Loading...
HomeMy WebLinkAboutAgenda - 04-08-2008-3ORANGE COUNTY BOARD OF COMMISSIONERS ACTION AGENDA ITEM ABSTRACT Meeting Date: April 8, 2008 Action Agenda Item No. ~__ SUBJECT: Use of Unbudgeted Sales Tax Refunds for Capital Projects DEPARTMENT: Budget PUBLIC HEARING: (Y/N) No ATTACHMENT(S): Attachment 1. January 3, 2008 Memorandum of Request from CHCCS Board of Education Attachment 2. November 28, 2005 focal Government Commission Staff Memorandum Attachment 3. Minutes and Interlocal Agreement Concerning Capital Projects for Public Schools, adopted December 13, 2005 Attachment 4. Policy on Planning and Funding School Capital Projects, adopted November 21, 2000 Attachment 5. County Capital Funding Policy, adopted April 24, 2007 INFORMATION CONTACT: Donna Coffey, (919) 245-2151 PURPOSE: To review and discuss a request received from the Chapel Hill Carrboro City Schools Board of Education to use unanticipated sales tax refunds for Carrboro High School and discuss future policy considerations associated with use of unanticipated capital project revenues. BACKGROUND: Chapel Hill Carrboro City Schools Request The capital project budget for Carrboro High School, which opened this past fall for freshmen, sophomores and juniors, anticipated the receipt of sales tax reimbursements totaling $450,000. (Beginning fall 2008, the new school will also house seniors.) To date, sales tax reimbursements for the project have totaled $912,756 and resulted in $462,756 in unanticipated project related revenue. Per the attached memorandum (Attachment 1) from the Chapel Hill Carrboro City Schools, the district has requested to use $400,000 of the unanticipated revenue to cover the additional items for Carrboro High including: ~k Additional furniture ~. Performing Arts equipment and supplies to start a drama program -~k Spectator stands for the competition field ~~ Additional textbooks for the senior class Background on Sales Tax Reimbursements to Schools Prior to 2005, NC General Statute 164.4(c) allowed local school districts, along with other governmental entities, to claim and receive refunds for local sales taxes they paid when making purchases throughout the year. During the 2005 legislative session, the NC General Assembly amended the Statute by eliminating local school districts from the entities eligible to receive sales tax reimbursements. The result of the legislative action was that the State decided to retain, within its coffers, the monies it had historically reimbursed to local school districts with the ultimate outcome being a substantial revenue loss for local school districts across the state. Recognizing that this action would have a significant negative impact on revenue available for capital projects for both Orange County and Chapel Hill Carrboro City Schools, the Boards of Education and County Commissioners directed staffs and attorneys to explore options that local officials might pursue to circumvent the situation caused by State legislative action. Using a November 28, 2005 memorandum from the focal Government Commission (Attachment 2) which clarified how, under certain conditions, a county may assume responsibility for the construction of school facilities and the purchase of supplies and materials, Orange County bond counsel drafted an interlocal agreement to resolve the sales tax reimbursement issue. On December 13, 2005, the Board of County Commissioners approved interlocal agreements with both school systems, and each district approved their respective agreement in January 2006. The interlocal agreement provides for: 1. Conveyance of property by the School Board to the County; 2. Immediate leasing of conveyed property back to the School Board, so that the property can continue to be used for school purposes; 3. School Board to undertake the contemplated projects as the County's agent, including entering into design and construction contracts; 4. County to administer the payment of funds to contractors; and 5. Re-conveyance of property back to the School Board once the project is complete. Future Policy Considerations In addition to the County's School Construction Standards, the Board of County Commissioners has the following policies and interlocal agreements in place to govern school and county capital planning, funding, and spending: Interlocal Agreement Concerning Capital Projects for Public Schools, adopted December 13, 2005 (Attachment 3) (as outlined above) Policy on Planning and Funding School Capital Projects, adopted November 21, 2000 (Attachment 4) County Capital Funding Policy, adopted April 24, 2007 (Attachment 5) However, none of these policies specifically speaks to how the Board wishes to handle capital project under expenditures or project over expenditures. Staff feels that it is important to take a more holistic look at policy implications regarding the use of unanticipated capital revenues and capital under/over expenditures, since there are both positive and negative impacts to consider in developing future capital related policies. While actual sales tax refunds for Carrboro High School were more than originally anticipated, in future Board considerations, it is also important to give thought to how to handle situations when sales tax refunds are less than originally anticipated. For example, the Board may recall that construction for Gravelly Hill Middle School had already started when the General Assembly made the legislative changes to sales tax reimbursements. In addition, there was approximately asix-month lag time between the time the General Assembly amended the Statute and the County's actual implementation of the interlocal agreements. An unintended consequence of the time lapse was that Orange County Schools received just over $170,000 in sales tax reimbursements compared to the original budget of $300,000. During discussions regarding the request from Chapel Hill Carrboro City Schools, staff talked about possible options to consider in developing future policies for remedy for use of unanticipated capital project revenues and under/over budgeted funds. Among those options are: / Budgeting for Sales Tax Reimbursements -Budget some or all anticipated sales tax reimbursements "in arrears" meaning that rather than the County anticipating sales tax revenues in the original project ordinance, Commissioners could amend the capital project ordinance after actual sales tax revenues are received. This approach is similar to how the County budgets for NC Education Lottery proceeds. / Use of Sales Tax Reimbursements -Among the options for how the Board could, use some or all anticipated sales tax reimbursements for (1) allowable project expenditures not included in the original project budget; (2) offset debt service for the project; and (3) reserve for future school planning. The Board may have considered additional options that staff has not considered. Tonight's meeting will offer an opportunity to discuss the Board's desires for future capital policy considerations. FINANCIAL IMPACT: Should the Board approve the request from Chapel Hill Carrboro City Schools, staff will prepare an amended Carrboro High School Capital Project Ordinance for the April 15, 2008 regular Commissioners' .meeting to increase the project by $400,000. RECOMMENDATION(S): The Manager recommends that the Board: 1. Review and discuss a request received from the Chapel Hill Carrboro City Schools Board of Education to use unanticipated sales tax refunds for Carrboro High School; 2. Discuss and provide direction to staff regarding future policy considerations associated with use of unanticipated capital project revenues and under/over budgeted funds; 3. Direct staff to consult with Bond Counsel and develop a policy for use of unanticipated capital project revenue and under/over budgeted funds and present to the Board for consideration of adoption in fall 2008. Chapel Hill -Carrboro City Schools Lincoln Center, Merritt Mill Road Chapel Hill, NC 27516 Telephone: (919) 967-8211 Fax: (919) 933-4560 Neil Pedersen, Superintendent Stephen A. Scroggs, Assistant Superintendent for Support Services To: Pam Jones, Director of Purchasing From: Stephen A. Scroggs, Assistant Superintendent Re: Sales Tax Refund for Carrboro High School Date: January 3, ?008 The budget for Carrboro High School includes $500,000 of anticipated sales tax refunds. School systems do not qualify for sales tax refunds associated with construction projects. Therefore, in order to recoup the sales tax, ownership of the site and payment of the construction bills was transferred from the Chapel Hill-Carrboro City Schools to Orange County. This legal transaction is used by school districts in order retain the large sums of money associated with sales tax. While the Carrboro High School budget included 5500,000 of anticipated sales tax refunds, Ken Chavious informed us last Fall that more than 5900,000 was refunded to the County as part of the high school project. The County and School District should be commended for another successful collaboration that benefits all the citizens of Orange County. The school system is requesting approval to appropriate the approximately S400,000 of additional sales tax refunds. These funds will be used for Carrboro High School needs that were deferred during construction. The project's extensive offsite work resulted in more cost than initially planned. Increased intersection improvements associated with the traffic light and paving the entire Rock Haven Road are examples of large unanticipated expenses. These additional costs eliminated all contingency funds and required that some areas of need be cut. In addition, the school district applied 42 million dollars to the project from Pay As You Go funds and allocated another $_500,000 from undesignated fund balance to help complete the project. Projects that require attention and would be addressed with the 5400,000 include the following: • Additional furniture that was reduced due to a lack of a senior class • Performing Arts equipment and supplies, to start a drama program • Spectator stands for the competition field • Additional textbooks for the senior class Thanks for you help in this matter. Please let me know if you need any additional information. 