. The difference between the amount payable at maturity of the Premium Bonds and the tax basis of the Premium Bonds to a purchaser (other than a purchaser who holds Premium Bonds as inventory, stock in trade or for sale to customers in the ordinary course of business) who purchas- es the Premium Bonds at the initial offering price is "Bond Premium." Bond Premium is amortized over the term of the Premium Bonds for federal income tax purposes. Owners of the Premium Bonds are required to decrease their adjusted basis in the Premium Bonds by the amount of amortizable Bond Premium attributable to each taxable year the Premium Bonds are held. Owners of the Pre- mium Bonds should consult their tax advisors with respect to the precise determination for federal income tax purposes of the treatment of Bond Premium upon the sale or other disposition of the Premium Bonds and with respect to State of North Carolina and local tax consequences of owning and disposing of the Premium Bonds. Bond Counsel's approving opinion .will not specifically address the characterization of any amounts as OID or Bond Premium, and will not specifically address the tax treatment of any amounts that may constitute OID or Bond Premium. FINANCIAL ADVISOR has acted as financial advisor to the County in connection with the issuance of the Bonds. The firm has provided technical assistance in structuring the Bonds and related escrow account and has performed the mathematical computations to determine the amount necessary to be deposited in the escrow account to pay and retire the Bonds to be Refunded. will also assist in the purchase and subscription of securities for the escrow account. Rule G-23 of the Municipal Securities Rulemaking Board allows any broker, dealer or municipal securities dealer, who has a finacial advisor relationship, to purchase new issues on a competitively bid basis with prior written consent of the issuer. has received written permission from the County to submit a competitive bid at the public sale for the Bonds. through the competitive bidding process, may acquire as principal or as a participant in a syndicate of underwriters, all or a portion of the County's Bonds, including those upon which has rendered advice. VERIFICATION OF MATHEMATICAL COMPUTATIONS The accuracy of (a) the mathematical computations of the adequacy of the maturing principal amounts of the respective Government Obligations and interest (if any) earned thereon, together with any cash in the related escrow account, to pay all of the principal of and premium, if any, and. interest on the Bonds to be Refunded as such interest payments become due and the Bonds to be Re- funded are redeemed and (b) the mathematical computations supporting the conclusion that the Re- funding Bonds are not "arbitrage bonds" under Section 148 of the Code are being verified by Barthe & Wahrman, PA, Bloomington, Minnesota. Bond Counsel will rely on said verification in rendering its opinion as to the exclusion of interest on the Refunding Bonds from gross income of the owners thereof for purposes of federal income taxation. 27 46 UNDERWRITING The underwriters for the Bonds are The underwriters have jointly and severally agreed, subject to certain conditions, to purchase all but not less than all of the Bonds. If all of the Bonds are sold at the public offering yields l~erei- nabove set forth, the underwriters anticipate total selling compensation of $ *. The pub- lic offering prices or yields of the Bonds may be changed from time to time by the underwriters. *Information provided by underwriters. MISCELLANEOUS Any statements in this Official Statement involving matters of opinion or estimates, whether or not expressly so stated, are intended as such and not as representations of fact. References herein to the State Constitution and legislative enactments are only brief outlines of certain provisions thereof and do not purport to summarize or describe all provisions thereof. The execution of this Official Statement has been duly authorized by the Local Government Commission of North Carolina and the Board of Commissioners for the County. LOCAL GOVERNMENT COMMISSION OF NORTH CAROLINA By COUNTY OF ORANGE, NORTH CAROLINA By By By Valerie Foushee Chair of the Board of Commissioners Frank Clifton County Manager Gary Humphreys Financial Services Director T. Vance Holloman Secretary of the Commission 28 47 APPENDIX E [Proposed form of Sanford Holshouser's opinion on the Bondsj . 2009 Orange County, North Carolina Orange County, North Carolina General Obligation Refunding Bonds. Series 2009 We have acted as bond counsel to Orange County, North Carolina (the "County"), in connection with the County's issuance today of the above-captioned bonds (the "Bonds"). The County is and has been our only client in this transaction. We have examined the applicable law and certified copies of proceedings and documents relat- ing to such issuance. Without undertaking to verify the same by independent investigation, we have relied on (1) computations provided to Barthe & Wahrman, P.A., Cloomington, Minnesota, the ma- thematical accuracy of which has been verified by them, relating to the yield of investments in an escrow fund established in connection with the. issuance of the Bonds, the sufficiency of such in- vestments to pay the Prior Bonds (as defined below) when due and the yield on the Bonds, and (2) representations