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HomeMy WebLinkAboutAgenda - 10-17-2017 - 8-d - Resolution to Refinance Existing Loan Obligations 1 ORANGE COUNTY BOARD OF COMMISSIONERS ACTION AGENDA ITEM ABSTRACT Meeting Date: October 17, 2017 Action Agenda Item No. 8-d SUBJECT: Resolution to Refinance Existing Loan Obligations DEPARTMENT: Finance and Administrative Services ATTACHMENT(S): INFORMATION CONTACT: Attachment 1: Resolution Gary Donaldson, (919) 245-2453 Paul Laughton, (919) 245-2152 Bob Jessup, (919) 933-9891 PURPOSE: To consider a resolution giving final approval for the County to issue Limited Obligation Bonds (LOB) of up to $51,000,000 to refinance existing loans, and achieve debt service savings. BACKGROUND: On September 19, 2017 the Board held a public hearing and adopted a resolution giving preliminary approval to issuing limited obligation bonds (LOBs) to refund a variety of existing County loan obligations. The Local Government Commission has approved the financing and the financing plan and documents have been further developed, and the Board needs to consider the accompanying resolution to give final approval to the financing plan and substantially final documents. 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. The refinancing of existing installment loan obligations is 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. This resolution accomplishes the following: 1. Formally authorizes the sale of up to $51,000,000 in limited obligation bonds to refinance existing obligations; 2. Formally approves the use of Morris Grove School and the West Campus office building as collateral for the loan; 2 3. Approves the forms of the various financing documents, including the "official statement" that will be used to provide information to prospective bond investors (copies of all draft documents are available on request from the Finance Office); 4. States the County's agreement to comply with the relevant provisions of federal tax law; and 5. Authorizes County staff to complete the process of issuing the bonds, and approves the steps to that end previously taken. This includes authorizing the Finance Officer to determine the final amount of the bond issue and the final principal payment schedule, to make the final call for redemption on the old financings, and generally to take all appropriate action to close these bonds and refund the old bonds. The actual interest rates on the bonds will be set on November 2, and the closing on the bonds is scheduled for November 16. Bonds Refunded Original Current Market Interest Rates Interest Rates 2006 Installment Financing 2.13% 1.65% 2011 Limited Obligation Bonds 5.00% 2.08% 2012 Limited Obligation Bonds 3.25%-5.00% 2.65% 2013 Installment Financing Draw 2 2.13% 2.05% 2016 Installment Financing Draw 1 2.30% 1.68% 2016 Installment Financing Draw 2 2.55% 2.37% FINANCIAL IMPACT: A preliminary estimate of the net present value savings through final loan maturity is $1,745,000 based on current market estimates as of October 3, 2017. The net present value savings represents 4.16% 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 of County Commissioners adopt the final resolution supporting the refinancing of the County's existing Limited Obligation Bonds. 3 RES-2017-069 s*h draft of October 2 Resolution providing final approval of terms and documents for 2017 County installment financing WHEREAS-- The Board of Commissioners has previously determined to refinance certain County obligations to achieve savings through lower interest rates. Exhibit A describes some of the existing County obligations being considered for refinancing. The Board has made a tentative determination to carry out the refinancing using a new installment financing, as authorized under Section 160A-20 of the North Carolina General Statutes. This financing plan also includes the use of limited obligation bonds, which represent interests in the installment payments to be made by the County that can be sold to investors. The County staff has made available to the Board the draft documents listed on Exhibit B (the "Documents"), and a draft of an official statement designed to provide information about the County and the financing to prospective investors in the bonds. These items relate to the County's carrying out the financing plan. This resolution provides the County Board's final approval of the financing terms and the substantially final financing documents. BE IT THEREFORE RESOLVED by the Board of Commissioners of Orange County, North Carolina, as follows: 1. Determination To Proceed with Financing -- The Board confirms its decision to carry out the proposed installment financing as described above. As part of this financing, the County will refinance those obligations as shown on Exhibit A as the Finance Officer may determine. Under the financing plan, the County will receive funds from the sale of the limited obligation bonds to carry out the refinancing. The County will repay the funds over time, with interest. The County will secure its repayment obligation by 4 granting a mortgage-like interest in the property of Morris Grove Elementary School and the County office building on West Margaret Lane in Hillsborough. 