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HomeMy WebLinkAboutAgenda - 11-19-1997 - 9b ORANGE COUNTY BOARD OF COMMISSIONERS ACTION AGENDA ITEM ABSTRACT Meeting Date: November 19. 1997 Action Agenda Item No. SUBJECT: Financing for Skills Development Center Renovations DEPARTMENT: County Manager/Finance PUBLIC HEARING: (YIN) BUDGET AMENDMENT: (Y/N) ATTACHMENT(S): INFORMATION CONTACT: Resolution Authorizing Financing Application Rod Visser, ext 2300 Public Hearing Notice Ken Chavious, ext 2450 11/13/97 Staff Memo on Financing Options TELEPHONE NUMBERS: Hillsborough 732-8181 Chapel Hill 968-4501 Durham 688-7331 Mebane 227-2031 PURPOSE: To consider adoption of a resolution indicating the County's intent to file an application with the Local Government Commission for an installment purchase for renovations to the Skills Development Center located at 501/503 West Franklin Street; and to establish a date for a public hearing on the financing proposal. BACKGROUND: County staff has been examining options to fund the renovation of the Skills Development Center located at 501/503 West Franklin Street. Bids for these renovations are due to be opened on November 20. The attached staff memorandum identifies some of the financing options that the Board may consider. The Manager recommends that the Board pursue the option of seeking approval from the Local Government Commission(LGC)to finance the project using an installment purchase. Installment purchase, or"private placement", is the financing approach that was contemplated in the 1997-2007 Capital Improvements Plan. If the financing can be completed before the end of the calendar year, the County will be able to remain"bank qualified" as a small issuer, having incurred less than $10 million in debt during 1997. Bank qualification would permit the County to obtain financing at interest rates 1.5% - 2% lower than if taxable debt must be incurred. If the installment purchase option is selected, the LGC requires the Governing Board to adopt a resolution which authorizes staff to submit an application for consideration and states certain findings of fact regarding the project necessity. The attached resolution was prepared in accordance with the LGC guidelines and will satisfy LGC requirements. The County's purchase of the building that will house the Skills Development Center was arranged through installment purchase with NationsBank.The Bank is willing to submit a proposal for the financing of the proposed renovations. Early indications are that the rate will be comparable to, if not better than. the existing loan. If the County chooses the installment purchase and considers acceptance of a proposal from NationsBank, a public hearing must be held on the proposed financing plan in order to comply with statutory and LGC requirements. Notice of the public hearing must be advertised at least ten days prior to the date fixed for the hearing. The LGC would consider the County's application after the public hearing on December 1. The private placement option would be subject to approval by the LGC at their last scheduled meeting for 1997, which is on December 2. RECOMMENDATION(S): The Manager recommends that the Board approve the installment purchase option; adopt the resolution; establish the public hearing date for December 1, 1997; and authorize the Clerk to advertise the public hearing notice. ORANGE COUNTY BOARD OF COMMISSIONERS A RESOLUTION AUTHORIZING THE FILING OF AN APPLICATION FOR APPROVAL OF A FINANCING AGREEMENT AUTHORIZED BY NORTH CAROLINA GENERAL STATUTE 160A-20 WHEREAS, the County of Orange,North Carolina desires to renovate a building in at 5011503 West Franklin Street, Chapel Hill North Carolina, in which to locate its Skill Development Center; and WHEREAS, the County of Orange desires to finance this purchase in an amount not to exceed $ thousand by use of an installment contract authorized under North Carolina General Statute 160A, Article 3, Section 20; and WHEREAS, findings of fact by this governing body must be presented to enable the North Carolina Local Government Commission to make its findings of fact set forth in North Carolina General Statute 159, Article 8, SECTION 151 prior to approval of the proposed contract; NOW, THEREFORE, BE IT RESOLVED that the Board of Commissioners of Orange County. North Carolina, meeting in regular session on the nineteenth day of November, 1997, make the following findings of fact: 1. The proposed project is necessary or expedient because: a. The facility will serve as a one stop information, assessment, referral and training center for citizens seeking access to various services available to prepare them for, and help them find, a job. There is no similar facility in the County. b. The original purchase of the property was for the purpose stated and the renovations will make the property ideal for the function it will provide. It's location on the Chapel Hill Transit and the County's OPT bus routes will make accessibility by public transportation convenient. c. The building is in immediate proximity to the highest concentration of unemployment and poverty in all of Orange County; and ' d. The renovation costs will be significantly less than the cost of new construction for a similar facility; and f. The renovation of the existing building will allow services to the citizens of the County to be offered much sooner than if a new facility were to be built. 