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Home My WebLink AboutAgenda - 01-04-1993 - VIII-A ii 1 ORANGE COUNTY BOARD OF COMMISSIONERS Action Agenda Item No / A- ACTION AGENDA ITEM ABSTRACT Meeting Date: January 4, 1993 SUBJECT: School Bond Sale DEPARTMENT Finance/Budget PUBLIC HEARING YES NO X ATTACHMENT(S) INFORMATION CONTACT 12/14/92 Staff Memo Ken Chavious, ext 2450 OCS & CHCCS Cash Flow Projections Sally Kost, ext 2151 TELEPHONE NUMBER Hillsborough 732-8181 Chapel Hill 968-4501 Mebane 227-2031 Durham 688-7331 PURPOSE: To approve the amount of bonds to be sold in the first installment of the $52 million in school bonds authorized by voters in the November, 1992 referendum. BACKGROUND: The first sale of Orange County bonds from the recent school bond referendum has been tentatively scheduled by the Local Government Commission for March 9, 1993 . A number of procedural steps lead up to this bond sale, including the determination of the amount to be sold. The two school systems have responded to the County staff's request for cash flow projections with the information contained in the attached memos. County staff have reviewed the schools ' cash flow projections, and as outlined in the attached staff memo, propose that the County plan to hold three bond sales: March 1993 - $22 million; March, 1994 - $13 . 2 million; and March, 1995 - $16.8 million. The plan for subsequent sales would of course be subject to review and revision based on the actual progress of the projects involved. RECOMMENDATION(S) : The Manager recommends that the Board approve the amount of $22 million to be sold by the Local Government Commission at the March 9, 1993 bond sale. ORANGE COL NTY 2 NORTH CAROLINA • lLlmq 2'e/`d' ( I(P C:kPta/fI Pd/76.? MEMORANDUM TO: John Link, County Manager FROM: Ken Chavious, Finance Director Sally Kost, Budget Director 1� Rod Visser, Assistant County Manage V DATE: December 14, 1992 SUBJECT: Bond Sale Issues We recently met to discuss certain issues relative to the upcoming bond sale scheduled for March 9, 1993 . Some of the major issues discussed were; amount of bonds to sell in March and in subsequent sales; interest rates; bond rating; the County' s financial condition; and bond issuance costs . The following information summarizes our discussions . 1 . Bond Sale Amounts - We reviewed the cash flow projections provided by each School System. Based on these projections, it appears that the bond sales required to meet cash flow needs are as follows: Mar 1993 Mar 1994 Mar 1995 OCS Technology $ 750 , 000 $1,150, 000 $ 100 , 000 • Middle Sch 4, 750 , 000 5, 250, 000 4, 000, 000 $5 , 500 , 000 $6 , 400, 000 $4,100 , 000 CHCCS Middle Sch $12 , 079, 200 $1, 920, 800 High Sch 4, 380 ,000 4, 905, 950 $12,714, 050 $16, 459, 200 $6, 826, 750 $12 ,714, 050 TOTAL YEARLY $21, 959, 200 $13 , 226 ,750 $16,814, 050 The initial information for our Official Statement is due to the LGC by January 11 , 1993 . The final decision on the amount of our March 1993 sale needs to be made prior to our January 27 meeting with the LGC and Bond Counsel . We have more flexibility with the amounts to be sold in subsequent years . AREA CODE (919) 732-8181 • 968-4501 • 688-7331 • 227-2031 • FAX (919) 644-3004 Ext. 2300 Agc5-;t V 3 We discussed the possibility of holding only two sales for the total $52 million. This would reduce some administrative costs . We would also be able to avoid arbitrage costs as long as the return on County investment of bond proceeds remains lower than the interest rate at which the bonds are sold. However , we think it best to pursue three smaller sales because of the greater flexibility we would have to respond to market conditions and changes in project timetables . We also felt that we should avoid having two sales within the same year because of the staff time required in the coordination and preparation for the sale of bonds . 