HomeMy WebLinkAboutAgenda 05-07-24; 6-a - Introduction of Bond Order Authorizing $300 Million General Obligation School Bonds, Subject to Voter Approval (First Reading), and Scheduling of a Related Public Hearing 1
ORANGE COUNTY
BOARD OF COMMISSIONERS
ACTION AGENDA ITEM ABSTRACT
Meeting Date: May 7, 2024
Action Agenda
Item No. 6-a
SUBJECT: Introduction of Bond Order Authorizing $300 Million General Obligation School
Bonds, Subject to Voter Approval (First Reading), and Scheduling of a Related
Public Hearing
DEPARTMENT: Finance and Administrative
Services
ATTACHMENT(S): INFORMATION CONTACT:
Attachment 1. Bond Order and Resolution Gary Donaldson, (919) 245-2453
Attachment 2. Presentation Chaz Offenburg, (919) 245-2071
Robert Jessup, (919) 933-9891
PURPOSE: To consider the introduction of a Bond Order authorizing $300 Million General
Obligation School Bonds, subject to voter approval and subsequent Board approval, and the
scheduling of a related public hearing. The Bond Order is the basic Board proceeding that
authorizes general obligation bonds, subject to voter approval. The Bond Order must come before
the Board twice, once for the "introduction" (this meeting), and then later for adoption (scheduled
for June 18, 2024). The Board must hold a public hearing before final adoption of the Bond Order.
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.
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 of that increase scheduled for the County's 2025-26
Fiscal Year.
At the Board's April 2, 2024 Business meeting, the Board adopted a preliminary resolution stating
its intent to apply to the North Carolina Local Government Commission (LGC) for the approval of
the bonds (the LGC is a division of the State Treasurer's office that must approve substantially all
local government borrowing). The County has published a notice of this intent as required by law,
and the LGC has accepted the County's application.
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If the Board proceeds to introduce the Bond Order tonight, the Board will be asked to take
additional action at subsequent meetings, currently scheduled as follows:
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 a November 2024 referendum.
Along with the introduction of the Bond Order, the Board is asked to consider the attached
resolution calling for the required public hearing on June 4, 2024 and directing staff to take related
action.
At this point, the Board can reduce the bond amount, but the Board cannot increase the amount
unless the County re-starts the process.
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 in the proposed November 2024 referendum, the
bonds will provide funds for priority public school projects that would otherwise have to be paid
from 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.
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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 (1) approve the introduction
of the Bond Order for up to $300 million in general obligation school bonds in the form presented;
and (2) adopt the resolution calling for a public hearing and directing staff to take related actions,
again in the form presented.
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Attachment ]
Proposed Bond Order for introduction
Bond Order Authorizing the Issuance of Orange County General
Obligation School Bonds in the Maximum Amount of
$300,000,000, Subject To Voter Approval
WHEREAS--
The Board of Commissioners of Orange County, North Carolina, has stated
its proposal to issue general obligation bonds to pay capital costs of providing
school facilities.
The County has applied to the North Carolina Local Government
Commission for its approval of such bonds, and the Commission has accepted
the County's application.
BE IT ORDERED by the Board of Commissioners of Orange County, North
Carolina, as follows:
1. There are hereby ordered to be issued general obligation school
bonds of the County to pay capital costs of providing school facilities, together
with related financing and other necessary or incidental costs.
2. The maximum aggregate principal amount of the bonds issued for
such purpose will be $300,000,000.
3. Taxes will be levied in an amount sufficient to pay the principal of
and interest on the bonds so issued.
4. A sworn statement of debt prepared by the County's Finance
Officer has been filed with the Clerk to this Board and is open to public
inspection.
S. This Bond Order will take effect when approved by the County's
voters in the manner provided by law.
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RES-2024-022
Resolution setting public hearing and
authorizing filing of debt statements
WHEREAS, there has been introduced at this meeting a bond order entitled
as follows:
Bond Order Authorizing the Issuance of Orange County General
Obligation School Bonds in the Maximum Amount of$300,000,000,
Subject To Voter Approval
AND WHEREAS, Section 159-57 of the General Statutes requires that a
public hearing be held on the bond order prior to its adoption, Section 159-56
of the General Statutes requires publication of a notice of the hearing, and
Section 159-55 of the General Statutes requires the filing of statements of debt
and estimated interest prior to the public hearing;
BE IT THEREFORE RESOLVED by the Board of Commissioners of Orange
County, North Carolina, that the County's Finance Officer is directed to prepare
and file, prior to the publication of the notice of public hearing, a sworn
statement of the County's net debt and a statement of estimated interest and
related matters in the forms prescribed by statute.
AND BE IT FURTHER RESOLVED (1) that a public hearing on the bond
order will be held at 7:00 p.m. (or as soon thereafter as the matter may be
heard) on June 4, 2024, in the Board's regular meeting room in the Whitted
Building, Hillsborough, North Carolina, and (2) that the Clerk to this Board is
directed to publish a notice of the public hearing, in the form provided for in
Section 159-56 of the General Statutes, one time, not less than six days prior to
the hearing date, in a newspaper having general circulation in the County.
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OR- -A-NGE COUNTY
NORTH CAR(3LINA
General Obligation School Bonds
First Read of the Bond Order
Board of County Commissioners Business Meeting
May 7, 2024
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Background
■ 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
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Annual Debt Service Payments on Existing Debt
$40,004,000
$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 2431 2032 2033 2034 2035
■County Annual Debt Service ■Schools Annual Debt Service ■Durham Tech Annual Debt Service
ORANGE COUNTY
NORTH CAROLINA
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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
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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
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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
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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
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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
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Bond Referendum Key Dates
(Net to F=XGeed Arrmni int)
Cuff and FInanr+lnn Team Meets with Le February 13, 2024T
Geyernmont GE) iccinn nn Plan of
FiRaRGe
Preliminary Resell itinn_Intont to PFeGee d nn Argil 7 2024 B ic�ss Mee
Net to EXGeed $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
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SAMPLE BALLOT
Orange County School Bonds
(For Orange County Schools and Chapel Hill - Carrboro City Schools
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 18, 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 estimated 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
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2016 BALLOT
Orange County School Bonds
Shall the order authorizing Orange County general obligation
bonds in the maximum amount of $120,000,000 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 May 5, 2016, be approved? [ ] YES
[ ] NO
ORANGE COUNTY
NORTH CAROLINA