2. The proposed contract is preferable to a bond issue for the same purpose because: a. The renovation to this property has been planned in the County Capital Improvements Plan(CIP) using local funds to pay installments, and this method of contracting would be the most expeditious manner in which to raise cash for the facility; b. The not-to-exceed amount of$------------ represented through this contract and imperative for the renovation of this property cannot be prudently raised in total from currently available appropriations. 3. The cost of financing under the proposed contract could be greater than the cost of issuing general obligation bonds. However, this method of financing will increase the alternatives available to Orange County to obtain the most cost effective, timely, and flexible means possible of -t funding this necessary project. Given Orange County's excellent credit standing. any differences in the comparable costs between bond financing and installment purchase financing will be reasonable. 4. The sums to fall due under the contract are adequate and not excessive for the proposed purpose because funding of the debt service thus created is already planned in Orange County's long-term Capital Improvement Plan. 5. The County of Orange's debt management procedures and policies are good because the County's existing and planned debt falls well within North Carolina's legal debt limitations for local governments; furthermore, Orange County's excellent creditworthiness is well recognized by investors and well established by the principal municipal bond rating agencies with bond ratings of Aal (Moody's) and AA+(Standard and Poor's). 6. There will be no increase in ad valorem property taxes necessary to meet the sums to fall due under the proposed contract. Debt will be retired through pay-as-you-go sales tax revenues already identified in the County's CIP. 7. The County of Orange is not in default in any of is debt service obligations. 8. The Attorney for the County of Orange has rendered an opinion that the proposed Projects are authorized by law and is a purpose for which public funds may be expended pursuant to the Constitution and laws of North Carolina. NOW, THEREFORE, BE IT FURTHER RESOLVED that the Finance Officer is hereby authorized to act on behalf of the County of Orange in filing an application with the North Carolina Local Government Commission for approval of these projects and the proposed financing contract and other actions not inconsistent with this resolution. This resolution is effective upon its adoption this the 19th day of November, 1997. The motion to adopt this resolution was made by Commissioner , seconded by Commissioner , and passed by a vote of to William L. Crowther, Chair ATTEST: Beverly A. Blythe, Clerk to the Board This is to certify that this is a true and accurate copy of this resolution adopted by the Orange County Board of Commissioners on the 19th day of November, 1997. Beverly A. Blythe, Clerk to the Board Date NOTICE OF PUBLIC HEARING CONCERNING A PROPOSED INSTALLMENT PAYMENT AGREEMENT OF THE COUNTY OF ORANGE, NORTH CAROLINA TO FINANCE THE RENOVATION OF PROPERTY LOCATED AT 501-503 WEST FRANKLIN STREET, CHAPEL HILL, FOR THE PURPOSE OF OPERATING A SKILLS DEVELOPMENT CENTER TO AID PERSONS SEEKING EMPLOYMENT OR BETTER EMPLOYMENT. NOTICE IS HEREBY GIVEN of a public hearing to be held at 7:30 P.M. on December 1, 1997, in the Old Courthouse on King Street in Hillsborough, North Carolina, for the purpose of considering whether the Board of Commissioners for the County of Orange, North Carolina should approve a proposed installment payment agreement and certain related documents under which the County would obtain financing for the renovation of property located at 501-503 West Franklin Street, Chapel Hill, North Carolina, for the purpose of operating a Skills Development Center for services such as information, assessment, referral and training for citizens seeking access to these services to prepare them for and help them locate employment or higher paying employment. Under the proposed installment payment agreement and related documents the County would secure the repayment by it of moneys advanced pursuant to such installment payment agreement by granting a