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HomeMy WebLinkAboutAgenda - 10-08-2013 - 41 ORANGE COUNTY BOARD OF COMMISSIONERS ACTION AGENDA ITEM ABSTRACT Meeting Date: October 8, 2013 Action Agenda Item No. 4 SUBJECT: Potential Bond Issuance DEPARTMENT: Finance and Administrative PUBLIC HEARING: (Y /N) Services ATTACHMENT(S): A) Proposed Steps for a Bond Referendum — Memo Provided By Bob Jessup, Bond Counsel B) County Debt Capacity Schedule C) Davenport and Company, LLC Debt Capacity Schedule D) Davenport and Company, LLC Future Debt Affordability Analysis INFORMATION CONTACT: Clarence Grier, 919 - 245 -2453 No PURPOSE: To receive a report on a potential bond referendum and related debt issuance. BACKGROUND: Over the past few months, the Board of County Commissioners has discussed the need for a future bond referendum to fund some County and school long - range capital needs. During the September 26, 2013 Board of County Commissioners and Boards of Education Joint Meeting, representatives of Davenport and Company, LLC presented information on the County's debt affordability and capacity as it relates to future debt issuances. Some of the information presented by both County staff and Davenport and Company LLC is as follows: The County maintains excellent bond ratings. MROWT1G1G1 Moody's - Aa1 positive outlook The issuance of debt for two of the County's largest projects most recently discussed — New County Jail Facility and Middle School #5 for the Chapel Hill - Carrboro City School District — total a combined $73.2 million dollars, and both projects are included in the current County Capital Investment Plan for the fiscal years 2015 - 2020. 2 Orange County Schools has indicated the need for a new Elementary #8. That project is not scheduled until FY 2021 -2022, but could be a potential project for inclusion in a potential bond referendum. Additionally, in order to afford additional debt, the County would potentially have to increase the property tax rate 2.82 cents for the new debt service. This projected tax increase would not include 1) any future other operating expenditure increases or 2) any future operating expenditure increases related directly to the new facilities and schools being built. Based on current projects included in the County's Capital Investment Plan and future debt service, the County could afford additional debt of the following after FY2018 — 19: Fiscal Year Capacity 2019 $ 9,068,407 2020 $ 9,562,078 2021 $ 10,796,372 2022 $ 46,790,237 2023 $ 43,627,691 Total $ 119,844,785 The Board of County Commissioners will need to finalize its decisions regarding outstanding issues such as the need for a future jail and school, and any other potential projects that would be financed with an approved bond referendum. Furthermore, the decision to start an educational campaign and appoint a Capital Needs Advisory Task Force will need to be completed as soon as possible. FINANCIAL IMPACT: There is not a financial impact with the information being provided. There will be a financial impact in future years as decisions are made to proceed with a bond referendum and issuing debt for future County and School projects. All projects that are being considered are currently in the County's Capital Investment Plan. It is currently expected that projects totaling $100 million will be financed with the issuance of general obligation or limited obligation bonds over a period not to exceed 20 years. At current municipal bond interest rates, the total combined debt service is estimated to be $6.7 million annually. This would represent 4.18 cents on the current property tax rate. RECOMMENDATION(S): The Interim Manager recommends that the Board receive the information and provide feedback and direction to staff. Attachment A Sanford Holshouser LLP Memorandum To: Orange County Officials Date: July 5, 2013 Regarding Required Procedures and Possible Schedule for General Obligation Bond Referendum From: Sanford Holshouser LLP -- Robert M. Jessup Jr. This memorandum describes the steps required for Orange County to conduct a general obligation bond referendum on May 6, 2014, and sets out a proposed schedule. Here are the required steps and suggested dates for action: 1. Determine tentative elan