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HomeMy WebLinkAboutAgenda - 09-08-2011 - 8aORANGE COUNTY BOARD OF -COMMISSIONERS ACTION AGENDA ITEM ABSTRACT Meeting Date: September 8, 2011 Action Agenda Item No. ~~ SUBJECT: Resolution Authorizing Application to the Local Government Commission to Issue Up to $42 5 Million in Limited Obligation Refunding Bonds DEPARTMENT: Financial Services PUBLIC HEARING:- (Y/N) No ATTACHMENT(S): 1. Resolution 2. Bond Refunding Analysis INFORMATION_ CONTACT: Clarence Grier, 919-245-2453 Bob Jessup, 919-933-9891 PURPOSE: To consider approving a resolution authorizing application to the Locai Government Commission (LGC) to issue up to $42.5 million in Limited Obligation Refunding Bonds to refund the 2007 Certificates of Participation (COPS). BACKGROUND: Staff maintains contact with several financial advisors who track the County's bonds against market conditions to identify opportunities to achieve debt service savings through refunding outstanding debt of the County. Municipal bond interest rates have continued to fall over the past fiscal year. Davenport & Company, LLC, in conjunction with -Branch Banking- and Trust (BB&T) and Wells Fargo, has identified an opportunity for debt service savings and provided an analysis of the potential savings under current market conditions. The current proposal is to refund $42.5 million of various debt obligations of the County. The analysis shows a potential savings of $1.76 million over the remaining life of the debt, with a net present value of $1.3 million. The analysis shows the reduction in debt service would average slightly over $'Fa7,000 a-year for fiscal years 2012 through 2027. The Local Government Commission requires the percentage savings of debt service to be approximately 3.0%, or more, of the amount of the refunded bonds. The proposal realizes a 3.067% savings. Market conditions could change between now and the time of issuance, potentially increasing or decreasing savings. Staff is proposing the Board approve a resolution 1) authorizing staff to proceed with an application requesting the Local Government Commission's approval to issue up to $42.5 million of Limited Obligation Refunding Bonds for the purpose of refunding various debt obligations of the County; and 2) authorizing Davenport and Company, LLC, to serve as Financial Advisor and the firm of Sanford Holshouser, LLP, represented by Bob Jessup, to serve as Bond Counsel. FINANCIAL IMPACT: The resulting financial impact of this action is a savings in future debt service costs described above. RECOMMENDATION(S): The Manager recommends that the Beard approve the attached resolufion 1) authorizing- staff`-to proceed with an application requesting_ the Local Govefnment Commission's approval to issue up to $42.5 million of refunding bonds for the purpose of refunding the 2007 COPS of the County; and 2) authorizing Davenport and Company, LLC, to serve as Financial Advisor and the firm of Sanford Holshouser, LLP, represented by Bob Jessup, to serve as Bond Counsel ao~l- ~~a 3 R~S~ Resolution Providing Final Approval of Terms and Documents Fer County's 2011 Installment Refinancing Transaction WHEREAS - The Board of Commissioners of Orange County, 1~TOrth Carolina,_ has previously determined to refinance certain existing County installment financings,~nost_par-titularly a 2007 installment fmancing with SunTrust Leasing Corporation. This refinancing will take the form of anew installment fmaneing pursuant to the authority of Section 160A-20-of the General Statutes and will include the use of limited obligation bonds, which represent interests-in the installment payments to be made by the County. The County's Finance Officer has made available to this Board the draft documents listed on Exhibit A (the "Documents''), and a-draft of an official statement providing for the disclosure of information to prospective investors m the County's financing obligations. All of these items relate to the County's carrying out the financing plan. BE IT THEREFORE 32ESOLVED -by the- Board of Commissioners of Orange County, North Carolina., as follows: 1. Determination To Proceed with Project -The Board confirms its decision to carry out the proposed refinancing. The County will refmance the 2007- SunTrust fmancing, along with any other-financings the Finance Officer may designate. 2. Approval- of Documents; Direction To Execute Documents -The Board approves the forms of the Documents submitted to this meeting. The Board authorizes and directs the Board's Chair and the County Manager, or either of them, to execute and deliver those Documents to which the County is a party. The Documents in their respective fmal forms must be in substantially the forms presented, with such changes as the Chair or the County Manager may approve. The execution and delivery of any Document by an authorized County officer will be conclusive- evidence of such officer's approval of any such changes. The Documents in final form, however, must provide for the principal amount of limited obligation bonds to not exceed $42,500,000 and a fmancing term not to extend beyond December 31, 2027. The collateral pledged to the repayment of the County's obligations under the Documents may include any portion, or all, of the collateral pledged to the repayment of obligations that are refmanced. The amount financed under the Documents may include amounts to pay financing expenses and other necessary and incidental costs. 