HomeMy WebLinkAboutAgenda - 08-04-1993 - VII-B 1
O R A N G E C O U N T Y
BOARD OF COMMISSIONERS
ACTION AGENDA ITEM ABSTRACT
Meeting Date: AUGUST 4 , 1993
Action Agenda
Item # VI -'B
SUBJECT: SWIMMING POOL FINANCING PROPOSAL
DEPARTMENT: COUNTY MANAGER PUBLIC HEARING: Yes X No
ATTACHMENT(S) : INFORMATION CONTACT:
RESOLUTION MANAGER'S OFFICE, EXTENSION 2300
PROPOSAL (UNDER SEPARATE COVER) TELEPHONE NUMBERS:
Hillsborough - 732-8181
Durham - 688-7331
Mebane - 227-2031
Chapel Hill - 967-9251/968-4501
PURPOSE: To receive a report on a proposal by the Municipal
Financial Group, Inc. in association with the Triangle
Youth Hockey Association to finance a swimming pool
and to consider adopting a resolution authorizing the
County Manager, County Finance Director and County
Attorney to proceed with negotiations with the above-
referenced parties to complete agreements for the
Board of County Commissioners ' consideration.
BACKGROUND: In earlier reports to the Board, staff indicated that
efforts were on-going to procure an acceptable
financing plan for the construction and operation of a
County public swimming pool. The BOCC identified a
$1. 5 million reserve fund for a public swimming pool
in the Adopted FY93-98 Capital Improvements Plan.
$100, 000 has already been set aside, with planned
allocations of $200, 000 in 1994-95 and $400, 000
in each of the next three years. Board members
earlier expressed concerns about the County's
contributions to the operational cost of a pool .
Under the proposed Financial Plan, the County's
contribution by contract would be a capital investment
of $4, 000, 000 over ten years with the remaining
capital costs and annual operating costs incurred by
the Triangle Youth Hockey
Association, Inc.
As indicated in the proposal, the financing mechanism
would be the use of a "63-20" Corporation Financing
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instrument that places the corporate debt on TYHA, not
the County. Please note that the County must agree to
accept title to the facility financed with the
proceeds of the tax-exempt obligations when the tax-
exempt obligations are discharged. Orange County
could reconvey the title, but it must wait at least 90
days and there can be no pre-discharge agreement to
reconvey.
RECOMMENDATION: The Manager recommends that the Board of County
Commissioners adopt the enclosed resolution that
authorizes staff to continue negotiations that will
produce final documents and agreements for the BOCC to
consider. In addition, the Manager recommends that
the Small Business Technology Development Center
continue to work with TYHA to produce a final
management plan that correlates with this financing
proposal.
I
DATE /o/ , 3
IT 7-- ie
I RESOLUTION
WHEREAS, the Triangle Youth Hockey Association (the "Association") is a
non-profit corporation created pursuant to Chapter 55A of the General Statues of
North Carolina which has been in existence since 1981; and
WHEREAS, the Association has proposed the development of a Triangle
Community Activity Center (the "Activity Center") to be located at Meadowlands
on Highway 70 Business, just east of Hillsborough; and
WHEREAS, the Activity Center would include a full-size ice rink, an olympic
size swimming pool (the "Pool"), and communal rooms and equipment to provide
fitness classes and spaces for local clubs and organizations to meet; and
WHEREAS, the Association has presented a business plan prepared by the
North Carolina Small Business and Technology Development Center establishing
that, based on the assumptions and projections set forth therein, such an Activity
Center is economically viable; and
WHEREAS, the Orange County B
9 y oard of Commissioners (the "Board") has
established a reserve fund for the construction of a public swimming pool facility
in the Hillsborough area as part of the County's 1992-1997 capital improvement
plans; and
WHEREAS, the Association has proposed the financing of the entire Activity
Center through a financing pursuant to the provisions of Internal Revenue Service
Revenue Proclamation 63-20, under which a non-profit corporation may, under the
guidelines set forth therein, finance construction of a public facility through a tax-
exempt financing; and
WHEREAS, through the proposed "63-20" financing, the Association would
be permitted to issue tax-exempt obligations to finance construction of the Center,
including the Pool, which would result in the development of a public pool at a
cost similar to the cost of public pool if the County were to finance and construct
the Pool itself; and
WHEREAS, the Board recognizes the public need for the Pool, is interested
in agreements that will enable the Pool to be constructed and operated for the
benefit of the public, and further, the County would agree to assist financially in
enabling such a Pool to be constructed and operated.
