HomeMy WebLinkAboutAgenda - 02-07-2012 - 7bORANGE COUNTY
BOARD OF COMMISSIONERS
ACTION AGENDA ITEM ABSTRACT
Meeting Date: February 7, 2012
Action Agenda
Item No. ~ - b
SUBJECT: Public Hearing on the Financing for Chapel Hill -Carrboro City Schools
Elementary #11 and Other County Capital Projects and Refinancing of Existing
Obligations
DEPARTMENT: Financial Services PUBLIC HEARING: (Y/N) YO
ATTACHMENT(S):
A) Copy of Hearing Notice
B) Resolution
C) Financing Document
INFORMATION CONTACTS:
Clarence Grier, 919-245-2453
Robert Jessup, 919-933-9891
PURPOSE: To conduct a public hearing on the issuance of approximately $25.5 million in
alternative financing for Elementary School #11 for Chapel Hill -Carrboro City Schools, for
other County capital projects and to refinance existing obligations, and consideration of a related
resolution supporting the County's application to the Local Government Commission for its
approval of the financing arrangements.
BACKGROUND: The Board of Commissioners has previously approved the construction of a
new elementary school for the Chapel Hill -Carrboro public schools, generally referred to as
"Elementary #11 ". The Board has made a preliminary determination to finance costs for this
projects by the use of an installment contract, as authorized under Section 160A-20 of the North
Carolina General Statutes. County staff estimates that the total amount to be financed for
school construction will be approximately between $20,500,000 and $21,500,000.
In addition, County staff believes that it would be in the County's best interests to include in this
financing package approximately $3,500,000 of additional funding for County capital projects.
These additions would include approximately $3.0 million for improvements to solid waste
convenience centers, and just over $500,000 for the purchase of three ambulances. Combining
these projects with the school financing would provide the efficiency of fewer separate
transactions, and would be expected similarly to reduce total transaction costs.
Also, the County's prospective investment banking underwriters for the debt issuance (Branch
Banking and Trust Company Capital Markets (BB&T)) have advised the County that because of
continuing low market interest rates, there may be opportunities for the County to refinance
some of the County's existing installment financing arrangements. BB&T estimates that adding
approximately $50 million to the debt issuance to refinance existing obligations could save the
County approximately $1.7 million over the next 15 years (or approximately $1.62 on a present
value basis). The amount of obligations to be refinanced, and the total savings, are dependent
on conditions at the time the County's obligations are offered by BB&T in the securities market.
The financing will also include amounts to pay transaction costs.
The statutes require that the County conduct a public hearing on the proposed financing
contract. A copy of the published notice of this hearing is attached as Attachment A.
After conducting the hearing and receiving public input, the Board will consider the adoption of
the resolution provided as Attachment B. This resolution formally requests the required
approval from the North Carolina Local Government Commission (LGC) for the County's
financing arrangements, and makes certain findings of fact as required under the LGC's
guidelines. County staff has been in contact with LGC staff, and staff expects no obstacles to
receiving LGC approval.
If the Board adopts the attached resolution indicating its intent to continue with the financing
plan, the Board will be asked to consider an additional resolution giving final approval to the
financing plan at its February 21, 2012 meeting. Staff expects the LGC to approve the financing
plan at the LGC's meeting on March 6. Under the current schedule, staff expects to set the final
interest rates and other terms of the financing around March 15, and to close on the financing by
the end of March.
FINANCIAL IMPACT: There is no financial impact related to this action. However, there will be
a financial impact in proceeding with the financing. A preliminary estimate of maximum debt
service applicable to the school and County projects financing would require $513,050 in fiscal
year 2012-13 with the highest debt service payment of $1.752 million falling in fiscal year 2020-
2021. The tax rate equivalent for the highest debt service payment is approximately 1.14 cents.
Any savings from refinancings would of course reduce these debt service impacts. The
estimated annual effect of the contemplated refinancings would be approximately $115,000,
which has a tax rate equivalent of approximately .06 cents.
The actual effects of the new debt service and refinancings may be higher or lower. These
effects will be established by the time of the closing.
RECOMMENDATION(S): The Manager recommends that the Board conduct the public
hearing and subsequently adopt the resolution supporting the application to the Local
Government Commission for approval of the financing arrangements.