0 ,~~.. ~~~=- 3~. ae ~ earth ar~[i~a K~- ~~~. ~ti~~~ j;~ ~~:~~ a art eat e~ tats "Traa~ur~r~ xzextatn x. mooRC State and Local Government Tinance Division TRGASUTtGR and the Local Government Commission November 2$, 2005 TO: County and School Board Officials and Certified Public Accountants FROM: T. Vance Holloman, Director Fiscal Management Section SUBJECT: Sales Tax Refunds and Motor Vehicle Property Taxes Sales Tax Refunds _ _ During tb.e 2005 legislative session, the General Assembly tools action to amend G.S. I64.~(c) to delete local school administrative units (LEAs) fiom those governmental entities eligible to receive a sales tax refund. This change is effective during the current fiscal year, so LEAs may claim a refund of sales taxes paid during the fiscal ,year ended June 30, 2005.. However, as G.S_ 164.~(c} is currently written, LEAs can not claim a refund for subsequent years. Action was also taken to require the Department of Revenue to deposit to the State Public School fund each qua~.-ter an amount equal to the one-fourth of the prior year refund of sales taxes paid to LEAs. Effective July 1, 200G, that amount will be equal to the refunds paid far the 2005 fiscal year adjusted by increases or decreases in State sales tax collections. These funds will be distributed to LEAs on the basis of avexage daily membership . We are aware of speculation that G.S. 1G4.~(c) may be amended to permit LEAs to claim refunds for local sales taxes paid. If this change does occur we will inform local officials. The LGC issued Memorandum No. 859 an October 16, 1997 which addresses the circumstances under which sales taxes paid for the construction of school facilities, as well as for the purchase of tangible property, by a .county for a LEA are eligible for a refund of sales tax under G. S. 105-1G4.14(c). At the time~that Memorandum was issued LEAs were not among the governmental units that could claim a sales tax refund. Memorandum No. 859 stated that under the provisions of G. S. 115C-521 and 522 LEAs are responsible fvr the construction of school facilities and the purchase of supplies and materials. The fact that a county might issue a check ira. payment to a vendor for the construction of school facilities or the purchase of tangible property for the LEA does not result in the county assuming responsibility for those tasks. Two provisions of the General Statutes make it possible for a county to assume this responsibility for a local board of education. The first is the authorization under G. S. 153A-158.1 far counties to acquire property for use by a LEA. The second way in which a county can assume this responsibility for a LEA is through an inter-local cooperation agreement between the 0 Memorandum # 1045 November 28, 2005 Page 2 county and the LEA under the provisions of G.S. 160A-4B0. The inter-iacal cooperation agreement should state that the county will contract for the const~.-uction of school facilities and will purchase tangible school property. In either case the county must have title to the asset at the time the consti~xetian or purchase tapes place and payments are made. Title to school facilities may pass fram the county to the LEA once construction is complete and all payments under the contract have been made. Ownership of tangible property may pass Flom the county to the LEA once the purchase has been completed. ' Since the issuance of Memorandum No. 859, schools became eligible for sales tax refunds under G.S. 164.4(c) and have recently lost that eligibility. The North Carolina Department of Revenue has reconfirmed to us that these two options are still valid provisions under which a county may claim a sales tax refund far school capital expenditures. Unless a county undertakes to malce contracts far eonsti-uction of school facilities or far purchase of tangible property under ane of the two methods described in the preceding paragraph, a county should not claim a sales tax refund for taxes paid. At the time Memarandum No. 859 was issued, not all counties were authorized to use the provisions of G. S. 153A-158.1. Other counties had to use inter-local cooperation agreements to become eligible for sales tax refunds far school expenditures. All 100 counties are now eligible to use G.S. 153A-15$.1. Intexest ou Uupaid lYtotar Vehicle Property Taxes The General Assembly enacted House Bill 17'79 which provides £or the creation of a combined motor vehicle registration renewal and property tax collectian system. The Bill calls far an increase in the first month's interest on uncollected property taxes on registered motor vehicles. This will apply to all property taxes levied on the registered motor vehicle: those levied by the county, any municipality and any special districts. The additional interest collected will be remitted to the Department of State Treasurer to be used by the Division of Motor Vehicles to create the combined registratian and collection system. A memorandum providing greater detail about the provisions of House Bill 1779 will be issued by the Department. Counties slaould be aware that effective January 1, 2006, the interest rate charged for the first month that registered motor vehicles taxes are delinquent will increase fiom the etuzent rate of 2% to 5%. The interest rate for subsequent months will remain at three-fourths of a percent (3/4%)- The additional interest collected and aemitted to the State should be accounted for in an agency fund, similar to the motor vehicle property taxes collected for municipalities and special districts. The additional interest would not be included in the county's budget. If you have questions or comments regarding this memorandum, please contact Vance Holloman at (919) 807-2380. 0 ~ ~~~~„~- VOTE: UNANIMOUS ~ d. School Sales Tax Reimbursements - Interiocal Agreements 'F" The Board reviewed and considered approving interlocal agreements between the County and each school system that will allow the County to pursue reimbursement for state and local sales taxes paid to contractors on major school capital projects subject to final review by County staff, County Attorney, and bond counsel and authorizing the Chair to sign. Finance Director Ken Chavious summarized this item. He said that during the 2005 session, the legislature rescinded the ability of the boards of education to claim refunds of sales tax paid for all goods and services. At the September 26, 2005 joint meeting with the school boards and County Commissioners, it was suggested that staff look into ways that these actions could be changed to allow for the refund of the sales tax reimbursements. Staff provided information on November 15th and the Board directed staff to develop the necessary mechanisms. The Local Government Commission has since issued a memo related to this issue, which is attached to the abstract. The memo clarifies how counties, under certain circumstances, may request and receive sales tax reimbursements on school projects. The memo also states that the legislature may take this issue up at the end of the short session with the possibility of restoring this ability to the school boards. The mechanism is an interlocal agreement between the school boards and the County. He described the agreement. Chair Jacobs welcomed Lisa Stuckey, Chair of CHCCS Board. Commissioner Carey asked for a review of the two mechanisms for the benefit of the public. Bob Jessup said that the primary text is that whether it is a school board project or a County project. If it is a school board project, it will not be eligible for the sales tax reimbursement. If it is a County project, two main criteria are that the County be the owner of the property and that the County be responsible for the work. They have accomplished both of these in the agreement by providing for conveyance of property, subject to being re-leased back to the school board for its use. Commissioner Halkiotis said that it is a shame to have to go through this process to benefit the children of this County. A motion was made by Commissioner Halkiotis, seconded by Commissioner Carey to approve interlocal agreements between the County and each school system that will allow the County to pursue reimbursement for state and local sales taxes paid to contractors on major school capital projects subject to final review by County staff, County Attorney, and bond counsel and authorize the Chair to sign. VOTE: UNANIMOUS e. Draft Water Conservation Policv For County Facilities and Report on Water Use and Performance IUleasures The Board considered adoption of a Water Conservation Policy covering Orange County government facilities and equipment, in follow up to the Board's Environmental Responsibility goal and to receive a report on building water use and possible water conservation performance measures. John Link said that they have already brought forward policies how to make their buildings more efficient and their vehicles more efficient and tonight they are bringing a policy for water. Public Works Director Wayne Fenton made a PowerPoint presentation and then summarized water use and billing errors in the notebook. Draft Water Conservation Policy and Water Use Report Purpose Tonight O 9~ S INTERLOCAL AGREEMENT CONCEF:NTNG CAPITAL PROJECTS FOR PUBLIC SCHOOLS This Interlocal Agreement is dated as of January 19, 2006, and is by and between ORANGE COUNTY, NORTH CAROLINA (the "County"), and THE