Loading...
HomeMy WebLinkAboutAgenda - 10-17-1995 - VI-B2 i 1 ORANGE COUNTY BOARD OF COMMISSIONERS Action Agenda Item No VS- B2, ACTION AGENDA ITEM ABSTRACT Meeting Date: OCTOBER 17, 1995 SUBJECT: RECOGNITION OF NACo AWARD FOR THE TRIANGLE SPORTSPLEX FINANCING -------------------------------- ------------------------------- DEPARTMENT County Manager PUBLIC HEARING YES NO x -------------------------------- ------------------------------- ATTACHMENT(S) : INFORMATION CONTACT Rod Visser Three page narrative TELEPHONE NUMBER Hillsborough 732-8181 Chapel Hill 968-4501 Mebane 227-2031 Durham 688-7331 ----------------------------------------------------------------------- PURPOSE: To recognize the Triangle SportsPlex and Orange County for their innovative approach to financing a $10 .2 million complex which provides services to all of Orange County' s citizens, young and old. BACKGROUND: Orange County officials worked with a non-profit youth hockey association to arrange tax-exempt financing and construction of the 82, 000 square foot Triangle SportsPlex, with regulation ice rink and two 25 meter swimming pools. Without the unique public-private partnership involved in this "63-20" financing, neither pools nor rink could have been built. RECOMMENDATION: The Administration recommends formal recognition of the persons involved from the Triangle SportsPlex and Orange County Government. i 2 1995 NACO ACHIEVEMENT AWARD APPLICATION ORANGE COUNTY, NORTH CAROLINA TRIANGLE SPORTSPLE$ FINANCING The program nominated for this 1995 NACo Achievement Award is the financing of the Triangle SportsPlex in Hillsborough, North Carolina. This 82,000 square foot recreational facility has just been constructed to provide Orange County citizens with a first rate venue for ice sports, swimming, and general fitness activities. This facility is unique in Orange County and surrounding jurisdictions in the Research Triangle area of North Carolina. It was made possible because of an innovative, infrequently used capital financing mechanism, without which the project would not have been undertaken. The SportsPlex, which houses a regulation 2001x85 ' ice rink, two 25 meter swimming pools (competition and recreational) , children's pool, daycare center, fitness center, multipurpose activity area, restaurant, pro shops, arcade, and meeting space, opens for business in early April 1995. Since the mid-1980x, Orange County had been interested in enhancing the recreational opportunities available to its citizens, especially young people, in the central and northern portions of the county. The County had no legal obligation to act on this matter, but there was particular interest in providing an indoor, year-round public swimming pool in central Orange County. A number of indoor and outdoor public pools were available in the Chapel Hill area, in the southern part of the county, but there had been no such facility immediately accessible to northern and central residents. County recreation department staff had relied on arrangements with private home owners, motels, and church camps to make pools available in the summer for small swimming classes. An indoor pool was estimated to cost $3.5 million. Given the magnitude of this project, the county was unable to make short term arrangements to finance and construct the desired pool facility. At the same time, representatives of the small but successful non-profit Triangle Youth Hockey Association (TYHA) , operating in an antiquated ice rink in Hillsborough, the County seat, were interested in constructing a new ice rink. Because such a project was far beyond their financial capacity to undertake, they approached the County about the possibility of pursuing a joint ice rink-swimming pool project. During the latter part of 1993 and the first part of 1994, Orange County officials worked with TYHA and a financial placement agent to market $10.2 million in tax-exempt bonds, and $425,000 in taxable revenue bonds, to construct an ice rink-swimming pool complex. These bonds were issued by the Orange County Community Activity Corporation (OCCAC) , a non-profit organization created by TYHA and Orange County to oversee the development and operation of the Triangle SportsPlex facility. OCCAC was empowered to issue tax-exempt revenue bonds under the provisions of Internal Revenue Service Ruling 63-20, which permits a non-profit, under certain conditions, to finance construction of a public facility through tax-exempt instruments. ORANGE COUNTY, NORTH CAROLINA 3 TRIANGLE SPORTSPLE% FINANCING Those conditions, met by Orange County, included County Commissioner approval of the financing and agreement to take title to the facility when all debt on the project is retired. While OCCAC is a private non- profit, the County Commissioners retain a significant oversight role in the stewardship of the SportsPlex as a public, community-wide resource by virtue of their appointing one less than a majority of the members of the OCCAC's 13 member Board of Directors. From the County's standpoint, the arrangement was possible because the debt does not belong to the County, which has no obligation in the unlikely event that OCCAC should default on payment of the bonds. The County's agreement to pay OCCAC $400,000 each year for 10 years provided the guaranteed income stream, combined with the tax-exempt interest income, necessary to assure the prospective investors that the deal was financially viable. The financing itself, which is the