HomeMy WebLinkAboutAgenda - 11-19-2002-7bORANGE COUNTY
BOARD OF COMMISSIONERS
ACTION AGENDA ITEM ABSTRACT
Meeting Date: November 19, 2002
Action Agenda
Item No. ~~
SUBJECT• Public Hearing on Alternative Capital Financing Plan
DEPARTMENT: Finance PUBLIC HEARING: (YIN) Yes
ATTACHMENT(S):
Resolutions
Financing Proposal
Bid Sheet
INFORMATION CONTACT:
Ken Chavious, ext. 2453
TELEPHONE NUMBERS:
Hillsborough 732-8181
Chapel Hill 968-4501
Durham 688-7331
Mebane 336-227-2031
PURPOSE: To conduct a public hearing on matters related to the Alternative Capital Financing
Plan approved by the Board on September 3, 2002 and to take action on items to facilitate the
acquisition of funds needed for the projects.
BACKGROUND: At the September 3, 2002 meeting, the Board of Commissioners adopted a
plan that included capital projects to be financed by the initial sale of the 2001 bonds and
projects to be alternatively financed. The Board also approved a schedule setting forth the
actions and dates to accomplish both initiatives. In accordance with the adopted schedule for
the alternative financing, staff has pursued a request for proposal process to finance
$3,475,000 in projects approved by the Board. The projects in this phase of the alternative
financing include renovations to Orange High School, conservation easements, property
acquisition for the community college satellite campus and funding for the Orange Enterprises
facility.
An application requesting approval of this proposed financing has been forwarded to the Local
Government Commission (LGC) in accordance with statutory provisions. Prior to the LGC
granting approval, the Board is required to conduct a public hearing on matters related to the
financing proposal. The Board has established November 19, 2002 as the date for the hearing.
The LGC is scheduled to take action on the County's application on December 2, 2002, and, if
approval is granted, closing and receipt of funds will occur during mid December 2002.
Staff solicited and received proposals from six financial institutions. Two of the proposals did
not comply with the provisions of the County's request and therefore were deemed non-
responsive. Of the responsive proposals submitted, the Branch Banking & Trust Company
(BB&T) proposal was the most favorable. This proposal included the lowest interest rate of
4.22% as well as the lowest overall cost to the County. A summary of the proposals is
attached.
FINANCIAL IMPACT: As mentioned above, the amount approved for the projects is
$3,475,000. Financing this amount over a 15 year period at an interest rate of 4.22% yields a
total cost to the County of $4,602,707. Since the LGC requires level principal payments, the
first year's annual principal and interest cost will be $428,707 with annual payments declining in
each subsequent year. Payments are scheduled to begin July 2003, and therefore there is no
impact on the current year budget. Payment of this debt fits within the guidelines of the debt
policy and the County's overall plans for debt issuance over the next 5 year period.
RECOMMENDATION(S): The Manager recommends that the Board conduct the public
hearing, accept the proposal from BB&T and adopt the required resolutions.
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Resolution supporting an application to the Local Government Commission
for its approval of a financing agreement -
2002 Private Placement Installment Financing
WHEREAS -
Orange County has previously approved in principle the undertaking and
financing of the following described projects by the use of an installment contract,
as authorized under Section 160A-20 of the General Statutes:
Renovations to Orange High School $950,000
Land acquisition for public buildings $1,000,000
Acquisition of easements and other property $1,000,000
interests for conservation purposes
Renovations and improvements to County $525,000
building used by Orange Enterprises
The County's undertaking of the financing was the subject of a public hearing
held earlier today on November 19, 2002.
Under the guidelines of the North Carolina Local Government Commission
(the "LGC"), this governing body must make certain findings of fact to support the
County's application for the LGC's approval of the County's proposed financing
arrangements for the projects.
NOW, THEREFORE, BE IT RESOLVED that the Board of Commissioners
of Orange County, North Carolina, makes the following findings of fact:
1. The proposed projects are necessary and appropriate for the County
under all the circumstances. The projects as a whole have been approved as part of
the County's long-term capital improvements program. The proposed renovations and
improvements to Orange High School and the County building used by Orange
Enterprises are appropriate to prolong the lives and enhance the levels of service
provided by those buildings. The County land acquisition is appropriate as part of the
County's long-term plan to bring additional community college services to the
County. The acquisition of easements or other property interests for conservation
ALTFINANPLANPHRES 1119
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purposes will enhance the natural environment and quality of life of the County's
residents.