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NOW, THEREFORE, BE IT RESOLVED that: the County Manager and County
Finance Director are hereby authorized and directed to proceed with negotiations with the
Association and Municipal Financial Group exclusive as placement agent per the financing
proposal dated July 23, 1993 for financing and development of the Pool.
APPROVED THIS 4/71X day of Aard 1993, by a vote of
Ayes V Nays /
By: /A / /� /
Title: >'k Thy / c�vot
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Municipal Financial Group
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TRIANGLE YOUTH HOCKEY ASSOCIATION
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Prepared by
MUNICIPAL FINANCIAL GROUP, INC.
1132 LUTTRELL
Blue Springs, MO 64015
(816) 228-3040
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TABLE OF CONTENTS
Section 1: Cover Letter
Section 2: Proposal
Section 3: Legal Information
Section 4: Resolution
Section 5: Estimated Sequence of Events
July 23, 1993 Municipal Financial Group
THE FLEXIBLE OPTION
Mr. Don Phillips
Hock Development
4117 N. Roxboro Road
Durham, NC 27704
Dear Don:
I am pleased to include our proposal for financing the new Triangle Community Activity
Center. From our research and previous conversations I feel confident that this should
be a good plan for all parties involved.
Our firm will act as placement agent to coordinate the funding and legal work necessary
to complete the proposed 63-20 financing. We are asking for resolutions to be passed by
both Orange County and the Triangle Youth Hockey Association approving this process
and allowing us to begin drafting the necessary documentation and securing funding.
I have asked Don Ubell of Parker Poe Adams & Bernstein to act as Bond Counsel and
our placement agent counsel. We would anticipate working with all parties involved to
select the appropriate North Carolina trustee for the issue.
I feel we have an excellent project here and look forward to working with all the parties
involved to complete the financing.
Sincerely,
CIPAL CIAL GROUP
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Dick Davis
Director of Public Finance
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Enclosure
1132 LUTTRELL • SUITE A • BLUE SPRINGS,MISSOURI 64015
816 228-3040 • FAX 816 228-4442 • 800.765-1011
4 AM Municipal Financial al Group
THE FLEXIBLE OPTION
FINANCING PROPOSAL
TRIANGLE YOUTH HOCKEY ASSOCIATION
ORANGE COUNTY, NORTH CAROLINA
JULY 23, 1993
STRUCTURE: 63-20 Corporation Financing-Supported by a contract to be negotiated
with Orange County outlining the County's contribution to the project.
TERM: Fifteen (15) - Twenty (20) Years
AMOUNT: $7,000,000 Project Costs
234,500 Issuance & Legal Costs (Estimated 3.5%)
300,000 Capitalized Interest (12 months)
$7,534,500 Estimated Total Issue
ESTIMATED
INTEREST RATE: 7.75% to 8.25% Fixed
This rate is an estimate and will be based on final
documentation and market conditions at closing. If the market
offers a better rate it will be presented to all parties.
PLACEMENT: Private Institutional Sophisticated Investors - Sold in
denominations of at lease $100,000 ?
Use of a "63-20" Corporation Financing
What is a "63-20" Corporation. The "63-20" designation derives from an Internal
Revenue Service Ruling carrying that numerical designation, further amplified in Rev.
Proc. 82-26. In essence, a corporation such as the Triangle Youth Hockey Association
("TYHA") is permitted to issue tax-exempt obligations directly as corporate debt if
certain conditions set forth by the Internal Revenue Service are met. The more critical
of the requirements are as follows:
- Orange County must approve TYHA and the financing, which would be
accomplished here through a resolution of the County Board of Commissioners.
