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Home My WebLink AboutAgenda - 03-23-1993 - VIII-A 1 ORANGE COUNTY BOARD OF COMMISSIONERS Action Agenda Item No Vlr-,q ACTION AGENDA ITEM ABSTRACT Meeting Date: March 23, 1993 SUBJECT: Refinancing of 1988 Bonds DEPARTMENT Finance PUBLIC HEARING YES NO X ATTACHMENT(S) INFORMATION CONTACT Savings Report Ken Chavious, ext 2450 Letter of Agreement with Financial TELEPHONE NUMBER Advisor Hillsborough 732-8181 Authorization for Financial Advisor Chapel Hill 968-4501 to Bid on Refinanced Bonds Mebane 227-2031 Refunding Request to LGC Durham 688-7331 Proposed LGC Refunding Schedule PURPOSE: To consider authorizing refinancing of 1989, 1990, and 1991 Series bonds approved by Orange County voters in the 1988 bond referendum. BACKGROUND: During the past year as interest rates have continued to fall, County staff have been monitoring the bond market to determine if the County should consider refinancing all or a portion of the bonds authorized for sale by voters in the November 1988 referendum. At the request of the County Finance Officer, Wachovia Bank has prepared a savings report that estimates that the County could save slightly more than $1 million by refinancing the remaining 1989, 1990, and 1991 Series bonds. The annual savings, beginning with FY1993-94, would be approximately $59,000. Estimated administrative fees of approximately $75,000, figured into the estimated cumulative savings, have been rolled into the refinancing. Accordingly, there are no upfront costs to the County if the bonds are refunded. All estimates are, of course, based on current market conditions. The Local Government Commission could sell Orange County' s refunded bonds as early as May 18. Depending on changes up or down in prevailing interest rates, the County' s cumulative savings as a result of a bond sale on May 18 could be less or more than the figures cited here. The North Carolina General Statutes permit only one refunding of an original bond issue, so a decision to pursue refunding now would reflect the County' s judgement that interest rates are unlikely to drop substantially further, and that it is prudent to try to achieve the significant savings that are now estimated. The LGC requires that an analysis of potential savings be performed by a financial advisor as part of the refunding process. Staff recommends that Wachovia Bank provide this service because of the County' s excellent experience in working with them on lease-purchasing and other financing arrangements. Wachovia would want to bid on the refunding bonds, which would not present a conflict of interest because the process is conducted by sealed, competitive bid. Securities laws do require the County to grant written authorization to the financial advisor to bid on the refunding bonds. 2 The process allows the County to reject all bids, so the County can pull out of the process at the last minute if it appears that market conditions are no longer favorable. Staff suggest that they be authorized to pursue this matter as long as a threshhold of $500,000 in cumulative savings can be achieved. RECOMMENDATION: The Manager recommends that the Board: approve the refinancing of 1989, 1990, and 1991 Series bonds if a minimum cumulative savings of $500, 000 can be realized; authorize the County Finance Officer to work with the Local Government Commission and Bond Counsel to take all required procedural steps; and authorize the Manager and Finance Officer to execute any written agreements needed to effect this refinancing. GENERAL OBLIGATION REFUNDING BONDS, SERIES 1993 TO REFUND SERIES 1989, 1990, & 1991 4 ORANGE COUNTY, NORTH CAROLINA GENERAL OBLIGATION REFUNDING BONDS, SERIES 1993 SAVINGS REPORT PROPOSED DEBT SERVICE PRIOR CUMULATIVE DATE PRINCIPAL COUPON INTEREST TOTAL D/S SAVINGS SAVINGS 6/ 1/94 1,505,000.00 4.650000 1,357,467.50 2,862,467.50 2,921,575.00 59,107.50 59,107.50 6/ 1/95 1,495,000.00 4.700000 1,287,485.00 2,782,485.00 2,841,375.00 58,890.00 117,997.50 6/ 1/96 1,485,000.00 4.800000 1,217,220.00 2,702,220.00 2,760,775.00 58,555.00 