HomeMy WebLinkAboutAgenda - 09-19-2017 - 5-a - Public Hearing on Refinancing Existing Loan Obligations 1
ORANGE COUNTY
BOARD OF COMMISSIONERS
ACTION AGENDA ITEM ABSTRACT
Meeting Date: September 19, 2017
Action Agenda
Item No. 5-a
SUBJECT: Public Hearing on Refinancing Existing Loan Obligations
DEPARTMENT: Finance and Administrative
Services
ATTACHMENT(S): INFORMATION CONTACT:
Attachment 1. Public Hearing Notice Gary Donaldson, (919) 245-2453
Attachment 2. Resolution Paul Laughton, (919) 245-2152
Attachment 3. Refinancing Summary Bob Jessup (919) 933-9891
PURPOSE: To conduct a public hearing on the issuance of up to $51 million to refinance
existing installment financing to achieve an estimated $2.4 million in debt service savings; and
approve a related resolution supporting the County's application to the Local Government
Commission (LGC) for approval of the refinancing plan.
BACKGROUND: The County and its financing team estimates that the total amount to be
refinanced is an amount Not to Exceed $51 million in Limited Obligation Bonds. Although the
Refinancing Summary (Attachment 3) currently identifies an amount of $41.9 million based on
the current market, the difference between the $41.9 million amount in the Refinancing
Summary and the Not to Exceed amount of $51 million in the Resolution is the financing's team
effort to maintain flexibility in accommodating various bond pricing alternatives. The Not to
Exceed amount provides sufficient pricing considerations to refinance the six loans that have
been identified as potential refunding candidates in this negotiated financing. The County's
financing team will work to secure the lowest cost of funds and to maximize the debt service
savings associated with the refunding.
If the Board adopts the resolution indicating its intent to continue with the refinancing plan, the
Board will be asked to consider a resolution giving final approval to the refinancing plans at the
October 3, 2017 BOCC meeting. A copy of the published notice of this hearing is provided as
Attachment 1.
North Carolina statutes require that the County conduct a public hearing on the proposed
financing. After conducting the public hearing and receiving public input, the Board will consider
the adoption of the resolution (Attachment 2). This resolution formally requests the required
approval from the North Carolina Local Government Commission (LGC) for the County's
refinancing.
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The refinancing of existing installment loan obligations is designed to provide savings to the
County without extending the terms of the existing loans (Attachment 3). The proposed
financing would be secured by a lien on some or all of the property purchased or improved
through the loans that are being refinanced, as well as the County's promise to repay the
financing. The County expects that the collateral for the financing will consist of some or all of
Morris Grove Elementary School, the County Justice Facility, Northside Elementary School, the
Orange County library building in Hillsborough, and the County's West Campus Office Building
located at 131 West Margaret Lane in Hillsborough.
Bonds Refunded Original Current Market
Interest Rates Interest Rates
2006 Installment Financing 2.13% 1.43%
2011 Limited Obligation Bonds 5.00% 1.75%
2012 Limited Obligation Bonds 3.25%-5.00% 2.43%
2013 Installment Financing Draw 2 2.13% 1.73%
2016 Installment Financing Draw 1 2.30% 1.41%
2016 Installment Financing Draw 2 2.55% 2.10%
FINANCIAL IMPACT: There is no financial impact related to this action. However, there will be
a financial impact in proceeding with the refinancing. A preliminary estimate of the net present
value savings through final loan maturity is $2.4 million based on current market estimates as of
August 30, 2017. The net present value savings represents 5.7% of the refunded bonds.
SOCIAL JUSTICE IMPACT: The following Orange County Social Justice Goal is applicable to
this agenda item:
• GOAL: ENSURE ECONOMIC SELF-SUFFICIENCY
The creation and preservation of infrastructure, policies, programs and funding necessary
for residents to provide shelter, food, clothing and medical care for themselves and their
dependents.
RECOMMENDATION(S): The Manager recommends that the Board conduct the public hearing
and adopt the resolution supporting the application to the Local Government Commission for
approval of the refinancing.