2. Approval of Documents; Direction To Execute Documents -- The Board approves the forms of the Documents submitted to this meeting. The Board authorizes the Chair and the County Manager, or either of them, to execute and deliver those Documents to which the County is a party. The Documents in their respective final forms must be in substantially the forms presented, with changes as the Chair or the County Manager may approve. The execution and delivery of any Document by an authorized County officer will be conclusive evidence of that officer's approval of any changes. The Documents in final form, however, must provide for the principal amount of limited obligation bonds to not exceed $51,000,000, a true interest cost of the financing not to exceed , and a financing term not to extend beyond December 31, 20 (and not extending beyond the latest bond payment date of any of the obligations refinanced). The amount financed under the Documents may include amounts to pay financing expenses and other necessary and incidental costs. 3. Sale of Bonds; Approval of Official Statement - The Board appoints Robert W. Baird & Co. to underwrite a public offering of the proposed limited obligation bonds. The Board approves the draft official statement submitted to this meeting as the form of the preliminary official statement pursuant to which the underwriter will offer the bonds for sale. The preliminary official statement as distributed to prospective investors must be in substantially the form presented, with such changes as the Finance Officer may approve. The Board directs the Finance Officer, after the sale of the bonds, to complete and otherwise prepare the preliminary official statement as an official statement in final form. The Board authorizes the use of the preliminary official statement and the final official statement (collectively, the "Official Statement") by the underwriter in connection with the sale of the bonds. The Board acknowledges that it is the County's responsibility, and ultimately the Board's responsibility, to ensure that the Official Statement in its final form neither contains an untrue statement of a material fact nor omits to state a material 2 5 fact required to be included therein for the purpose for which such Official Statement is to be used or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. 4. Call of Existing Obligations for Prepayment -- The Board authorizes the Finance Officer to make, on the County's behalf, an irrevocable call for redemption or prepayment of such of the obligations shown on Exhibit A as the Finance Officer deems beneficial to the County. The Finance Officer will make this call for redemption by the execution and delivery of an appropriate certificate in connection with the original delivery of the planned limited obligation bonds. 5. Officers To Complete Closing - The County Manager, the Finance Officer and all other County officers and employees are authorized to take all proper steps to complete the financing in accordance with the terms of this resolution. The Board authorizes the County Manager to hold executed copies of all financing documents authorized by this resolution in escrow on the County's behalf until the conditions for their delivery have been completed to her satisfaction, and then to release the executed documents for delivery to the appropriate persons or organizations. Without limiting the generality of the previous paragraphs, the Board specifically authorizes the County Manager (a) to approve and enter into, on behalf of the County, any additional agreements appropriate to carry out the financing plan contemplated by this resolution, and (b) to approve changes to any documents previously signed by County officers or employees, provided that the changes do not substantially alter the intent from that expressed in the form originally signed. The County Manager's authorization of the release of any document for delivery will constitute conclusive evidence of her approval of any changes. In addition, the County Manager and the Finance Officer are authorized to take all appropriate steps for the efficient and convenient carrying out of the County's on- going responsibilities with respect to the financing. This authorization includes, without limitation, contracting with third parties for reports and calculations that may be required under the Documents, this resolution or otherwise with respect to the bonds. 