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HomeMy WebLinkAboutAgenda 04-02-24; 6-a - Preliminary Resolution Stating an Intent to Proceed with a November 2024 Referendum on $300 Million General Obligation School Bonds 1 ORANGE COUNTY BOARD OF COMMISSIONERS ACTION AGENDA ITEM ABSTRACT Meeting Date: April 2, 2024 Action Agenda Item No. 6-a SUBJECT: Preliminary Resolution Stating an Intent to Proceed with a November 2024 Referendum on $300 Million General Obligation School Bonds DEPARTMENT: Finance and Administrative Services ATTACHMENT(S): INFORMATION CONTACT: Attachment 1. Resolution Gary Donaldson, (919) 245-2453 Attachment 2. PowerPoint Presentation Chaz Offenburg, (919) 245-2071 Robert Jessup, (919) 933-9891 PURPOSE: To consider a preliminary resolution expressing the County's intent to proceed with a voter referendum on November 5, 2024, to authorize up to $300 million of County general obligation school bonds. The resolution states the County's preliminary intent to proceed, directs County staff to proceed with an application for approval from the North Carolina Local Government Commission (LGC), and makes certain "findings of fact" requested by the LGC staff, including the need for the bonds and the expected tax rate impact. BACKGROUND: Since the presentation of the Woolpert School Facility Study in December 2023, the Board has considered at several meetings plans to respond to the funding needs described in the study and how to balance school capital needs, other County capital needs and the resources available. At the January 19, 2024 Board Retreat, the Board made the determination to start the bond authorization process based on a referendum amount of$300 million in County general obligation school bonds for both school districts. The attached resolution represents the first formal step in calling for a November 5, 2024 bond referendum. Based on revisions as noted in the Manager's Recommended FY 2024-34 Capital Investment Plan (CIP), the County's assumptions for repaying the $300 million in proposed County general obligation school bonds and related interest is estimated to have a tax rate equivalent impact of 3.41 cents per $100 of valuation, with all that increase scheduled for the County's 2025-26 Fiscal Year. The attached presentation delineates the additional CIP tax rate impacts separate from the general obligation bonds tax rate impacts. If the Board adopts the attached preliminary resolution, the Board will be asked to take additional action at subsequent meetings, currently scheduled as follows: 2 Consider the authorizing bond order on May 7, 2024 first reading and call for a required public hearing Hold public hearing June 4, 2024 Take final action on bond order on June 18, 2024 second reading In any event, the Board must complete its formal authorization process before the summer break to allow the County Board of Elections adequate time for ballot printing and other organizational matters for the referendum. If the Board adopts the preliminary resolution for$300 million in School bonds, the Board can later in the process reduce the bond amount, but the Board cannot increase the amount beyond whatever amount is included in the attached resolution (unless the process was re-started). Both the Orange County Schools and Chapel Hill — Carrboro City School Boards of Education have adopted resolutions in support of the bond referendum process. SECURITY FOR BOND REPAYMENT: A general obligation bond, as proposed, is not secured by any physical collateral. Instead, the County promises to levy property taxes in whatever amount is necessary to provide for repaying the bonds, including the interest on the money borrowed through the bonds. FINANCIAL IMPACT: If the voters approve, the bonds will provide funds for priority public school projects that would otherwise have to be paid for out of recurring revenues or borrowed through more expensive and less flexible means. County staff has worked closely with the County's financial advisers to estimate the effect on the County's tax rate that repaying the bonds is likely to have. The estimates are based on a variety of assumptions, including assumptions about when the bonds would be issued, the interest rates that the bonds will carry, the repayment period, and growth in the County's tax base over time. The estimated tax impact is likely to be different from the actual impact. Based on the County's assumptions, repaying the bonds and related interest is estimated to have a tax rate equivalent impact of 3.41 cents per $100 of valuation, with all that increase scheduled for the County's 2025-26 Fiscal Year. The County will work to minimize the tax rate impact, in a manner consistent with moving ahead with the projects and addressing other County needs. SOCIAL JUSTICE IMPACT: The following Orange County Social Justice Goal is applicable to this item: • GOAL: ENABLE FULL CIVIC PARTICIPATION Ensure that Orange County residents are able to engage government through voting and volunteering by eliminating disparities in participation and barriers to participation. 