CHAPEL HILL-CARRBORO CITY SCHOOLS BOARD OF EDUCATION (the "School Board"), and provides as follows: The County and the School Board have agreed on an arrangement to facilitate their cooperation in certain projects for additions, improvements,. renovations and repairs to School Board property. Under this arrangement, the School Board will transfer property to the County. The School Board will then lease the property back from the County. The School Board, on the County's behalf, will arrange for contracts for the contemplated projects. The County will disburse funds to contractors. This arrangement is intended to be flexible and to include a wide range of capital projects for public schools operated by the School Board. Capitalized terms used in this Agreement and not otherwise defined have the meanings set forth in Exhibit A. Now, therefore, for and in consideration of the mutual promises in this Agreement, the parties agree as follows: 1. The School Board will convey Contract Property to the County Whenever the School Board determines that it would be in the School Board's interest in carrying out a Project for some of the School Board's property to become Contract Property subject to the terms of this Agreement, the School Board will convey such property to the County pursuant to the following provisions: a) The School Board will publish a notice of public hearing, in substantially the form of Exhibit B, at least ten days prior to the hearing date. As shown in Exhibit B, the notice will describe, in brief and general terms, the 94432v1 ] 0 property to be conveyed and the Project to be undertaken with respect to that property. b) After conducting a public hearing as provided in the notice, the School Board will adopt a resolution, substantially in the form of Exhibit C, (i) designating the property to be conveyed, (ii) describing the contemplated Project, and (iii) requesting the County to accept conveyance of the property and to treat the same as Contract Property under this Agreement. c) The School Board will provide a certified copy of the resolution contemplated in (b) above to the County. The County will then provide for the County Board promptly to consider the School Board's request. d) If the County determines to accept the conveyance, then the School Board will prepare, execute, deliver and record an appropriate deed to the County providing for the conveyance. The deed must be acceptable to the County in form and substance. Upon the recording of the deed, the property described therein automatically becomes Contract Property under this Agreement, without the need for further action by any party. 2. The County will lease all Contract ]Property to the School Board. a) Demise. The County hereby leases each portion of the Contract Property to the .School Board, and the School Board hereby leases the Contract Property from the County, in accordance with the provisions of this Agreement, to have and to hold for the Lease Term. The Lease Term commences automatically upon the recording of the' deed constituting -the property as Contract Property, without the need for further action by any parry. The School Board must prepare and record a Memorandum of Lease, substantially in the form of Exhibit D, with respect to each element of the Contract Property promptly upon the commencement of the Lease Term. b) Termination. The Lease Term terminates with respect to any portion of Contract Property upon the reconveyance of that property to the School Board pursuant to Section 4. c) Quiet Enjoyment. The County covenants that the School Board will during the Lease Term peaceably and quietly have and hold and enjoy the Contract Property without suit, trouble or hindrance from the County, except as expressly 94432v1 2 Iv required or permitted by this Agreement. The County will not interfere with the School Board's quiet use and enjoyment of the Contract Property during the Lease Term. The County will, at the School Board's request and the County's cost, join and cooperate fully in any legal action in which the School Board asserts its right to such possession and enjoyment, or which involves the imposition of any taxes or other governmental charges on or in connection with the Contract Property. In addition, the School Board may at its own expense join in any legal action affecting its possession and enjoyment of the Contract Property and will be joined (to the extent legally possible, and at the School Board's expense) in any action affecting its liabilities under this Agreement. d) Considerati®n. In partial consideration for its acquisition of rights to use the Contract Property during the Lease Term, the School Board agrees to use the Contract Property for public education in fulfillment of its obligation, shared by the County, to provide for educational services in the County. In addition, in consideration of its rights under this Agreement, the School Board undertakes the obligations imposed on it under this Lease, including those imposed by Section 2(e). e) Care and Maintenance. The School Board shall have all responsibilities for the maintenance, care, security and safekeeping of the Contract Property, including (without limitation) the following: Environmental Matters - to maintain .the Contract Property in compliance with all federal, State and local environmental laws and regulations, and to notify the County in the event of any change in the environmental condition of the Contract Property, or the receipt of any notice from any regulatory or administrative body concerning environmental matters related to the Contract Property. Taxes and Other Governmental Charges - to pay when due the full amount of all taxes, assessments and other governmental charges lawfully made by any governmental body during the term of this Agreement related to any Contract Property. Insurance - to acquire, carry and maintain, at its own expense, (i) broad-form extended coverage property damage insurance with respect to ~ all Improvements in an amount equal to the estimated replacement cost of such Improvements, with such property damage insurance to include the County as a loss payee, (ii) comprehensive general liability insurance in an amount not less than $1,000,000 for personal injury or death and $1,000,000 for property damage, 94432v1 3 I I and (iii) workers' compensation insurance issued by a responsible carrier authorized under State law to insure the School Board against liability for compensation under applicable State law as in effect from time to time. All insurance shall be maintained with generally recognized responsible insurers and may carry reasonable deductible or risk-retention amounts. No School Board agent or employee shall have the power to adjust or settle any property damage loss greater than $50,000 with respect to the Contract Property, whether or not covered by insurance, without the County's prior written consent. The County shall not be responsible for the sufFiciency or adequacy of any required insurance and shall be fully protected in accepting payment on account of such insurance or any adjustment, compromise or settlement of any loss agreed to by the County. Compliance with Requirements - to cause any Improvements to be designed and constructed in compliance with all applicable legal requirements, including subdivision, building and zoning regulation, and to observe and comply promptly with all .current and future requirements relating to the Contract Property's use or condition imposed by (i) any judicial, governmental or regulatory body having jurisdiction over the Contract Property or any portion thereof or (ii) any insurance company writing a policy covering the Contract Property or any portion thereof, whether or not any such requirement shall necessitate structural changes or improvements or interfere with the use or enjoyment of the Contract Property. The School Board shall in no event. use the Contract Property or any .part thereof, nor allow the same to be used, for any unlawful purpose, or suffer any act to be done or any condition to exist with respect to the Contract Property or any part thereof, nor any article to be brought thereon, which may be dangerous, unless safeguarded as required by law, or which may, in law, constitute a nuisance, public or private, or which may make void or voidable any insurance then in force with respect thereto. Maintenance and Repairs - to keep the Contract Property in good order and repair (reasonable wear and tear excepted) and in good operating condition, to prevent any waste or any other occurrence whereby the value or usefulness of the Contract Property might be impaired, and from time to time to make all necessary or appropriate repairs, replacements and renewals. Security - to take all reasonable steps necessary to safeguard the Contract Property, including all personal property related thereto. vaasavl 4 is Utilities - to pay all charges for utility services furnished to or used on or in connection with the Contract Property. No Encumbrance, Mortgage or Pledge -not to directly or indirectly create, incur, assume or suffer to exist any mortgage, pledge, lien (including mechanics' and materialmen's liens), charge, encumbrance or other claim in the nature of a lien on or with respect to the Contract Property. Notice of Damage and Destruction - to notify the County promptly if (i) the Contract Property or any portion thereof is stolen or is destroyed or damaged by fire or other casualty, (ii) a material defect in the construction of any Improvements shall become apparent, or (iii) title to or the use of all or any portion of the Contract Property shall be lost by reason of a defect in title. Each notice shall describe generally the nature and extent of such damage, destruction or, taking ~ Disclaimer of Warranties. THE COUNTY