3 6 6. Other Financing Participants - Sanford Holshouser LLP will serve as the County's bond counsel. Davenport & Company LLC, will serve as the County's financial adviser. The Bank of New York Mellon Trust Company, N.A., will serve as Trustee under the Trust Agreement and Escrow Agent under the Escrow Agreement. Bingham Arbitrage Rebate Services, Inc. will serve as the agent to verify mathematical calculations in support of the County's refunding program. The Board authorizes the Finance Officer to appoint one or more co-managing underwriters for the sale of the proposed bonds if the Finance Officer believes that appointment would be in the County's best interest. 7. Miscellaneous Provisions - The Board authorizes all County officers and employees to take all further action as they may consider desirable to carry out the purposes of this resolution. In particular, the Board directs the Clerk to this Board to apply the County's seal to the final form Documents, and to attest to the application of the seal. The Board ratifies all prior actions of County officers and employees to this end. Upon the unavailability or refusal to act of the County Manager, the Chair or the Finance Officer, any other of those officers may assume any responsibility or carry out any function assigned in this resolution. In addition, the Vice Chair or any Deputy or Assistant Clerk may carry out or exercise any rights or responsibilities assigned in this resolution to the Chair or the Clerk. The Board repeals all other Board proceedings, or parts of proceedings, in conflict with this resolution, to the extent of the conflict. This resolution takes effect immediately. 4 7 Exhibit A - Candidates for Refinancing 2006 Financing - the outstanding balance ($3,000,000) of the County's 2006 installment financing contract. This loan helped finance Carrboro High School. 2011 LOBs - a portion of the bonds from the County's 2011 Limited Obligation Bond issue that may be prepaid. There are $14,750,000 of those bonds. The 2011 LOBs helped refinance an earlier loan that, among other purposes, Morris Grove Elementary School and improvements to the County justice facility. 2012 LOBs - the bonds from the County's 2012 Limited Obligation Bond issue that may be prepaid. There are $11,545,000 of those bonds. The 2012 LOBs helped finance Northside Elementary School, the new County library in Hillsborough, the County office building on West Margaret Lane in Hillsborough and a variety of other County projects. 2013 Financing - $5,202,000 of the amount outstanding under the County's 2013 installment financing contract (this portion bears interest at a rate higher than the balance of this loan). This loan helped finance a wide variety of County projects, including utility improvements in the Buckhorn Economic Development District. 2016 Financing - the outstanding balance ($7,453,000) of the County's 2006 installment financing contract. This loan helped finance improvements to Grady Brown school and a variety of other school and County improvements. 5 8 Exhibit B -- Draft Documents (a) A draft dated October 2, 2017, of a Supplemental Installment Financing Contract to be dated on or about November 1, 2017 (the "Financing Contract"), between the County and Orange County Public Facilities Company (the "Company), providing for the advance of funds to the County, for the County's obligation to repay the amounts advanced, and for the County's responsibilities for the use and care of the collateral. (b) A draft dated October 2, 2017, of a Deed of Trust and Security Agreement to be dated on or about November 1, 2017, from the County to a deed of trust trustee for the Company's benefit, providing for a security interest in property to secure the County's obligations under the Financing Contract. The County expects the security will consist of Morris Grove Elementary School and the County office building on West Margaret Lane in Hillsborough. (c) A draft dated October 2, 2017, of a First Supplemental Trust Agreement to be dated on or about November 1, 2017, between the Company and a Trustee, providing for the issuance of limited obligation bonds to generate funds for the advance to the County under the Financing Contract. The bonds are payable from amounts paid by the County under the Financing Contract. (d) A draft dated October 2, 2017, of an Escrow Agreement to be dated on or about November 1, 2017, between the County and the Trustee, providing for the safekeeping and investment of bond proceeds until the proceeds can be applied to the payment of existing obligations. (e) A draft of a Bond Purchase Agreement to be dated on or about November 2, 2017, providing for the underwriter's obligation to purchase the bonds. The final form of this Agreement will set out the final principal amount, principal payment schedule and interest rates for the bonds, and the other terms and conditions for the underwriter's obligation to purchase the bonds. 6