for bond nurnoses and amounts. Although Step 5 provides for the first formal Board action to determine what will be presented to the voters, the bond program needs to be substantially worked out before we begin the formal process. In addition, the plan for what projects are to be included in the bond package is something that LGC representatives will want to discuss in detail with County representatives as part of the meeting described in the next step. 3 Each separate general purpose for bonds has to be the subject of a separate ballot question. The statutes assume that each question put to voters will propose a dollar amount for a separate generic purpose, such as paying "capital costs of school facilities. " Although the statutes allow the purpose to be stated with more specificity, it is highly recommended that the purpose in the ballot question be left as general as possible. The more specific plans underlying the planning for the bond issue do not legally bind the County to a particular future plan of action in the issuance of the bonds or construction of specified facilities. 2. Meet with LGC staff. The County should arrange a meeting with LGC staff about the proposed referendum as soon as possible. At the meeting, the County should obtain a copy of the required application for the LGC's approval of the proposed bonds. 3. Give informal notice to the County Board of Elections. Because the Board of Elections will need to coordinate its own procedures for the bond referendum, it would help the Board of Elections to receive a phone call to inform the Board of the County's plans, even if the plans are still subject to change. In addition, State law generally requires that absentee ballots be available at least 50 days prior to the election date (in this case, by March 17), and we want to be sure that our schedule is generally acceptable to the Board of Elections. 4. Obtain School Board Resolution. If any of the bonds will be proposed for school purposes, the statutes contemplate that the affected school boards should provide a formal referendum request to the Commissioners. This request usually proposes a maximum amount of bonds to be considered at the referendum. This schedule assumes that each school board could provide this resolution to the Commissioners prior to a County Board meeting in early January. 5. Adopt "Findings" Resolution. As part of the application process, the LGC wants to see a statement describing why the proposed projects and bonds are necessary and desirable. This resolution will also state an estimated tax rate impact of the borrowing. This resolution could be adopted at a County Board meeting in early January. This resolution will also authorize the publication of the "Notice of Intent" described in Step 6. 6. Publish Notice of Intent To File Application. The County must publish a notice of its intent to file an application for the LGC's approval of the proposed bonds. The notice must be published at least 10 days before filing the application. The notice needs to be published as soon as possible after the Board adopts the findings resolution described in Step 5. The own words resolution and the Notice of Intent establish the maximum amount of bonds that can be proposed at the referendum for each of the specified purposes. From this point, we can decrease the amount of bonds or eliminate purposes, but we can increase an amount or add a purpose only by re- starting the authorization process. 7. Make Legislative Committee 45 -day filing. The guidelines call for this filing to go in 45 days before the LGC considers your application. Because the LGC only needs to "accept" your application in advance of the referendum — it doesn't technically have to "approve" the application prior to the referendum -- I'd suggest we send in the legislative filing when we're ready to file the LGC application, and just ask the LCG to defer formal action until our 45 -day period has expired. So that would mean making the filing some time after the mid - January County Board meeting. PJ 5 8. File LGC Application. As stated above, this cannot happen until at least 10 days have elapsed since the publication of the notice of intent. The application needs to be filed and formally accepted by the LGC before we have the County Board take its next steps as described in Step 9. Although we have to submit the LGC application as part of the referendum process, it is not necessary to receive LGC approval until we are ready to proceed with the actual sale of bonds, which of course will be after the referendum. The LGC may or may not act on the application prior to the referendum, although the current LGC practice is in fact to consider applications as they are received (instead of waiting for the time of a bond issuance). 