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HomeMy WebLinkAboutAgenda - 01-18-2001-7bORANGE COUNTY BOARD OF COMMISSIONERS ACTION AGENDA ITEM ABSTRACT Meeting Date: January 18, 2001 Action Agenda Item No. 7-L SUBJECT: Public Hearing on Financing for Property Acquisition at 112 and 118 North Churton Street in Hillsborough DEPARTMENT: Finance PUBLIC HEARING: (Y/N) Yes Purchasing ATTACHMENT(S): Financing Proposal Resolution INFORMATION CONTACT: Ken Chavious 245-2453 Pam Jones 245-2652 TELEPHONE NUMBERS: Hillsborough 732-8181 Chapel Hill 968-4501 Durham 688-7331 Mebane 336-227-2031 PURPOSE: To conduct a public hearing on matters related to financing the purchase of property located at 112 and 118 North Churton Street in Hillsborough, and to take action required on such matters to facilitate the acquisition of funds. BACKGROUND: At the December 12, 2000 meeting, the Board of Commissioners approved the purchase of property that it currently leases from CCB at 112 and 118 North Churton Street, Hillsborough, contingent upon favorable results from the general building assessment and environmental analysis; and authorized the staff to pursue financing for the acquisition. Results of the environmental analysis reflected the presence of an underground storage tank (UST) behind the smaller building at 118 N. Churton Street. Initial review by the consultant showed it to contain water. Further analysis of an abandoned well on the site has prompted additional testing in order to determine the impact of the UST, however. CCB has agreed to address the removal of the tank. The County Attorney will continue dialogue with them as we review the test results associated with the well. Closing on the property would be conditioned upon the successful abandonment of the well and mitigation of any contamination resulting from the UST. The only other notable environmental issue involved asbestos containing materials in the form of floor tile and pipe wrap. The floor tiles are in good shape and pose no environmental threat. The pipes, which are wrapped with the deteriorating suspect material, are located in the basement of the smaller building and are no longer in use as part of the heating system. The pipe wrap will be removed and disposed of properly. There were no environmental issues cited in regard to the old bank building at 112 N. Churton Street. There were no notable findings as a result of the general building condition assessment at either facility. The accepted offer for both properties is $485,000. Pursuant to the Board's authorization, staff solicited Requests for Proposal (RFP) for financing this amount over a ten-year period. BUT submitted a very competitive "non-bank qualified" interest rate of 6.58%, however, the proposal was proffered prior to the recent action by the Federal Reserve to reduce interest. It is the intention of the Finance Director to seek a downward adjustment to the rate. Nonetheless, the BB&T proposal is recommended to the Board for acceptance at a rate not to exceed 6.58%. Further, the BB&T proposal provides a refinancing option at such time the County's bank qualification status changes. The recommended proposal is attached. This acquisition requires Local Government Commission (LGC) approval. Pursuant to their requirements, a public hearing is being held to receive comments on the financing of the property. Comments, along with the application and other items required for LGC review will be forwarded for their February 6, 2001 meeting. Assuming their approval is forthcoming on that date, closing on this property is anticipated by the end of February 2001. Bond Counsel has prepared a resolution providing for the acceptance of the proposal as well as the other items required for LGC approval. FINANCIAL IMPACT: BB&T submitted a 6.58% interest rate to finance the $485,000 purchase price. The LGC requires that payback be based on a level principal payment. While this will decrease the overall cost of financing from that which as projected for the Board originally, it will increase the annual debt service payments in the front months of the loan. Pursuant to the attached amortization