HomeMy WebLinkAboutAgenda - 11-04-2010 - 6aORANGE COUNTY
BOARD OF COMMISSIONERS
ACTION AGENDA ITEM ABSTRACT
Meeting Date: November 4, 2010
Action Agenda
Item No. o - a
SUBJECT: Public Hearing on the Issuance of Up to $9.9 Million of Qualified School
Construction Bonds for the Chapel Hill -Carrboro City Schools and Orange
County Schools
DEPARTMENT: Financial Services
PUBLIC HEARING: (Y/N) Yes
ATTACHMENT(S):
Listing of QSCB Projects
Financing Schedule
INFORMATION CONTACT:
Clarence Grier, 919-245-2453
Bob Jessup, 919-933-9891
PURPOSE: To conduct a public hearing on the proposed issuance of up to $9.9 million of
Qualified School Construction Bonds for the Chapel Hill -Carrboro City Schools and Orange
County Schools.
BACKGROUND: At the October 5, 2010 meeting the Board of County Commissioners
approved proceeding with the preliminary steps necessary to seek Qualified School
Construction Bond (QSCB) financing for the Chapel Hill -Carrboro City Schools and Orange
County Schools systems in an amount not to exceed $9.9 million. The Board authorized setting
a public hearing on the proposed financing for the November 4, 2010 Board Meeting. The
public hearing was advertised in the Chapel Hill Herald on October 16, 2010.
Chapel Hill Carrboro City Schools applied to the North Carolina Department of Public Instruction
(DPI) and received approval to use its 2010 QSCB allocations of $4.6 million for roofing projects
at McDougle Middle School and various other projects. Orange County Schools applied to the
North Carolina Department of Public Instruction (DPI) and received approval to use its 2009 and
2010 QSCB allocations of $5.3 million for auditorium renovations at CW Stanford Middle School
and various other projects.
Qualified School Construction Bonds are tax credit bonds. The issuer receives a tax credit at an
interest rate established by the Treasury Department at the time of issuance. The issuer then
provides the tax credit to the purchaser of the bonds. The potential purchaser will evaluate the
financing including the issuer of the project and the tax credit rate. The potential purchaser will
determine whether to purchase the QSCB and further determine whether the tax credit rate is
sufficient, or if a higher interest rate, is needed to make the financing.
Branch Banking & Trust (BB&T) is expected to be the purchaser of this issuance and was also
the issuer of the previous QSCB issuance for the Carrboro High School Arts Wing. The current
approach for this type of financing is to negotiate terms directly with the purchaser.
Based on recent conversations with BB&T, the tax credit rates issued by the US Treasury have
fallen from the 6.1-6.3% range during the first half of 2010 to a 5.27 - 5.5% range over the past
three months. BB&T requires a 5.27% or higher tax credit in order to sustain a QSCB financing
at 0% interest. In order for a QSCB financing to be acceptable to BB&T for an issuer with a
credit rating similar to Orange County's, a supplemental interest coupon of 1.00% would be
necessary. The approximate annual payment fora $9.899 million/15 year financing loan with a
supplemental coupon rate of 1.0% would be $714,000 per year, with a net interest cost of
approximately $810,335 over the life of the loan.
All QSCB financing for the funds allotted for 2010 must occur by December 31, 2010 in order to
retain the allotment. This issuance of QSCB financing must follow the required steps through
the Local Government Commission (LGC). There will be a number of entities seeking to issue
this type of financing prior to the end of the year. There are at most two potential financing
sources, and it is anticipated there will be many discussion items at the December LGC
meeting. Therefore, staff and bond counsel believe it would be prudent to put the County in the
position to complete the financing as early as possible. Staff and bond counsel are proposing a
schedule (see attached) which would enable this financing to be presented to the LGC for
approval at its November meeting, which occurs November 16, 2010.
FINANCIAL IMPACT: There is no financial impact until the Board gives final approval to the
financing. There will be a financial impact as noted above with the authorization to proceed with
the issuance of the bonds.
RECOMMENDATION(S): The Manager recommends that the Board:
1) Open the public hearing and receive comments from the public;
2) Close the public hearing; and
3) Offer direction to staff on the issuance of the Qualified Schools Construction Bonds for
the Chapel Hill -Carrboro City Schools and Orange County Schools systems.
LEA
CHCCS
Chapel Hill Carrboro City Schools
Chapel Hill Carrboro City Schools
Chapel Hill Carrboro City Schools
Chapel Hill Carrboro City Schools
Chapel Hill Carrboro City Schools
Chapel Hill Carrboro City Schools
Total CHCCS QSCB Projects
OCS
Orange County Schools
Orange County Schools
Orange County Schools
Orange County Schools
Orange County Schools
Orange County Schools
Orange County Schools
Total OCS QSCB Projects
Project
McDougle Elementary and Middle School Roof Replacement
McDougle Elementary and Middle School Roof Replacement
Glenwood Elementary School Roof Replacement
Ephesus Elementary School Roof Replacement
Phillips Middle School Roof Replacement
Ephesus Elementary School Roof Project
CW Stanford Middle School Auditorium
CW Stanford Middle School Auditorium
C.W. Stanford Middle School Roof Replacement
Orange High School Roof Replacement
Central Elementary School Roof Replacement
Central Elementary School Breezeway Enclosure
Efland Cheeks Elementary School Renovation
Total all QSCB Projects
Year Allocation Amount
2010 1 $ 2,371,489
2010 2 828,511
2010 2 400,000
2010 2 400,000
2010 2 405,000
2010 2 225,000
4,630,000
2009 1 1,555,077
2010 1 1,448,363
2010 2 1,000,000
2010 2 500,000
2010 2 100,000
2010 2 250,000
2010 2 416,000
5,269,440
$ 9,899,440
w
A~a~hme~r+ ~,
Proiected CHCCS and OCS School Financing Schedule
County makes initial contact with LGC As soon as possible
State Board approves applications By mid-September
School Board develops construction As soon as possible and in any event by
estimates mid-September
County Board: adopt findings resolution, October 5 BOCC meeting
which includes reimbursement declaration
and call for ublic hearing
Advertise for school board hearing By October 19
Publish notice of County public hearing By October 19
School Board: hold public hearing; adopt First Board Meeting in November for both
resolution approving financing plan [and School Boards
pro erty transfer, if necessary]
County Board holds public hearing; adopts November 4 BOCC meeting
resolution providing final approval to
fmancing terms and documents
County's preliminary application due to By October 19
LGC
LGC approval November 16 (full Commission)
First available closing date December 6