3. Approval of Official Statement -The Board approves the draft official statement submitted to this meeting as the form of the preliminary official statement pursuant to which the contemplated limited obligation bonds will be offered for sale. The preliminary official statement as distributed to prospective investors must be in substantially the form presented, with such changes as the Finance Officer may approve. The 4 Board directs the Finance Officer, after the sale of the bonds, to complete and otherwise prepare the preliminary official statement as an official statement in final form. The Board approves and appoints BB~°iT Capital- Markets (a division of Scott & Stringfellow, LLC) and Wells Fargo Securities as the underwriters of the bonds. The Board authorizes and approves the use of the preliminary official statement and final official statement by the underwriters in connection with the sale of the bonds. The Board acknowledges that it is the County's responsibilit3~, 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 Offioial 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 ~nd_complete,_and_further acknowledge and accept their own responsibility for causing the County to fulfill these responsibilities for the Official-Statement. 4. Authorization To Refinance obligations with Existing Lenders -The Board understands that for certain of the County's outstanding_installment financing obligations, it may be in the County's best interest to modify the existing agreements with the current lenders, instead of refinancing those obligations through the issuance of the limited obligation bonds. The Finance Officer, and all other County officers and representatives, are authorized and directed to take all appr-opriate action to carry out such modifications and refinancings with the existing lenders. 5. Authorization to County ll~anager and Finance O~~cer To Comlrlete Closing - The County Manager, the Finance Officer and all other County officers and employees are authorized and directed to take all proper steps to complete the financing in accordance with the terms of this resolution. The Board authorizes- and directs the Finance Officer to hold executed copies of all financing documents authorized or permitted by this resolution in escrow on the County's behalf until the conditions for their delivery have been completed to such officer's satisfaction, and thereupon to release the executed copies of such documents for delivery to the appropriate persons or organizations. Without limiting -the generality of the foregoing, the Board specifically authorizes the Finance Officer (a} to approve any additional agreements appropriate to carry out the plan of financing contemplated by this resolution, including agreements for the custody or investment of bond proceeds and agreements for appropriate professional services, and (b) to approve changes to any documents or closing certifications previously signed by County officers or employees, provided that such changes do not conflict with this resolution or substantially alter the intent from that expressed in the form originally signed. The Finance Offtcer's authorization of the release of any such document for delivery will constitute conclusive evidence of such officer's approval of any such changes. 2 5 In-addition, the Finance Officer is authorized and directed to take alI appropriate steps for the efficient and convenient carrying out of the County's on-going responsibilities with respect to the bands. This authorization includes, without limitation, contracting with third parties for reports and calculations that-may be required under tree bonds, this resolution or otherwise with respect to the bonds. 6. 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 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 County Manager, the Board's Chair or the Finance- Officer, any other of such officers may assume any responsibility or carry out-any function assigned in this resolution. In addition, upon the unavailability of the Chair or the Clerk, respectively, any of the rights or responsibilities directed to such officers may be carried out or exercised by the Vice Chair or any Deputy or Assistant__Clerk._All _other Board proceedings, or parts thereof, in conflict with this resolution are repealed; to the extent of the conflict. This resolution takes effect immediately. Exhibit A -- Dra#t Documents (a) A draft da#ed August 22, 2011, of an Installment Financing Contract to be dated on- or about September 1, 2011 (the "Financing Contract"), between the County and Orange County Public Facilities Company (the "Company), providing for the advance of funds to the County for the County to refinance other financing obligations, and further providing for the County's obligation to repay the amounts advanced. (b) A draft dated-August 22, 2011, of a Deed of Trust and Security Agreement to