subject of this NACo award nomination, was consummated at closing in April 1994, with all $10.2 million tax-exempt bonds purchased by a major Boston-based investment management firm, and the $425,000 taxable bonds purchased by another investment management firm. The investors are being paid back from SportsPlex receipts, derived from operating revenues and County payments for the OCCAC's provision of recreational services to Orange County citizens. The County's objectives in undertaking this financing arrangement were multiple, and are leading to benefits from this project in a number of facets. First, it affords the opportunity for citizens in the central and northern parts of the County to have year round access to swimming activities that were previously extremely limited in capacity, variety, duration, and intensity. Second, because of the central location of the SportsPlex, these services are conveniently extended to all County residents, none of whom must travel more than 25 minutes to use the SportsPlex. The location also is convenient for swim teams from both school systems in the County. Third, the facility makes available "bonus" recreational opportunities, in the form of fitness activities, ice sports, and roller sports, that the County would not have been able to provide without the partnership of TYHA. Fourth, for an investment of $4 million over ten years, the County will own this $10 million facility when all the debt is retired, projected to be sometime between the 12th and 15th years of operation. Thereafter, tremendous potential exists for the SportsPlex to serve as a revenue generator for the County, as annual debt service payments of roughly $1 million will end. "63-20 financing" has not been widely used in North Carolina, but was the only realistic option to make this project happen in the short term. First, with an earmarked annual revenue stream of only $1.5 million for all non-school capital projects and equipment, Orange County does not have the ability to finance a $3.5 million pool project through pay-as- you-go revenues. Second, Orange County has significantly increased its issued general obligation debt in the past few years, primarily for new school construction. With a burgeoning student population reflecting J i ORANGE COUNTY, NORTH CAROLINA 4 TRIANGLE SPORTSPLE% FINANCING 4-5% annual growth, the County's additional GO debt capacity, as a practical matter, had to be preserved for new school construction over recreation. Third, Certificates of Participation (COPs) were a less desirable alternative as they would also have counted against the County's debt limitation. Orange County's costs in the arrangement of the Triangle SportsPlex financing were measured in staff hours committed to development and evaluation of options, preparation for public presentation and discussion of the financing, negotiation of terms and conditions for the operation and financing of the facility, and legal and administrative procedural requirements. County staff members who devoted significant portions of their time to the arrangement of the SportsPlex financing included the County Manager, Assistant County Manager, County Attorney, Finance Director, Economic Development Director, and Recreation and Parks Director, with lesser time commitments from several other staff members. Total staff hours involved in the arrangement of financing are estimated at between 400-500. On the other hand, actual out-of-pocket costs associated with the financing were incidental (primarily supplies and copying costs) . Since the SportsPlex is being operated by the non- profit OCCAC, the County is incurring no ongoing operational, capital, or maintenance costs (beyond the ten annual payments of $400,000 related to the operating agreement with OCCAC) . Moreover, the County will recognize operational savings of several hundred thousand dollars per year that would be incurred if the County operated a similar facility. The most visible measurement of the success of the financing arrangement is the SportsPlex itself, which will receive its Certificate of Occupancy in late March and open to host an ice skating competition the first weekend in April. Significant events already booked include the ice sports of the State Games of North Carolina and a full summer slate of youth hockey camps. The construction project is being completed within budget and well ahead of schedule. For example, the project budget included 17 months of capitalized interest, but only 12 months will be required before the operating revenue stream becomes available to cover debt service payments. In sum, the Triangle SportsPlex is worthy of a NACo Achievement Award for 1995 because it represents the epitome of what "public-private partnership" should be. The hard work and vision of many dedicated volunteers and County officials resulted in an innovative financing solution to an important need. Two meritorious recreation projects, which separately could not be undertaken, were combined into one project which is just beginning to bring a tremendous array of new or improved services to all of Orange County's citizens, young and old. Orange County hopes that the financing described herein, and in more detail in the accompanying Limited Offering Statement, will provide an example of an alternative financing mechanism that can be replicated elsewhere in the United States by local governments that may not .be aware of the demonstrated utility of 63-20 financing.