AGENDA #2b

 

MEMORANDUM

 

TO:                  Mayor and Town Council

 

FROM:            W. Calvin Horton, Town Manager

 

SUBJECT:       Public Hearing to Consider Using Installment Contract for Refinancing the Town’s Parking Certificates of Participation Issued in 1994

 

DATE:             June 23, 2003

 

 

The purpose of this public hearing is to receive comments from citizens on the proposed use of an installment contract to refinance the Town’s existing Parking Certificates of Participation issued in 1994 to finance the James C. Wallace Parking Deck and portions of other Town parking facilities.

 

The attached resolution would declare findings by the Council that a proposed installment contract is a necessary and expedient method to accomplish this refinancing, 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 in June, for consideration by the Commission on September 3, 2003.

 

BACKGROUND

 

The Town has an opportunity to refinance its existing Parking Certificates of Participation that will result in significant debt service savings.   The current outstanding Certificates run for twenty more years, maturing in 2023.   The Certificates are eligible for refinancing effective December 1, 2003, and the refinancing can be completed as early as September, 2003.

 

On June 9, 2003, the Council began the process necessary to obtain approval from the Local Government Commission to refinance (or replace) these Parking Certificates by adopting a resolution calling for tonight’s public hearing to consider this refinancing using an installment contract.  Notice of the public hearing was published in the Chapel Hill Herald on June 13, 2003, as required by procedures of the Commission.

 

DISCUSSION

 

We propose to solicit proposals from financial institutions for an installment contract to replace the existing parking certificates.  Our preliminary analyses indicate that potential total dollar debt service savings could be about $1.7 million over a twenty-year period at current interest rates, and more than $2 million if refinanced for only a fifteen-year period.  We are continuing our discussion with our advisors on the best terms for this refinancing.  We plan to request banking proposals for a twenty-year and fifteen-year maturity.

 

After hearing from citizens during the public hearing, the Council could proceed with the process necessary to obtain approval of this refinancing 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 to accomplish this refinancing, 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 in June.

 

In accord with the schedule established to complete the approval process, we would solicit proposals from financial institutions for the financing of the project during the summer, and submit recommendations on the award of the financial contract to the Council on August 25. 

 

The Council’s award of the contract would be subject to approval by the Local Government Commission. The Commission is scheduled to consider the Town’s application on September 3, 2003.    Assuming approval by the Commission, we believe we could complete the refinancing in September, 2003.

 

RECOMMENDATION

 

We recommend that the Council adopt the attached resolution stating its findings that an installment contract is a necessary and expedient method for accomplishing a refinancing of the Town’s Parking Certificates of Participation.  The resolution would authorize 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 (2003-06-23/R-2)

 

WHEREAS, the Town of Chapel Hill, North Carolina desires to refinance its existing Parking Certificates of Participation eligible for a current refunding on December 1, 2003; and

 

WHEREAS, the Town desires to refinance the Parking Certificates of Participation by the use of an installment contract authorized under North Carolina General Statute Chapter 160A, Article 3, 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 23rd 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 refinance the Town’s outstanding Parking Certificates of Participation to accomplish significant debt service savings.

 

2.   The proposed contract is preferable to a bond issue for the same purpose because timing is of the essence in order to take advantage of current market interest rates that would result in significant debt service savings, and the amount of up to $6.85 million 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 about 1.1 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 refinance 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 23^rd day of June, 2003.