MEMORANDUM
TO: Mayor and Town Council
FROM: W. Calvin Horton, Town Manager
SUBJECT: Public Hearing to Consider Using Installment Contract Financing for Major Renovations on the Inter-Faith Council Building (IFC), Roof repairs for Town Hall, Fire Station #2, Fire Station #3, the Chapel Hill Museum, and Renovations of Town Tennis and Basketball Courts; Authorization to Proceed with Financing
DATE: March 22, 2004
INTRODUCTION
The purpose of this public hearing is to receive comments from citizens on the proposed use of an installment contract to finance: major exterior repair for the Inter-Faith Council Building(IFC), roof replacement for Town Hall, Fire Station #2, Fire Station #3, and the Chapel Hill Museum; and resurfacing of various Town tennis and basketball courts. Notice of the public hearing was published in the Chapel Hill Herald on March 6, 2004 as required by procedures of the Commission.
Attached Resolution A would declare findings by the Council that a proposed installment contract is a necessary and expedient method to finance the proposed renovations, and would formally approve and ratify the filing by the Manager, Finance Director, and Attorney of an application with the North Carolina Local Government Commission for approval of the projects and a proposed financing contract. The application to the Commission was submitted on March 8 for consideration by the Commission on April 6, 2004.
Attached Resolution B would accept the lowest cost installment financing proposal submitted by Wachovia Bank to finance these projects over a ten-year period, also contingent upon approval of the financing proposal by the Local Government Commission. The resolution would authorize the Manager, Finance Director, and Town Attorney to complete the steps necessary with Wachovia Bank and the Local Government Commission to execute an installment financing agreement.
The attached budget ordinance would amend the current year’s Capital Improvements Fund budget as necessary to reflect the financing and project budgets, consistent with prior authorization of the Council.
BACKGROUND AND DISCUSSION
The Town needed to: make major exterior repairs to the IFC building, replace roofs at the Town Hall, Fire Station #2, Fire Station #3, and the Chapel Hill Museum; and resurface various tennis and basketball courts. In order to complete all these projects on a timely basis, the Council agreed to consider installment financing for the required $1,050,000 over a ten-year period. The Council approved reimbursement resolutions before beginning each of the projects with the exception of the IFC building. Because work has not begun on the IFC building, a reimbursement resolution is not required. If the Council approves the bid for the IFC building and the recommended financing for that and the other projects, the Local Government Commission would still need to approve the financing proposal and supporting documentation at their April 6, 2004 meeting.
Recommendations on award of a construction contract for the IFC building are presented to the Council in a separate item tonight.
After hearing from citizens during the public hearing, we recommend that the Council proceed with the process necessary to obtain approval from the Local Government Commission by adopting the attached Resolution A in a format prescribed by the Commission. The resolution would state the Council’s findings that an installment contract is a necessary and expedient method for financing this project, and would approve and ratify the filing an application to the Commission for approval of the proposed financing contract. We submitted the required application materials to the Commission on March 8, 2004.
The attached Resolution A would formally approve and ratify the filing of an application for approval of a financing agreement authorized by the North Carolina General Statute 160A-20.
The Local Government Commission is scheduled to consider the Town’s application on April 6. We propose to close the financing agreement and receive the funding before April 26.
FINANCING FOR THE PROJECT
A Request for Financing Proposals was distributed to financial institutions on March 1, to be returned to the Town by March 8. The proposals for financing requested a fixed interest rate and even principal payments over a ten-year period.
On March 8, five responsive proposals were received from financial institutions as follows:
|
Financial Institution |
Interest Rate |
Principal & Interest |
Fees (not to exceed) |
Total Cost |
|
2.92% |
1,213,345 |
- |
1,213,345 |
|
|
RBC Centura |
2.94% |
1,212,068 |
5,250 |
1,217,318 |
|
Bank of America |
3.199% |
1,228,901 |
5,500 |
1,234,401 |
|
First Citizens |
3.58% |
1,282,286 |
500 |
1,282,786 |
|
Ashford Capital Corporation, Inc. |
3.975% |
1,269,122 |
- |
1,269,122 |
Based on the proposals received, Wachovia Bank offers the lowest interest rate and total cost with a bid of 2.92% for the ten-year term.
The bid offers to finance the cost of this project over a ten-year period at a fixed interest rate of 2.92%. The first semi-annual payment would be $68,255, beginning in fiscal year 2004-05, and will decline by about $800 with each payment over the next ten years. Funding for the installment payments is included in the Manager’s proposed Capital Improvements Budget for 2004-2005.
The attached Resolution B would authorize the Manager and Finance Director to enter into an installment-purchase contract with Wachovia Bank for this project, subject to final approval of the financing by the N.C. Local Government Commission. The resolution confirms that the Town does not expect to issue more than $10 million in tax-exempt debt during the calendar year. This expectation allows financial institutions to bid lower rates for governmental installment-purchase contracts.
RECOMMENDATION
That the Council:
· Adopt attached Resolution A stating its findings that an installment contract is a necessary and expedient funding method for the subject projects and authorizing an application to the Local Government Commission for approval of the proposed financing.
· Adopt attached Resolution B authorizing the Manager and Finance Director to execute the proposed installment-purchase agreement with Wachovia Bank for this project, subject to approval of the financing by the Local Government Commission.
· Enact the attached budget ordinance amending the current Capital Improvements Fund budget to establish a project budget for: the major exterior repair on the IFC building; roof repairs for Town Hall, Fire Station #2, Fire Station #3, and the Chapel Hill Museum; and resurfacing various Town tennis and basketball courts in the amount of $1,050,000 as discussed above.