HomeMy WebLinkAboutAgenda - 06-04-2024; 5-a - Public Hearing on a Proposed Bond Order Authorizing $300 Million in County General Obligation School Bonds, Subject to Voter Approval 1
ORANGE COUNTY
BOARD OF COMMISSIONERS
ACTION AGENDA ITEM ABSTRACT
Meeting Date: June 4, 2024
Action Agenda
Item No. 5-a
SUBJECT: Public Hearing on a Proposed Bond Order Authorizing $300 Million in County
General Obligation School Bonds, Subject to Voter Approval
DEPARTMENT: Finance and Administrative
Services
ATTACHMENT(S): INFORMATION CONTACT:
Attachment 1. PowerPoint Gary Donaldson, (919) 245-2453
Chaz Offenburg, (919) 245-2071
Robert Jessup, (919) 933-9891
PURPOSE: To conduct a public hearing on a proposed Bond order authorizing $300 Million in
County General Obligation School Bonds, subject to subsequent Board approval and voter
approval.
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 are 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.
At its 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 LGC's 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. At its May 7, 2024 Business meeting, the
Board introduced the Bond Order (similar to the required first reading that is sometimes required
for an ordinance) and called for tonight's public hearing. The Notice of the Public Hearing was
published on May 22, 2024, in both The Herald Sun and the News of Orange County newspapers
as required by law and consistent with the County's usual procedures.
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Following the public hearing, the Board will be asked to take final action to adopt the Bond Order
at the Board's June 18, 2024 Business meeting. The Board will also then be asked to consider a
required resolution to set formally the details of the referendum.
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. At this point, the Board can reduce the bond amount, but the Board
cannot increase the amount unless the process re-started.
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 need 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.
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 conduct the public hearing
and provide any further desired direction to staff. No Board action other than conducting the public
hearing is required at this time.
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ORANGE COUNTY
NORTH CAROLINA
General Obligation School Bonds
Public Hearing
Board of County C ,mss Business Meeting
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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 5
and Debt Service to General Fund Revenues
Tax Rate Breakdown of Capital
Improvement Plan
DS to G F Tax Rate
Year Debt to AV 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% c - School
2029 1.77% 16.79% - GO Bonds:
— 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%0 -
2035 1.21% 18.89% -
Total Impact 8.88
ORANGE COUNTY
NORTH CAROLINA
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Annual Debt Service Payments on Existing Debt
$40,000,000
$35,000,000
$30,000,000
$25,000,000
$20,000,000
$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 0 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
X70,000,000
$60,000,000
$50,000,000
$40,000,000
$30,000,000 -
$20,000,000
X10,000,000
� l0 00 O N � l0 00 O N � l0 00 O N �
N N N m M m m M d' d Zt d' d u1 Ln u1
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 _i 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 - 1070007000 10 , 000 , 000
2027 100,0007000 1070007000 110, 000, 000
2028 - 10,0001000 107000, 000
2029 100,000,000 107000,000 11070007000
2030 - 1070007000 10, 000 , 000
2031 - 1070007000 10 , 000 , 000
2032 1007000,000 107000,000 11070007000
2033 - 1070007000 10, 000 , 000
2034 - 10,000,000 10, 000 , 000
2035 - 107000,000 10, 000, 000
Total 300 , 000 , 000 100 , 000 , 000 4007000 , 000
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
Home 3.41 GO Bond Tax Rate Per 8.88 CIP Total Tax Rate Per
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GO Bond and CIP Total Tax Rates
Value $100 Assessed Value $100 Assessed Value
WON $34. 10 '► : : : 1
11111 $68.20 $177.60
$3007000 $102.30 $266.40
$400,000 $136.40 $355.20
$500)000 $170.50 $444.00
ORANGE
NORTH ' •
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Bond Key Dates
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anrd� fer P blip fin
Hold Public Hearing June 41 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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2024 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