~~ ~
Orange County, North Carolina -- Notice of Public Hearing
Installment Financing for Elementary #11,
for other County projects and to refinance existing obligations
The Board of Commissioners of Orange County, North Carolina, will hold a public
hearing on Tuesday,. February 7, 2012, at 7:00 p.m. (or as soon thereafter as the matter may be
heard). The purpose of the hearing is to take public comment concerning a proposed financing
contract, under which the County would borrow approximately $75,000,000 to pay costs of the
construction of a new elementary school for the Chapel Hill - Carrboro public schools, for other
County capital projects and to refinance existing obligations.
The hearing will be held in the Commissioners' usual meeting room in Hillsborough
Commons, DSS Building (Old Wal-Mart), 113 Mayo St., Hillsborough, North Carolina.
The County expects to finance approximately $20,500,000 for the new elementary school,
approximately $3 million for improvements to solid waste convenience centers, approximately
$500,000 to purchase three new ambulances, and up to approximately $50,000,000 to refinance
existing obligations. The actual amount of financing to refinance existing obligations may be
higher or lower depending on market conditions, but all amounts issued for refinancing will
produce savings to the County by reducing the applicable interest rates. The County may also use
financing proceeds to provide required reserves and to pay financing costs.
The proposed financing would be secured by a lien on the new elementary school (and its'
related real property), and may also include other facilities that are already subject to financing
liens. There would be no recourse against the County or its property (other than the pledged
facilities and associated land) in the case of a default. As part of this financing plan, the Chapel
Hill - Carrboro Board of Education will transfer the school property to the County.
All interested persons will be heard. The County's plans are subject to change based on
the comments received at the public hearing and the Board's subsequent discussion .and
consideration. The County's entering into the financing is subject to obtaining approval from the
North Carolina Local Government Commission.
3
Persons wishing to make written comments in advance of the hearing or wishing more
information concerning the subject of the hearing may contact Clarence Grier, Orange County
Finance Officer, Post Office Box 8181, Hillsborough, NC 27278 (telephone 919/245-2453).
~~S~ao~~~ ot~ A~+-~3 4
Resolution supporting an application to the Local Government Commission for
its approval of a financing agreement for the County -for Elementary School #11, for other
County capital protects and to refinance existing obligations
WHEREAS --
Orange County has previously determined to carry out the acquisition and construction of
anew elementary school for the Chapel Hill - Carrboro school system, often referred to as
"Elementary #11," and to finance the costs of this project by the use of an installment fmancing,
as authorized under Section 160A-20 of the North Carolina General Statutes.
The Board of Commissioners has also determined to fund approximately $3,500,000 for
additional County capital projects, including approximately $3.0 million for improvements to
solid waste convenience centers and just over $500,000 for the purchase of three ambulances.
County staff has further advised the Board that because of generally low borrowing rates,
the County may be able to save money by refinancing a variety of the County's existing
installment financings.
The Board believes a single installment financing for the new school, the additional
County projects and to carry out refinancings would be in the County's best interest.
This fmancing will require approval from the North Carolina Local Government
Commission. Under the LGC's guidelines, this governing body must make certain findings of fact
to support the County's application to the LGC for its approval of the proposed financing
arrangements.
THEREFORE, BE IT RESOLVED by the Board of Commissioners of Orange
County, North Carolina, that the County makes a preliminary determination to finance
approximately $20,500,000 to pay capital costs of the proposed new elementary school and
$3,500,000 to pay costs of the other County projects described above.
BE IT FURTHER RESOLVED that the Board approves additional financing as
appropriate to carry out beneficial refinancings of existing County obligations, with the amount of
this fmancing currently estimated as not to exceed $50,000,000.
The Board will make a fmal determination to proceed with the financing, and to approve
financing terms and conditions, by one or more subsequent resolutions. Likewise, the Board will
establish a maximum amount to be financed by a later resolution. Some financing proceeds may
be use to reimburse the County for prior expenditures on project costs, and some proceeds will be
used to pay financing costs.
5
BE IT FURTHER RESOLVED that the Board of Commissioners makes the following
findings of fact:
(1) The proposed projects are necessary and appropriate for the County under all the
circumstances.