176,552.50 6/ 1/97 1,475,000.00 4.800000 1,145,940.00 2,620,940.00 2,680,175.00 59,235.00 235,787.50 6/ 1/98 1,465,000.00 4.800000 1,075,140.00 2,540,140.00 2,599,575.00 59,435.00 295,222.50 6/ 1/99 1,455,000.00 4.800000 1,004,820.00 2,459,820.00 2,518,975.00 59,155.00 354,377.50 6/ 1/ 0 1,895,000.00 4.800000 934,980.00 2,829,980.00 2,888,175.00 58,195.00 412,572.50 6/ 1/ 1 1,875,000.00 4.800000 844,020.00 2,719,020.00 2,775,425.00 56,405.00 468,977.50 6/ 1/ 2 1,850,000.00 4.800000 754,020.00 2,604,020.00 2,662,675.00 58,655.00 527,632.50 6/ 1/ 3 1,825,000.00 4.800000 665,220.00 2,490,220.00 2,549,925.00 59,705.00 587,337.50 6/ 1/ 4 1,800,000.00 4.800000 577,620.00 2,377,620.00 2,437,175.00 59,555.00 646,892.50 6/ 1/ 5 1,775,000.00 4.800000 491,220.00 2,266,220.00 2,324,425.00 58,205.00 705,097.50 6/ 1/ 6 1,745,000.00 4.800000 406,020.00 2,151,020.00 2,211,675.00 60,655.00 765,752.50 6/ 1/ 7 1,720,000.00 4.800000 322,260.00 2,042,260.00 2,098,925.00 56,665.00 822,417.50 6/ 1/ 8 1,685,000.00 4.800000 239,700.00 1,924,700.00 1,985,775.00 61,075.00 883,492.50 6/ 1/ 9 1,655,000.00 4.800000 158,820.00 1,813,820.00 1,871,775.00 57,955.00 941,447.50 6/ 1/10 1,620,000.00 4.900000 79,380.00 1,699,380.00 1,759,475.00 60,095.00 1,001,542.50 28,325,000.00 12,561,332.50 40,886,332.50 41,887,875.00 1,001,542.50 ACCRUED 28,325,000.00 12,561,332.50 40,886,332.50 41,887,875.00 1,001,542.50 Dated 6/ 1/93 with Delivery of 6/ 1/93 Bond Years 261,230.000 _ Average Coupon 4.808534 Average Life 9.222595 N I C % 4.737179 % Using 100.6580791 T I C % 4.837946 % From Delivery Date Net Present Value Savings at: 4.7137% Equals 788,354.25 or 2.7832% of Par of the Current Issue or 3.1099% of Par of the Prior Issue Prepared by Public Finance Services, Wachovia Bank of North Carolina, N.A. RUNDATE: 03-15-1993 a 10:57:51 FILENAME: ORANGE KEY: NEW WACHOVIA. Wachovia Bank of North Carolina,N.A. 301 North Main Street 1:-_,3/0?3)6i3 Winston-Salem, NC 27150-3099 5 March 16, 1993 Mr. Ken Chavious Finance Director County of Orange Orange County Government Services Center 200 S. Cameron Hillsborough, North Carolina 27278 Dear Ken: We are pleased that the County of Orange has agreed to allow Wachovia Bank of North Carolina, N.A. to serve as financial advisor to the County for the advance refunding of the outstanding General Obligation School Bonds 1989, 1990,and 1991 and Public Building Bonds 1989, 1990, and 1991. Wachovia has agreed to advise the County for a fee of $15,000 plus direct out-of-pocket expenses, not to exceed $500. The fee would be payable only if the County were to complete the refunding of these bonds. We look forward to working with you on this project. Sincerely, County of Orange, North Carolina C- 10^,t,Q_ 2/it Richard M. Marvin Senior Vice President/Manager By: Public Finance ITS Finance Director ATTEST: WP 1206.msc WACHOVIA Wachovia Bank of North Carolina,N.A. 301 North Main Street Winston-Salem,NC 27150-3099 6 March 16, 1993 Mr. Ken Chavious Finance Director County of Orange Orange County Government Services Center 200 S. Cameron Hillsborough, North Carolina 27278 Dear Ken: Wachovia is pleased to be providing financial advisory services to the County on its General Obligation Refunding Bonds, Series 1993. Wachovia will also be invited by the Local Government Commission to bid on your bonds when they are offered for sale. The Municipal Securities Rulemaking Board, the municipal bond industry's self-regulating board, requires that the issuer consent in writing prior to the sale date that the advisor may bid on the bonds at competitive sale. The County, by this letter, acknowledges that Wachovia may through the competitive bidding process acquire as principal or as a participant in a syndicate of underwriters, all or a portion of the County's bonds including those upon which Wachovia has rendered financial advice. The County by this letter expressly consents to Wachovia's participation in the bidding and possible purchase as principal of the County's bonds. Again, Wachovia appreciates the opportunity to serve the County and we look forward to the successful sale and closing of the bonds. Sincerely, County of Orange, North Carolina 16 ),„.1 )1/4, )111, Richard M. Marvin By: Senior Vice President/Manager Public Finance Its: Finance Director Attest: WP1206.msc ory _- 3/4- 00�y /A —^i V�52„ 7 17 FINANCE DEPARTMENT 4, Orrb meto‘ ORANGE COUNTY NORTH CAROLINA March 23 ,'. 