2 . Interest Rates - We talked briefly about the interest rate that we have been using in all of our previous estimates ( 7%) and felt that we will more than likely get a better rate when bonds are sold in March. Currently, it is probable that our rate will be in the neighborhood of 5 . 25 to 6% . Recent bond sales of governments with similar ratings were within this range. Rates within this range also mean that the tax rate required to pay debt service will be lower than our previous estimates . If we sell $22 million of bonds in March 1993 , the approximate debt service cost in 1993-94 would be $2 . 4 million. Considering the impact of the 1993 revaluation, we estimate that the 1993-94 tax rate impact would be between 5 and 6 cents. We will monitor the bond market more closely in the coming months and keep you informed of any drastic changes . 3 . Bond Rating - Each time bonds are sold a new bond rating is required. The two major rating agencies, are Moody' s and Standard & Poor' s . As you may recall , during our last bond sale in 1991 , Moody' s upgraded our rating from Aa to Aal and S&P' s rating remained at AA. In any case both ratings are very good and we do not expect for them to change for the 1993 bond sale. However, you should be aware that major increases in indebtedness and decreases in fiscal reserves could negatively impact bond rating. It is extremely important that we keep this in mind during each year' s budget process . The rating agencies will be contacted in mid to late January. Since we did not sell bonds in 1992, it is possible that they may want a presentation. If so, we can prepare a presentation similar to the one in 1989 which was very effective. The 1989 rating presentation involved Commissioner input, so the BOCC need to be aware of this possibility. 4 4 . Financial Condition - As Ken pointed out during the presentation of the 1992 Audit Report, our present financial condition is very stable. Last year we were able to withstand some major revenue shortfalls with only minimal impact on our fund balance. Currently, we do not foresee any revenue shortfalls of the magnitude we experienced in 1991-92 . We feel , at this point, that we will go into the upcoming bond sale, as well as end the year, in good financial condition. 5 . Bond Issuance Costs - Administrative costs associated with the issuance of bonds consist mainly of Bond Counsel charges, printing of the Official Statement, fees charged by rating agencies, and advertising. Issuance costs in the three previous bond sales were approximately $132 , 000 . This averages out to $44, 000 per sale. Issuance Costs are usually distributed in the following manner. Bond Counsel 45% Rating Agencies 34% LGC 18% Advertising 3% Issuance cost tend to vary slightly with the size of each bond sale. Inflation may also impact these costs. We need to officially establish the bond sale amount for March 9 as early as possible so that it can be provided to the LGC by the January 27 deadline. As mentioned above, we have more flexibility with the subsequent years. Please contact us if you have any questions. O5 t ) (! rangt (!Inuntg *Omits 4wyEifit10 ' 200 EAST KING STREET HILLSBOROUGH, NORTH CAROLINA 27278-2570 OFFICE OF THE SUPERINTENDENT (919) 732-8126 MEMO TO: JOHN LINK, COUNTY MANAGER J FROM: ANDY OVERSTREET, SUPERINTENDENT / f ' DATE: NOVEMBER 5, 1992 SUBJECT: CASH FLOW PROJECTIONS FOR SCHOOL BOND PROJECTS We have prepared our best estimate of quarterly cash flow requirements instead of monthly estimates which will not be available for some time. We are proceeding with architect selection and site selection as fast as possible. We are also working with a technology planner/engineer for implementation of these projects early on. Our quarterly needs are as follows : - I MIDDLE SCHOOL TECHNOLOGY Now through March 1993 $ 1, 900, 000 $ 50,000 April - June 1993 500, 000 50, 000 5, , b July - Sept 1993 200, 000 300,000 Oct - Dec 1993 1,700, 000 300, 000 Jan - Mar 1994 450,000 50 ,000 'April - June 1994 1,900, 000 100, 000 �� July - Sept 1994 1,900, 000 600, 000 Oct - Dec 1994 700, 000 300, 000 Jan Mar 1995 750, 000 150, 000 Aril - June 1995 1,500, 000 50, 000 ;July - Sept 1995 2,000, 000 50,000 4. ( iTh 0 Oct - Dec 1995 300, 000 -0- Jan - Mar 1996 200, 000 -0- $14,000, 000 - $2,000, 000 We do hope to have our site selected so that we may be able to close on the property as early as March 1993 . If not, those funds will be needed the next quarter. As you know, our cash flow estimates will likely change as professional detailed plans are completed for each project. If you have questions please call. pc: Wayne Watts School Board Members Ke Chavious r lly Kost i!; 12/04/92 16:50 $933 .580 CHAPEL HI LL-CARR 0 004 6 HRSF + TRSG HASKINS,RICE,SAVAGE&PEARCE,PA. THE ROBERTS/STACY GROUP,PA. CARREORO IDLE SCHOOL CASH FLOW REQUIREMENTS 11/92- 6/93 This cash flow analysis is based on a total project budget of $149,000,000 broken down as follows; A. Construction& Related Costs $ 12,060,000 B. A/E 4r Consultant Fees 940,000 C. Owner Costs (resting,Permits,Etc.) 100,000 D. Land Purchase Cost 900,000 MQ1SMILMIE ALE &rStNSIlLTAhnifira CONSIS CTIONN_COSrS PreaiouS to Nov.'92 573,650 a . November'92 _ 50,200 . . 125,000 900.000(Land Cost) ` \'c December'92 56,450 503,750 r;-` 50,000(Fees) January'93 11,650 605,000 10,000(Testing) February'93 11,650 605,000 10,000 Misting) March '93 11,650 605,000 10,000 (Testing) April '93 11,650 605,000 10,000(resting) May '93 11,650 605.000 5,000(Testing) june '93 11,650 ,✓- 605,000 5,000(Testing) e,' July '93 , ' 21,650 _ 605,000 - August '93 , ..\�' 21,650 �+ 605,000 - } 'g3 11,650 672,200 - October'93 \ 11,650 672,200 - November'93 11,650 672,200 - December'93 11,650 672,E - January'94 11,650 672,200 - February'94 11,650 672,200 - March '94 11,650 672,200 - Aprfl '94 11,650 :,V 672,200 - \ May'94 - 11,650 ' 610,650 - June '94 ' 11450 6OSJM - 940,0001 12,060,0001 1.000,000 i "I c•1 r. Hobdni Piro.&maw&P, i e.PA. The Ichats/ag Cmq PA, MO Nos. 0w1t,1 195 4011 so c 1 ikvmd.&ate mD laggb.NC VON Bale;/,NC 276W Pienr/41Sa 191PJwl1 1 MX 01974416 FAX 6rW1-1133 12/04/92 16:49 'x'933 4580 CHAPEL HILL-CARR p r1' f ( q3 1002 vi • 1 l — �} 7 HLSP + TR.9G HunaN6,RACE,SAVAGE&PMARCE,Y.A. THE EOEUtVJSI'ACY c.'>IiOUP,P.A. NEW EMI SCHOOL FOE THE CHAPEL HILL-CARRaoRg BOAED OF EDUCATION CASH FLOW REQUIREMENTS This auk flow*relysls is based ern a total protect budget 01 523,000.000 broken dawn as follows: A. Cbrultruedon is iWabsd Cosh $ 66,600,000 S. Technology 1.000,000 C. Ail Ix GunNltant Pees 1.700.000 D. Owing Cowie(Tesanj,Pemba,EI 200,000 !. Land Purdue*Cost 3,500,000 , biellanliaiita 61E ke COP{SHLTA ,EIZI CONSTRUCTIO►r�,z �$ OE@ F«btuta►13 .3r000r - . Much '93 . 20,000 � r Apr31 MI mom `c r r, • .. June 93 Q.000 /!t9N , - , . �u1 $2. L - Orlelrse MI 6,000 - Ncrvember'93 624000 • - Dtwmlmt"93 t SZ.000 • - Wormy IN 02,000 - February'94 Et,000 • - ldarch'94 144: • - May'94 ,r - L.. . ,..-- • Jim'91 d 12,000 '., our•; `. '' , July'94 Zr 12,000 c. - - / -`" August"94 62,400 ` - Soptombar 14 41,000 . :" • - Oelohr'94 41,000 .• ,..... ... NOMA1bRt'94 16,400 . _ El3,670 100,000 :" Member 106 16Aoa 70,000 Jemmy' 5 16,400 893,eW 20,000 • • Sabniagy'NS 16,400 =AT 20.000 Much'95 X400 633.470 26,0912• April'93 16,400 u3.M 20400 May'95 16,400 433.670 - Y.d nkift&maiP KA T1+Illahowighow OiweM MDlbwwwt Car"aae tat set WWer i.ir..d,sham tid#,.!R WIN atlM■aal■ ,PAZ cwt w�nowm . -, w. 0A. lo.ou LyaJ3 45tl(1 CHAPEL HILL-CARR X1009 Cub ricrow limitstrementa- 2/93- 114191 a 8 June 133.670 July'9 16,400 August 16.600 x,926,300 300 •36.400 916,100 • °ember'95 ,. li.d00 926.300 • November 16 16,400 926.300 • December'95 v's 16,400 920400 January'96 .0 16.400 926,300 •- Pab.0 Ri 16'� 926,300 - Ap1 l,96 16,400 x,300 - May '96 16,400 960,270 ium '96 _-15400 —JIM ._� 1.200.Q09 17,600,000✓ 8,700,000V • . i