The County has worked with Chapel Hill - Carrboro School Board to develop a plan for
financing school facilities, of which the currently-proposed elementary school is a part. The
ambulances and convenience center improvements will improve services to County residents.
(2) The proposed installment financing is preferable to a bond issue for the same
purposes.
As the elementary school .will be a discrete facility, it is particularly suitable for
installment financing. The amounts to be financed for other County projects are relatively small,
and it will be cost-effective for the County to combine that financing with the larger school
financing. As the financings that are proposed to be refinanced are all installment financings, it is
most appropriate to carry out the refinancing as an installment financing.
The County has no meaningful ability to issue non-voted general obligation bonds for this
project, and the County has no previously-authorized bonds for these projects. The projects will
produce no revenues that could support aself-liquidating financing. The County expects that in
the current interest rate environment for municipal securities that there will be no substantial
difference in interest rates between general obligation bonds and installment financings for this
project.
The County maintains a balance in school construction financing between voter-approved
bonds, pay-as-you-go funding and installment financing, and the Board believes that under the
circumstances installment financing is the preferable vehicle for Elementary # 11.
(3) The estimated sums to fall due under the proposed financing contract are adequate
and not excessive for the proposed purpose. The County will closely review proposed financing
rates against market rates with guidance from the LGC. All amounts financed will reflect either
approved contracts or previous actual expenditures.
(4) As confirmed by the County's Finance Officer, (i) the County's debt management
procedures and policies are sound and in compliance with law, and (ii) the County is not in
default under any of its debt service obligations.
(5) The County estimates that the maximum tax rate impact of paying debt service on
the financing for the new elementary school will be the equivalent of approximately 1.14 cents
per $100 of valuation. Given the County's need for the new school, the Board believes that such a
tax rate impact is reasonable under all the circumstances.
L
The County estimates that the tax-rate impact of the additional financing for County
projects- will be negligible, especially since solid waste enterprise revenues will help pay debt
service on the financing for the convenience center improvements. Any refinancings will reduce
the County's debt service obligations.
(6) The County Attorney is of the opinion that the proposed projects are authorized by
law and are purposes for which public funds of the County may be expended pursuant to the
Constitution and laws of North Carolina.
BE IT FURTHER RESOLVED as follows:
(a) The Finance Officer is authorized and directed to take all appropriate steps toward
the completion of the financing, including completing an application to the LGC for its approval
of the proposed financing. All prior actions of County representatives in this regard are regard are
approved, ratified and confirmed.
(b) This resolution takes effect immediately.