and certifications by representatives of the Town, the North Carolina Local Gov- ernment Commission (the "LGC") and others as to certain facts relevant to both our opinion and re- quirements of the Internal Revenue Code of 1986, as amended (the "Code"). The Bonds are being issued to pay principal, applicable redemption premium and interest on the outstanding balance of the Town's General Obligation Public Improvement Bonds, Series (the "Prior Bonds"), as more fully described in the proceedings and documents relating to the issuance of the Bonds. The County has made certain covenants (the "Covenants") in the proceedings and documents providing for the issuance of the Bonds to comply with the provisions of the Code regarding, among other matters, the use, expenditure and investment of the proceeds of the Bonds and the timely payment of any arbitrage rebate required under the Code. We have assumed the capacity of all natural persons, the genuineness of all signatures, the authenticity of all documents submitted to us as originals and the conformity to authentic original documents of all documents submitted to us as copies or specimens. E-2 48 Based on the foregoing, as of today and under existing law, we are of the following opinions: 1. The Bonds have been duly authorized and issued. The Bonds are legal, valid and binding obligations of the County, enforceable in accordance with their terms. The County's faith and credit are pledged for the payment of principal of and interest on the Bonds, and the County is authorized to levy and collect ad valorem taxes, without restriction as to rate or amount, on all locally taxable property to pay the principal of and interest on the Bonds. 2. Our opinion as set forth in paragraph 1 is subject to the effect (a) of bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights, and (b) of general principles of equity, regardless of whether applied in a proceeding in equity or at law. 3. Interest on the Bonds paid by the County (a) is not included in gross income for federal in- come tax purposes and (b) is not an item of tax preference for purposes of the federal alternative minimum income tax imposed on individuals and corporations. The County's failure to comply with the Covenants could cause interest on the Bonds to be included in gross income for federal income tax purposes retroactively to the date of issuance of the Bonds. 4. Interest on the Bonds is exempt from existing State of North Carolina income taxation. We express no opinion regarding other federal or North Carolina tax consequences of the own- ership of or receipt or accrual of interest on the Bonds. Our services as bond counsel have been limited to rendering the foregoing opinion based on our review of such proceedings and documents as we have deemed necessary to evaluate the legality, validity and enforceability of the Bonds and to evaluate the status of the Bonds and the interest thereon under the federal and North Carolina tax laws referenced above. We have not made any investigation concerning the County's operations or condition. We ex- press no opinion (a) as to the County's ability to provide for payments on the Bonds, (b) as to the ac- curacy, completeness or fairness of any information that may have been relied on by anyone in making a decision to purchase Bonds, including the LGC's Official Statement with respect to the Bonds, or (c) as to any party's compliance with any terms or conditions precedent to any purchase of Bonds. This opinion is based on constitutional and statutory provisions and judicial decisions existing today. We assume no responsibility to update this opinion or take any other action with regard to changes in facts, circumstances or the applicable law. Very truly yours, (To Be Signed, "Sanford Holshouser LLP"] E-2 49 APPENDIX F DTC's Book-Entry System The Depository Trust Company ("DTC"), New York, New York, will act as securities depository for the Bonds. The Bonds will be issued as fully-registered bonds registered in the name of Cede & Co., DTC's partnership nominee, or such other name as may be requested by an authorized repre- sentative of DTC. One fully-registered bond certificate for each maturity of the Bonds will be regis- tered in the name of Cede & Co., as nominee for DTC, each in the aggregate principal amount of such maturity and will be deposited with DTC. SO LONG AS CEDE & CO. IS THE REGISTERED OWNER OS THE BONDS, AS DTC'S PARTNERSHIP NOMINEE, REFERENCES HEREIN TO THE OWNERS OF REGISTERED OWNERS OF THE BONDS SHALL MEAN CEDE & CO. AND SHALL NOT MEAN THE BENEFICIAL OWNERS OF THE BONDS. DTC is alimited-purpose trust company organized under the New York Banking Law, a "bank- ing organization" within the meaning of the New York Banking Law, a member of the Federal Re- serve System; a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 2 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues and money market instruments from over 85 countries that DTC's direct participants ("Direct Participants") deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transac- tions in deposited securities trough electronic computerized book-entry transfers and pledges be- tween Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. DTC is a wholly- owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC, in turn, is owned by a number of its Direct Participants and members of the National Securities Clearing Cor- poration, Government Securities Clearing Corporation, MBS Clearing Corporation and Emerging Markets Clearing Corporation, as well as by the New York Stock Exchange, Inc., the American Stock Exchange, Inc. and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC is rated AAA by Standard & Poor's Rat- ings Services ("S&P"). The DTC Rules applicable to its Direct and Indirect Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com. Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC's records. The ownership interest of actual pur- chasers of the Bonds (`Beneficial Owners") is in turn recorded on the Direct .and Indirect Partici- pants' records. Beneficial Owners will not receive written confirmation from DTC of their purchases, but Beneficial Owners are expected to receive written confirmations providing details of the transac- tion, as well as periodic statements of their holdings, from the Direct or Indirect Participants through which the Beneficial Owners entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of the Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Bonds, except in the event that use of the book-entry system for the Bonds is discontinued. To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their regis- tration in the name of Cede & Co. or such other nominee do not affect any change in beneficial own- ership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts the Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. F-1 50 Conveyance of notices and other communications by DTC to Direct Participants, by Direct Par- ticipants to Indirect Participants and by Direct and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of the Bonds may wish to take certain steps to augment transmission to them of notices of significant events with respect to the Bonds, such as prepayments, tenders, defaults and proposed amendments to the security documents. Neither DTC nor Cede & Co. will consent or vote with respect to the Bonds. Under its usual procedures, DTC mails an Omnibus Proxy to the County as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Bonds are credited on the record date (identified in a listing attached to the Om- nibus Proxy). Principal and interest payments on the Bonds will be made to Cede & Co. or such other nomi- nee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail information from the County on each payable date in accordance with their respective holdings shown on DTC's records. Payments by Direct and Indirect Participants to Beneficial Owners will be governed by standing in- structions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Direct and Indi- rect Participants and not of DTC or the County, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest to DTC is the responsibility of the County, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of the Direct and Indirect Participants. , DTC may discontinue providing its service as securities depository with respect to the Bonds at any time by giving reasonable notice to the County. Under such circumstances, or in the event the County desires to use a similar book-entry system with another securities depository, there may be a successor securities depository (all references to DTC include any such successor). The County may also decide to discontinue participation in the system of book-entry transfer through DTC (or a suc- cessor securities depository) at any time by giving reasonable notice to DTC. If the book-entry sys- tem is discontinued and there is no successor securities depository, Bond certificates will be printed and delivered to the Beneficial Owners. The information in this section concerning DTC and DTC's book-entry has been obtained from DTC, and the County takes no responsibility for the accuracy thereof. The County cannot and does not give any assurances that DTC, Direct Participants or Indirect Participants will distribute to the Beneficial Owners of the Bonds (a) payments of principal, pre- mium, if any, or interest on the Bonds, (b) confirmations of their ownership interests in the Bonds or (c) prepayment or other notices sent to DTC or Cede & Co., .its partnership nominee, as the regis- tered owner of the Bonds, or that they will do so on a timely basis or that DTC, Direct Participants or Indirect Participants will serve and act in the manner described in this Official Statement. THE COUNTY WILL NOT HAVE ANY RESPONSIBILITY OR OBLIGATIONS TO THE DIRECT PARTICIPANTS, INDIRECT PARTICIPANTS OR THE BENEFICLAL OWNERS WITH RESPECT TO (1) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC OR ANY DIRECT PARTICIPANT OR INDIRECT PARTICIPANT; (2) THE PAYMENT BY DTC OR ANY DIRECT PARTICIPANT OR INDIRECT PARTICIPANT OF ANY AMOUNT DUE TO ANY BENEFICIAL OWNER IN RESPECT OF THE PRINCIPAL AMOUNT OF OR PREPAYMENT PRICE OR INTEREST ON THE BONDS; (3) THE DELIVERY BY DTC OR ANY DIRECT PARTICIPANT OR INDIRECT PARTICIPANT OF ANY NOTICE TO ANY BENEFICIAL OWNER THAT IS REQUIRED OR PERMITTED TO BE GIVEN TO OWNERS UNDER THE TERMS OF THE BOND ORDER AND RESOLUTION; (4) THE SELECTION OF THE BENEFICIAL OWNERS TO RECEIVE PAYMENT IN THE EVENT OF ANY REDEMPTION OF THE BONDS; OR (5) ANY CONSENT GIVEN OR OTHER ACTION TAKEN BY DTC AS OWNER. F-2 51 ASSIGNMENT FOR VALUE RECEIVED the undersigned hereby sell(s), assign(s) and transfer(s) unto (Please print or type transferee's name and address, including zip code) PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OR TRANSFEREE: the within bond and all rights thereunder, hereby irrevocably constituting and appointing Attorney, to transfer said bond on the books kept for the registration thereof, with full power of substitution in the premises. Dated: Signature Guaranteed: NOTICE: Signature(s) must be guaranteed by a participant in the Securities Transfer Agent Medallion Program ("STAMP") or similar program. (Signature of Registered Owner) NOTICE: The signature above must correspond with the name of the registered owner as it appears on the front of this bond in every particular without alteration or enlargement or any change whatsoever. ii 52 Exhibit B -- Undertaking for Continuing Disclosure The County undertakes, for the benefit of the beneficial owners of the Bonds, to provide the following: (a) by not later than seven months from the end of each of the County's fiscal years, to the Municipal Securities Rulemaking Board ("MSRB"), audited County financial statements for such fiscal year, if available, prepared in accordance with Section 159-34 of the General Statutes of North Carolina, as it may be amended from time to time, or any successor statute, or, if such audited financial statements are not available by seven months from the end of any fiscal year, unaudited County financial statements for such fiscal year, to be replaced subsequently by audited County financial statements to be delivered within 15 days after such audited financial statements become available for distribution; (b) by not later than seven months from the end of each of the County's fiscal years, to the MSRB, (i) the financial and statistical data as of a date not earlier than the end of the preceding fiscal year (which data will be prepared at least annually, will specify the date as to which such information was prepared and will be delivered with any subsequent material events notices specified in subparagraph (c) below) for the type of information included under heading "The County -Debt Information" and "- Tax Information" in the final Official Statement (excluding any information on overlapping or underlying units), and (ii) the combined budget of the County for the current fiscal year, to the extent such items are not included in the audited fmancial statements referred to in (a) above; (c) in a timely manner, to the MSRB, notice of any of the following events with respect to the Bonds, if material: (1) principal and interest payment delinquencies; (2) non-payment related defaults; (3) unscheduled draws on debt service reserves reflecting financial difficulties; (4) unscheduled draws on any credit enhancements reflecting financial difficulties; (5) substitution of credit or liquidity providers, or their failure to perform; (6) adverse tax opinions or events affecting the tax-exempt status of the Bonds; (7) modifications to rights of the beneficial owners of the Bonds; 12 53 (8) Bond calls; (9) defeasances; (10) release, substitution or sale of any property securing repayment of the Bonds; and (11) rating changes; and (d) in a timely manner, to the MSRB, notice of a failure of the County to provide required annual financial information described in (a) or (b) above on or before the date specified. If the County fails to comply with the undertaking described above, any beneficial owner of the Bonds may take action to protect and enforce the rights of all beneficial owners with respect to such undertaking, including an action for specific performance; provided, however, that failure to comply with such undertaking will not be an event of default and will not result in any acceleration of payment of the Bonds. All actions will be instituted, had and maintained in the manner provided in this paragraph for the benefit of all beneficial owners of the Bonds. The County shall provide the documents referred to above to the MSRB in an electronic format as prescribed by the MSRB and accompanied by identifying information as prescribed by the MSRB. The County may discharge its undertaking as set forth in this resolution by providing such information in any manner that the United States Securities and Exchange Commission subsequently authorizes in lieu of the manner described above. The County reserves the right to modify from time to time the information to be provided to the extent necessary or appropriate in the County's judgment, provided that: (a) any such modification may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of the County; (b) the information to be provided, as modified, would have complied with the requirements of Rule 15c2-12 as of the date of the final Official Statement, after taking into account any amendments or interpretations of Rule 15c2-12, as well as any changes in circumstances; and 13 54 (c) any such modification does not materially impair the interests of the beneficial owners, as determined either by parties unaffiliated with the County or by the approving vote of the registered owners of a majority in principal amount of the Bonds pursuant to the terms of the bond resolution, as it may be amended from time to time, at the time of the amendment. Any annual financial information containing modified operating data or financial information will explain, in narrative form, the reasons for the modification and the impact of the change in the type of operating data or financial information being provided. 14