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Attachment 1
s*h draft of August 30
Orange County, North Carolina -- Notice of Public Hearing
Refinancing of Various Existing Obligations
The Board of Commissioners of Orange County, North Carolina, will hold a
public hearing on Tuesday, September 19, 2017, at 7:00 p.m. (or as soon thereafter
as the matter may be heard). The purpose of the hearing is to take public comment
concerning a proposed financing contract, under which the County would borrow an
amount estimated as up to approximately $51,000,000 to refinance existing
financing obligations and to pay related financing costs.
The hearing will be held in the Commissioners' meeting room in the Southern
Human Services Center, 2501 Homestead Road, Chapel Hill, North Carolina 27516.
The refinancings are designed to provide savings to the County without
extending the terms of the existing loans. The proposed financing would be secured
by a lien on some or all of the property purchased or improved through the loans
that are being refinanced, as well as the County's promise to repay the financing, but
there would be no recourse against the County or its property (other than the
pledged property) if there were a default on the financing. The County expects that
the collateral for the financing will consist of some or all of Morris Grove Elementary
School, the County Justice Facility, Northside Elementary School, the Orange County
library building in Hillsborough, and the County's West Campus Office Building
located at 131 West Margaret Lane in Hillsborough.
All interested persons will be heard. The County's plans are subject to change
based on the comments received at the public hearing and the Board's subsequent
discussion and consideration. The County's entering into the financing is subject to
obtaining approval from the North Carolina Local Government Commission.
Persons wishing to make written comments in advance of the hearing or
wishing more information concerning the subject of the hearing may contact Gary
Donaldson, Orange County Finance Officer, Post Office Box 8181, Hillsborough, NC
27278 (telephone 919/245-2453, email gdonaldson @orangecountync.gov).
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RES-2017-021 Attachment 2
s*h draft of August 31
Resolution supporting an application to the Local Government
Commission for its approval of a County financing agreement
for the refinancing of existing loans
WHEREAS--
The County has determined that it can save money by refinancing some of its
existing installment contracts. The refinancings will save the County money without
extending the terms of the existing loans.
The County desires to carry out this refinancing using a single new
installment financing contract, as authorized under Section 160A-20 of the North
Carolina General Statutes.
Under the guidelines of the North Carolina Local Government Commission,
this governing body must make certain findings of fact to support the County's
application for the LGC's approval of the County's financing arrangements.
THEREFORE, BE IT RESOLVED by the Board of Commissioners of Orange
County, North Carolina, that the County makes a preliminary determination to
finance approximately $51,000,000 to refinance existing obligations. The County
requests that the LGC approve the County's application for this new financing.
The Board will determine the final amount to be financed by a later
resolution. The final amount financed may be slightly lower or slightly higher than
$51,000,000. Some of the financing proceeds may be used to pay financing expenses
or to provide any required reserves.
The Board will also determine the collateral for the financing by a subsequent
resolution. The collateral will consist of some or all of the property purchased or
improved through the loans that are being refinanced, and the County expects this
will primarily be collateral pledged to County financings from 2011 and 2012. The
collateral for the 2011 and 2012 financings consists principally of Morris Grove
Elementary School, the County Justice Facility, Northside Elementary School, the
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Orange County library building in Hillsborough, and the County's West Campus
Office Building located at 131 West Margaret Lane in Hillsborough. The Chapel Hill -
Carrboro City School Board previously approved the use of those schools as
collateral for the 2011 and 2012 financings.
BE IT FURTHER RESOLVED that the Board of Commissioners makes the
following findings of fact in accordance with LGC guidelines:
(1) The proposed refinancing appropriate for the County under all the
circumstances.
(2) The proposed installment financing is preferable to a bond issue for the
same purposes. The obligations to be refinanced are also installment financings, so
it makes sense to use the same vehicle for the refinancing.
(3) The estimated sums to fall due under the proposed financing contract
are adequate and not excessive for the proposed purpose. There is no money in this
financing for new projects, and the refinancings will save money without extending
any loan terms.
(4) As confirmed by the County's Finance Officer, (a) the County's debt
management procedures and policies are sound and in compliance with law, and (b)
the County is not in default under any of its debt service obligations.
