MEMORANDUM

AGENDA #4b

MEMORANDUM

TO: Mayor and Town Council

FROM: W. Calvin Horton, Town Manager

SUBJECT: Resolution Awarding General Obligation Bonds Sold on March 25

DATE: April 14, 2003

The attached resolution would award the Town’s General Obligation bonds sold on March 25 to the lowest bidder, Merrill Lynch & Co. Adoption of the resolution would be the final action required by the Council to complete the refunding bond sale.

Seven bids were received for the bonds, ranging from 3.6595% to 3.9886%. Merrill Lynch & Co.’s bid was determined to be the lowest bid at a proposed interest rate of 3.6595%.

RECOMMENDATION

That the Council adopt the attached resolution awarding the General Obligation bonds to Merrill Lynch & Co. at an interest rate of 3.6595%.

A RESOLUTION AWARDING THE BONDS, DESIGNATING THE TOWN OF CHAPEL HILL, NORTH CAROLINA AS PAYING AGENT FOR THE $4,250,000 GENERAL OBLIGATION PUBLIC IMPROVEMENT BONDS, SERIES 2003, AND AMENDING THE FORM OF THE BONDS (2002-04-14/R-3)

BE IT RESOLVED by the Town Council of the Town of Chapel Hill, North Carolina (the "Town") as follows:

Section 1. Notice was duly distributed calling for sealed bids to be received by the Local Government Commission, at its office in the City of Raleigh, North Carolina, until 11:00 A.M., North Carolina time on Tuesday, March 25, 2003, for the Bonds, at which hour bidding was closed and the following bids were found to have been filed offering to purchase the Bonds and to accord in all respects with the terms of the notice, each bid being accompanied by an official bank check, a cashier's check, a certified check, a treasurer's check or a financial surety bond in the amount of $85,000 payable unconditionally to the order of the State Treasurer of North Carolina.

(1) Bid of Merrill Lynch & Co. offering to pay $4,253,931.75 plus accrued interest for the Bonds, and naming for the Bonds the interest rates set forth below in Column (1) of the tabulation headed "INTEREST RATES NAMED IN BIDS."

(2) Bid of Wachovia Bank, National Association offering to pay $4,257,085, plus accrued interest for the Bonds, and naming for the Bonds the interest rates set forth below in Column (2) of the tabulation headed "INTEREST RATES NAMED IN BIDS."

(3) Bid of Morgan Keegan & Company, Inc. offering to pay $4,252,975, plus accrued interest for the Bonds, and naming for the Bonds the interest rates set forth below in Column (3) of the tabulation headed "INTEREST RATES NAMED IN BIDS."

(4) Bid of SunTrust Equitable Securities offering to pay $4,250,000, plus accrued interest for the Bonds, and naming for the Bonds the interest rates set forth below in Column (4) of the tabulation headed "INTEREST RATES NAMED IN BIDS."

(5) Bid of Legg Mason Wood Walker, Inc. offering to pay $4,253,913.25 plus accrued interest for the Bonds, and naming for the Bonds the interest rates set forth below in Column (5) of the tabulation headed “INTEREST RATES NAMED IN BIDS.”

(6) Bid of Davenport & Company LLC offering to pay $4,253,451.75, plus accrued interest for the Bonds, and naming for the Bonds the interest rates set forth below in Column (6) of the tabulation headed "INTEREST RATES NAMED IN BIDS."

(7) Bid of BB&T Capital Markets offering to pay $4,250,000, plus accrued interest for the Bonds, and naming for the Bonds the interest rates set forth below in Column (7) of the tabulation headed “INTEREST RATES NAMED IN BIDS.”

Year of $4,250,000

Maturity Bonds Interest Rates Named in Bids

(1) (2) (3) (4) (5) (6) (7)

