HomeMy WebLinkAboutAgenda - 05-05-2004-2ORANGE COUNTY
BOARD OF COMMISSIONERS
ACTION AGENDA ITEM ABSTRACT
Meeting Date: May 5, 2004
Action Agenda
Item No. 2
SUBJECT: Scope and Timetable far Issuance of General Obligation Bonds, Alternative
Financing, and Two-Thirds Net Debt Reduction Bonds
DEPARTMENT: Budget/Finance
PUBLIC HEARING: (Y/N) No
ATTACHMENT (S):
May 5, 2004 Proposed Debt Issuance
Schedule
September 3, 2002 BOCC Approved Debt
Issuance Schedule
INFORMATION CONTACT:
Donna Dean, 919-245-2151
Ken Chavious, 919-245-2453
Robert Jessup, Bond Counsel
TELEPHONE NUMBERS:
Hillsborough 732-8181
Chapel Hill 968-4501
Durham 688-7331
Mebane 336-227-2031
PURPOSE: To review, amend as needed, and approve, staff plans to pursue the second
sale of voter approved 2001 general obligation bonds, the second installment of planned
alternative capital financing, issuance of two-thirds net debt bands, and sale of the 1997
voter approved Efland sewer bonds.
BACKGROUND: On September 3, 2002, the Board approved a plan to pursue $112.7
million in capital financing for major school and County capital projects through 2006-07.
This total included two components: 1) $75 million in general obligation bonds that were
subsequently approved by Orange County voters in November 2001; and 2) $37.7 million in
alternative financing that would be arranged through mechanisms such as private placement
loans or the issuance of Certificates of Participation (COPs). In accordance with the
September 3 approved plan, staff procured alternative financing of $3.475 million in
December 2002 and issued bonds totaling $19.175 million in April 2003.
In addition to the above-mentioned plan, the County needs to issue the $1,2 million in
sanitary sewer bonds for Efland Sewer (approved by the voters in November 1997),
because the Local Government Commission requires general obligation bonds to be issued
within seven years. The authorization an the sewer bonds will expire this November 2004,
These bonds will be used with other funds for the Efland Sewer expansion.
The proposed May 2004 debt issuance schedule includes a number of modifications from,
and additions to, the debt issuance schedule approved by the BOCC in September 2002.
For example, the new schedule reflects the BOCC's formal decision to reallocate $12,8
million in bond funds originally planned for Chapel Hill-Carrbaro Schools' Elementary School
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#10 that are now to be used towards the constn~ction of CHCCS High School #3 instead,
Elementary #10 funding is now reflected on the debt issuance schedule to come from
alternative financing, County staff have coordinated with school and Town staffs regarding
updated cash flaw needs for various partner projects, The debt issuance schedule has
been modified to reflect such changes (e.g, Homestead Aquatic Center and Southern
Community Park) in the pace of individual project planning and approval, Staff have also
included plans to issue two-thirds net debt reduction bonds, which can be used next fiscal
year because the County will not have issued any new debt for FY 2003-04, Proceeds from
those bonds would be used for a portion of Whiffed Human Services Center renovations,
Little River Park development, and other County projects that the BOCC can specify at a
later date.
The Finance Director, Budget Director and the County's Band Counsel recently met with
representatives of the North Carolina Local Government Commission (LGC) to discuss the
planned capital financings, The LGC, an arm of the State Treasurer's Office, is statutorily
charged with conducting the sale of all local government bonds and with overseeing most
other long-term financing arrangements for local governments, Preliminary indications from
the LGC staff are that the County's capital financing plans are acceptable and should
receive a favorable decision from the Commission when formally presented for approval in
the coming months,
This meeting affords the Board the opportunity to review again, in detail the specific projects
and dollar amounts proposed far issuing debt in the upcoming year, The Budget Director
plans to make a brief PowerPoint presentation, review the spreadsheets accompanying this
abstract, and respond to any Board question about possible changes to the project
timelines, It is important to note the following points;
At this time, staff proposes to pursue $18,850,000 in alternative financing, consisting of the
issuance of $10,350,000 in COPS and $4,200,000 in 2/3 bonds along with $19,740,000 in
2001 voter approved bonds, Staff currently plans to pursue these issuances concurrently in
order to achieve economies in staff time and issuance costs, The Finance Director and
Bond Counsel will briefly review the steps to be taken leading up to these capital financings,
including the required Board actions.
FINANCIAL IMPACT: As was explained during the public information campaign leading up
to the November 2001 band referenda, the cumulative debt service impacts from the plan
for bond sales an alternative financing could range farm 7 to 10 cents on the property tax
rate, depending on size, timing and prevailing interest rates, The annual cost of debt service
associated with the first issuance of debt far this financing plan equates to about 1,8 cents
per $100 of assessed valuations. Depending on how the LGC structures debt service
payments associated with this sale, the anticipated tax rate impact for the next fiscal year
(FY 2004-05) would be less than one cent since the sale is projected to occur during the
year, Staff projects the full year tax rate impact of this particular issuance to range between
three and four cents per $100 of assessed valuations, It is important to note that all planned
debt issuance is in accordance with the County's debt issuance policy and well within the
parameters established therein.
RECOMMENDATION (S): The Manager recommends that the Board review and amend, as
needed, the list of projects and amounts to be included in this issuance of debt, including the
1997 sewer bonds; approve the issuance of $4..2 million in additional two-thirds net debt
bonds to be used for County projects; and direct staff to proceed with all necessary steps to
effect the financings, in accordance with the schedule prepared by Bond Counsel,