security interest in the property purchased. -------------------------- Beverly A. Blythe . Clerk to the Board of Commissioners for the County of Orange, North Carolina 6 MEMORANDUM TO: Orange County Board of Commissioners John Link, County Manager FROM: Rod Visser, Assistant County Manager DATE: November 13, 1997 RE: Skills Development Center Renovations - Financing Options Ken Chavious, Donna Dean, Pam Jones and I have been brainstorming about options for financing the planned Skills Development Center renovations, since funds from the public building bonds are no longer an option. You may recall that the 1997-2007 Recommended Capital Improvements Plan included the assumption that a$500,000 private placement would be sought to finance those renovations. The 1997-98 adopted budget therefore includes a reserve of$70,000 for the first debt service payment, should the County pursue private placement financing. We are reviewing the options the County could consider for how to finance the renovations. These ideas are not fully fleshed out, but here is a preliminary assessment: • 1997 Private Placement- The County has issued $9 million in debt so far in calendar year 1997 (for Southern Village Elementary), so we have $1 million of"bank qualified" debt capacity remaining (we would expect to get interest rates 1.5% to 2% lower if our debt is tax exempt and bank qualified). Our conversations with Local Government Commission(LGC) staff indicate that they are willing to work with us to meet all legal and LGC deadlines and still be able to close the loan before December 31. The private placement option is the one we included in the CIP, so there is some logic in pursuing this if we can work out the details with the LGC. NationsBank, which provided the County with the financing for the building purchase in 1995, has signaled a willingness to work with the County on the renovation financing at very favorable rates • 1998 Private Placement- We could follow the same process, without the time constraints, and close on a private placement loan in early 1998. However, we would be limited to selling less than $10 million of the recently passed bonds in 1998 if we would want a Skills Development Center private placement to remain bank qualified. This point also needs further research, and would depend primarily on cash flow requirements of the various bond funded capital projects, especially construction of the Meadowmont Middle School. • Use of Funds Reserved for Land Acquisition - 1997-98 marks the third year that the proceeds of 1 cent on the tax rate have been earmarked to a reserve for future land acquisition for schools and parks. The amount available exceeds $1.5 million. With the passage of the school and park bonds, the Board may want to examine this reserve fund and determine how the proceeds should be used, or whether they should continue to be held in reserve. A variation on this option would be to borrow funds from this account to pay for the renovation work, and replenish the funds in the reserve over a period of years. 7 i • Use of Fund Balance - The Board could consider appropriating fund balance from either the General Fund,the County Capital Project Fund, or some combination. Undesignated fund balance in the General Fund as of June 30, 1997 is about$93 million. Use of fund balance is administratively easier and less expensive than borrowing money, and use of even $780.000 would still leave our fund balance in the General Fund well above our established goal of maintaining at least 8%undesignated fund balance. However, the County has not made it a practice to use General Fund money for capital projects, and there is not sufficient capital project fund balance to cover the amount needed. If the Board approves the recommendations on the November 19 agenda related to Emergency Generators, capital project fund balance can be increased by $220,000(because$300,000 was set aside for that project, and staff has developed a scaled-down project recommendation of$80,000). One other consideration in the possible use of fund balance is that with the failure of the public building bond, there may be a need to look at greater use of fund balance to accomplish the improvements that had been planned for the Whiffed and Northern Human Services. • Use of Fund Balance and Increased 1998-99 CIP Appropriation - The Board could appropriate some General Fund and/or capital project fund balance now, with the infusion of additional cash in July through a 1998-99 capital project ordinance to pay the balance of the construction contract. Pam Jones advises that it is likely that construction work will not be completed until early in the next fiscal year. There may be additional options that we have not yet thought of, so we will continue to investigate these and any other ideas that you may have on this matter.