MAKES NO WARRANTY OR REPRESENTATION, EITHER EXPRESS OR IMPLIED, AS TO THE VALUE, DESIGN, CONDITION, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR FITNESS FOR A PARTICULAR USE OF THE CONTRACT PROPERTY. OR A,NY PART THEREOF OR A,NY OTHER REPRESENTATION OR WARRANTY WITH RESPECT TO THE CONTRACT PROPERTY OR ANY PART THEREOF. In no event will the County be liable for any direct or indirect, incidental, special or consequential damage in connection with or arising out of this Agreement or the existence, furnishing, functioning or use by any of them of any item, product or service provided for herein. The School Board acknowledges that the County has not designed any improverinients on the Contract Property (the "Improvements"), that the County has not supplied any plans or specifications with respect thereto and that the County (a) is not a manufacturer of, nor a dealer in, any of the component parts of the Improvements or similar Contract Property, (b) has not made any recommendation, given any advice nor taken any other action with respect to (i) the choice of any supplier, vendor or designer of, or any other contractor with respect to, the Improvements or any component part thereof or any property •or rights relating thereto, or (ii) any action taken or to be taken with respect to the Improvements or any component part thereof or any property or rights relating thereto at any stage of the construction thereof, (c) has not at any time had physical possession of the Improvements or any component part thereof or made any inspection thereof or any property or rights relating thereto, and (d) has not made any warranty or other 94432v1 5 13 representation, express or implied, that the Improvements or any component part thereof or any property or rights relating thereto (i) will not result in or cause injury or damage to persons or property, (ii) have been or will be properly designed, or will accomplish the results which the School Board intends therefor, or (iii) are safe in any manner or respect. g) Permits and Other Authorizations. The School Board covenants and represents to the County that the School Board has obtained all permits, consents, approvals or authorizations of all governmental entities and regulatory bodies required as a condition to the use of Contract Property for public school purposes. The School Board further covenants and warrants to maintain through the duration of this Agreement all such permits, consents, approval or authorizations necessary to use the Contract Property for public school purposes. h) Property owned by County. Except for personal property purchased by the School Board at its own expense, title to the Contract Property and any and all additions and modifications to or replacements of any portion of the Contract Property will be held in the County's name until re-conveyed as provided in Section Four. The School Board has no right, title or interest in the Contract Property or any additions and modifications to or replacements of any portion of the Contract Property during the Lease Term, except as expressly set forth in this Agreement. i) School Board's Subleasing and Assignment. (i) Except as provided in subsection (ii), the School Board may not sublease the Contract Property, in whole or in part, enter into other agreements for the use of any part of the Contract Property or assign any of its rights or obligations under this Agreement, without the County's prior written consent. (ii) The School Board may enter into agreements for the use of portions of the Contract Property with state and local (but not federal) government entities, and may allow for the occasional use of portions of the Contract Property by non- government entities, in each case without the necessity of obtaining the County's prior consent. The School Board must make an annual report to the County of all such agreements so that the County may monitor such use to protect its rights to the Contract Property and to assure compliance with any separate covenants made by the County with respect to such Contract Property. The School Board must n:iake this report by September 15 of each year for the School Board's then most recently- completed fiscal year. 94432v1 0 j) Indemnification. To the extent permitted by law, the School Board will indemnify and save the County harmless against and from all claims, by or on behalf of any person, f~~- corporation or other legal entity, arising from the operation or management of the Contract Property during the Lease Term, including any arising from: (i) any condition of the Contract Property; or (ii) any negligent act of the School Board or of any of its agents, contractors or employees or any violation of law by the School Board or breach of any covenant or warranty by the School Board under this Agreement. The School Board will, upon notice from the County, defend or pay the cost of defending the County in any action or proceeding brought in connection with any claims arising out of circumstances described in (i) or (ii) above. 3. The School Board will carry out all Projects as the County's agent a) The County appoints the School Board as its agent to carry out all phases of the Projects. The School Board, as the County's agent, assumes all the County's rights, duties and responsibilities regarding such matters, except as limited in this Agreement. The School Board will appoint no further agent to assume such rights or carry out such duties and responsibilities without the County's prior written consent. b) The School Board, with the County's approval, may enter into any purchase order or contract with respect to a Project in the School Board's name. Alternatively, the County may require that any such purchase orders or contracts be entered into by the County in its own name or be entered into by the County and the School Board jointly. All contracts must comply with the public procurement laws and any other State laws applicable to either the School Board or the County, as appropriate, with regard to entering into such contracts. The School Board must provide that contractors provide bonds and insurance coverages that comply with the requirements of North Carolina law. c) The School Board, as the County's agent, will be responsible for carrying out each Project, and the School Board will have all rights to supervise each Project. The County and its representatives and agents will have the right to enter upon the Project sites and inspect the Project work from time to time during 94432v1 ~] is construction and after the completion of construction, and the School Board will cause any vendor, contractor or sub-contractor to cooperate with the County and its representatives and agents during such inspections. No right of inspection or approval granted in this Section will be deemed to impose upon the County any duty or obligation whatsoever to undertake any inspection or to make any approval. No inspection made or approval given by the County will be deemed to impose upon the County any duty or obligation whatsoever to identify or correct any defects in the School or to notify any person with respect thereto, and no liability will be imposed upon the County, and no warranties (either express or implied) are made by the County as to the quality or fitness of any improvement, any such inspection and approval being made solely for the County's benefit. d) For so long as the School Board is not in default of any of the provisions of this Agreement, the School Board will have the right to enforce in its own name or in the County's name purchase orders or contracts entered in the County's name or the School Board's name for the Project; provided however, that if the School Board is i.n default of any provisions of this Agreement for a period of thirty days after being notified by the County of such default without cure, the County will have the right to assume all the School Board's responsibilities for the Project. In the event of such a termination, the School Board will assign any and all right, title and interest to any and all contracts relating to the Project, including but not limited to any architect agreements, any and all engineering agreements, any and all construction agreements, and any and all plans, specifications and other drawings or documents prepared or to be prepared for the Project. The School Board agrees to reimburse to the County for any and all costs, expenses, and damages incurred by the County in the assumption of the rights and responsibilities of the School Board due to such event of default without cure, and to indemnify and hold the County harmless for any and all claims for damages by others related to such event of default without cure. e) The School Board will request funds for the payment of Project Costs from the County, and will provide the County with the necessary information supporting a requisition. The County will have the right to obtain such additional evidence as it deems appropriate to determine the accuracy of the representations set forth in the form of requisition and the propriety of payment. The School Board will provide the County with such information in the School Board's possession as the County may request. The County will pay all invoices to the third parties to which money is owed. 94432v1 $ Ib f) Notwithstanding any provision of this Agreement, the County retains the sole power to control and direct the application and distribution of proceeds of casualty insurance applicable to any Contract Property. 