9. Introduce Bond Orders; Set public hearing. After the County files its application, the Board needs to introduce the "Bond Orders" and set a date for the required public hearing. We can take these actions at any time after the LGC accepts the application (even the same day). Our schedule shows these steps occurring at a Board meeting in early February. The "Bond Order" is the basic authorization for bonds approved by the County Board. The statutes provide for the format and most of the text of a bond order; the bond order is a short, general statement of the Board's determination to proceed. Each of the separate generic purposes for which bonds are to be proposed will be the subject of a separate bond order: The details of an actual bond issue are further approved by the Board at the time of a bond issue. 10. File sworn statement of debt. This is a statement, required by statute, that details outstanding County debt. This document will be similar, but not quite identical, to a debt statement that appears in the LGC application. This statement needs to be filed after the bond orders are introduced but before the publication of the notice of public hearing (as described in the next step). 11. Publish Notice of Public Hearing. We need to publish notice of the required public hearing at least six days prior to the hearing. 12. Hold Public Hearing; Adopt Bond Order; Set Ballot Question and Referendum Date. After holding a public hearing, the Board needs to adopt the Bond Orders and adopt a resolution that formally sets the ballot questions and the date for the referendum. Our schedule shows these steps occurring at a County Board meeting in early March. The Board Clerk must then send a copy of the resolution setting the date and the ballot question to the County Board of Elections 3 R within three days after the Board meeting. We can arrange the schedule to have the public hearing at a meeting before the Board takes final action on the Bond Orders and ballot questions. For absentee ballots to be available by March 17, an early March Board meeting is just about as late as we can go for the final Board action. The adoption of the bond order establishes the final amount of bonds that will go before the voters. There is never any obligation in fact to issue any or all of the bonds approved at a referendum. 13. Publish Bond Order as Adopted. This should be done as soon as possible after the Bond Order is adopted. There is no particular deadline for publishing this notice, but the notice starts a 30 -day period for court challenges to the authorization process that must lapse before any bonds can be issued. 14. Publish Notice of Bond Referendum. This notice must be published twice, once not less than 14 days and once not less than 7 days before the close of voter registration. State law permits registration until the 25th day prior to the election date. That puts the date registration closes at April 11 for a referendum on May 6. The first publication, then, needs to be at least 14 days earlier, or on or before March 28, and the second publication no more than one week later (by April 4). I would certainly encourage you, however, to plan to publish at least a week before the final legal date, in order to leave time to re- publish in case of any problems with publication. I have attached schedules in table form for elections in both May 2014 and November 2014. These tables summarize the steps that have been described in more detail above. Once the voters have approved the bonds, you are looking at a minimum of 90 to 120 days to get through the process to actually issue bonds. The County Board must adopt a resolution to formally approve the election results, and the County