schedule, annual payments will range from a high of $78,000 in the first year to a low of $52,000 in the last year. As a point of comparison, the 10-year lease cost to the County would have been at least $615,000 (not including any inflation escalation), the 10-year debt payback payments will total $648,554, which essentially indicates that the additional cash required over 10 years in order to own the buildings is less than $33,000. The County currently pays approximately $61,500 in rent on the facilities, which will be reallocated to offset the annual debt service payment. Additional funds needed to support the annual debt payment will be provided through the Capital Investment Plan. RECOMMENDATION(S): The Manager recommends that the Board conduct the public hearing and adopt the resolution authorizing staff to proceed. BB&T December 29, 2000 Mr. Kenneth T. Chavious Finance Director Orange County PO Box 8181 Hillsborough, NC 27278 Dear Ken: Governmental Finance 3605 Glenwood Avenue, Suite 130 Raleigh, NC 27612 (919) 716-9880 Fax(919)716-9871 Branch Banking and Trust Company ("BB&T") is pleased to offer this proposal for the financing requested by Orange County (the "County"). (1) Project: Acquisition of two (2) buildings for the Clerk of Courts and Veteran Affairs (2) Amount To Be Financed: $485,000.00 (3) Interest Rates, Financing Terms and Corresponding Payments: Term Rate 10 years 6.58%* * In 2002, if the County is bank qualified, the interest rate may be negotiated to a lower bank qualified rate in order to reduce the County's interest expense. Payments shall be quarterly in arrears. See the attached amortization schedules for information on payments. The interest rate stated above is valid for a closing not later than 45 days after today. Closing of the financing is contingent upon completing documentation acceptable to BB&T and upon the title and condition of the property being acceptable to BB&T. We would also like to review your most recent financial statements before funding this transaction. Our fee for providing the financing and preparing documentation shall be one percent of the amount financed. All applicable taxes, surveys, permits, costs of environmental studies, title insurance premiums, LGC approval fees, costs of lawyers for the County and any other costs will be the County's responsibility and separately payable by the County. The financing documents will allow prepayment of the principal balance in whole at any payment date with a one percent prepayment premium. 4 The stated interest rate assumes that the County expects to borrow more than $10,000,000 in calendar year 2000 and that the financing will qualify as qualified tax-exempt financing under the Internal Revenue Code. BB&T reserves the right to terminate its interest in this bid or to negotiate a mutually acceptable rate if the financing is not qualified tax-exempt financing. (4) Security: This financing will be secured by a first lien security interest on (a) all personal property acquired with financing proceeds, (b) all improvements to real estate that are constructed or improved with financing proceeds, and all associated real estate, and (c) all real estate acquired with financing proceeds. (5) Financing Documents: BB&T proposes to use its standard form financing contracts and related documents for this installment financing. We will provide a sample of those documents to you should BB&T be the successful proposer. BB&T appreciates the opportunity to make this financing proposal and requests to be notified within five days of this proposal should BB&T be the successful proposer. BB&T shall have the right to cancel this offer by notifying the County of its election to do so (whether or not this offer has previously been accepted by the County) if at any time prior to the closing there is a material adverse change in the County's financial condition, if we discover adverse circumstances of which we are currently unaware, if we are unable to agree on acceptable documentation with the County or if there is a change in law (or proposed change in law) that changes the economic effect of this financing to BB&T. We reserve the right to