4. The County will re-convey property to the School Board when a Project is complete Upon ,the completion of any Project, the County will re-convey the subject Contract Property to the School Board at the School Board's request. The School Board shall make this request by the adoption of an appropriate resolution. The School Board will deliver a certified copy of the resolution to the County. The School Board will provide the County with an appropriate form of deed for execution and delivery by the County to the School Board. Notwithstanding the foregoing, the parties shall provide for all property conveyed to the County pursuant to this Agreement to be re-conveyed to the School Board not later than December 31, 2025. All provisions of this Agreement relating to the lease of Contract Property shall terminate immediately with respect to particular Contract Property upon the re-conveyance of such Contract Property to the School Board, without the need for further action by any party. 5. Administrative and Miscellaneous Provisions a) Representations, Covenants and Warranties. The County and the School Board each represents, covenants, and warrants for the other's benefit as follows: (i) Neither the execution and delivery of this Agreement, nor the fulfillment of or compliance with its terms and conditions, nor the consummation of the transactions contemplated by this Agreement, results in a breach of the terms, conditions and provisions of any agreement or instrument to which either is now a party or by which either is bound, or constitutes a default under any of the foregoing. (ii) To the knowledge of each party, there is no litigation or other court or administrative proceeding pending or threatened against such party (or against any other person) affecting such party's rights to execute or deliver this Agreement or to comply with its obligations under this Agreement. Neither such party's execution and delivery of this Agreement, nor its compliance with its obligations under this 94432vi 9 r~r Agreement, requires the approval of any regulatory body or any other entity the approval of which has not been obtained. b) Notices. All notices, certificates or other communications under this Agreement will be sufficiently given and will be deemed given when delivered or mailed by registered mail, postage prepaid, addressed as follows: (i) If intended for the County Projects, to County Manager, Orange County, Attention: Notice under 2006 Interlocal Agreement for School Projects, 200 South Cameron Street, Hillsborough, North Carolina 27278 ; or (ii) If intended for the School Board, to Superintendent, The Chapel Hill- Carrboro City Schools Board of Education, Attention: Notice under 2006 Interlocal Agreement for School Projects, 750 S Merritt Mill Road, Chapel Hill, North Carolina 27516. c) Binding Effect. This Agreement will inure to the benefit of and shall be binding upon the School Board and the County, and their respective successors and assigns. d) Amendments, Changes and Modifications. This Agreement may be amended only in writing signed by both parties. e) Severability. If any provision of this Agreement, other than the requirement of the County to provide quiet enjoyment of the Contract Property, is held invalid or unenforceable by any court of .competent jurisdiction, such holding will not invalidate or render unenforceable any other provision hereof. f) Execution in Counterparts. This Agreement may be simultaneously executed in several counterparts, each of which will be an original and all of which will constitute but one and the same instrument. g) Applicable Law. The parties intend that this Agreement will be governed by and construed in accordance with State law. h) School Board and County Representatives. Whenever under the provisions hereof the approval of the School Board or the County is required to take some action at the request of the other, unless otherwise provided, such approval or such request must be given (i) for the County by the County Manager, and (ii) for 94432v1 1 ~ IS the School Board by its Superintendent, or (iii) in either case by anyone designated by the respective governing body to perform any act (or any specified act) under this Agreement, and in any such case the School Board and the County will be authorized to act on any such approval or request. i) Not exclusive. 'This Agreement is not intended as the exclusive method for the County and the School Board to cooperate with respect to capital projects for public schools operated by the School Board. The parties may proceed with respect to such projects in a variety of methods. These methods may include separate but similar leasing arrangement for designated Contract Property. j) F~.rther Assurances; Corrective Instruments. The School Board and the County agree that they will, from time to time, execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, such supplements hereto and such further instruments as may reasonably be required for carrying out the intention of this Agreement. k) Retroactive. The parties intend that, to the extent pernvtted by law, this Agreement should be deemed to be retroactive with respect to Projects that may have been in progress at any time on or after July 1, 2005. The parties will cooperate as may be reasonably necessary to provide for the application of this Agreement to such Projects. Exhibits - A Definitions B Form of notice of public hearing C Form of resolution from School Board D Form of memorandum of lease [The remainder of this page has been le, ft blank intentionally.] 94432v1 1 1 19 IN WITNESS W]FIEREOF, the parties hereto have caused this Agreement to be executed in their corporate names by their duly authorized officers, all as of the date first above written. [SEAL] ATTES ~'~~~ ~'r: «~ ~~ [~jame] Donna S. Baker Clerk, Board of Commissioners [SEAL] ATTEST: [Name] Secretary [Name] Moses Carey, Chair, Board of Commis THE CHAPEL HILL-CAI2RBOR0 CITY SCHOOLS BOARD OF EDUCATION By: [Name] Chair [Interlocal Agreement dated as of January 19, 2006] 9aa.savl 12 OI~;ANGE COUNTY, NORTH CAROLINA ao STATE OF NORTH CAROLINA;,ORANGE COUNTY I, ~o , a Notary Public of said State and County, do hereby certify th [name] and [name] personally came before me this day and acknowledged that they are the Chair and Clerk, respectively, of the Board of Commissioners of Orange County, North Carolina, and that by authority duly given and as the act of such County, the foregoing instrument was signed in the County's name by such Chair, sealed with its corporate seal and attested by such Clerk. Witness my hand and official seal this _ day of~n~r", ''vv6 ~,~ ~ Notary lic My commission expires: ~D'.~~0`~~~ STATE OF NORTH CAROLINA; ORANGE COUNTY I, ~ ~% n ~ ~ ~ r~ ~'t ~-- ~, a Notary Public of said State and County, do hereby certify .that Neil Pedersen, with whom I am personally acquainted, and who being by me duly sworn, says that he is the Secretary of The Chapel Hill-Carrboro City Schools Board of Education and that Lisa Stuckey is the Chair of such Board of Education, the Board described in and which executed the foregoing instrument; that she knows the common seal of said Board; that the seal affixed to the foregoing instrument is said common seal, and the name of the Board was subscribed thereto by the said Chair, and that said Chair and Secretary subscribed their names thereto, and said common seal was affixed, all by order of the Board and that the said instrument is the act and deed of said Board. Witness my hand and official seal this c~ y "~ay of January, 2006. ~_ Not Public Y-~~ ~ ~'= ~iC..C~f~{.~-l~ it7 (7 ~ 6 ~~~,t019fi}/ttl~ll~...~. My commission expires: ~ ~ ~ ~~~~~ ~p~C~ ~ ~rr~ ~~ ~:'~t~'~AA~, ~ : '~ ©~. ~8'ttC .~ o 94432v1 13 . , ~~r/~~/~~~; • w • . •_ '„~•(~~`1 ~ ~ ~sy~pCOU`~~~~~~~~ a~ Exhibit A -Definitions Unless the context clearly requires otherwise, capitalized terms used in this Agreement and not otherwise defined shall have the following meanings: "Contract Property" means all property transferred to the County from the School Board pursuant to the terms of this Agreement. "County Board" means the County's governing board as from time to time constituted. "Improvements" means all real property and fixtures related to the real estate of Contract Property. "Lease 'Term," for any particular parcel of Contract Property, .means the period of time during which such property is leased to the School Board in accordance with section 2, as determined pursuant to sections 2(a) (for the commencement of the Lease Term) and 2(b) (for the termination of the Lease Term). "Project," for any particular parcel of Contract Property, means the process of carrying out contemplated capital improvements on that property, as generally described in the resolution of the School Board calling for the conveyance of such property to the County, as described in section 1(b). "Project Cost" means all costs of a particular Project, including costs of the design, planning, constructing, acquiring, installing and equipping of improvements to Contract Property, including sums required to reimburse the County or the School Board for advances made for any such costs, 94432v1 14 as Exhibit B - ]Form of Notice of Public Hearin Notice of Public Hearing by Chapel Hill-Carrboro City Schools Board of Education -- Property Conveyance to Orange County Please take notice that The Chapel Hill-Carrboro City Schools Board of Education will hold a public hearing on Thursday, February 2, 2006 at 6:45 p.m. (or as soon thereafter as the .matter may be heard). The purpose of the hearing will be to take public comment concerning a proposal for .the Board to transfer the property described below to Orange County, to facilitate capital improvements to . the property. The property to be transferred may be briefly described as follows: Pin# 9777583576 W/S Smith Level Road 13.57 acres Pin# 9777493386 W/S Smith Level Road P93/163 49.412 acres The project to be undertaken with respect to this property may be briefly described as follows: Construction of Carrboro High School, a 162,000 square foot 9-12 school