must publish a notice of the results that triggers a 30 -day period during which people can bring legal challenges to the bond election process. Then, to approve the issuance of bonds takes only one more Board resolution, with no other 4 7 required public hearings or published notices. The real timing issue in proceeding with a bond issue centers around the progress of the projects that are going to be financed. In general, the LGC wants you to have firm construction numbers for most of the projects to be financed before you close on the financing — the LGC wants to be sure you don't borrow too much money, or too little money, or borrow it earlier than you need it. This is only LGC policy — not the law — so the LGC has flexibility in how it administers this policy. In general, the LGC will give you some more leeway in the timing of issuing voter - approved bonds than for other types of financing, but it still wants to see that you are close to construction with well - developed estimates (at least) before allowing you to borrow money. Please let me know if you have any questions about this information, or if I can be of any other assistance. -- RMJ 5 N Orange County -- Proposed Timetable for November '14 Bond Referendum Event 1. Determine tentative referendum plan 2. Meet with LGC staff Date As soon as possible As soon as possible after informal decision to proceed with November referendum 3. Give informal notice to County Board As soon as possible after informal of Elections decision to proceed with November referendum 4. Obtain school board resolution Prior to Event 5 5. Board adopts preliminary resolution At a County Board meeting by early June explaining purpose for referendum and authorizing publication of notice of intent to file LGC application 6. Publish notice of intent to file application 7. Legislative committee 45 -day filing 8. File LGC application 9. Board introduces bond order and schedules public hearing 10. Clerk files sworn statement of debt 11. Publish notice of public hearing 12. Hold public hearing 8 As soon as possible after Event 5 As soon as possible after Event 5 Must be at least 10 days after Event 6 and prior to Event 9 At a County Board meeting prior to summer break Any time between Event 9 and Event 11 After Event 10 and at least six days prior to Event 12 At a Board meeting in late August or early September 13. 14. 15. 16. M Adopt bond orders; formally set ballot At a Board meeting in late August or early questions and referendum date Publish bond order as adopted Publish notice of referendum (twice) Referendum occurs W September As soon as possible after Event 13 By 9/26; then by 10/3 11/4 Attachment B 10 APPROVED - County Debt Service and Debt Capacity (General Fund Only) Fiscal Years 2013 -18 W1111 Current Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year Debt Service 2012 -13 2013 -14 2014 -15 2015 -16 2016 -17 2017 -18 Total Annual Debt Service 24,887,879 25,609,786 25,412,505 24,186,472 23,152,009 22,091,295 General Fund Budget 180,002,776 Annual Growth Projections 1.50% 1.50% 1.50% 1.50% 2.00% Projected General Fund Budget 187,733,499 190,549,501 193,407,744 196,308,860 200,235,037 Annual Debt Service as a % of General Fund 13.83% 13.64% 13.34% 12.51% 11.79% 11.03% Debt Service Policy 15.00% 15.00% 15.00% 15.00% 15.00% 15.00% Future Debt Service Capacity 1.17% 1.36% 1.66% 2.49% 3.21% 3.97% Projected Debt Financing 2013 -2014 - $7,679,750 County Capital $3,751,000 360,096 360,096 360,096 360,096 Culbreth MS Science Addition (CHCCS) $600,000 57,600 57,600 57,600 57,600 CRHS (OCS) Auxilliary Gym $3,328,750 319,560 319,560 319,560 319,560 2014 -2015 - $9,276,042 County Capital $5,422,000* 520,512 520,512 520,512 Culbreth MS Science Addition (CHCCS) $3,854,042 369,988 369,988 369,988 2015 -2016 - $23,100,663 County Capital $10,300,069 988,807 988,807 CRHS (OCS) Classroom Wing $12,282,960 1,179,164 1,179,164 Culbreth MS Science Addition (CHCCS) $517,634 49,693 49,693 2016 -2017 - $9,707,474 County Capital $8,539,000 819,744 Middle School #5 (CHCCS) $1,168,474 112,174 W1111 11 Current Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year Debt Service 2012 -13 2013 -14 2014 -15 2015 -16 2016 -17 2017 -18 2017 -2018 - $43,434,774 County Capital $36,748,508 