2. The proposed installment financing is preferable to a bond issue for the
same purpose. The County has no meaningful ability to issue non-voted ,general
obligation bonds for these projects, and these projects will produce no revenues that
could be used to support aself-liquidating financing. The County has chosen to
finance these particular projects by installment financing in connection with
proposing other projects for financing by general obligation bond issues, and it is
appropriate for the County to balance its capital finance program between bonds and
installment financing.
3. The estimated sums to fall due under the proposed financing contract are
adequate and not excessive for the proposed purpose. The County has obtained
competitive lending proposals, and will closely review proposed lending rates against
market rates with guidance from the LGC.
4. As confirmed to the Board at this meeting by the County's Finance
Officer, (a) the County's debt management procedures and policies are sound and in
compliance with law, and (b) the County is not in default under any of its debt service
obligations.
5. The proposed projects described above are part of a larger County
capital improvements program. This program includes some $75,000,000 of County
general obligation bonds and a variety of other financing. Although the County
expects that there may be tax increases associated with the overall program, any tax
increase attributable to the current proposed financing will be minimal. The County
bases this expectation on its expected interest rates and term for the current proposed
financing.
6. The County Attorney is of the opinion that the proposed projects are
authorized by law and are purposes for which public funds of the County may be
expended pursuant to the Constitution and laws of North Carolina.
BE IT FURTHER RESOLVED that the actions of the County's Finance
Officer in filing an application with the LGC for its approval of the project and the
proposed financing arrangements are authorized, ratified and approved, and that this
resolution takes effect immediately.
ALTFINANPLANPHRES 1119
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Resolution Providing Final Approval Of
Financing Terms and Documents -Installment Financing Projects
WHEREAS:
The Board of Commissioners of Orange County, North Carolina, has
previously determined to carry out a financing plan for the acquisition and
construction of renovations to Orange High School and the County building used by
Orange Enterprises, along with acquisition of land and other property interests for
public buildings and property acquisition purposes (the "Projects").
BE IT THEREFORE RESOLVED by the Board of Commissioners of
Orange County, North Carolina, as follows:
1. Determination To Proceed with Projects -- The Board confirms its
decision to carry out the financing plan for the Projects. The County will finance the
Projects through Branch Banking and Trust Company, in accordance with the BB&T
proposal dated October 28, 2002.
2. Determination to Acquire Property -- The intended financing plan for
the Projects contemplate the County's acquiring the Orange High School property
from The Orange County Board of Education (the "School Board"), and imposing a
lien on that property to secure the County's repayment obligation for the entire
financing package. The Board approves the County's acquisition of the Orange High
School property for this purpose. The Board notes that the School Board approved
this property transfer on November 18, 2002.
3. Direction To Execute Documents -- The Board authorizes and directs
the Board's Chair to execute and deliver, on the County's behalf, financing documents
(the "Documents") in such forms as the Chair, on the Finance Officer's advice, may
approve. The Documents in final form, however, must provide for the amount
financed by the County not to exceed $3,475,000, for an annual interest rate not to
exceed 4.22% (in the absence of default or change in tax status), and for a financing
term not to extend beyond December 31, 2017. The Board expects that the
Documents will include the agreements described in Exhibit A.
4. Authorization to Finance Officer To Complete Closing -The Board
authorizes and directs the Finance Officer to hold executed copies of the Documents,
and any other documents authorized or permitted by this resolution, in escrow on the
County's behalf until the conditions for the delivery of the Documents have been
ALTFINANPLANPHRES21119 5
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completed to such officer's satisfaction, and thereupon to release the executed copies
of such documents for delivery to the appropriate persons or organizations. Without
limiting the generality of the foregoing, the Board specifically authorizes the Finance
Officer to approve changes to any documents (including the Documents and any
closing certifications) previously signed by County officers or employees, provided
that such changes shall not substantially alter the intent of such documents from that
expressed in the forms of such documents as executed by such officers. The Finance
Officer's authorization of the release of any such document for delivery will
constitute conclusive evidence of his approval of any such changes.
