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HomeMy WebLinkAboutAgenda 09-17-19 Item 5-a - Public Hearing on Refinancing Existing Loan Obligations 1 ORANGE COUNTY BOARD OF COMMISSIONERS ACTION AGENDA ITEM ABSTRACT Meeting Date: September 17, 2019 Action Agenda Item No. 5-a SUBJECT: Public Hearing on Refinancing Existing Bond 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 Attachment 4. PowerPoint PURPOSE: To conduct a public hearing on the issuance of up to $24 million to refinance existing debt to achieve 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 $24 million in Limited Obligation Bonds. Although the Refinancing Summary (Attachment 3) currently identifies a principal amount to be refinanced of $16.6 million, the actual amount to be refinanced is contingent on prevailing market conditions at the time of market pricing. The Not to Exceed amount provides sufficient pricing considerations and flexibility for the financing team as it works to secure the lowest interest costs and maximize debt service savings. 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 1, 2019 BOCC meeting. A copy of the published notice of this hearing is provided as Attachment 1. North Carolina General 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. 2 The refinancing of existing installment bond 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. Five Refunding Bond Opportunities Original Current Market Interest Rates Interest Rates 2010 General Obligation Bonds 3.49% 1.91% 2012 Installment Financing 2.45% 1.65% 2013 Installment Financing 2.13% 1.34% 2016 Installment Financing Draw 2 2.55% 1.44% 2016 Installment Financing Draw 1 2.30% 1.59% FINANCIAL IMPACT: There is no financial impact related to conducting the public hearing and considering the resolution. 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 $649,464 based on current market estimates as of August 28, 2019. The net present value savings represents 3.90% of the refunded bonds. SOCIAL JUSTICE IMPACT: The following Orange County Social Justice Goal is applicable to this 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. ENVIRONMENTAL IMPACT: There is no Orange County Environmental Responsibility Goal impact associated with this item. 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. 3 Attachment 1 Orange County, North Carolina -- Notice of Public Hearing Refinancing of Various Existing County Financing Obligations The Board of Commissioners of Orange County, North Carolina, will hold a public hearing on Tuesday, September 17, 2019, 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 expected as not exceed $24,000,000 to refinance existing financing obligations and to pay related financing costs. The hearing will be held in the Commissioners' usual meeting room in the County's 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 County expects the refinancings will be combined with a new County financing contract for additional public assets and improvements. The County will secure its obligation to repay its financing obligations by granting a mortgage-like lien on some or all of the property purchased, improved or refinanced under the combined new contract, as well as the County's promise to repay the financing. There will be no recourse against the County or any of its property (other than the pledged property), however, if the County were to default on the financing. The County expects that the collateral for the financing will include property in the County's planned "northern campus" off Highway 70 just north of Hillsborough (including the site of the planned new jail) and portions of the County's "southern campus" off Homestead Road in Chapel Hill, along with other properties that have been previously pledged to other related County financings. 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. 4 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@ orange countync.gov). RES-2019-057 Attachment 2 5 s*h draft of August 26 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, general obligation bonds and other loans. 