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 February 7, 2012; that a quorum was present and acting throughout such
meeting; and that such resolution has not been modified or amended, and remains in full effect as
of today.
Dated this day of February, 2012.
[SEAL]
Donna S. Baker
Clerk, Board of Commissioners
Orange County, North Carolina
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Jan 25, 2012 8:22 am Prepared by BB&T Capital Markets (Finance 6.022 orange county, nc:COPS_1)
TABLE OF CONTENTS
Orange County, North Carolina
Certificates of Participation, Series 2012
Rates as of January 23, 2012
Preliminary and Subject to Change
Report
Page
Certificates of Participation, Series 2012
Sources and Uses of Funds 1
Bond Summary Statistics 2
Bond Pricing 3
Bond Debt Service 4
7
8
Jan 25, 2012 8:22 am Prepared by BB&T Capital Markets (Finance 6.022 orange county, nc:COPS_1) Page 1
SOURCES AND USES OF FUNDS
Orange County, North Carolina
Certificates of Participation, Series 2012
Rates as of January 23, 2012
Preliminary and Subject to Change
Dated Date 03/29/2012
Delivery Date 03/29/2012
Sources:
Bond Proceeds:
Par Amount 22,030,000.00
Net Premium 3,315,463.20
25,345,463.20
Uses:
Project Fund Deposits:
Elementary School 21,500,000.00
Emergency Service Vehicles 531,500.00
Solid Waste Convenience Center Upgrades 3,000,000.00
25,031,500.00
Delivery Date Expenses:
Cost of Issuance 200,000.00
Underwriter's Discount 110,150.00
310,150.00
Other Uses of Funds:
Additional Proceeds 3,813.20
25,345,463.20
9
Jan 25, 2012 8:22 am Prepared by BB&T Capital Markets
(Finance 6.022 orange county, nc:COPS_1) Page 2
BOND Si.TMMARY STATISTICS
Orange County, North Carolina
Certificates of Participation, Series 2012
Rates as of Janua ry 23, 2012
Preliminary and Subject to Change
Dated Date 03/29/2012
Delivery Date 03/29/2012
Last Maturity 10/01/2032
Arbitrage Yield 2882982°k
True Interest Cost (TIC) 3.382051 °k
Net Interest Cost (NIC) 3928454°~
All-In TIC 3.466457°~
Average Coupon 4.892298°k
Average Life (years) 12501
Duration of Issue (years) 9.602
Par Amount 22,030,000.00
Bond Proceeds 25,345,463.20
Total Interest 13,473,750.42
Net Interest 10,268,437.22
Total Debt Service 35,503,750.42
Maximum Annual Debt Service 1,751,750.00
Average Annual Debt Service 1,731,421.04
Underwriter's Fees (per $1000)
Average Takedown
Other Fee 5.000000
Total Underwriter's Discount 5.000000
Bid Price 114.549765
Bond Component
Paz Average Average
Value Price Coupon Life
Serials
2032 Term 14,460,000.00
7,570,000.00 116.613 4.780%
112.063 5.000°k 9.307
18.603
22,030,000.00 12501
All-In Arbitrage
TIC TIC Yield
Par Value 22,030,000.00 22,030,000.00 22,030,000.00
+ Accrued Interest
+ Premium (Discount) 3,315,463.20 3,315,46320 3,315,463.20
- Underwriter's Discount -110,150.00 -110,150.00
- Cost of Issuance Expense -200,000.00
- Other Amounts
Target Value 25,235,313.20 25,035,313.20 25,345,463.20
Target Date 03/29/2012 03/29/2012 03/29/2012
Yield 3.382051°k 3.466457% 2.882982°k
Jan 25, 2012 8:22 am Prepared by BB&T Capital Markets
10
(Finance 6.022 orange county, nc:COPS 1) Page 3
Maturity
Bond Component Date Amount
BOND PRICING
Orange County, North Carolina
Certifiicates of Participation, Series 2012
Rates as of January 23, 2012
Preliminary and Subject to Change
Yield to
Rate Yield Price Maturity
call calf Premium
Date Price (-Discount)
Serials:
2032 Term
10/01/2013 735,000 2000% 0.450% 102.323 17,074.05