S. Resolutions As To Tax Matters -- The County will not take or omit to
take any action the taking or omission of which will cause its obligations to pay
principal and interest components of installment payments under the Financing
Agreement (as described on Exhibit A) (the "Obligations") to be "arbitrage bonds,"
within the meaning of Section 148 of the "Code" (as defined below), or "private
activity bonds" within the meaning of Code Section 141, or otherwise cause interest
components of the installment payments to be includable in gross income for federal
income tax purposes. Without limiting the generality of the foregoing, the County
will comply with any Code provision that may require the County at any time to pay
to the United States any part of the earnings derived from the investment of the
proceeds made available to it under the Financing Agreement, and the County will
pay any such required rebate from its general funds. For the purposes of this
resolution, "Code" means the United States Internal Revenue Code of 1986, as
amended through the date of the initial delivery of the Financing Agreement,
including applicable Treasury regulations.
6. Obligations Are wank-Qualified " Obligations -- The County
designates the Obligations as "qualified tax-exempt obligations" for the purpose of
Code Section 265(b)(3).
7. Authorization to School Board Attorney -The Board authorizes and
approves actions taken and to be taken by the School Board's attorney in connection
with the conveyance of the Orange High School property to the County and in
obtaining a title insurance policy on that property for the County's benefit. The Board
waives any conflict that may arise between such activities on the County's behalf and
the attorney's representative of the School Board.
8. Miscellaneous Provisions -- All County officers and employees are
authorized and directed to take all such further action as they may consider necessary
or desirable in furtherance of the purposes of this resolution. All such prior actions
ALTFINANPLANPHRES21119
of County officers and employees are ratified, approved and confirmed. Upon the
absence, unavailability or refusal to act of the Chair or the Finance Officer, the
County Manager may assume any responsibility or carry out any function assigned
to the Chair or the Finance Officer in this resolution. All other Board proceedings,
or parts thereof, in conflict with this resolution are repealed, to the extent of the
conflict. This resolution takes effect immediately.
ALTFINANPLANPHRES21119 '~
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Exhibit A --Draft Documents
(a) A Financing Agreement and Deed of Trust to be dated on or about
December 10, 2002, from the County to a deed of trust trustee for the Bank's benefit
of Branch Banking and Trust Company ("BB&T"), providing for the advance of
funds to the County, setting forth the County's repayment obligation and imposing
a security interest in a portion of the Projects (consisting of all or a portion of the
Orange High School property) to secure the County's obligations under the Financing
Agreement.
(b) A Project Fund Agreement to be dated on or about December 10, 2002
(the "Financing Agreement"), between the County and BB&T, providing for the
custody of financing proceeds pending their expenditure on costs of the Projects.
The County expects that the Financing Agreement and the Project Fund
Agreement will be in forms substantially similar to those used by the County in prior
financings with BB&T.
(c) A Lease Agreement to be dated on or about December 10, 2002,
providing for the County to lease the Orange High School property back to The
Orange County Board of Education (the "School Board").
(d) An Agency Agreement to be dated on or about December 10, 2002,
providing for the School Board to undertake the acquisition and construction of the
planned improvements to Orange High School as the County's agent.
The County expects that the Lease Agreement and the Agency Agreement will
be in forms substantially similar to those used by the County in prior installment
financings for school improvements.
ALTFINANPLANPHRES21119 8
BB&T
9
Branch Banking & Trust Co.
October 28, 2002
Mr. Kenneth T. Chavious
Finance Director
Orange County
PO Box 8181
Hillsborough, NC 27278
Dear Ken:
Governmental Finance
3605 Glenwood Avenue, Suite 130
Raleigh, NC 27612
(919) 716-9880
Fax (919) 716-9871
Branch Banking and Trust Company ("BB&T") is pleased to offer this proposal for the financing
requested by Orange County (the "County").
(1) project: High School Renovations
(2) Amount To lBe Financed: $3,475,000.00
(3) Interest Rates, Financing Terms and Corresponding Payments:
Term Rate
10 years 4.02%
15 years 4.22%
Payments shall, be quarterly in arrears. See the attached amortization schedules for information on
payments.
The interest rate stated above is valid for a closing not later than 45 days after today. Closing of
the financing is contingent upon completing documentation acceptable to BB&T and upon the title and
condition of the property being acceptable to BB&T. We would also ldce to review your most recent
financial statements before funding this transaction.