3 ENVIRONMENTAL IMPACT: The following Orange County Environmental Responsibility Goal impact is applicable to this item: • ENERGY EFFICIENCY AND WASTE REDUCTION Initiate policies and programs that: 1) conserve energy; 2) reduce resource consumption; 3) increase the use of recycled and renewable sources; and 4) minimize waste stream impacts on the environment. RECOMMENDATION(S): The Manager recommends that the Board adopt the attached resolution stating an intent to proceed with a referendum for up to $300 million in general obligation school bonds in the form presented. 4 RES-2024-018 Attachment 1 Resolution Stating Intent To Proceed with a Referendum On $300,000,000 General Obligation School Bonds Introduction -- Orange County has studied the need for capital improvements for public schools. The Board of Commissioners has received requests from the Chapel Hill - Carrboro and the Orange County School Boards to proceed with a referendum on the issuance of County general obligation bonds to provide funds for construction and improvement of school facilities. After considering the need for improvements and the alternative means of financing the required costs, the Board has made a preliminary determination to finance at least some of the costs by issuing general obligation bonds. The issuance of these bonds is subject to the approval of the County's voters at a bond referendum. This resolution is the Board's first formal step toward placing these bonds before the voters. BE IT THEREFORE RESOLVED by the Board of Commissioners of Orange County, North Carolina, that the Board makes an initial determination to proceed with a referendum on November 5, 2024, for County general obligation school bonds in the maximum amount of$300,000,000. BE IT FURTHER RESOLVED that Board makes the following findings of fact in support of its determination: (1) The proposed capital projects are necessary and expedient for the County. (2) The amount of bonds proposed is adequate and not excessive for the proposed purpose. The precise amount of bonds issued, and the projects eventually funded with bond proceeds, will depend on final project plans and costs and the evolving needs within the County. (3) The County's debt management and budgetary and fiscal management policies have been carried out consistently in accordance with the law. 5 (4) The Board projects that repaying the bonds and related interest will require a property tax increase of approximately 3.41 cents per $100 of valuation over the next three County fiscal years. The Board finds that the expected tax rate impact is reasonable under the circumstances. The actual tax effect will depend on the final amount financed, the stages in which the bonds are issued, the length of the repayment period, the actual interest rates on the bonds when sold and the growth in the County's tax base over time. The County will work to minimize the tax rate impact in a manner consistent with moving ahead with school projects and addressing other County needs. BE IT FURTHER RESOLVED, as follows: (a) The Board directs the County Manager and the Finance Officer to proceed with the authorization of the referendum, including proceeding with an application to the LGC for its approval of the proposed bonds.The Board appoints the Finance Officer as the County's authorized representative with respect to the LGC application process. (b) The Board directs the County Manager, in collaboration with the Board Clerk,to publish a notice of the County's intent to apply to the LGC for approval of the bonds. This notice must be in the form prescribed by statute and consistent with this resolution. (c) The Board authorizes all County representatives to take all further action as they may consider desirable for accomplishing the purposes and intentions of this resolution.The Board ratifies all prior actions of County representatives in this regard. This resolution takes effect immediately. - - 6 OR- -A-NGE COUNTY NORTH CAR(3LINA Preliminary Resolution for General Obligation School Bonds Board of County Commissioners Business Meeting April 2, 2024 Background 7 ■ School Capital Needs Taskforce recommended School Facility Study to prioritize both School District facilities with Facility Conditions Index as a key measure. ■ At the Board of Commissioners Retreat on January 19, 2024, the County approved moving forward with a funding plan for County and School Facility Needs. Funding for this plan includes: A $300 million General Obligation School Bond Referendum and additional Pay- Go School Funding of $100 million. Limited Obligation Bond funding for identified County Facility Needs and previously approved CIP projects. ■ New State Law requires GO Bond Ballot to include Total Debt Service (Principal and Interest) and GO Bond Tax Rate. Prior Bond Ballots had included the Principal amount. ■ Local Government Commission has reviewed the County Plan of Finance and Debt Policies with Staff, Financial Advisors and Bond Counsel to ensure compliance with the new State Law.. ■ Four separate Board