10/01/2014 750,000 2500% 0.650% 104.590 34,425.00
10/01/2015 770,000 3.000% 0.880% 107.302 56,225.40
10/01/2016 790,000 3.250% 1.030% 109.749 77,017.10
10/01/2017 815,000 4.000% 1.230% 114.701 119,813.15
10/01/2018 850,000 4.000% 1.520% 115.306 130,101.00
10/01/2019 885,000 5.000% 1.810% 122.293 197,293.05
10/01/2020 930,000 5.000% 2.070% 122.743 211,509.90
10/01/2021 975,000 5.000% 2320% 122743 221,744.25
10/01/2022 1,025,000 5.000% 2520% 122.765 233,341.25
10/01/2023 1,075,000 5.000% 2.660% 121.324 C 2.817% 10/01/2022 100.000 229,233.00
10/01/2024 1,125,000 5.000% 2820% 119.701 C 3.089% 10/01/2022 100.000 221,636.25
10/01/2025 1,185,000 5.000% 2.920% 118.701 C 3.275% 10/01/2022 100.000 221,606.85
10/01/2026 1,245,000 5.000% 3.040% 117.513 C 3.455% 10/01/2022 100.000 218,036.85
10/01/2027 1,305,000 5.000% 3.160% 116.340 C 3.614% 10/01/2022 100.000 213,237.00
14,460,000 2,402,294.10
10/01/2028 1,370,000 5.000% 3.610% 112.063 C 4.123% 10/01/2022 100.000 165,263.10
10/01/2029 1,440,000 5.000% 3.610% 112063 C 4.123% 10/01/2022 100.000 173,707.20
10/01/2030 1,510,000 5.000% 3.610% 112063 C 4.123% 10/01/2022 100.000 182,151.30
10/01/2031 1,585,000 5.000% 3.610% 112.063 C 4.123% 10/01/2022 100.000 191,198.55
10/01/2032 1,665,000 5.000% 3.610% 112063 C 4.173% 10/01/2022 100.000 200,848.95
7570,000 913,169.10
22,030,000 3,315,463.20
Dated Date
Delivery Date
First Coupon
Paz Amount
Premium
Production
Underwriter's Discount
Purchase Price
Accrued Interest
03/29/2012
03/29/2012
10/01/2012
22,030,000.00
3,315,463.20
25,345,463.20 115.049765 %
-110,150.00 -0.500000%
25,235,313.20 114.549765 %
Net Proceeds 25,235,313.20
11
Jan 25, 2012 8:22 am Prepared by BB&T Capital Markets (Finance 6.022 orange county, nc:COPS 1) Page 4
BOND DEBT SERVICE
eriod
Ending
rincipal Orange County, North Carolina
Certificates of Participation, Series 2012
Rates as of January 23, 2012
Preliminary and Subject to Change
Coupon Interest Debt Service
ond
Balance
otal
Bond Value
10/01/2012 513,050.42 513,050.42 22,030,000 22,030,000
10/01/2013 735,000 2.000% 1,014,825.00 1,749,825.00 21,295,000 21,295,000
10/01/2014 750,000 2.500% 1,000,125.00 1,750,125.00 20,545,000 20,545,000
10/01/2015 770,000 3.000% 981,375.00 1,751,375.00 19,775,000 19,775,000
10/01/2016 790,000 3.250% 958,275.00 1,748,275.00 18,985,000 18,985,000
10/01/2017 815,000 4.000% 932,600.00 1,747,600.00 18,170,000 18,170,000
10/01/2018 850,000 4.000% 900,000.00 1,750,000.00 17,320,000 17,320,000
10/01/2019 885,000 5.000% 866,000.00 1,751,000.00 16,435,000 16,435,000
10/01/2020 930,000 5.000% 821,750.00 1,751,750.00 15,505,000 15,505,000
10/01/2021 975,000 5.000% 775,250.00 1,750,250.00 14,530,000 14,530,000
10/01/2022 1,025,000 5.000% 726,500.00 1,751,500.00 13,505,000 13,505,000
10/01/2023 1,075,000 5.000% 675,250.00 1,750,250.00 12,430,000 12,430,000
10/01/2024 1,125,000 5.000% 621,500.00 1,746,500.00 11,305,000 11,305,000
10/01/2025 1,185,000 5.000% 565,250.00 1,750,250.00 10,120,000 10,120,000
10/01/2026 1,245,000 5.000% 506,000.00 1,751,000.00 8,875,000 8,875,000
10/01/2027 1,305,000 5.000% 443,750.00 1,748,750.00 7,570,000 7,570,000
10/01/2028 1,370,000 5.000% 378,500.00 1,748,500.00 6,200,000 6,200,000
10/01/2029 1,440,000 5.000% 310,000.00 1,750,000.00 4,760,000 4,760,000
10/01/2030 1,510,000 5.000% 238,000.00 1,748,000.00 3,250,000 3,250,000
10/01/2031 1,585,000 5.000% 162,500.00 1,747,500.00 1,665,000 1,665,000