Our fee for providing the financing and preparing documentation shall be one-half of one percent
of the amount financed, subject to negotiation. All applicable taxes, surveys, permits, costs of
environmental studies, title insurance premiums, LGC approval fees, costs of lawyers for the County and
any other costs will be the County's responsibility and separately payable by the County.. The financing
documents will allow prepayment of the principal balance in whole at any payment date without a
Prepayment premium.
10
The stated interest rate assumes that the County expects to borrow less than $10,000,000 in
calendar year 2002 and that the financing will qualify as tax-exempt financing under the Internal Revenue
Code. BB&T reserves the right to terminate its interest in this bid or to negotiate a mutually acceptable rate
if the financing is not atax-exempt financing.
(4) Security:
This financing will be secured by a first lien security interest on (a) all personal property acquired
with financing proceeds, (b) all improvements to real estate that are constructed or unproved with financing
proceeds, and all associated real estate, and (c) all real estate acquired with financing proceeds.
(5~ 1N~inancing Documents:
BB&T proposes to use its standard form financing contracts and related documents for this
installment financing. We will provide a sample of those documents to you should BB&T be the successful
proposer.
BB&T appreciates the opportunity to make this financing proposal and requests to be notified
within five days of this proposal should BB&T be the successful proposer.
BB&T shall have the right to cancel this offer by notifying the County of its election to do so
(whether or not this offer has previously been accepted by the County) if at any time prior to the closing
there is a material adverse change in the County's financial condition, if we discover adverse circumstances
of which we are currently unaware, if we are unable to agree on acceptable documentation with the County
or if there is a change in law (or proposed change in law) that changes the economic effect of this financing
to BB&T. We reserve the right to negotiate and/or terminate our interest in this transaction should we be
the successful proposer.
We have attached the form of a resolution that your governing board can use to award the
financing to BB&T should we be the successful proposer. If your board adopts this resolution, then BB&T
will not require any further board action prior to closing the transaction.
Please call me at (919) 716-9880 with your questions and comments. We look forward to hearing
from
G. Glenn
Compound Period ......... Quarterly
Nominal Annual Rate .... 4.220 °~
CASH FLOW DATA
Event Date Amount Number Period End Date
1 Loan .12/10/2002 3,475,000.00 1
2 Payment 07/01/2003 59,913.79 58 Quarterly 10/01/2017
Fixed Principal (+Int.)
AMORTIZATION SCHEDULE -Normal Amortization, 360 Day Year
Date Payment _ Interest Principal Balance
Loan 12/10/2002 3,475,000.00
2003 Totals 0.00 0.00 0.00
1 07/01/2003 142,774.79 82,861.00 59,913.79 3,415,086.21
2 10/01/2003 95,942.95 36,029.16 59,913.79 3,355,172.42
3 01/01/2004 95,310.86 35,397.07 59,913.79 3,295,258.63
4 04/01/2004 94,678.77 34,764.98 59,913.79 3,235,344.84
2004 Totals 428,707.37 189,052.21 239,655.16 .
5 07101 /2004 94,046.68 34,132.89 59,913.79 3,175,431.05
6 10/01/2004 93,414.59 33,500.80 59,913.79 3,115,517.26
7 01/01/2005 92,782.50 32,868.71 59,913.79 3,055,603.47
8 04/01/2005 92,150.41 32,236.62 59,913.79 2,995,689.68
2005 Totals 372,394.18 132,739.02 239,655.16