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. The County expects the refinancings will be combined into a single County financing contract with another County financing for new public assets and improvements. 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 $24,000,000 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 $24,000,000. 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 County expects that the collateral for the financing will include property in the County's planned "northern campus" off Highway 70 just north of Hillsborough (including the site of the planned new jail) and portions of the 6 County's "southern campus" off Homestead Road in Chapel Hill, along with other properties that have been previously pledged to other related County 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 is appropriate for the County under all the circumstances. (2) The proposed installment financing is preferable to a bond issue for the same purposes. Some of the obligations to be refinanced are also installment financings, so it makes sense to use the same vehicle for the refinancing. As the County is already planning a substantial installment financing for new public assets and improvements, combining the refinancings into the same overall financing package will be convenient and cost-effective. (3) The estimated sums to fall due under the proposed financing contract are adequate and not excessive for the proposed purpose. 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. 7 Orange County,NC Summary of Potential Refunding Opportunities Preliminary-Rates as of 8/28/2019 Tax Status Tax-Exempt Tax-Exempt Tax-Exempt Tax-Exempt Tax-Exempt Refunding Type Current Refunding Current Refunding Current Refunding Current Refunding Current Refunding 1 Summary of Bonds Refunded: 1 Maturities 2/1/2021-2/1/2022 5/1/2020-5/1/2022 6/1/2020-6/1/2028 5/1/2020-5/1/2031 5/1/2020-5/1/2023 2 Refunded Bonds $4,790,000.00 $1,225,886.50 $4,304,000.00 $4,696,000.00 $1,344,000.00 3 Refunded Bonds Call Date 11/5/2019 11/5/2019 11/5/2019 11/5/2019 11/5/2019 4 Average Coupon of Refunded Bonds 3.4910/ 2.4551/. 2.1300/ 2.5509/ 2.3000/, 5 6 7 Par Amount $4,575,000.00 $915,000.00 $3,260,000.00 $3,515,000.00 $940,000.00 8 Premium 230,318.70 218,873.65 573,778.85 772,079.25 72,774.40 9 Equity Contribution 87,075.00 102,611.08 548,675.20 451,874.00 339,456.00 10 Total Sources $4,892,393.70 $1,236,484.73 $4,382,454.05 $4,738,953.25 $1,352,230.40 11 12 13 Refunding Escrow Deposits $4,835,472.50 $1,226,220.89 $4,343,216.61 $4,697,330.53 $1,344,343.47 14 Cost of Issuance 34,010.66 6,802.13 24,234.92 26,130.59 6,987.98 15 Underwriter's Discount 20,632.56 4,126.51 14,702.11 15,852.12 4,239.26 16 Additional Proceeds 2,277.98 -664.80 300.41 -359.99 -3,340.31 17 Total Uses $4,892,393.70 $1,236,484.73 $4,382,454.05 $4,738,953.25 $1,352,230.40 18 19 Bond Statistics: 20 All-In True Interest Cost 1.913% 1.647% 1.3430A 1.442% 1.5930/. 21 True Interest Cost 1.342% 1.553% 1.195% 1.331% 1.228% 22 Arbitrage Yield 1.478% 1.478% 1.478% 1.478% 1.478% 23 Average Life(Years) 1.273 7.332 4.680 6.194 1.969 24 25 Refunding Statistics: 26 Escrow Yield 1.4360/ 1.436% 1.4360A 1.436% 1.4360/. 27 Negative Arbitrage - - - - - 28 Gross Savings $150,354.17 $83,541.19 $197,810.34 $358,554.61 $34,726.89 29 NPV Savings($) $126,252.72 $65,729.18 $146,212.46 $291,681.37 $19,590.01 30 NPV Savings(%of Refunded Par) 2.6360/ 5.362% 3.3970A 6.211% 1.4580/. 