negotiate and/or terminate our interest in this transaction should we be the successful proposer. We have attached the form of a resolution that your governing board can use to award the financing to BB&T should we be the successful proposer. If your board adopts this resolution, then BB&T will not require any further board action prior to closing the transaction. Please call me at (919) 716-9880 with your questions and comments. We look forward to hearing from you. 0009 ; l aul G. Glenn Vice President 12/29/2000 Orange County Compound Period .........: Quarterly Nominal Annual Rate ....: 6.580 % CASH FLOW DATA Event Start Date Amount Number Period End Date 1 Loan 02/15/2001 485,000.00 1 2 Payment 05/15/2001 12,125.00 40 Quarterly 02/15/2011 Fixed Payment (+ Interest) AMORTIZATION SCHEDULE - Normal Amortization, 360 Day Year Date Payment Interest Principal Balance Loan 02/15/2001 485,000.00 1 05/15/2001 20,103.25 7,978.25 12,125.00 472,875.00 2001 Totals 20,103.25 7,978-25 12,125.00 2 08/15/2001 19,903.79 7,778.79 12,125.00 460,750.00 3 11/15/2001 19,704.34 7,579.34 12,125.00 448,625.00 4 02/15/2002 19,504.88 7,379.88 12,125.00 436,500.00 5 05/15/2002 19,305.43 7,180.43 12,125.00 424,375.00 2002 Totals 78,418.44 29,918.44 48,500.00 6 08/15/2002 19,105.97 6,980.97 12,125.00 412,250.00 7 11/15/2002 18,906.51 6,781.51 12,125.00 400,125.00 8 02/15/2003 18,707.06 6,582.06 12,125.00 388,000.00 9 05115/2003 18,507.60 6,382.60 12,125.00 375,875.00 2003 Totals 75,227.14 26,727.14 48,500.00 10 08/15/2003 18,308.14 6,183.14 12,125.00 363,750.00 11 11/15/2003 18,108.69 5,983.69 12,125.00 351,625.00 12 02/15/2004 17,909.23 5,784.23 12,125.00 339,500-00 13 05/15/2004 17,709.78 5,584.78 12,125.00 327,375.00 2004 Totals 72,035.84 23,535.84 48,500.00 14 08/15/2004 17,510.32 5,385.32 12,125.00 315,250.00 15 11/15/2004 17,310.86 5,185.86 12,125.00 303,125.00 16 02115/2005 17,111.41 4,986.41 12,125.00 291,000.00 17 05/15/2005 16,911.95 4,786.95 12,125.00 278,875.00 2005 Totals 68,844.54 20,344.54 48,500.00 18 08/15/2005 16,712.49 4,587.49 12,125.00 266,750.00 19 11/15/2005 16,513.04 4,388.04 12,125.00 254,625.00 20 02/15/2006 16,313.58 4,168.58 12,125.00 242,500.00 21 05/15/2006 16,114.13 3,989.13 12,125.00 230,375.00 2006 Totals 65,653.24 17,153.24 48,500.00 12/29/2000 Orange County ^ ~ _. Date Payment Interest Principal Balance 22 08/15/2006 15,914.67 3,789.67 12,125.00 218,250.00 23 11/15/2006 15, 715.21 3,590.21 12,125.00 206,125.00 24 02/15/2007 15,515.76 3,390.76 12,125.00 194,000.00 25 05/15/2007 15,316.30 3,191.30 12,125.00 181,875.00 2007 Totals 62,461.94 13,961.94 48,500.00 26 08/15/2007. 15,116.84 2,991.84 12,125.00 169,750-00 27 11/15/2007 14,917.39 2,792.39 12,125.00 157,625.00 28 02/15/2008 14,717.93 2,592.93 12,125.00 145,500.00 29 05/15/2008 14,518.48 2,393.48 12,125.00 133,375.00 2008 Totals 59,270.64 10,770.64 48,500.00 30 08/15/2008 14,319-02 2,194.02 12,125.00 121,250-00 31 11115/2008 14,119.56 1,994.66 12,125.00 109,125.00 32 02/15/2009 13,920.11 1,795.11 12,125.00 97,000.00 33 05/15/2009 13,720.65 1,595.65 12,125.00 84,875.00 2009 Totals 56,079.34 7,579.34 48,500.00 34 08/15/2009 13,521-19 1,39619 12,125.00 72,750-00 35 11/16/2009 13, 321.74 1,196.74 12,125.00 60, 625.00 36 02/1512010 13,122.28 997:28 12,125.00 48,500.00 37 05/15/2010 12,922.83 797.83 12,125.00 36,375.00 2010 Totals 52,888.04 4,388.04 48,500.00 38 08/15/2010 12,723.37 598.37 12,125.00 24,250.00 39 11/15/2010 12,523.91 398.91 12,125.00. 12,125.00 40 02/15/2011 12,324.46 199.46 12,125.00 0.00 2011 Totals 37,571.74 1,196.74 36,375.00 Grand Totals 648,554.15 163,554.15 485,000.00 i ORANGE COUNTY BOARD OF COMMISSIONERS 7 Resolution making findings of fact and authorizing the filing of an application with the Local Government Commission for its approval of a financing agreement authorized by Section 160A-20 of the North Carolina General Statutes - Orange County Churton Street Building Acquisitions WHEREAS, the Board of Commissioners of Orange County has previously approved in principle a project to finance the acquisition of two buildings and associated property, specifically the old Hillsborough Savings Bank building at 112 North Churton