9 07/01/2005 91,518.32 31,604.53 59,913.79 2,935,775.89
10 10/01/2005 90,886.23 30,972.44 59,913.79 2,875,862.10
11 01/01/2006 90,254.14 30,340.35 59,913.79 2,815,948.31
12 04/01/2006 89,622.04 29,708.25 59,913.79 2,756,034.52
2006 Totals 362,280.73 122,625.57 239,655.16
13 07/01/2006 .88,989.95 29,076.16 59,913.79 2,696,120.73
14 10/01/2006 88,357.86 28,444.07 59,913.79 2,636,206.94
15 01/01/2007 87,725.77 27,811.98 59,913.79 2,576,293.15
16 04/01/2007 87,093.68 27,179.89 59,913.79 2,516,379.36
2007 Totals 352,167.26 112,512.10 239,655.16
17 07/01/2007 86,461.59 26,547.80 59,913.79 2,456,465.57
18 10/01/2007 85,829.50 25,915.71 59,913.79 2,396,551.78
19 01/0112008 85,197.41 25,283.62 59,913.79 2,336,637.99
20 04/01/2008 84,565.32 24,651.53 59,913.79 2,276,724.20
2008 Totals 342,053.82 102,398.66 239,655.16
21 07/01/2008 83,933.23 24,019.44 59,913.79 2,216,810.41
22 10101!2008 83,301.14 23,387.35 59,913.79 2,156,896.62
23 01/01/2009 82,669.05 22,755.26 59,913.79 2,096,9$2.83
24 04/01/2009 82,036.96 22,123.17 59,913.79 2,037,069.04
11
Date Payment Interest Principal Balance
2009 Totals 331,940.38 92,285.22 239,655.16
25 07/01 /2009 81,404.87 21,491.08 59,913.79 1,977,155.25
26 10/01/2009 80,772.78 20,858.99 59,913.79 1,917,241.46
27 01/01/2010 80,140.69 20,226.90 59,913.79 1,857,327.67
28 04/01/2010 79,508.60 19,594.81 59,913.79 1,797,413.88
2010 Totals 321,826.94 82,171.78 239,655.16
29 07/01/2010 78,876.51 18,962.72 59,913.79 1,737,500.09
30 10!01/2010 78,244.42 18,330.63 59,913.79 1,677,586.30
31 01/01/2011 77,612.33 17,698.54 59,913.79 1,617,672.51
32 04/01/2011 76,980.23 17,066.44 59,913.79 1,557,758.72
2011 Totals 311,713.49 72,058.33 239,655.16
33 07/01/2011 76,348.14 16,434.35 59,913.79 1,497,844.93
34 10!01/2011 75,716.05 15,802.26 59,913.79 1,437,931.14
35 01/01!2012 75,083.96 15,170.17 59,913.79 1,378,017.35
36 04/01/2012 74,451.87 14,538.08 59,913.79 1,318,103.56
2012 Totals 301,600.02 61,944.86 239,655.16
37 07/01/2012 73,819.78 13,905.99 59,913.79 1,258,189.77
38 10/01/2012 73,187.69 13,273.90 59,913.79 1,198,275.98
39 01/01/2013 72,555.60 12,641.81 59,913.79 1,138,362.19
40 04/01/2013 71,923.51 12,009.72 59,913.79 1,078,448.40
2013 Totals 291,486.58 51,831.42 239,655.16
41 07101/2013 71,291.42 11,377.63 59,913.79 1,018,534.61
42 10/01/2013 70,659.33 10,745.54 59,913.79 958,620.82
43 ~p1 /01/2014 70,027.24 10,113.45 59,913.79 898,707.03
44 04/01/2014 69,395.15 9,481.36 59,913.79 838,793.24
2014 Totals 281,373.14 41,717.98 239,655.16
45 07/01/2014 68,763.06 8,849.27 59,913.79 778,879.45
46 10/0112014 68,130.97 8,217.18 59,913.79 718,965.66
47 01/01/2015 67,498.88 7,585.09 59,913.79 659,051.87
48 04/01/2015 66,866.79 6,953.00 59,913.79 599,138.08
2015 Totals 271,259.70 31,604.54 239,655.16
49 07/01/2015 66,234.70 fi,320.91 59,913.79 539,224.29
50 10/01/2015 65,602.61 5,688.82 59,913.79 479,310.50
51 01/01/2016 64,970.52 5,056.73 59,913.79 419,396.71
52 04/01/2016 64,338.43 4,424.64 59,913.79 359,482.92
2016 Totals 261,146.26 21,491.10 239,655.16
53 07/01/2016 63,706.33 3,792.54 59,913.79 299,569.13
54 10!01/2016 63,074.24 3,160.45 59,913.79 239,655.34
55 01/01!2017 62,442.15 2,528.36 59,913.79 179,741.55
56 04/01/2017 61,810.06 1,896.27 59,913.79 119,827.76
2017 Totals 251,032.78 11,377.62 239,655.16
57 07/01/2017 61,177.97 1,264.18 59,913.79 59,913.97
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Date Payment Interest Principal Balance
58 10/01/2017 60,545.88 631.91 59,913.97 0.00
2018 Totals 121,723.85 1,896.09 119,827.76
Grand Totals 4,602,706.50 1,127,706.50 3,475,000.00
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