- Orange County must have the right at any time to obtain unencumbered fee
title and exclusive possession of the property financed by defeasing the tax-exempt
obligations.
- Orange County must have the option to purchase the property for the amount
of the outstanding indebtedness plus accrued interest (a par redemption) if TYHA
were to default on the obligations.
- Orange County must agree to accept title to the facility financed with the
proceeds of the tax-exempt obligations when the tax-exempt obligations are
discharged. Orange County would eventually be able to reconvey, but it must wait
at least 90 days and there can be no pre-discharge agreement to reconvey.
How Would the Financing Proceed. TYHA and the Municipal Financial Group
(Placement Agent) would develop the necessary documentation with the amount of input
the County desired. A trust indenture with a North Carolina financial institution, as
trustee, would govern the provisions for the issuance of bonds by TYHA. TYHA would
negotiate a contract with the County outlining the extent and limitation of the County's
contribution to the project. The contract would be assigned to the trustee under the
trust indenture. The County could exercise the degree of control of the project and its
operation that it desired to through this contract. The placement agent would be
responsible for placing the bonds issued by TYHA to "sophisticated investors" in
denominations of at least $100,000. The bonds would not be rated. If there were a
default on the TYHA bonds, the bonds would not become the responsibility of the
County.
RESOLUTION
WHEREAS, the Triangle Youth Hockey Association (the "Association") is a
non-profit corporation created pursuant to Chapter 55A of the General Statues of
North Carolina which has been in existence since 1981 ; and
WHEREAS, the Association has proposed the development of a Triangle
Community Activity Center (the "Activity Center") to be located at Meadowlands
on Highway 70 Business, just east of Hillsborough; and
WHEREAS, the Activity Center would include a full-size ice rink, an olympic
size swimming pool (the "Pool"), and communal rooms and equipment to provide
fitness classes and spaces for local clubs and organizations to meet; and
WHEREAS, the Association has presented a business plan prepared by the
North Carolina Small Business and Technology Development Center establishing
that, based on the assumptions and projections set forth therein, such an Activity
Center is economically viable; and
WHEREAS, the Orange County Board of Commissioners (the "Board") has
established a reserve fund for the construction of a public swimming pool facility
in the Hillsborough area as part of the County's 1992-1997 capital improvement
plans; and
WHEREAS, the Association has proposed the financing of the entire Activity
Center through a financing pursuant to the provisions of Internal Revenue Service
Revenue Proclamation 63-20, under which a non-profit corporation may, under the
guidelines set forth therein, finance construction of a public facility through a tax-
exempt financing; and
WHEREAS, through the proposed "63-20" financing, the Association would
be permitted to issue tax-exempt obligations to finance construction of the Center,
including the Pool, which would result in the development of a public pool at a
cost similar to the cost of public pool if the County were to finance and construct
the Pool itself; and
WHEREAS, the Board recognizes the public need for the Pool, is interested
in agreements that will enable the Pool to be constructed and operated for the
benefit of the public, and further, the County would agree to assist financially in
enabling such a Pool to be constructed and operated.
NOW, THEREFORE, BE IT RESOLVED that: the County Manager and County
Finance Director are hereby authorized and directed to proceed with negotiations with the
Association and Municipal Financial Group exclusive as placement agent per the financing
proposal dated July 23, 1993 for financing and development of the Pool.
APPROVED THIS _ day of , 1993, by a vote of
Ayes Nays
By: _
Title:
•
ESTIMATED SEQUENCE OF EVENTS
August 4 Resolution passed by Orange County and TYHA
based on Municipal Financial Group (MFG) proposal
August 5 - 25 Draft Documentation produced for review by all
parties. Offering memorandum drawn by MFG and
distributed to potential investors.
Aug 25 - Sept. 15 Documentation Finalized - Investors selected and
specific terms finalized regarding repayment, interest
rates, etc.
Sept. 15 - Oct. 15 Closing date set, all documents executed and funds
deposited to Escrow