campus The County will lease the property back to the School Board for its continued use for school purposes. The County and the School Board expect that the property will be transferred back to the School Board once the project is complete. The hearing will be held at Chapel Hill Town Hall, Council Chambers . .All interested persons will. be heard. The Board's plans are subject to. change based on the comments received at the public hearing and the Board's subsequent discussion and consideration. Persons wishing to make written comments in advance of the hearing or wishing more information concerning the subject of the hearing may contact Donna Wyatt, 750 South Merritt Mill Road, Chapel Hill., NC 919.967.8211 ext. 226 94432v1 15 as Exhibit C -Form of School Board resolution Resolution authorizing conveyance of property to Orange County to facilitate a capital proiect WHEREAS: The Chapel Hill-Carrboro City Schools Board of Education (the "School Board") has previously determined to cooperate with Orange County, North Carolina (the "County"), to undertake capital projects for the schools operated by the School Board. To carry out the agreed-upon plan of cooperation, the County and the School Board have entered into an Interlocal Agreement dated as of January 19, 2006, providing for the conveyance of property to the County, followed by the leasing of the property back to the School Board. The Interlocal Agreement also provides for the School Board to undertake the capital projects on the County's behalf, and for the eventual re-conveyance of the property to the School Board. BE IT TI~EREFORE RESOLVED by The Chapel Bill-Carrboro City Schools Board of Education, as follows: 1. The School Board requests that the County acquire the following property for the purposes contemplated by the Interlocal Agreement: Parcel # 9777583576 W/S Smith Level Road 13.57 acres and Parcel # 9777493386 W/S Smith Level Road P93/163 49.412 acres 2. The. Project to be carried out with respect to the transferred property may be briefly described as follows: Construction of Carrboro High School, a 162,000 square foot 9-12 school building. 3. The Board, under the authority of Section 153A-158.1 of the General Statutes, authorizes the conveyance of the Board's interest in such property to the County for the purposes described in the Interlocal Agreement, without further consideration. The Board's Chair is authorized and directed to execute and deliver an appropriate deed or deeds (the "Deed") to carry out such conveyance. The Deed will be in such form as the Chair may approve. The description of the property conveyed in the Deed shall be such as the Board's Chair may approve in consultation with the Board's attorney. 94432v1 1C a4 4. All Board officers and employees are authorized and directed to take all such further action as they may consider necessary or desirable in connection with the furtherance of the purposes of this resolution. 94432v1 1 7 as Exhibit D -form of memorandum of lease Return After Recording To: Geoffrey E. Gledhill, Esq. Orange County Attorney Post Office Drawer 1529 Hillsborough, NC 27278 MEMORANDUM OF LEASE STATE OF NORTH CAROLINA ) ORANGE COUNTY ) ORANGE COUNTY, NORTH CAROLINA, a political subdivision of the State of North Carolina, as lessor, having an address of 200 South Cameron Street, Hillsborough, NC 27278, hereby leases to THE CHAPEL HILL-CARRBORO CITY SCIIOOLS BOARD OF EDUCATION, as lessee, having an address of 750 S Merritt Mill Road, Chapel Hill, North Carolina 27516, for a term beginning ,and continuing for a maximum period ending December 31, 2025, the real property described in Exhibit A. The provisions set forth in a written agreement between the parties dated as of January 19, 2006, are hereby incorporated in this memorandum. [Signature blocks to be added; property description to be attached] 94432v1 1 g Approved 11/21/00 OP;ANGE COUNTY Policy on Planning and Funding School Capital Projects (This document is intended to clam the expectations of the Orange County Board of Commissioners in collaborating with the Boards of Education in pla~aning for and implementing school capital projects) 1. Background The County's ten year capital investment plan is a planning document that is updated annually. Before the begnning of each fiscal year, the Board of County Commissioners approves the funding plan in concept. However, funding of individual projects is contingent upon the scope of work required to complete the project. • Level 1 Projects: Level one projects are those projects that have a relatively small scope of wont and can be accomplished using a single prime contractor, in-house staff or entail purchasing equipment and vehicles. Specific examples of Leve11 proj ects include roofing projects, parking lot paving and re-wiring of existing buildings. The Board approves the entire project ordinance at one time. ® Level 2 Projects: Level two projects are major projects that require several phases to complete. For these projects, the Board of County Commissioners approves afour-phase appropriation process to include: • Concept/Pre Planning Phase (includes preliminary programming and design work that would result in conceptual drawings and preliminary cost estimates. • Planning Phase (including siting & infrastructure) • Design and Construction Approval P. base (including final design, equipment, furnishings, non-recurring start up, technology, contingency) ^ Schools have the latitude to shift funds between major components without prior BOCC approval, providing that the actual cost of the project does not exceed budget. ^ Superintendents will provide the County Manager with written project updates at their regular monthly meetings. In turn, the County Manager will provide the Board of County Commissioners with written progress reports related to the project. • Final Accounting Phase ^ Upon completion of the project, School and County staff will reconcile actual project expenditures with approved budget and provide the BOCC with a "final accounting" of proj ect. Page 1 of 6 Policy on Planning and Funding School Capital Projects ati Approved 11/21/00 2. Site Standards In. accordance with North Carolina State Statutes, a local board of education cannot execute a contract nor expend funds to purchase a facility site without the consent of the local board of county commissioners. As each school system in Orange County plans for future school-related facilities, it is important that they adhere to' the following guidelines related to the potential acquisition, either by purchase or donation, of a site, in addition to any siting criteria they may have established internally: . Potential Sites -The Board of Education is to notify the Orange County Board of Commissioners, in writing, whenever they have tentatively identified a potential school site for purchase, or if a potential donor indicates interest in donating a site to the system. The written correspondence should provide the following information for Commissioner consideration: ® Location, including tax map numbers, of the potential site; ® Opporhusities for additional facilities to be co-located as a park site, as outlined in the "Memorandum of Agreement for Providing Coordinated Site and Facility Planning"; ® The availability of public utilities within the urban services boundaries of the County; ® If a donated site: a Any lrnowledge of a donor's plans for adjacent development; ~ Special considerations or expectations the donor may.have referenced in initial discussions pertaining to the donation; Upon receipt ofthe Board of Education's notification, the Commissioners will appoint, by a majority vote of the Board, a representative to work directly with the Board of Education. As a partner with the school system, the Commissioner representative will receive information and provide input regarding talks and negotiatians related to the potential site. The Commissioner representative will share information regarding the progress of tallcs and negotiations of the potential site with other members of the Board of Commissioners. Environmental Factors - A school system is to pay particular attention to the physical environment surrounding the site and new facility. • In order to avoid future flood hazards, a facility should not be located in close proximity to wetlands, stream buffers, or in a flood plain. Facility siting should also avoid other physical factors that create either additional construction or longer-term maintenance problems, or other unfavorable environmental impacts. Page 2 of 6 Policy on Planning and Funding School Capital Projects as Approved 11/21/00 « Once a system acquires a site and before grading begins, each school system receives State approval of its erosion control plan and additional County review to ensure that unnecessary cutting of trees or clearing of land does not occur. Adequate natural buffers are to be left intact with existing trees, or replanted if the areas are disturbed during construction. Special attention should be paid to "specimen" trees as outlined in the County land development code. Road and Utility Requirements -Major elements for a system to consider in siting a new facility relate to infrastructure requirements by a Town or other public utility. Iu some recent instances, the systems have been required to provide costly infrastructure such as sidewall~s and road improvements. These elements greatly inflate construction costs of new facilities. As a system begins initial planning, there should be a joint meeting between elected Town, County and Education officials to discuss particular requirements that all parties expect of other project partners. 