Actions required from April 2 through June 4, 2024. . ORANGE COUNTY NORTH CAROLINA Total Tax-Supported Debt to Assessed Value 8 and Debt Service to General Fund Revenues Tax Rate Breakdown of Capital Improvement Plan Year Debt to AV DS to GF Tax Rate Base CIP: Revenues Equivalent 2.79¢ 2024 1.64% 13.60% - 2025 1.66% 13.09% - School Pay-Go: 2026 1.21% 12.83% 8.88� 2.680 2027 1.44% 14.18% - 2028 1.54% 14.59% - School GO Bonds: 2029 1.77% 16.79% _ - 3.410 2030 1.58% 18.34% - 2031 1.51% 19.67% - 2032 1.67% 19.01% - 2033 1.55% 19.32% - 2034 1.34% 19.89% - 2035 1.21% 18.89% - Total Impact 8.88 ORANGE COUNTY NORTH CAROLINA Annual Debt Service Payments on Existing Debt $40,000,000 $35,000,000 $30,000,000 $25,000,000 $20,004,000 $15,000,000, $10,000,000 $5,000,000 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 ■County Annual Debt Service ■Schools Annual Debt Service ■Durham Tech Annual Debt Service ORANGE COUNTY NORTH CAROLINA 10 Annual Debt Service Payments on Existing and Proposed CIP Debt $90,000,000 $80,000,000 $70,000,000 $60,000,000 $50,000,000 -- - $40,000,000 $30,000,000 $20,000,000 $10,000,000 lD 00 O N � lD 00 O N � w 00 O N lzt N N N m m m m m � qt � Ln Ln Ln O O O O O O O O O O O O O O O O N N N N N N N N N N N N N N N N Existing Debt Service _ Proposed CIP Debt Service Proposed School GO Bond Debt Service ORANGE COUNTY NORTH CAROLINA 11 Additional Sc • • l Funding FY GO Bonds Add'I School Pay-Go Total 2024 - - - 2025 - - - 2026 - 10,000,000 109000,000 2027 100,000,000 10,000,000 110,000,000 2028 - 10,000,000 10,0001000 2029 100,000,000 10,000,000 11070007000 2030 - 10,000,000 1070007000 2031 - 10,000,000 10,0007000 2032 100,0007000 10,000,000 110,0009000 2033 - 10,000,000 107000,000 2034 - 10,000,000 107000,000 2035 - 1070007000 10,000,000 Total 300,000,000 100,000,000 400,0007000 ORANGE COUNTY NORTH CAROLINA 12 General Obligation Bond North Carolina General Obligation Financing Key Provisions General Obligation Bonds - Voter Approval Required; exception for Refunding and Two-Third Bonds - Security Pledge- Full faith, credit/taxing power of the County - Maturity Term- 20 years statute permits 40 years - Senior position and takes priority to all other County Limited Obligation Bonds and Installment Notes. - Source of repayment- Property Tax - Finances-, Buildings, School Facilities and Renovations with long useful life - Ratings-Aaa/AAA/AAA by Moody's, Standard & Poor's and Fitch Ratings - LGC approval required ORANGE COUNTY NORTH CAROLINA 13 AAA GO Bond Ratings from the Three Nationally Recognized Rating Agencies ■ Orange County has maintained AAA ratings from Fitch, Moody's and Standard & Poor's the past ten years. ■ One of few counties with this distinction nation-wide. ■ AAA rating designation allows for lowest possible borrowing rates. ■ Prior three rating agencies' analyses have cited; ❖ Stable tax and economic base. ❖ Strong financial performance and financial policies. ❖ Regular monitoring of budget versus actuals with quarterly financial reporting to the Board. •'• Long-term financial modeling and proactive operating and debt management strategies. ORANGE COUNTY NORTH CAROLINA 14 GO Bond and CIP Total Tax Rates . 3.41 GO Bond Tax Rate8.88 CIP Total . 00 00 Assessed Value $100,000 $34. 10 $88.80 $200,000 $68.20 $177.60 $300,000 $102.30 $266.40 $400,000 $136.40 $355.20 $500,000 $170.50 $444.00 ORANGE COUNTY NORTH CAROLINA 15 Bond Referendum Key Dates Tentative GO Bond Plan January 19, 2024, Board Retreat (Not to Exceed Amount) Staff and Financing Team Meets with Local February 13, 2024 Government Commission on Plan of Finance Preliminary Resolution-Intent to Proceed on April 2, 2024, Business Meeting Not to Exceed $300 Million First Reading- Authorizing the Bond Order May 7, 2024, Business Meeting and Call for Public Hearing Hold Public Hearing June 4, 2024, Business Meeting Second Reading- Take Final Action on June 18, 2024, Business Meeting Bond Order Bond Education Committee Summer- Autumn 2024 Bond Referendum November 5, 2024 16 SAMPLE BALLOT Orange County School Bonds Additional property taxes may be levied on property located in Orange County in an amount sufficient to pay the principal of and interest on bonds if approved by the following ballot question. Shall the order authorizing $300,000,000 bonds plus interest to pay capital costs of providing school facilities and paying related costs and providing that additional taxes may be levied in an amount sufficient to pay the principal of and interest on the bonds, as adopted by the County's Board of Commissioners on June 4, 2024, be approved, in light of the following: (1) The estimated cumulative cost over the life of the bond, using the highest interest rate charged for similar debt over the last 20 years, would be $480,360,000. (2) The amount of property tax liability increase for each one hundred thousand dollars ($100,000) of property tax value to service the cumulative cost over the life of the bond provided above would be $34.10 per year. [ ] YES [ ] NO ORANGE COUNTY NORTH CAROLINA 17 QUESTIONS ORANGE COUNTY NORTH CAROLINA