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Home My WebLink AboutAgenda - 09-03-2002 - 9a i ORANGE COUNTY BOARD OF COMMISSIONERS ACTION AGENDA ITEM ABSTRACT Meeting Date: September 3, 2002 Action Age d a Item No. -q_ SUBJECT: Scope and Timeline for Sale of 2001 Bonds and Alternative Financing DEPARTMENT: Finance/Budget PUBLIC HEARING: (Y!N) No ATTACHMENT(S): INFORMATION CONTACT: Ken Chavious, ext 2453 Bond Refunding Debt Service Comparison Donna Dean, ext 2151 Bond Sale Event Timetable TELEPHONE NUMBERS: Bond/ARemative Financing Tables Hillsborough 732-8181 (under separate cover) Chapel Hill 968.4501 Durham 688-7331 Mebane 336-227-2031 PURPOSE: To review, amend as needed, and approve, staff plans to pursue the first sale of voter approved 2001 general obligation bonds and the first installment of planned alternative capital financing. BACKGROUND: In summer 2001, the Board approved a plan to pursue $112.7 million in capital financing for major school and County capital projects through FY 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). During the process of reviewing and approving the 2002-03 County operating budget and 2002- 12 Capital Investment Plan in June 2002, the Board directed several refinements to the originally proposed timelines for certain bond and alternative financing projects. Staff 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 capital financing arrangements. Preliminary indications from 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 for the first bond sale and alternative financing installment. The Budget Director plans to make a brief PowerPoint presentation, review the spreadsheets accompanying this abstract, and respond to any Board questions about possible changes to the project timelines. Particular note should be made of Table 5, which captures Orange:County 2 School (OCS) and County staff discussion, as well as BOCC direction provided during June 2002 budget work sessions, regarding the following project considerations: • Funding for a possible addition to the OCS Board of Education building may be postponed while OCS explores the possibility of relocating central office staff currently housed at the Hillsborough Elementary campus to other existing space within the district. That postponement affords the opportunity to accelerate funding for siting and planning OCS Middle School #3. Park project funding reflects Board direction in June 2002 to undertake park projects generally on an `equal footing", with Town park project and timelines maintained as presented last winter. Accelerated funding for conservation easements provides for greater flexibility to act as opportunities present themselves during the coming year. Senior Center funding allocations provide for initial funding to begin planning and design for a replacement when the Galleria lease for the Chapel Hill Senior Center expires. Over the life of the funding plan, both senior center projects will receive equal amounts of funding from bonds and alternative financing. At this time, staff proposes to pursue the first piece ($3.475 million) of the nearly $38 million alternative financing plan with closing by the end of December 2002. That will allow the County to obtain lower interest rates for that capital financing because of the County s position as "bank qualified" (having issued less than $10 million in debt in any calendar year). Staff also proposes to hold off on the first bond sale until March 2003, rather than the December 2002 - January 2003 timeline first proposed. The later sale date will allow the County to piggyback the 2001 bond sale with the refinancing of previously refinanced bonds. Some of the Countys 1988 bonds were refunded in 1993 at interest rates ranging from 4.75% to 5.1%. Staff proposes to again refund about $26 million of those outstanding bonds, this time at an all-inclusive cost annual interest rate of about 3.29%. This will result in annual debt service savings in excess of $120,000, and a total savings over the next eleven years of $1.35 million. The approach of combining the bond sale and refunding will reduce administrative costs (e.g. allowing the County to compile, issue, and produce only one Official Statement). Because of "call" dates established for the 1993 refunded bonds, March 2003 is the earliest date at which they can be refunded again, to take advantage of the prevailing lower interest rates. The Finance Director will briefly review the steps to be taken leading up to these capital financings, per the calendar prepared by the County's Bond