MEMORANDUM
TO: Mayor and Town Council
FROM: W. Calvin Horton, Town Manager
SUBJECT: Public Hearing to Consider Proposed Method for Financing the Purchase of Land for a Municipal Public Works Site
DATE: April 9, 2001
The purpose of this public hearing is to receive comments from citizens on the proposed use of an installment contract to finance the purchase of land to be used primarily as a Public Works operational facility.
The attached resolution would declare findings by the Council that a proposed installment contract is a necessary and expedient method to finance the proposed purchase, and would authorize the Manager, Finance Director and Attorney to file an application with the North Carolina Local Government Commission for approval of the Project and a proposed financing contract.
BACKGROUND
The current Municipal Operations site off Airport Road, which includes the Public Works and Transportation Departments, is leased from the University for $1 a year. The term of this lease expires on December 31, 2006, and the University has not agreed to the Town’s requests to extend the term.
At the Council’s direction, the staff has searched for a suitable site in the Town and its surrounding areas. We found very little vacant land in large tracts. An area with potential was identified as that bounded by Eubanks Road, Mill House Road and I-40. The Land Use Plan of the Comprehensive Plan designates this area as appropriate for a future Public Works site.
This area has limited access; no utilities; several streams and adjacent Resource Conservation Districts and a major power easement crisscrossing it. These factors are probably related to another unusual characteristic: there is a lot of undeveloped acreage there. This area would be a good site because it is largely undeveloped; is fairly flat; has relatively few neighbors who may be disturbed; and, is appropriately designated on the Land Use Plan.
On February 26, 2001, the Town Council considered in closed session the acquisition price of 54 acres owned by the Nichols and Hogan families, and directed the Town Manager to proceed with the acquisition.
March 26, 2001, the Council began the process necessary to obtain approval from the Local Government Commission of a proposed installment contract to finance the purchase of land to be used primarily for a Public Works operational facility. The Council adopted a resolution calling for a public hearing on April 9 (as required by the Commission) to consider the purchase of the proposed site using an installment contract. Notice of the public hearing was published in the Chapel Hill Herald on March 29, 2001 as required by procedures of the Commission.
DISCUSSION
The property being purchased is a 54-acre tract of land located north of Eubanks Road, which is accessed by Millhouse and Clyde Roads. The Town has a contract to purchase the land for $789,200. (Please see the location map.)
We propose to use an installment contract for the purchase, with a maturity of 10 years. If we need to borrow as much as $900,000 and if we have an interest rate of 5%, we estimate the installment payment, using even principal payments over the 10-year maturity, would be about $135,000 in the first year, and decline about $4,500 each year until maturity. Our costs would be $789,200 for the purchase of the land; $80,000 for the contract purchased from a development company; $7000 for our agent; and, survey and closing costs.
After hearing from citizens at this public hearing, the Council could proceed to obtain approval of this proposed purchase by adopting the attached resolution in a format prescribed by the Commission. The resolution states the Council’s findings that an installment contract is a necessary and expedient method for financing this project, and authorizes the Manager, Finance Director and Attorney to file an application to the Commission for approval of the proposed financing contract. We would propose to file the application with the Commission on April 10.
In accord with the established process to complete the approval process, we would solicit proposals from financial institutions for the financing of the project within the next two weeks, and submit recommendations on the award of a financial contract to the Council for this purchase on April 24.
The Local Government Commission is scheduled to consider the Town’s application on May 1. The Council would be scheduled to consider a resolution approving the final documents and financing terms on May 7. Under the contract documents the Town will be acquiring the property before June 9.
RECOMMENDATION
We recommend that the Council adopt the attached resolution stating its findings that an installment contract is a necessary and expedient method for the proposed purchase of land, and authorizing an application to the Local Government Commission for approval of the proposed financing.
ATTACHMENT
1. Location map (p. 5).
2. Memorandum form Town Attorney, April 9, 2001 (p. 6).
A RESOLUTION AUTHORIZING THE FILING OF AN APPLICATION FOR APPROVAL OF A FINANCING AGREEMENT AUTHORIZED BY NORTH CAROLINA GENERAL STATUTE 160A-20 (2001-04-09/R-1)
WHEREAS, the Town of Chapel Hill, North Carolina desires to purchase land in an amount not to exceed $900,000 to be used primarily as a Public Works operations center to better serve the citizens of the Town; and
WHEREAS, the Town desires to finance the Project by the use of an installment contract authorized under North Carolina General Statute 160A, Article3, Section 20; and
WHEREAS, findings of fact by the governing body must be presented to enable the North Carolina Local Government Commission to make its findings of fact set forth in North Carolina General Statute 159, Article 8, Section 151 prior to approval of the proposed contract;
NOW, THEREFORE, BE IT RESOLVED by the Council of the Town of Chapel Hill that the Council, meeting in a regular session on the 9th day of April, 2001, makes the following findings of fact;
l. The proposed contract is necessary and expedient in order to take advantage of an opportunity to complete the purchase of available land for a Public Works site in a timely manner.
2. The proposed contract is preferable to a bond issue for the same purpose because timing is of the essence in order to complete the purchase contract by June 9, 2001, and the amount of $900,000 is more than can be prudently raised from currently available appropriations, unappropriated fund balances, and non-voted bonds in a timely manner.
3. The cost of financing under the proposed contract is expected to be approximately the same as the cost of issuing general obligation bonds.
4. The sums to fall due under the contract are found to be adequate and not excessive for the proposed purpose.
5. The debt management policies of the Town are found to have been carried out in strict compliance with applicable law and will be continued in the future.
6. The increase in taxes necessary to meet the sums to fall due under the proposed contract is estimated to be .4 cents per $100 valuation and is not deemed to be excessive.
7. The Town is not in default in any of its debt service obligations.
8. The attorney for the Town has rendered an opinion that the proposed Project is authorized by law and is a purpose for which public funds may be expended pursuant to the Constitution and laws of North Carolina.
NOW, THEREFORE, BE IT FURTHER RESOLVED that the Manager, Finance Director, and Attorney are hereby authorized to act on behalf of the Town in filing an application with the North Carolina Local Government Commission for approval of the Project and the proposed financing contract and actions not inconsistent with this resolution.
This the 9th day of April, 2001.