HomeMy WebLinkAboutAgenda - 12-06-2010 - 7bORANGE COUNTY
BOARD OF COMMISSIONERS
ACTION AGENDA ITEM ABSTRACT
Meeting Date: December 6, 2010
Action Agenda
Item No. 7 - b
SUBJECT: Update and Additional Action on the $103.6 Million Limited Obligation Bond
Issuance to Refund Various Debt Obligations of the County and to Finance the
Purchase of Equipment
DEPARTMENT: Financial Services PUBLIC HEARING: (Y/N) No
ATTACHMENT(S):
INFORMATION CONTACT:
Clarence Grier, 919-245-2453
PURPOSE: To provide an update on the status and to authorize additional action on the
issuance of $103.6 million of Limited Obligation Bonds (LOBs) to refund various debt
obligations and finance equipment purchases.
BACKGROUND: At the October 19, 2010 meeting, the Board of County Commissioners
authorized staff to proceed with the necessary steps to issue $103.6 million in LOBs to refund
various debt obligations of the County, and to finance the purchase of Sheriff's Department
radios, computer equipment and software.
Due to market fluctuations and the Federal Reserve plan to stimulate the economy, interest
rates on municipal bonds have increased and the projected savings of $4.7 million in
September 2010 has been reduced to a little over $1.1 million. This would not meet the
required three percent savings for the issuance of refunding bonds as required by the Local
Government Commission (LGC}.
Staff has consulted with Davenport and Company, LLC, Financial Advisors; Bob Jessup, Bond
Counsel; and the LGC. All agree that interest rates may not return to the levels of September
2010 to provide the projected savings on the refunding as presented at the October 19, 2010
meeting. Additionally, interest rates may not decrease in order to provide the necessary three
percent savings required by the LGC.
Branch Banking and Trust (BB&T) has agreed to lower the interest rate on the 2006 installment
Purchase Note Payable ($6.6 million balance as of November 30, 2010} from 4.39% to 2.99%.
This reduction in the interest rate will provide a savings of approximately $490,000 in debt
service over the remaining eleven years of the note agreement.
2
It is requested that the Board:
1) Authorize staff to proceed with an application requesting the Local Government
Commission's approval of the September 2010 proposed refunding at the December
2010 meeting;
2} If the LOBs cannot be issued and sold at the LGC's December meeting, allow staff to
leave the application on hold with the LGC until such time, not extending beyond six
months, that the LOBs can be issued. If the LOBs cannot be issued after six months,
staff will cancel the issuance/sale with the LGC; and
3) Authorize staff to move forward with BB&T to obtain a rate reduction for the 2006
Installment Purchase Note Payable.
FINANCIAL {MPACT: The financial impact of proceeding with the above actions is that the
County will possibly be able to achieve savings of future debt service cost. The total amount of
future savings wi{I be determined as the County moves closer to the potential issuance of the
debt.
RECOMMENDATION(S): The Manager recommends that the Board receive the update and:
1) Authorize staff to proceed with an application requesting the Local Government
Commission's approval of the September 2010 proposed refunding at the December
2010 meeting;
2) if the LOBs cannot be issued and sold at the LGC's December meeting, allow staff to
leave the application on hold with the LGC until such time, not extending beyond six
months, that the LOBs can be issued. If the LOBs cannot be issued after six months,
staff will cancel the issuancelsale with the LGC; and
3) Authorize staff to move forward with BB&T to obtain a rate reduction for the 2006
Installment Purchase Note Payable.