08241992
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HARNETT COUNTY BOARD OF CO~1MISSIONERS SPECIAL MEETING, AUGUST 24, 1992
The Harnett County Board of Commissioners met in special session on
August 24, 1992, in the Library Conference Room, Harnett County
Library, Main street, Lillington, North Carolina with the following
members present: Beatrice Bailey Hill, Walt Titchener, Bill Shaw,
Mack Reid Hudson, and Chairman Lloyd G. Stewart presiding. Others
present were Dallas H. Pope, County Manager; John M. Phelps, II,
Public Utilities Attorney; Vanessa W. Young, Finance Officer; and Kay
S. Blanchard, Recording Secretary.
Chairman Stewart called the meeting to order at 7:30 p.m. and
Commissioner Shaw offered the invocation.
Chairman Stewart called on Dallas H. Pope, County Manager, who briefed
the grou~ tha~ the purpose of the special meeting was the Northeast
Metro Acquisi~ion Project.
BACKGROUND INFO John M. Phelps, II, Public Utilities Attorney, provided background
PROVIDED ON RESOLUTION information concerning a resolution titled "Resolution Authorizing the
Filing of an Application for Approval of a Financing Agreement
Authorized by N.C.G.S. S 160A-20 (Northeast Metro Acquisition
Project), which was adopted by the Harnett County Board of
Commissioners at their regular Board meeting, August 17, 1992.
BRIEFING ON PURPOSE
OF SPEC IAL ~1EETING
PRESENTATION OF
LEGAL & FINANCIAL
INFORMATION
COMMENTS
PREVIOUS RESOLUTION
RESCINDED
,
ADOPTION OF RESOL.
RE: NE METRO ACQUISI-
TION PROJECT
ADJOURNMENT
John Barnes, J. Lee Peeler & Co., Inc., and Paul H. Billow, Poyner &
Spruill, Attorneys at Law, presented financial and legal information
on requirements and procedures for proceeding with the financing
process concerning the purchase of the Northeast Metropolitan Water
System.
Comments concerning the Northeast Metro Acquisition Project were
provided by the following:
1. Sol Kozma, Dunn resident
2. Bob Stivender, Town of Angier Board Member
3. Frank Lewis, former mayor of Lillington
4. Marcel Brown, Town of L.i:;',lington Board Memb~r
5. Carl Dean, City Manager of Dunn
5. Ben Thomp~on, ~ttorney for the City of Dunn
After discussion by th~ BoarQ of Commissioners, Commissioner Hudson
moved that the resolutibn concerning the project which was adopted by
the Board on August 17, 1992, be rescinded. Commissioner Shaw
seconded the motion and it passed with the following vote:
Ayes 3, Noes 2, Absent O.
John M. Phelps, II, Public Utilities Attorney, presented for the
Board's consideration a revised resolution titled "Resolution
Authorizing the Filing of an Application for Approval of a Financing
Agreement Authorized by N.C.G.S. S 160A-20 (Northeast Metro
Acquisition Project). Commissioner Hudson moved for adoption of the
resolution. Commissioner Shaw seconded the motion and it passed with
the following vote: Ayes 3, Noes 2, Absent O. The resolution
is copied in full at the end of these minutes as Attachment 1.
There being no further business, '~he special meeting of the Harnett
County Board of Commissioners, August 24, 1992, adjourned at 9:35 p.m.
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t1~ d. Stewart, Chairman
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Vanessa W. Young, Cler to Board
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Kay S Blanc ard, Secretary
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Attachment 1.
RESOLUTION AUTHORIZING THE FILING OF AN APPLICATION
FOR APPROVAL OF A FINANCING AGREEMENT
AUTHORIZED BY N.C. GEN. STAT. S 160A-20
(NORTHEAST METRO ACQUISITION PROJECT)
WHEREAS, Northeast Metropolitan Water District of Harnett
County, North Carolina (the "District") and County of Harnett (the
"County") entered into an agreement designated as "Lease" dated May
30, 1980 (the "Lease") pursuant to which District leased its water
production and distribution facilities to County; and
WHEREAS, as part of the terms of the Lease, County agreed to
pay to District, as rental, for the use of the District's
facilities, a sum equal to the annual debt service expense of
District, plus an additional sum of money equal to District's
annual administrative costs; and
WHEREAS, the terms of the Lease also provide that all water
mains, hydrants, valves, fittings, meters, pumping stations,
pumping equipment, water treatment facilities, storage facilities,
customer service lines and other appurtenances leased to County
shall be maintained and operated by County for the rental period,
including replacement of all worn or depreciated equipment by
painting, repair or replacement; and
WHEREAS, pursuant to the Lease, County further agreed to pay
for all sewer service charges, all heat, gas, oil, fuel and
electrical charges incurred in the use of the leased facilities;
and
WHEREAS, since the commencement of the lease term, County has
complied with the terms and conditions of the Lease and has paid
the rental payments as hereinabove set forth, said payments being
obtained from both revenues collected by County from water sales
and funds otherwise available from County resources; and
WHEREAS, the Lease granted County the exclusive option to
purchase the leased premises upon payment of $1.00 and a sum of
money that is sufficient to enable District to pay the outstanding
bonded indebtedness of District as it comes due and a sum of money
sufficient to enable District to meet its administrative expenses
while the bonded indebtedness remains unpaid; and
WHEREAS, District has issued a non tax exempt Water Refunding
Bond dated June, 1988 and $1,857,200 of such bond is now
outstanding (the "outstanding bond"); and
WHEREAS, the rate of interest on the outstanding bond is a
variable rate equal L0 the prime rate of First Citizens Bank and
Trust Company, plus 0.5%, subject to a maximum rate of 10.5% and
a minimum rate of 6.5% per annum;
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WHEREAS, District has also issued Water Bond Anticipation
