AGENDA #3f

 

BUDGET WORKING PAPER

 

 

TO:                  W. Calvin Horton, Town Manager

 

FROM:               James M. Baker, Finance Director

 

SUBJECT:       General Information on Installment Financing

 

DATE:            May 30, 2001

 

 

This memorandum provides information on several questions by the Council regarding installment financing for various items included in the proposed Capital Improvements Fund budget for 2001-2002.  Below is general information on these questions.

 

Collateral Security

 

When an installment contract is used for renovations or capital improvements to Town facilities, a collateral security interest must be taken by the financial institution in the renovation or improvement financed.  If capital improvements or renovations are made to two or more buildings or facilities as a designated project to be financed, then it is permissible to execute a collateral security in one of the buildings or facilities renovated to cover the cost of all buildings included in the project.  However, the security must be taken in one of the buildings financed, and could not be taken in some other building or asset of the Town not involved in the project.  All installment contracts involving capital renovations and improvements require approval by the N. C. Local Government Commission after completing a public process prescribed by the Commission (similar to process required for the recent financing of land for a new Public Works facility).

 

Carpet Replacement

 

I believe that replacement of carpet in Town Hall would not be eligible for financing unless it was part of other capital renovations and improvements to the Town Hall.  The installment funding mechanism is not intended to finance discrete maintenance tasks that are not part of a general renovation.             

 

Emergency Generator for Town Hall

 

An emergency generator is basically equipment that would be eligible to be financed for a period not to exceed the normal useful life of the generator.  Equipment financing does not require approval by the Local Government Commission.

 

 

 

Public Works Lube Pit and Vehicle Washing Facility

 

I believe these projects would be eligible to be financed as a capital renovation or improvement project, subject to the approval process by the Local Government Commission as noted above.  If parts of the project involved the purchase of large pieces of equipment as noted in the budget working paper on these projects, it would be possible to finance the equipment only, which would fall under the equipment financing rules that would not require approval by the Commission.