31 32 FY Cash Flow Savings: 33 6/1/2021 75,004.17 $7,329.99 $22,335.54 $30,475.61 $16,398.89 34 6/1/2022 75,350.00 6,484.48 25,475.50 35,006.00 10,824.00 35 6/1/2023 - 7,584.80 24,653.40 30,260.00 7,504.00 36 6/1/2024 - 8,685.12 25,474.80 34,764.00 - 37 6/1/2025 4,910.44 26,918.40 30,543.50 38 6/1/2026 6,260.76 23,109.20 31,698.00 39 6/1/2027 7,611.08 26,068.50 33,102.50 40 6/1/2028 - 4,086.40 23,775.00 34,757.00 - 41 6/1/2029 7,287.04 - 31,786.50 42 6/1/2030 4,012.36 34,191.00 43 6/1/2031 5,862.68 31,970.50 44 6/1/2032 - 7,713.02 - - - 45 6/1/2033 - 5,713.02 - - 46 Total Cash Flow Savings: $ 150,354.17 $ 83,541.19 $ 197,810.34 $ 358,554.61 $ 34,726.89 Prepared by Davenport&Company LLC 9/5/2019 8 The U.S.Securities and Exchange Commission (the "SEC") has clarified that a broker, dealer or municipal securities dealer engaging in municipal advisory activities outside the scope of underwriting a particular issuance of municipal securities should be subject to municipal advisor registration. 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Version 01.13.14 1 BD CB MB TC 9 ORANGE COUNTY NORTH CAROLINA FY 2019=20 Refinancing Various Bond Obligations Gary Donaldson, Chief Financial Officer September 17, 2019 10 Public Hearirom Ourp oo- ➢ Board Approval for FY 2019-20 Installment Purchase Financing as authorized under Section 160A-20 of North Carolina General Statutes ➢ Not to exceed $24,000,000 in Bonds to refinance existing debt and achieve estimated County savings of $649,464 through final maturity ➢ Approve Resolution supporting Limited Obligation Bond application to the Local Government Commission ORANGE COUNTY NORTH CAROLINA g 11 Refinancin Terms ➢ Security Pledge- Annual Appropriations and County collateral of Southern Campus, Seymour Center and Northern Campus Site added to Master Deed of Trust ➢ No extension of Loan Maturities; Final Maturity June 1 , 2030 ➢ Net Present Value Savings- 3.9% which exceeds the County's 3% Policy ➢ Source of Repayment- Property Taxes ➢ Subordinate Lien to General Obligation Bonds ➢ Current and Projected Ratings- Aa1/AA+/AA+ from Moody's, Standard & Poor's and Fitch Ratings ➢ LGC Approval required ORANGE COUNTY NORTH CAROLINA Interest Rates Savings 12 Series of Bonds Original Interest Rates Current Interest Rates Series 2010 GO Bonds 3.49% 1 .91 % Series 2012 Installment 2.45% 1 .65% Financing Series 2013 Installment 2. 13% 1 .34% Financing Series 2016 Installment 2.55% 1 .44% Financing Draw 2 Series 2016 Installment 2.30% 1 .59% Financing Draw 1 Estimated County savings of $649,464 through final maturity ORANGE COUNTY NORTH CAROLINA 13 Five RefundingOpportunitiesBond Tax Status Tax-Exempt Tax-Exempt Tax-Exempt Tax-Exempt Tax-Exempt Refunding Type Current Refunding Current Refunding Current Refunding Current Refunding Current Refunding Summary of Bonds Maturities 2/1/2021-2/1/2022 5/1/2020-5/1/2022 6/9/2020-6/9/2028 5/1/2020-5/1/2031 5/1/2020-5/1/2023 Refunded Bonds $4,790,000-00 $1,225,886.50 $4,304,000-00 $4,696,000.00 $1,344,000.00 Refunded Bonds Call Date 11/5/2019 19/5/2019 11/5/2019 11/5/2019 L1/5/2019 Average Coupon of Refunded Bonds 3.491% 2.455% 2.130% 2.550% 2.300% Par Amount $4,575,000-00 $915,Q00.00 $3,26Q000.Q0 $3,515,00Q.00 $940.000_00 Premium 230,318-70 218,873.65 573,778.85 772,07925 72,774.40 Equity Contribution 87,075-00 102,61L08 548,67520 451,874-00 339,456.00 Total Sources $4,892,393.70 $1,236,484.73 $4,382,454-05 $4,738,953.25 $1,352,230.40 Refunding Escrow Deposits $4,835,472.50 $1,226,220.89 $4,343,216.61 $4,697,330.53 $1,344,343.47 Cost of Issuance 34,010-66 6,802.13 24,234.92 2Q130.59 6,987.98 Underwriter's Discount 20,632-56 4,126 51 14,702-11 15,852.12 4,239.26 Additional Proceeds 2,277.98 -664.80 300.41 -359.99 -3,340.31 Total Uses $4,892,393.70 $1,236,484.73 $4,382.454-05 $4,738,953.25 $1,352.230-40 Bond Statistics- All-in True Interest Cost 1.913% 1.647% L343% 1.442% 1.593% i ORANGE COUNTY NORTH CAROLINA 14 Financing Calendar August 28 Public Hearing Notice Advertisement in Herald-Sun and News of Orange September 17 Public Hearing and Board Action Adopting Resolution Supporting LGC Application September County Submits LGC Application and Credit Reviews October 1 LGC Approves Refinancing October 1 Board Action Adopting Final Resolution and refinancing terms November Refinancing Bond Closing UKANC.31: C.:UUN I Y NORTH CAROLINA 15 Questions/Comments ORANGE COUNTY