10/01/2032 1,665,000 5.000% 83,250.00 1,748,250.00
22,030,000 13,473,750.42 35,503,750.42
12
Jan 25, 2012 8:22 am Prepared by BB&T Capital Markets (Finance 6.022 orange county, nc:COPS_1) Page 5
BOND DEBT SERVICE
eriod
Ending
rincipal Orange County, North Carolina
Certificates of Participation, Series 2012
Rates as of January 23, 2012
Preliminary and Subject to Change
Annual
Coupon Interest Debt Service Debt Service
ond
Balance
otal
Bond Value
03/29/2012 22,030,000 22,030,000
10/01/2012 513,050.42 513,050.42 513,050.42 22,030,000 22,030,000
04/01/2013 507,412.50 507,412.50 22,030,000 22,030,000
10/01/2013 735,000 2.000% 507,412.50 1,242,412.50 1,749,825.00 21,295,000 21,295,000
04/01/2014 500,062.50 500,062.50 21,295,000 21,295,000
10/01/2014 750,000 2.500% 500,06250 1,250,062.50 1,750,125.00 20,545,000 20,545,000
04/01/2015 490,687.50 490,687.50 20,545,000 20,545,000
10/01/2015 770,000 3.000% 490,687.50 1,260,687.50 1,751,375.00 19,775,000 19,775,000
04/01/2016 479,137.50 479,137.50 19,775,000 19,775,000
10/01/2016 790,000 3.250°~ 479,137.50 1,269,137.50 1,748,275.00 18,985,000 18,985,000
04/01/2017 466,300.00 466,300.00 18,985,000 18,985,000
10/01/2017 815,000 4.000% 466,300.00 1,281,300.00 1,747,600.00 18,170,000 18,170,000
04/01/2018 450,000.00 450,000.00 18,170,000 18,170,000
10/01/2018 850,000 4.000% 450,000.00 1,300,000.00 1,750,000.00 17,320,000 17,320,000
04/01/2019 433,000.00 433,000.00 17,320,000 17,320,000
10/01/2019 885,000 5.000°~ 433,000.00 1,318,000.00 1,751,000.00 16,435,000 16,435,000
04/01/2020 410,875.00 410,875.00 16,435,000 16,435,000
10/01/2020 930,000 5.000% 410,875.00 1,340,875.00 1,751,750.00 15,505,000 15,505,000
04/01/2021 387,625.00 387,625.00 15,505,000 15,505,000
10/01/2021 975,000 5.000°~ 387,625.00 1,362,625.00 1,750,250.00 14,530,000 14,530,000
04/01/2022 363,250.00 363,250.00 14,530,000 14,530,000
10/01/2022 1,025,000 5.000% 363,250.00 1,388,250.00 1,751,500.00 13,505,000 13,505,000
04/01/2023 337,625.00 337,625.00 13,505,000 13,505,000
10/01/2023 1,075,000 5.000°~ 337,625.00 1,412,625.00 1,750,250.00 12,430,000 12,430,000
04/01/2024 310,750.00 310,750.00 12,430,000 12,430,000
10/01/2024 1,125,000 5.000% 310,750.00 1,435,750.00 1,746,500.00 11,305,000 11,305,000
04/01/2025 282,625.00 282,625.00 11,305,000 11,305,000
10/01/2025 1,185,000 5.000°~ 282,625.00 1,467,625.00 1,750,250.00 10,120,000 10,120,000
04/01/2026 253,000.00 253,000.00 10,120,000 10,120,000
10/01/2026 1,245,000 5.000% 253,000.00 1,498,000.00 1,751,000.00 8,875,000 8,875,000
04/01/2027 221,875.00 221,875.00 8,875,000 8,875,000
10/01/2027 1,305,000 5.000% 221,875.00 1,526,875.00 1,748,750.00 7,570,000 7,570,000
04/01/2028 189,250.00 189,250.00 7,570,000 7,570,000
10/01/2028 1,370,000 5.000% 189,250.00 1,559,250.00 1,748,500.00 6,200,000 6,200,000
04/01/2029 155,000.00 155,000.00 6,200,000 6,200,000
10/01/2029 1,440,000 5.000°~ 155,000.00 1,595,000.00 1,750,000.00 4,760,000 4,760,000
04/01/2030 119,000.00 119,000.00 4,760,000 4,760,000
10/01/2030 1,510,000 5.000% 119,000.00 1,629,000.00 1,748,000.00 3,250,000 3,250,000
04/01/2031 81,250.00 81,250.00 3,250,000 3,250,000
10/01/2031 1,585,000 5.000% 81,250.00 1,666,250.00 1,747,500.00 1,665,000 1,665,000
04/01/2032 41,625.00 41,625.00 1,665,000 1,665,000
10/01/2032 1,665,000 5.000% 41,625.00 1,706,625.00 1,748,250.00
22,030,000 13,473,750.42 35,503,750.42 35,503,750.42