(5) The County expects that there will be no actual increase in taxes
necessary to meet debt obligations under the proposed financing arrangements
because of the overall debt service savings.
(6) The County Attorney is of the opinion that the proposed projects are
authorized by law and are purposes for which public funds of the County may be
expended pursuant to the Constitution and laws of North Carolina.
BE IT FURTHER RESOLVED that the Board authorizes all County officers and
employees to take all appropriate steps to complete the proposed refinancing,
including completing an application to the LGC for its required approval, that the
Board ratifies all prior actions taken toward accomplishing these purposes, and that
this resolution takes effect immediately.
lAttachment 6
Refinancing of Existing Loans ORANGF- COU
NORT, H CARIO-UNIX
A B
G N
...............,,............... ...............111111111111111--IIIIIIII,............... ............... ............... ............... ...............
Surnmam,of Refunding Results
Bonds Ref na-ed 2006 2011 10Bs 2 0 12 10 Bs-T E 2013 I-C - -raw 2 2016 In - Draw '_20'6 1F^ - Draw 2 10ta-
2 Par Refunded $ 3,000,000 $ 14,750,000 $ 11,545,000 $ 5,202,000 $ 1,971,000 $ 5,482,000 $ 41,950,000
3 Coup
on 2.130% 5.000% 3.25%-5.00% 2.130% 2.300% 2.550% NA
Call Date 12/21/2017 10/1/2021 10/1/2022 Current Current Current NA
5 -ua..Di
cz, r,--e 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% NA
6 Maturities Refunded 2/21/17-12/21/21 10/1/22-10/1/26 10/1/23-10/1/32 6/1/18-6/1/28 5/1/18-5/1/23 5/1/18-5/1/31 NA
8 Re-funding Bonds
9 Bond Par Amount $ 2,285,000 $ 13,675,000 $ 10,685,000 $ 4,080,000 $ 1,530,000 $ 4,325,000 $ 36,580,000
10/1/2032
0/1/2030
10/1/2022
10/1/202 7
10/1/2032
10/1/2026
10/1/2021
-o , na,Maturity
True interest Cost L129% L647% 2.359% L604% L168% 2.000% L948%
ee
_5%
J. ZL J. 1 4 . 4 ZL
12 €€€n Tc- A33% _5% 2.-32% 1.1-30% 1.-12% 2.103% 2.0
,.3
,.4 Savings
15 W463 $ 1.481 37 ,9 $ 8283956 $ 180.775 $
Gross Savings $ 4 69J88 $ 2411 J00 $ 2.847.4011
16 Not PV Savings $ 37,163 $ 1,334,815 $ 703,448 $ 110,524 $ 47,760 $ 168,563 $ 2,402,274
17 Net PV Savings% 1.239% 9.050% 6.093% 2.125% 2.423% 3.075% 5.727%
Average Annual Savings $ 8,893 $ 148,172 $ 51,810 $ 16,434 $ 11-631 $ 17,264 $ 177-963
-an
Note:The Not to Ceea('NTE)amount the resocution is intenaea to orov"Cle amoce cushion to refinanCethes"x coansthat nave Deen"Clent"t"ea as.0otentia€refunding- acdaies M
itate a argerfinan-cing amount.The NTE amo nt
n wo u
this negotiatea finan-cing.The NTE amount a--ommoaates a ais-count.pricini4structure with cowerinterest rates Dutwhi ucd ne-
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Co nt� finan-cing team will worK to se-cure the cowest Cost offunas,the mgnesi G'S-t a-c-commodates ootentia,variations in the refunainges--rows interest eamcngs rate.The u s
earnings rate and to maximize the aeDtservicce savings associated with the refunaings.
Notes:
Preliminary and subject to change.
SavincFs shown are net of estimated fixed Costs of Issuance of$275,000 and Underwriter's Discount of$182,900.
Based on current market estimates as of 8301/17.
Assumes a closing date of 11/16/17.
Assumes the County makes an equity contribution of$1,832,350,from budgeted debt service, at closing
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