2004 150,000 2.0% 3.5% 2.25% 5.0% 4.0% 2.5% 3.0%

2005 150,000 2.0% 5.5% 2.25% 5.0% 4.0% 2.5% 2.5%

2006 75,000 2.0% 5.5% 2.25% 3.0% 3.5% 2.5% 2.5%

2007 150,000 2.0% 5.5% 2.25% 5.0% 3.5% 2.5% 3.0%

2008 150,000 3.5% 5.0% 2.4% 4.0% 3.5% 2.5% 3.0%

2009 150,000 3.5% 3.5% 2.75% 3.0% 3.5% 3.0% 3.25%

2010 300,000 3.5% 3.5% 3.5% 3.15% 3.5% 3.125% 3.5%

2011 300,000 3.5% 3.5% 3.5% 3.25% 3.5% 3.375% 3.5%

2012 300,000 3.5% 3.5% 3.5% 3.4% 3.75% 3.75% 3.75%

2013 300,000 3.375% 3.5% 3.5% 3.45% 3.75% 4.0% 3.75%

2014 300,000 3.375% 3.5% 3.65% 3.5% 3.6% 4.0% 3.8%

2015 300,000 3.625% 3.5% 3.75% 3.65% 3.7% 4.0% 3.9%

2016 300,000 3.75% 3.5% 3.85% 3.75% 3.8% 4.0% 4.0%

2017 300,000 3.75% 3.75% 3.95% 3.85% 3.875% 4.0% 4.125%

2018 300,000 3.875% 3.75% 4.0% 3.9% 4.0% 4.0% 4.25%

2019 300,000 4.0% 4.0% 4.1% 4.0% 4.0% 4.0% 4.3%

2020 300,000 4.0% 4.0% 4.1% 4.1% 4.0% 4.1% 4.4%

2021 125,000 4.0% 4.0% 4.2% 4.25% 4.0% 4.1% 4.5%

Section 2. That the bid offering to purchase the Bonds at the lowest net interest cost to the Town, such cost being determined by deducting the amount of premium bid from the aggregate amount of interest upon all the Bonds from April 1, 2003 until their respective maturities, was the bid of Merrill Lynch & Co. offering to pay $4,253,931.75 plus accrued interest for the Bonds, and naming for the Bonds the interest rates set forth above in Column (1) of the tabulation headed "INTEREST RATES NAMED IN BIDS" in Section 2 above, such net interest cost being 3.6595%.

Section 3. It is hereby determined that under the terms of the Notice of Sale with respect to the Bonds the bid of Merrill Lynch & Co. should be accepted and the acceptance thereof is in the best interests of the Town.

Section 4. The Bonds are hereby awarded to Merrill Lynch & Co. at the price set forth in Section 2 above offered for the Bonds and at the rates of interest named in said bid as set forth above in Column (1) of the tabulation headed "INTEREST RATES NAMED IN BIDS" in Section 2 above, and the Bonds shall be issued bearing interest at those rates.

Section 5. The Bonds shall be prepared and executed by the Mayor and Town Clerk of the Town substantially in the form and manner set forth in the Bond Resolution, as amended by the terms of this Resolution, with a certificate of authentication to be added thereto and executed by the Director of Finance of the Town. Bonds in typewritten form shall be delivered to or upon the order of The Depository Trust Company, New York, New York upon payment of the purchase price and accrued interest no later than April 15, 2003.

Section 6. The Town of Chapel Hill, North Carolina is hereby designated and appointed by the Town to act as Paying Agent for the Bonds.

Section 7. The form of the Bonds authorized and approved in Section 7 of the Bond Resolution adopted by the Town Council on February 24, 2003 is hereby amended and restated as follows:

(Form of Bond)

NO. R-___________ $__________

UNITED STATES OF AMERICA

STATE OF NORTH CAROLINA

TOWN OF CHAPEL HILL, NORTH CAROLINA
GENERAL OBLIGATION PUBLIC IMPROVEMENT
BOND, SERIES 2003

INTEREST RATE

MATURITY DATE

ORIGINAL

ISSUE DATE

CUSIP

________________

April 1, ____

April 1, 2003

_______________

REGISTERED OWNER: CEDE & CO.

PRINCIPAL AMOUNT:_________________ Dollars

The Town of Chapel Hill, North Carolina (hereinafter referred to as the “Town”), a municipal corporation of the State of North Carolina, is justly indebted and for value received hereby promises to pay in the manner hereinafter provided, to the registered owner named above or registered assigns or legal representative on the Maturity Date specified above, the principal amount shown above and to pay to the registered owner hereof interest thereon from the date of this Bond until this Bond is paid in full at the interest rate per annum specified above, payable on October 1, 2003 and semiannually thereafter on April 1 and October 1 of each year. Principal of and interest on this Bond are payable in clearinghouse funds to The Depository Trust Company (“DTC”) or its nominee as registered owner of the Bonds and are payable to the owner of the Bonds shown on the records of DTC at the close of business on the day immediately preceding an interest payment date or a principal payment date. The Town is not responsible or liable for maintaining, supervising or reviewing the records maintained by DTC, its participants or persons acting through such participants.

This Bond is issued in accordance with the Registered Public Obligations Act, Chapter 159E of the North Carolina General Statutes, as amended, and pursuant to The Local Government Finance Act, the bond orders adopted by the Town Council of the Town on September 23, 1996 and approved by a majority of the qualified voters of the Town who voted thereon at a referendum duly called and held on November 6, 1996 and a bond resolution adopted by the Town Council on February 24, 2003. This Bond is one of a series of Bonds designated as “Town of Chapel Hill, North Carolina General Obligation Public Improvement Bonds, Series 2003” initially issued in the aggregate principal amount of $4,250,000 (the “Bonds”). The Bonds are being issued for the purpose of financing street improvements, parks and recreational facilities, fire stations and law enforcement facilities, public works facilities and open space and greenways in the Town.