be dated on or about September 1, 2011, from the County to a deed of trust trustee for the Company's benefit, providing fora security interest in certain County property (including Morris Grove Elementary School and the 2007 County Justice Facility improvements) to secure the County's obligations under the Financing Contract. (c) A draft dated August 22, 2011, of a Trust Agreement to be dated on or about September 1, 2011, between the Company and a Trustee, providing for the issuance of limited obligation bonds to generate funds for the advance to the County under- the Financing Contract. The bonds are payable from amounts paid by the County under the Financing Contract. (d) A draft of a Bond Purchase Agreement to be dated on or about September 1, 2011, providing for the underwriters' obligations to purchase the bonds. The Bond Purchase Agreement includes a Letter of Representation to be delivered by the County. The final form of this Agreement will set out the final principal amount, principal payment schedule and interest rates for the bonds. 6 I certify as follows: that the foregoing resolution was properly adopted at a meeting.of the Board of Commissioners of Orange- County, North Carolina; that such meeting was properly called and held on September 8, 201.1; that a quorum was present and acting throughout such meeting; and that such resolution has not been modified or amended, and remains in fuH effect as of today. Dated this day of September, 201 1. [SEAL] Clerk, Board of Commissioners Orange County, North Carolina 4 ® Capital Markets Savintrs Summa througph o8/i8/n -ORANGE COUNTY, NORTH CAROLINA MUNICIPAL MARKETS g ~ b Sources and Uses of Funds Savings Statistics Annual Savings Sources: Bond Proceeds: Par Amount 37,410,000.00 Premium 3,623,590.65 _ 41,033,590.65 Other Sources of Funds: Contribution for Accrued Interest 414,471.96 41,448,062.61 Uses: Refunding Escrow Deposits: Cash Deposit 41,060,755.96 Delivery Date Expenses: Cost of Issuance 200,000.00 Underwriter's Discount 187,050.00 387,050.00 Cither Uses of Funds: Additional Proceeds 256.65 41,446,062.61 Dated Date 10/1/2011 Delivery Date 10/1/2011 Arbitrage yield 3.067330% Escrow yield Bond Par Amount 37,410,000.00 True Interest Cost 3.379646% Netlnterest Cost 3.631257% Average Coupon 4.713325% Average Life 8.489 Par amount of refunded bonds 40,045,600.00 Average coupon of refunded bonds 4.140000% Average life of refunded bonds 8.250 Net PV Savings 1,298,145.97 Percents a Savin s of refunded bonds 3.241669% Percentage savings of refunding bonds 3.470051% Present Value to Prior Debt Refunding Debt 10/01/2011 @ _ Date Service Service Savings 3.0673305% 6/30/2012 828,943.92 793,300.00 35,643.92 41,342.29 • 6/30/2013 4,108,928.85 4,002,200.00 106,728.85 133,768.90 6/30/2014 4,005,310.86 3,896,875.00 108,435.86 130,851.04 6/30/2015 3,901,692.87 3,795,475.00 106,217.87 124,411.65 6/30%2016 3,798,074.88 3,690,050.00 108,024.88 121,811.36 6/30/2017 3,694,456.89 3,588,900.00 105,556.89 115,437.79 6/30/2018 3,590,838.90 3,481,800.00 109,038.90 114,297.41 6/30/2019 3,487,220.91 3,380,200.00 107,020.91 108,679.61 6/30/2020 3,383,602.92 3,277,375.00 106,227.92 104,120.88 6/30/2021 3,279,984.93 3,172,875.00 107,109.93 101,008.54 6/30/2022 3,176,366.94 3,067,875.00 108,491.94 98,355.23 6/30/2023 3,072,748.95 2,967,250.00 105,498.95 92,636.09 6/30/2024 2,969,130.96 2,861,000.00 108,130.96 91,072.59 6/30/2025 2,865,512.97 2,759,125.00 106,387.97 86,570.55 6/30/2026 2,761,894.98 2,b51,625.00 210,269.98 85,927.31 6/30/2027 2,658,276.99 2,548,500.00 109,776.99 82,469.98 _ 6/30/2028 2,554,659.00 2,444,625.00 110,034.00 79,600.06 54,137,646.72 52,379,050.00 1,758,596.72 1,712,361.28 Bond Buyer -Municipal Market Data• Municipal Market Data - Snapshot ~ Taxable vs. Tax-exempt = August tool -August sou (loyr. Spot) as of August 18, sou 3Yr Treasury vs. loyr MMD,1/8/l0 - 8/18/11 ~.~ .m 350 3m :.so :.ro i. Municipal Market Data (MMD) serves as the benchmark of the tax-exempt industry; reflects AAA-rated G.O. pledge. za,a :ou ow , = n . s s , e s ,o „ ,: ,• ,< a .s ,> >. „ :o v z: :a z. xs zc „ :e ,s w ~. Municipal Market Data (MMD) serves as the benchmark of the tax-exempt industry; reflects AAA-rated G.O. pledge. e L z.rox F sex Municipal Market Data= -Weekly Adjustments Week of 4/8/2011 }!15/2011 4/22/2011 4/29/2011 5/6/2011 5/13/2011 5/20/2011 5/27/2011 6/3/2011 6/10/2011 6/17/2011 6/24/2011 7/1/2011 7/8/2011 7/15/2011 7/27f2011 7/29/2011 8/5/2011 8/1 Z/2011 6/19/2011 Year 1 - - - (0.02) - (0.04) - - (0.01) (0.02) - - ~ - - (0.03) - - - - - 5 (0.01) (0.07) (0.10) (0.12} (0.10) (0.14) (0.06) 0.03 (0.06) 0.01 ~ 0.02 - 0.08 0,01 (0.10 - (0.03) (0.16) - (0.15) 10 0.06 (0.12) (0.16) (0.14) (0.11) (0.10) - - 0.(h (0.05) 0.0] 0.02 - 0.13 (0.02) (0.08) 0.02 (0.01) (0.29) - (0.23) 20 0.03 (0.07) (0.06) (0.13) (0.14) (0.06) (0.05) 0.01 (0.05) 0.01 (0.01) (0.04) 0.14 (0.01) (0.10) 0.02 0.01 (0.33) - (0.10) average 0.02 (0.06) (0.06) (0.10) (0.09) (0.09) (0.03) 0.01 (0.04) 0.00 0.01 (0.01 > 0.09 (o.oo) (0.06} o.ol (o.m> (o.zo> (D.IZ) i. Comparison ofshort-term taxable and mid-term tax-exempt curves demonstrates relationship between borrowing rates and reinvestment rates (for escrows).