3. Building Design Standards As a school system selects a particular facility design, it is important that the most cost-effective design alternative be pursued. Historically in Orange County, new school buildings have bean designed uniquely for each particular project. The Board of Commissioners encourages systems to pursue non-traditional, or prototype, designs that can be replicated for use on more than one project. Should a system choose a unique design, it is to provide a detailed cost comparison analysis and justification in writing of why that particular approach was chosen over a prototype design. 4. Construction Standards Over the past few years, the County has given special attention to defining construction standards for each school level -elementary, middle and high schools. The standards provide a m;n;mum anal maximum square footage and student capacity for each level. As a system undertakes construction of a new facility, it is critical that the system adheres to the most recent school construction standards (estimated proj ect cost should include a reasonable allowance for inflation). The Commissioners agree to provide fixnding for new school facilities that are designed within. the adopted standards: They do not agree to fund projects that go beyond the adopted standards unless there is sufficient justification provided in writing by the Board of Education. One justification for going beyond the standards relates to co-location of facilities, .in particular recreational facilities. In this case, the system must provide detailed explanations outlining the benefits to be offered to the community and citizens, in the context of the intergovernmental "Memorandum of Agreement for Providing Coordinated Site and Facility Planning" and the "Orange County Parklands Acquisition~and Evaluation Criteria" adopted by the Board of Commissioners on December 7, 1999. Page 3 of 6 Policy on Planning and Funding School Capital Projects aq Approved 11/21/00 5. Project Approval A project's inclusion in the ten-year plan does not give the Schools or the County legal authority to expend funds. The legal authority to expend funds lies in County Commissioner approved capital project ordinances. Therefore, the schools should not incur any expenses for any capital project until the Board of County Commissioners approves the capital project ordinance. In order to provide timely flaw of the approval process and ensure that all elements are addressed, the following steps should be followed: • Details included in each system's ten-year Capital Investment Plans regarding the scope and timing of various phases of individual capital projects is limited. To that end, as individual Boards of Education begin discussions related to new capital projects (new construction, site acquisitions, major renovations, etc), they will be expected, in writing, to notify the Board of County Commissioners of the substance of those discussions. The memorandum from the School Board will: • Provide the Commissioners with an overview of the project concept along with other project specifics that the Board of Education has defined to that point; • Justify the need based on current school capacities and projected student enrollments consistent with the School Adequate Public Facility Ordinance (if the Ordinance is in effect at this time); • Provide a preliminary cost projection of the project based upon the adopted school . construction standards and provisions of the Cost Effective Facilities Initiative (CEFI), which has derived from earlier discussions about "value engineering'.' (if this policy is in effect at this time); • Request that the Board of Commissioners approve a capital project ordinance to provide funding for the initial planning phase of the project; • Instruct the Superintendent to update the County Manager, in writing, of the project's progress at hislher monthly meetings with the County Manager. Upon receipt of the memorandum from the Board of Education, the Board of Commissioners will: • Act upon the project concept by either approving it or asking the Board of Education to amend the concept plan; • Instruct County staff to confirm the project's cost estimate and student capacity in accordance with the County's adopted School Construction Standards Reports along with student enrollment projections; Page 4 of 6 Policy on Planning and Funding School Capital Projects 3~ Approved 11/21/00 • If the Board of Commissioners approves the project concept, the County Budget Director will prepare an agenda abstract and related capital project ordinance that provides funding for the concept and pre-planning phase of the project; • Appoint, by majority vote of the Board, either a Commissioner representative (preferably the same representative that participated in the siting phase of the project) and one staff representative, or two staff representatives, to partner with the school system as the plans develop; • Instruct the County Manager to update the Commissioners on a regular basis regarding .the written information shared by the School Superintendent. 6. Expenditure of Project Funds Funding for PYOjectPlanning -School systems will not expend or encumber for planning of any project until the Board of Caunty Commissioners has approved the plan concept. Baclcground -For several years, the Board of Commissioners has approved, a capital project ordinance entitled Planning for Future Projects for each school system. The creation of these ordinances enabled a system to expend a portion of their pay-as-you-go funds for planning during a project's conceptual stages. Once a project grew beyond the concept stages, systems requested the Commissioners to approve a "project specific" capital project ordinance allocating all foods anticipated to carry out the planned project. In turn, each district expended their monies up-front for planning, design, architect, constnxetion, furniture and equipment. In return, the County reimbursed each District with all of the project-related expenditures up to the total project budget. With the changes implemented by the County Commissioners in June 1999, this process has changed. It is important to note that unless a County approved capital project ordinance is in place (i.e. adopted by the County Commissioners), that the County is not legally or otherwise obligated to reimburse the school system for their expenditures. If the Board of County Commissioners approve the project concept and capital project ordinance as outlined in Item 5 above, the following steps occur: • Following Board of Commissioner approval of final plans for the project, the school system advertises for construction bids; • Once the system receives the bids, the School Superintendent notifies the County Manager, in writing, of the result of all bids received. • The County Manager informs the Board of Commissioners, in writing, of the construction bid results. 7. Submission Timelines • Wlu1e the Board of Education may receive the bids, it should not execute any contract until the Board of County Commissioners receives bid information and approves a capital project ordinance for the construction phase of the project; Page 5 of 6 Policy on Planning and Funding School Capital .Projects 31 Approved 11/21/00 • Generally, the Board of Commissioners conducts regular meetings on the first and third Tuesday of each month. To allow for timely preparation of the meeting agenda, the following timelines should be followed by staff ' • Twenty-one days prior to the Board of Commissioners meeting, the School Finance or Budget Director or the Director of Facilities provides the County Budget Director with: • Bid Tabulation of School Construction or Major Renovation Project (example included as Attachment 1 of this Memorandum.) • Any other pertinent information regarding the project. • Fourteen dais prior to the meeting, the County Budget Director submits a draft agenda abstract including the bid tabulation and capital project ordinance to the County Manager's office. for review. The Budget Director forwards (via a-mail or fax) a copy of the abstract and attachments to the School Finance or Budget Director and the Director of Facilities for review and comments. Ten days prior to the meeting, the School Finance or Budget Director and the Director of Facilities provide abstract revisions and comments to the County Budget Director. • Seven days prior to the meeting the County Budget Director submits .final agenda abstract and attachments to the County Manager's Office. A copy of the abstract and attachments are forwarded (via e-mail or fax) to the school system. Upon adoption by the Board of Commissioners, the County Budget Director informs the School Finance and Budget Director and the County Finance Director of the abstract approval and the assigned account number(s). This is done via a standard memorandum that indicates purpose and account codes. • .All requests for payment from the School Finance Directors are forwarded to the County Finance Department for payment. The County Finance Department ensures that the requisition far payment falls within the purposes approved by the Board of Education. 