Street and the Graham Building at 118 North Churton Street in Hillsborough; and WHEREAS, the County desires to finance an amount not to exceed $500,000 for the project by the use of an installment contract, as authorized under Section 160A-20 of the North Carolina General Statutes; and WHEREAS, the County's undertaking of the financing was the subject of a public hearing held earlier this evening on January 18, 2001; and WHEREAS, under the guidelines of the North Carolina Local Government Commission (the "LGC"), this governing body must make certain findings of fact to support the County's application for the LGC's approval of the County's proposed financing arrangements for the project; NOW, THEREFORE, BE IT RESOLVED that the Board of Commissioners of the Orange County, North Carolina, makes the following findings of fact: 1. The proposed project is necessary and appropriate for the County under all the circumstances. The County is currently leasing these buildings from the owner, and the current owner is seeking to sell the buildings. The County would find it difficult to replace the space at comparable rents, and there is no assurance that a new owner would continue to lease the space to the County. In addition, the County expects the financing payments to be at least comparable to the rent the County is now paying. 2. The proposed installment financing is preferable to a bond issue for the same purpose. The County has no ability to issue two-thirds bonds for this project. The County is currently considering the possibility of a conducting a multi-purpose bond referendum, but the small amount to be financed, the availability of relatively low-cost installment financing and the need to act on the owner's timetable makes it desirable to proceed now with an installment financing. 3. The sums to fall due under the contract are adequate and not excessive for the proposed purpose. The County has negotiated the purchase price for the building with the owner, and has solicited competitive proposals for the financing. s 4. As previously reported to the Board by the 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 increases in taxes necessary to meet debt obligations under the proposed financing arrangements. The County expects that given the amount to be financed, the interest rates to be payable by the County on the proposed financing and the expected term of the financing, the County will be able to repay the financing within current resources. 6. The County Attorney is of the opinion that the proposed project is authorized by law and is a purpose for which public funds of the County may be expended pursuant to the Constitution and laws of North Carolina. BE IT FURTHER RESOLVED that all actions of the Finance Officer in filing an application with the LGC for its required approval of the project and the proposed financing arrangements are authorized, ratified and approved. BE IT FURTHER RESOLVED as follows: (a) The County determines to finance the Project through Branch Banking and Trust Company (the "Bank") in accordance with a proposal submitted by the Bank. The amount financed shall not exceed $500,000, the annual interest rate (in the absence of default or a loss of tax-exempt status) shall not exceed 6.58%, and the financing term shall not exceed ten years from closing. (b) All financing contracts and all related documents for the closing of the financing (the "Financing Documents") shall be in such forms as the Bank may, request and as are acceptable to the Finance Officer. The County Manager, the Finance Officer and all other County officers and employees are authorized and directed to execute and deliver any Financing Documents, and to take all such further action as they may consider necessary or desirable, to carry out the financing as contemplated by this resolution. _ (c) All prior actions of County officers in furtherance of the purposes of this resolution are ratified, approved and confirmed. All other resolutions (or parts thereof) in conflict with this resolution are repealed, to the extent of the conflict. This resolution shall take effect immediately. This the 18`" day of January, 2001.