1993 Mr. Everett M. Chalk, Assistant Director Local Government Commission Department of State Treasurer 325 North Salisbury Street Raleigh, NC 27611 Re: County of Orange General Obligation Advance Refunding Series 1989, 1990 and 1991 School and Public Building Bonds Dear Everett: This letter serves as Orange County's official request and application for the Commission's consideration to allow the County of Orange to refund it's Series 1989, 1990 and 1991 School and Public Building General Obligation Bonds. The original principal amount issued totalled $11, 800, 000 for Series 1989 , $9, 075, 000 for Series 1990, and $8, 125, 000 for Series 1991. The current outstanding principal amount for all Series is $26, 575, 000. The County has reviewed an analysis of the advance refunding for the bonds and based upon the potential cumulative and present value savings achievable as outlined herein, we have determined that it would be in the County's best interest to proceed with a refunding issue. The proposed issue would be contingent upon market conditions justifying an offering of refunding bonds and obtaining a present value savings of at least three percent of the prior issue. Details of this transaction are as follows: Proposed Transaction - Advance Refunding Authorizing Statute - N.C.G.S. Section 159-72 Refunded Bonds - Series 1989 , 1990 and 1991 School And Public Building Bonds Issue Amount/Maturity - $28 , 325, 000. (not to exceed) 17 years (remaining maturity schedule of refunded bonds) 109 COURT STREET • P.O.BOX 8181 • HILLSBOROUGH,NORTH CAROLINA 27278 • 919/732-8181 8 Potential Savings - Based upon repayment scenarios under consideration and interest rate environment as of March 12 , 1993 , net present value savings and savings as a percent of the refunded bond principal amount will be approximately $788 , 354 and 3 . 1099% respectively. The average annual cash savings is estimated to be $59, 000. The County currently anticipates moving forward in this transaction with a competitive offering. It is our understanding that this method is recommended by the Local Government Commission. We also anticipate retaining Richard Marvin of Wachovia Bank & Trust Company to act as the County's financial Advisor for this proposed refunding issue. Please contact me if you have any questions or comments regarding the County's efforts to pursue the proposed refunding issue. Yours truly, Kenneth T. Chavious Finance Director cc: Orange County Commissioners John Link, County Manager Geoffrey Gledhill, County Attorney Gundars Aperans, Brown & Wood Richard Marvin, Wachovia Bank & Trust Co. Mic J/ / 93 �`- 41 State (Of North Caroling pelxttrtment ®f ctttt.e C` rrttsurrr 9 HARLAN E. BOYLES State and Local Government Finance Division ROBERT M. HIGH TREASURER and the Local Government Commission DEPUTY TREASURER March 13, 1993 Mr. Ken Chavious Finance Officer County of Orange Orange County Government Services Center 200 S. Cameron Hillsborough, North Carolina 27278 Re: Refunding Bond Sale Sceduled for May 18, 1993 Dear Ken: In reference to the above bond sale, listed below is a tentative calendar of dates that need to be met: Sale Date May 18, 1993 Mail final Official Statement May 7, 1993 Go to the printer May 5, 1993 Finalize the Official Statement May 3, 1993 Due Diligence Meeting (Conf. Call) April 14, 1993 Mail 1st draft April 8, 1993 If you have any questions on the above dates and/or materials , please feel free to contact us. Sincerely, Gordon H. Johnson Bond Sales & Deliveries GHJ/kmm CC: Gundars Aperans , Esquire Brown & Wood Richard Marvin Wachovia Bank of N.C. , N.A. 325 North Salisbury Street, Raleigh, North Carolina 27603-1388 (919) 733-3064 COURIER #56-20-45 (FAX 733-9586) Au Equal Opportunity Af%irmntireAetiou Employer