8. Change Orders The School Superintendent submits, in writing, to the County Manager all contract change orders for the project. Upon receipt of the information, the County Budget Director prepares an agenda abstract and an amended capital project ordinance for approval by the Board of Commissioners at their next scheduled meeting. If there are change orders that cause project expenditures to be over budget, the School district must receive approval from the Board of Commissioners prior to approving the change order. Page 6 of 6 Policy on Planning and Funding Schooi Capital Projects Adopted 04/24/2007 Orange County Board of Commissioners Approved Capital Funding Policy Preamble This capital funding policy is the product of extensive analysis and deliberation. The intent of this policy is to reflect greater priority than there has been historically on providing funding for County projects, with particular emphasis directed at enhanced upkeep of existing County facilities. The policy reflects the implementation of the Board of Commissioners' resolution of November 16, 2004 that the Board "does hereby adopt in principle a policy of allocating a target of 60 percent of capital expenditures for school projects and 40 percent of capital expenditures for county projects over fhe decade beginning in calendar year 2005" This policy continues the County's principle and historical practice of funding all School and County related debt service obligations before allocating any other School or County capital funds for other purposes. Long Range Capital Investment Plan During October of each fiscal year, the County Manager shall present, to the Board, ten- year County and School capital needs and funding plans in the form of a Capital Investment Plan. Each year, the Board of Commissioners shall conduct a public hearing on the Manager's Recommended CIP during November and subsequently adopt aten- year Capital Investment Plan (CIP). The first year of the adopted ten-year Capital Investment Plan shall become the basis for the annual capital budget and incorporated into the next annual operating budget recommended by the County Manager. County and School recurring capital needs will be identified and reviewed during each _ annual operating budget cycle, and recurring capital appropriations will be approved by the Board of Commissioners as an element of each annual Orange County Budget Ordinance. The ten-year plan for long-range capital funding shall include: ® Anticipated County capital expenditures casting $25,000 or more (excluding equipment) • Anticipated school capital expenditures costing $50,000 or more (excluding equipment) Equipment costing $5,000 or more Sources of Funds The County will allocate the following sources of funds for County and School debt service and long-range and recurring capital: • All proceeds from the Article 40 and Article 42 half-cent sales taxes. (The North Carolina General Statutes require that 30 percent of the Artic% 40 (NCGS§105-487(a)) and 60 percent of the Article 42 (NCGS§705-502(a)) sales tax 33 Adopted 04/24/2007 revenue be earmarked for public schoo! capital outlay as defined in NCGS§~Q5-426(f7 or to retire any indebtedness incurred by the county for these purposes) • School Construction Impact Fees for each school system. • Public School Building Capital Fund monies • Properly tax revenue sufficient to pay all debt service on remaining 1988, 1992, 1997, or 2001 bonds, or refinancings thereof, as well as alternative financing programmed in the debt issuance schedule approved by the Board on May 5, 2004 and any subsequent updates to that schedule as the Board may approve. ® It is the intent of the Board of County Commissioners to dedicate the equivalent of four cents an the annual ad valorem property-tax to funding recurring capital expenditures for schools (three cents) and county (1 cent). However, there will be times when the County will be~~bound fiscally and unable to achieve full funding. During those times, Commissioners may find it necessary to depart from the Policy. During the 2008-18 Capital Investment Plan development process, the Board will consider a timetable for phasing in the additional two-cents necessary to fully the recurring capital component of this policy. (This 4-cent rate may, but need nof, be adjusted with each quadrennial revaluation to a "revenue neutral" earmarking) • Beginning in fiscal year 2007-08, the County will budget NC Education Lottery proceeds "in arrears" -meaning that funds will be budgeted in the year after the State distributes them. For example, lottery proceeds distributed to the County during the upcoming 2007-08 fiscal year would be budgeted the following fiscal year, 2008-09. Debt Service All County and School related debt service obligations would be funded prior to allocation of programmed funding for any other capital purposes. All proceeds from annual allocations of North Carolina Public School Building Capital Funds will be earmarked explicitly to pay for eligible school debt service. Orange County Schools' impact fees will be earmarked explicitly to pay for debt service on. projects that involved the construction of new school space in the Orange County Schools system. Chapel Hill-Carrboro City Schools' impact fees will be earmarked explicitly to pay for debt service on projects that involved the construction of new school space in the Chapel Hill-Carrboro City Schools system: NC Education Lottery Proceeds Beginning in fiscal year 2008-09, each school district will have the option to dedicate its share of the annual NC Education Lottery monies either (1) to repay debt service for debt issued .after fiscal year 2006-07 to address school facility renovation needs or (2) as an additional revenue to the districts pay-as-you-go funding to address school facility renovation needs. If either district chooses to dedicate Lottery proceeds to repay debt service, Lottery proceeds, sufficient to cover annual debt payments for principal and interest, will be,dedicated for the life of the financing. 3~F Adopfed 04124/2007 Beginning in fiscal year 2008-09, during the first quarter of each year, County staff will request, from the State, the amount of monies accumulated in the Lottery fund for both school districts with the intent of expending those funds during the fiscal year for either debt service payments or individual School capital projects as identified by each districts during their annual update of their ten-year capital plan. Allocation With the exception of the revenues earmarked for School and County recurring capital and the Construction Management function, the net proceeds of all programmed revenue sources after debt service obligations have been satisfied will be allocated on the basis of 60% to schools and 40% to the County. Capital funding far each ten-year capital planning period will be allocated between the two school systems based on certified student membership as of November 15 each year. Capital Project Ordinances -Form and Purpose All funds allocated to capital projects are to be accounted for in a Capital Project Fund as authorized by a Board of County Commissioner approved Capital Project Ordinance. The Capital Project Ordinance will include a detailed break down of each major cost category related to the project. In accordance with the Board of County Commissioners November 2000 adopted "Policy on Planning and Funding Schoo/ Capital Projects'; whenever School capital project bids are either higher or lower than originally projected, or any other factor affecting the project budget occurs, the affected school system is expected to work with County Management and Budget staff to present revised capital project ordinances for adoption by the Board of Commissioners. The same expectations shall be applicable for changes to County Capital project budgets. Community Use of Schools It is the intent of the Board of County Commissioners to evaluate each new proposed school in both School Districts far joint community use opportunities, including, but not limited to, park and recreation use. Recurring Capital As outlined in the "Sources of Funds" section of this policy, recurring capital funding for the Schools and County will be based on the estimated proceeds of 4 cents on the annual General Fund property tax rate. The proceeds from 3 cents will be earmarked for schools, with funds allocated to each school system for the next fiscal year based on each system's respective share of the student membership as of November 15 immediately preceding the next fiscal year. Proceeds from 1 cent an the tax rate will be earmarked far County recurring capital needs. With regard to County Equipment and Vehicle acquisitions accomplished using third party financing, the Board of County ~ Commissioners will determine the source of funding to repay the associated debt service at the point that the Board approves the financing arrangement. 35 Adopfed 04/24/2007 Construction Management Function Beginning with the 2005-06 fiscal year, the Board of Commissioners will appropriate funding to establish a Construction Management function to oversee County and School capital projects. In fiscal years 2005-06 through 2007-08, $100,000 will be allocated annually to fund this function. The source of funding for the Gonstruction Management function will be split on a 60/40 basis with each school district sharing the schools portion of funding (60%) in accordance with certified student membership as of November 15 each year. Each entity's share of this function will be deducted from its share of long- range capital funding prior to allocating capital funds. Schools Adequate Public Facilities Ordinance Orange County's Schools Adequate Public Facilities Ordinance (SAPFO) and Memoranda of Understanding (MOUs) between the County and its municipal and school partners establish the machinery to assure that, fo the extent possible, new development will take place only when there are adequate public school facilities available, or planned, which will accommodate such new development. The Board of County Commissioners is committed to the principle that new school space documented as needed through the annual SAPFO technical review process will be reflected in the next adopted CIP, and will be funded so as to be constructed to be available before the relevant level of service threshold is exceeded. Rescission This policy rescinds the Orange County Board of Commissioners Capital Funding Policy, as originally approved on December 7, 1996 and as amended on February 3, 1998 and June 23, 2005. Approved April 24, 2007.