Counsel. FINANCIAL IMPACT: As was explained during the public information campaign leading up to the November 2001 bond referenda, the cumulative debt service impacts from the plan for bond sales and alternative financing could range from 7 to 10 cents on the property tax rate, depending on size, timing, and prevailing interest rates. Depending on how debt service payments are structured through the LGC, the debt service impact for the next fiscal year (FY 2003-04) resulting from the first bond sale and alternative financing could be in the range of 1 to 2 cents per$100 of assessed valuation. RECOMMENDATION(S): The Manager recommends that the Board review and amend, as needed, the list of projects and amounts to be included in the first bond sale and alternative financing installment, and direct staff to proceed with all necessary steps to effect the financings, in accordance with the schedule prepared by Bond Counsel. Sent bq: Ferris, Baker, Watts, Inc 804 849 2207; 3 Preliminary COUNTY OF ORANGE, NORTH CAROLINA GENERAL OBLIGATION imns, SERIES 2003 DEBT SERVICE COMPARISON Date Total P.i Net New D/S 01d Not D/S SwInS5 6101/2003 3,429,214.61 3,429,214,51 3,549,912.$0 120,887,98 8+0112004 3.897.915.50 3.W.91 5.60 4,020,266.00 _ 122,349.50 6701(2006 3,735,022.00 3.735,022,00 3,856,980.00 121,958,00 6+0112006 3,570.764.50 3570.754.50 3,694,715.00 1231961160 6/01/2007 3A07.611.00 3,407.511.00 3,528,470.00 120,859.00 8/0112008 3,242,801.50 3,2421801.60 3,303,500.00 120,88880 6101/2009 3.071.143.50 3,071,143.50 3.194,805.00 123,061.60 6!0112010 2,910,958.00 2,910,956.00 3,032.640.00 121,664.00 670112011 1,131,822.00 1,131=00 1.256,750.00 - 124,928.00 6101/2012 1,080,102.00 1,080,10200 1,204,500.00 124,398.00 6/01/2013 1,027,917.00 1.027,91700 1.182,260.00 124.333.00 Total 30505.259.61 30506259.51 31,664.787.60 1,349.527.99 PRESENT VALUE ANALYSIS SUMMARY(NET TO NET) Gross PV Debt 8enrice 9avings........................................_................................_........... 1,156,225.67 Net PV CashtlaW Savings @ 3.293%WIC)................_.................... 1,168,228,67• Con9ngency or Rounding Amount.............__........_........................................ ......... 314.77 NET PRESENT VALUE BENEFIT.......................................................................... $1,156,540.44 NET PV BENEFIT/$25,92S,000 REFUNDED PRINCIPAL......._...._................_. ....... 4.461%, . ......... NET PV BENEFIT/$26,970,000 REFUNDING PRINCIPAL................ .............._................. 4.288% REFUNDING BOND INFORMATION RefundingDated Date,............_........_.............................................. ...,....... 3�112D03 Refunding OeINGy t7afe................................................... _............................ .................... 3/01!2003 Fevri�,6ikar Watts,MoWpamted File=ORANW COUNTY.SF PulNic Finance 8222002 7>13 PM 4 Orange County, North Carolina -- Sample Timetable for a General Obligation Bond Closing in March, 2003 Bond Sale Events Date 1. Determine proposed amount and As soon as possible projects for new money bonds, and preferred schedule for sale and closing 2. Call the LGC to discuss general terms As soon as possible after of issue, including refunding plans determining tentative LGC may request follow-up meeting program 3. Submit an LGC "application" - cover By Nov 30 [prior to event 4] letter with run of numbers from financial advisor 4. BOCC "introduces" bond order; December 2/December 10 formally calls for public hearing BOCC meeting 5. . File sworn statement of debt After event 4 and prior to event 6 6. Publish notice of public hearing By 12/31; after event 6 and at least six days before event 7 7. BOCC holds public hearing; adopts January BOCC meeting bond order for refunding bonds 8. Publish notice of Bond Order as As soon as possible after adopted event 7 and in any event by January 25; must wait 30 days from this event to close, and LGC prefers to wait 30 days from publication to sell 1TJ701!1.WPD + 5 9. LGC and County work to produce December to early February draft OS from County information 10. LGC working group meeting to Some time in mid- to late discuss bond terms and draft OS January ("due diligence" meeting) 11. County Board adopts a resolution (1) February Board meeting approving amount of bonds and maturity structure and (2) approving form of OS and terms for continuing disclosure 12. LGC bond sale March 4? -- As determined by LGC and County at or near time of initial meeting 13. Bond Closing March 25? -- Three weeks after sale 1TJ701!1.WPD