Middle School #5 (CHCCS) $6,686,266 New Debt Service Projected Annual Debt Service Projected Annual Debt Service As a Percent of the General Fund Budget Available Annual Debt Service Capacity Based on the 15% Debt Service Policy 737,256 1,627,756 3,845,420 4,777,337 24,887,879 25,609,786 26,149,761 25,814,228 26,997,429 26,868,632 13.83% 13.64% 13.72% 13.35% 13.75% 13.42% 2,112,537 2,550,239 2,432,664 3,196,934 2,448,900 3,166,623 * Includes $2,400, 000 in new financing for Lands Legacy, which should be subject to a voter referendum. Assumptions: $ 960,000 of annual debt service = $ 10,000,000 of debt issued at current interest rates for 15 years $ 800,000 of annual utility debt service = $10,000,000 of debt issued at current interest rates of 20 years WIN APPROVED - Water and Sewer Projects Debt Service (Article 46 Sales Tax) Fiscal Years 2013 -18 Debt Service Current Fiscal Year 2012 -13 Fiscal Year 2013 -14 Fiscal Year 2014 -15 Fiscal Year 2015 -16 Fiscal Year 2016 -17 Fiscal Year 2017 -18 Total Available Funds Dedicated to Debt Service (FY 12 -18) Article 46 Sales Tax Budget (for Debt Service) 750,000 769,500 789,293 809,382 829,773 850,469 $ 4,798,417 Annual Debt Service as a % of Economic $ 2013 -2014 - $275,000 Development's Share of Article 46 Sales Tax 12,800 12,800 12,800 12,800 $ Eno EDD $115,000 9,200 Proceeds 60.00% 60.00% 60.00% 60.00% 60.00% 60.00% Projected Debt Financing 2012 -13 - $4,256,046 Buckhorn EDD Phase 2 - $4,256,046 340,484 340,484 340,484 340,484 340,484 $ 2013 -2014 - $275,000 Efland Sewer Flow to Mebane $160,000 12,800 12,800 12,800 12,800 $ Eno EDD $115,000 9,200 9,200 9,200 9,200 $ 2014 -2015 - $5,186,000 Buckhorn EDD- (Efland Sewer to Mebane) - $3,436,000 274,880 274,880 274,880 $ Eno EDD - $1,750,000 140,000 140,000 140,000 $ 2015 -2016 - $2,500,000 Buckhorn- Mebane EDD Phase 3 & 4 - $2,500,000 200,000 200,000 $ 2016 -2017 - $0 2017 -2018 - $0 Projected Annual Debt Service - 340,484 362,484 777,364 977,364 977,364 Available Article 46 Sales Tax Proceeds for Debt Service 750,000 429,016 426,809 32,018 (147,591) (126,895) $ Note: Since the obligation for the Article 46 Sales Tax runs for 10 years, without renewal, the General Fund would be obligated to pay the debt service. Assumptions: $ 960,000 of annual debt service = $ 10,000,000 of debt issued at current interest rates for 15 years $ 800,000 of annual utility debt service = $10,000,000 of debt issued at current interest rates of 20 years 1,702,418 51,200 36,800 824,640 420,000 400,000 1,363,359 12 11"] Attachment C se eo„ 1 m> Future Debt Capacity Proposed FY 2014-2018 CTP and FY 2019 -2023 Debt Capacity Existing and Proposed Debt Service Cn 35 C 0 30 i ,, ■, 25 = __■ ■ ■I ■� 20 F 15 - -I -� 10 - - - - - - - - -I 3I)- 3I 3b alb A Existing Tax Supported J Proposed General County J Proposed School J Future Capacity Existing and Proaosed Princibal N 25 — — c o _�■ 20 _ ■•111' ■I 15 ■ 10 5 -- !1IIl�l��p- nr, tib ti� �� �� rL� �b r� 3� 3- 3� 3b 3' p' p� �O r ro 'o -o ro ro ro ro 'o § § P 'o '-p JExistingTax Supported J Proposed General County JProposed School J Future Capacity DAVENPORT & COMPANY September 26, 2013 Proposed Debt Assumptions ■ Borrowing Assumptions — Amortization: Level Principal — Term: 20 -years — Interest Rate: 5.0% — First Interest: FY after issuance — First Principal: FY after Issuance ■ Future Debt Capacity: — FY 2019: $ 9,068,407 — FY 2020: 9,562,078 — FY 2021: 10,796,372 — FY 2022: 46,790,237 — FY 2023: 43,627,691 — Total Capacity: $119,844,785 ■ Total Proposed FY19 -23 DS: $182,763,297 ■ Key Debt Ratios (worst shown) — Debt Per Capita: — Debt to AV: — Debt Service vs. Expenditures: — 10 Year Payout Ratio: $1,422 (FY 2018) 1.27% (FY 2023) 15.56% (FY 2019) 64.2% (FY 2023) Orange County, NC 19 Attachment D Debt Affordability Analysis Proposed FY 2014 -2018 CIP A B C D F F G H I J K L M N O P ■ Value of 1¢ in FY 2014 = $1,606,829 ■ Assumed Growth Rate= 1.15% DAVENPORT & COMPANY September 26, 2013 Note: The Analysis above does not include potential operating impacts associated with new capital projects, nor does it address potential changes in the County's existing operating budget. Orange County, NC 17 Debt Service Requirements Revenue Available for DS Debt Service Cash Flow Surplus (Deficit) FY Existing Debt Service CIP Debt Service CIP Operating CIP Pay -Go Cash Impact : General Fund ; Budgeted Debt Total Service General Fund Other Budgeted for Dedicated Pay -Go Cash Revenue Total Revenues Available Surplus/ (Deficit) Revenue from Prior Tax Equiv. (Column 0) Capital Reserve Adjusted Surplus/ Utilized (Deficit) Estimated Incremental Tax Equivalent Capital Reserve Fund Balance 2014 25,089,644 - 4,344,849 29,434,493: 25,089,644 4,344,849 29,434,493 2015 24,201,003 868,299 4,957,232 30,026,534: 25,089,644 4,344,849 29,434,493 (592,042) - (592,042) 0.364 2016 22,744,495 1,774,196 4,724,433 29,243,124 ; 25,089,644 4,344,849 29,434,493 191,368 598,830 790,198 - 790,198 2017 21,655,566 4,039,365 4,801,994 30,496,925 ; 25,089,644 4,344,849 29,434,493 (1,062,432) 605,696 (456,737) - - 333,462 2018 21,688,632 4,907,463 4,666,219 31,262,314: 25,089,644 4,344,849 29,434,493 (1,827,822) 612,640 (333,462) (881,720) 0.521 - 2019 20,418,975 9,124,022 4,666,219 34,209,216: 25,089,644 4,344,849 29,434,493 (4,774,724) 1,511,493 (3,263,230) 1.921 - 2020 19,802,383 8,888,517 4,666,219 - 33,357,120 ; 25,089,644 4,344,849 - 29,434,493 (3,922,627) 4,829,468 - 906,841 - 906,841 2021 19,159,723 8,653,013 4,666,219 32,478,955: 25,089,644 4,344,849 29,434,493 (3,044,462) 4,884,840 1,840,377 2,747,218 2022 18,418,174 8,417,508 4,666,219 31,501,901: 25,089,644 4,344,849 29,434,493 (2,067,408) 4,940,846 2,873,438 5,620,657 2023 14,104,871 8,182,003 4,666,219 26,953,093 ; 25,089,644 4,344,849 29,434,493 2,481,400 4,997,495 7,478,895 13,099,552 2024 10,225,448 7,946,498 4,666,219 22,838,165: 25,089,644 4,344,849 29,434,493 6,596,328 5,054,794 11,651,121 24,750,673 2025 7,090,542 7,710,993 4,666,219 19,467,754: 25,089,644 4,344,849 29,434,493 9,966,739 5,112,749 15,079,488 39,830,161 2026 4,753,048 7,475,488 4,666,219 16,894,756 ; 25,089,644 4,344,849 29,434,493 12,539,737 5,171,369 17,711,106 57,541,267 2027 6,386,169 7,239,983 4,666,219 18,292,371: 25,089,644 4,344,849 29,434,493 11,142,121 5,230,661 16,372,782 73,914,049 2028 1,568,129 7,004,479 4,666,219 13,238,826; 25,089,644 4,344,849 29,434,493 16,195,667 5,290,632 21,486,299 95,400,348 2029 1,308,491 6,768,974 4,666,219 12,743,683 ; 25,089,644 4,344,849 29,434,493 16,690,809 5,351,292 22,042,101 117,442,449 2030 1,257,283 6,533,469 4,666,219 12,456,971: 25,089,644 4,344,849 29,434,493 16,977,522 5,412,647 22,390,168 139,832,617 2031 1,206,075 6,297,964 4,666,219 12,170,258; 4,344,849 29,434,493 17,264,234 5,474,705 22,738,939 162,571,556 2032 1,154,868 6,062,459 4,666,219 11,883,546: 25,089,644 4,344,849 29,434,493 17,550,947 5,537,475 23,088,422 185,659,978 2033 814,253 5,826,954 4,666,219 - 11,307,426 ; 25,089,644 4,344,849 - 29,434,493 18,127,067 5,600,964 - 23,728,031 - 209,388,009 2034 - 5,591,449 4,666,219 10,257,668: 25,089,644 4,344,849 29,434,493 19,176,824 5,665,182 24,842,006 234,230,015 2035 4,921,795 4,666,219 9,588,014: 25,089,644 4,344,849 29,434,493 19,846,479 5,730,135 25,576,614 259,806,629 2036 4,244,195 4,666,219 8,910,414 ; 25,089,644 4,344,849 29,434,493 20,524,078 5,795,834 26,319,912 286,126,540 2037 2,898,555 4,666,219 7,564,774: 25,089,644 4,344,849 29,434,493 21,869,719 5,862,285 27,732,004 313,858,544 2038 2,280,326 4,666,219 6,946,545 25,089,644 4,344,849 29,434,493 22,487,948 5,929,499 28,417,447 342,275,991 2039 - 4,666,219 4,666,219 25,089,644 4,344,849 29,434,493 24,768,274 5,997,483 30,765,757 373,041,747 2040 4,666,219 4,666,219: 25,089,644 4,344,849 29,434,493 24,768,274 6,066,247 30,834,520 403,876,268 2041 4,666,219 4,666,219 25,089,644 4,344,849 29,434,493 24,768,274 6,135,799 30,904,072 434,780,340 2042 4,666,219 4,666,219 ; 25,089,644 4,344,849 29,434,493 24,768,274 6,206,148 30,974,422 465,754,762 2043 4,666,219 4,666,219: 25,089,644 4,344,849 29,434,493 24,768,274 6,277,304 31,045,578 496,800,340 Total 243,047,772 143,657,966 191,478,611 578,184,349 ; Total (790,198) Total Tax Effect 2.811 ■ Value of 1¢ in FY 2014 = $1,606,829 ■ Assumed Growth Rate= 1.15% DAVENPORT & COMPANY September 26, 2013 Note: The Analysis above does not include potential operating impacts associated with new capital projects, nor does it address potential changes in the County's existing operating budget. Orange County, NC 17