The Bonds maturing prior to April 1, 2014 will not be subject to redemption prior to maturity. The Bonds maturing on April 1, 2014 and thereafter will be subject to redemption prior to maturity, at the option of the Town, from any moneys that may be made available for such purpose, either in whole or in part, on any date not earlier than April 1, 2013, at a redemption price equal to 100% of the principal amount of the Bonds to be redeemed, plus interest accrued to the date fixed for redemption.

If less than all of the Bonds of any one maturity shall be called for redemption, the particular Bonds or portions of Bonds of such maturity to be redeemed shall be selected by lot in such manner as the Town in its discretion may determine; provided, however, that the portion of any Bond to be redeemed shall be in the principal amount of $5,000 or any integral multiple thereof and that, in selecting Bonds for redemption, each Bond shall be considered as representing that number of Bonds which is obtained by dividing the principal amount of such Bond by $5,000. So long as a book-entry system with DTC is used for determining beneficial ownership of Bonds, if less than all of the Bonds within a maturity are to be redeemed, DTC shall determine by lot the amount of interest of each direct participant in the Bonds to be redeemed. If less than all of the Bonds then subject to redemption shall be called for redemption, the particular maturities and amounts of the Bonds or portions of Bonds to be redeemed shall be determined by the Town.

Whenever the Town shall elect to redeem Bonds, written notice of the redemption of such Bonds, stating the redemption date, redemption price and identifying the Bonds or portions thereof to be redeemed by reference to their numbers and further stating that on such redemption date there shall become due and payable upon such Bond or portions thereof so to be redeemed, the principal thereof, redemption premium and interest accrued to the redemption date and that from and after such date interest thereon shall cease to accrue. Such notice of redemption shall be given by certified or registered mail to DTC or its nominee as the registered owner of the Bond not more than 60 days nor less than 30 days prior to the redemption date at the address provided to the Town by DTC, but any failure or defect in respect of such mailing will not affect the validity of the redemption. The Town is not responsible for mailing notices of redemption to anyone other than DTC or its nominee unless no qualified securities depository is the registered owner of the Bonds.

It is hereby certified and recited that all conditions, acts and things required by the Constitution or laws of the State of North Carolina to exist, be performed or happen precedent to and in the issuance of this Bond, exist, have been performed and have happened, and that the amount of this Bond, together with all other indebtedness of the Town, is within every debt and
other limit prescribed by said Constitution or statutes. The faith and credit of the Town are hereby pledged to the punctual payment of the principal of and interest on this Bond in accordance with its terms.

This Bond shall not be valid or become obligatory for any purpose until this Bond has been authenticated by the Director of Finance of the Town and the certifications hereon shall have been signed by authorized representatives of the Local Government Commission of North Carolina.

IN WITNESS WHEREOF, the Town of Chapel Hill, North Carolina has caused this Bond to be manually signed by its Mayor and its Clerk and its official seal to be imprinted hereon, all as of the 1st day of April 2003.

(SEAL)

Town Clerk Mayor

Town of Chapel Hill, North Carolina Town of Chapel Hill, North Carolina

CERTIFICATE OF LOCAL GOVERNMENT COMMISSION

The issuance of the within Bond has been approved under the provisions of The Local Government Bond Act, of North Carolina as amended.

( signature )
JANICE T. BURKE

Secretary of the Local Government Commission

CERTIFICATE OF AUTHENTICATION

This Bond is one of the Series of Bonds designated herein and issued under the provisions of the Bond Resolution referenced herein.

By:

James M. Baker

Director of Finance

Town of Chapel Hill, North Carolina

ASSIGNMENT

FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto _________________, the within Bond and irrevocably appoints _________________, attorney-in-fact, to transfer the within Bond on the books kept for registration thereof, with full power of substitution in the premises.

Dated: ________________________ _________________________________________

NOTICE: The signature to this assignment must correspond with the name as it appears upon the face of the within Bond in every particular, without any alteration whatsoever.

Signature Guaranteed:

______________________________

(Bank, Trust Company or Firm)

(Authorized Officer)

Section 8. The officers and agents of the Town are hereby authorized and directed to do all acts and things necessary to carry into effect the provisions of this Resolution.

Section 9. This Resolution shall be in full force and effect immediately upon its passage.

This the 14^th day of April, 2003.