MEMORANDUM
TO: Mayor and Town Council
FROM: W. Calvin Horton, Town Manager
SUBJECT: Public Hearing to Consider Using Installment Contract Financing for the Purchase of Additional Land for the Town Operations Center
DATE: June 9, 2003
The purpose of this public hearing is to receive comments from citizens on the proposed use of an installment contract to purchase an additional 13.17 acres of land for the proposed Town Operations Center.
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 purchase and a proposed financing contract. The application to the Commission would be filed on June 10, for consideration by the Commission on July 1, 2003.
BACKGROUND
On May 28, 2003, the Council began the process necessary to obtain approval from the Local Government Commission of a proposed installment contract to finance the purchase of additional 13.17 acres of land for the proposed Town Operations Center (TOC). The Council adopted a resolution calling for tonight’s public hearing (as required by the Commission) to consider this purchase using an installment contract. Notice of the public hearing was published in the Chapel Hill Herald on May 30, 2003 as required by procedures of the Commission.
DISCUSSION
We propose to use an installment contract for the purchase of 13.2 additional acres, with a maturity of 10 years. A firm contract in the amount of $342,000 for this purchase has now been negotiated with the seller of property with a proposed closing date in early July, 2003. The Council has authorized the Manager to execute the contract. Debt service payments would begin in fiscal year 2003-04 and would be dependent upon the actual final amount financed and the interest rate on the financing. We estimate payments of about $40,000 annually which could be funded this year from debt service reserve funds resulting from additional State-shared revenues received in the current budget year.
After hearing from citizens during the public hearing, the Council could proceed with the process necessary to obtain approval of this proposed purchase by adopting the attached resolution presented 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 purchase, and authorize the Manager, Finance Director and Attorney to file an application with the Commission for approval of the proposed financing contract. We propose to formally file the application with the Commission on June 10.
In accord with the schedule established to complete the approval process, we would solicit proposals from financial institutions for the financing of the project on June 10, and submit recommendations on the award of the financial contract to the Council on June 23, subject to approval by the Local Government Commission.
The Local Government Commission is scheduled to consider the Town’s application on July 1. Assuming approval by the Commission, we propose closing this purchase with the seller in early July.
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 additional land and authorizing an application to the Local Government Commission for approval of the proposed financing.
A RESOLUTION AUTHORIZING THE FILING OF AN APPLICATION FOR APPROVAL OF A FINANCING AGREEMENT AUTHORIZED BY NORTH CAROLINA GENERAL STATUTE 160A-20 (2003-06-09/R-1)
WHEREAS, the Town of Chapel Hill, North Carolina desires to purchase 13.17 acres of additional land for construction of the proposed Town Operations Center to better serve the citizens of the Town at an estimated cost of about $342,000; and
WHEREAS, the Town desires to finance the purchase of said land by the use of an installment contract authorized under North Carolina General Statute Chapter 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 Chapter 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 June, 2003, 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 said land to continue the planning and design of the proposed Town Operations Center 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 continue the planning and design of the proposed facility, and the amount of up to $340,000 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 less than 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 performed 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 anticipated contract is estimated to be less than .l cent 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 purchase is authorized by law and is a purpose for which public funds may be expended pursuant to the Constitution and laws of North Carolina.
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 land purchase and the proposed financing contract and actions not inconsistent with this resolution.
This the 9th day of June, 2003.