Notes in the amount of $1,080,000 (the "outstanding notes") which
mature on October 21, 1992;
WHEREAS, in order to provide for the appropriate management
and operation of the leased facilities, after execution of the
Lease, County established a Department of Public Utilities; and
WHEREAS, the Board of Commissioners of the County of Harnett
(the "Board") thereafter endeavored to provide public water to
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other areas of Harnett County and in connection therewith created
six county water and sewer districts; and
WHEREAS, water distribution systems now exist in four of said
county water and sewer districts and the water supplied to each is
provided by County from the leased water production facilities; and
WHEREAS, because of the volume of its water sales, County
currently receives sufficient revenues therefrom each fiscal year
so as to pay all costs and rentals associated with its obligations
to District under the Lease; and
WHEREAS, in order to eliminate the complex administrative and
financial accounting tasks associated with the operation and
management of several water systems, County's independent auditors
have recommended consolidation of County's public utility districts
when feasible; and
WHEREAS, according to a tabulation of the Bond Buyer's Index
recently compiled for the last thirteen months, issued by the North
Carolina Department of State Treasurer, the index was at its lowest
point during the thirteen month period; and
WHEREAS, the Board finds that because of the current favorable
interest rate environment, it is feasible and advisable to exercise
its option to purchase the leased facilities and to obtain
financing therefor as soon as practicable; and
WHEREAS, County desires to purchase the water production and
distribution facilities of District for such amount as equals $1.00
plus that sum of money which will enable District to retire its
outstanding bond and its outstanding notes, all for the purpose of
better serving the citizens of Harnett County; and
WHEREAS, County desires to finance the purchase, and the costs
associated with the purchase and its financing (the "Project") by
use of an installment contract authorized under N.C. Gen. Stat. S
160A-20; and
WHEREAS, the Project cost, including the purchase price and
costs of issuance, is estimated at approximately $3,100,000; and
WHEREAS, said N.C. Gen. Stat. S 160A-20 allows the County to
finance the purchase of real or personal property by an installment
contract (the "Contract") where a security interest is created in
the property being purchased; and
WHEREAS, the Board conducted a public hearing to receive
public comment on the desirability of the Contract for the Project,
and the Board received evidence supporting the need for such
financing as herein described; and
WHEREAS, findings of fact by this 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; and
WHEREAS, the Board now desires to make certain findings of
fact and further provide other instructions relative to the
Project.
NOW, THEREFORE, BE IT RESOLVED that the Board of Commissioners
of the County of Harnett meeting in special session on August 24,
1992 does hereby make the following findings of fact:
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1. The Project and associated proposed Contract are necessary
and/or expedient for several reasons, including but not limited to
the following:
a. Based upon financial savings reports, projections,
and associated documentation provided to the Board,
it is clear that debt service costs required to
finance the cost of the Project will be less than
payments due under the Lease.
b. Providing a safe drinking water source to the
citizens of Harnett County pursuant to the most
economical method is desirous and appropriate.
c. It is expected that because of new standards and
mandates imposed by Congress pursuant to the Safe
Drinking Water Act, modifications and/or upgrades
to the existing water production facility will be
required. County as an entity is provided with
greater flexibility relative to financing options
to pay for such modifications and/or upgrades and
County is also more likely to finance such
modifications and/or upgrades, particularly where
publicly marketed issues are involved, at a lesser
rate of interest than District.
d. Duplicative costs associated with providing
administrative and financial accounting tasks and
functions to both District and County will be
eliminated by implementation of the project.
2. Based upon current County budgetary requirements, the cost
of the Project as proposed, which cost exceeds $3,000,000,
surpasses the amount that can be prudently raised from County's
available appropriations and unappropriated fund balances.
3. County has no non-voted bonds that could be issued by it
in the current fiscal year pursuant to Article V, Section 4 of the
North Carolina Constitution.
4. The proposed financing Contract as contemplated by the
Board, under the circumstances attendant thereto, is preferable to
a voted general obligation bond issue for several reasons,
including but not limited to the following:
i,. The cost of a special election necessary to approve
a general obligation bond financing, as required by
the laws of this State, would result in the
expenditure of significant funds.
b. The time required for a general obligation bond
election would cause an unnecessary delay which may
result in the loss of the favorable interest rates
currently available to County in the financial
marketplace;
c. The time required for a general obligation bond
election would result in funds becoming available
for the Project at a time after District's
outstanding notes mature, thereby causing
unnecessary expense to District for renewal of said
notes. Lnder the proposed schedule for financing,
the purchase funds will be available to District
prior to the maturity of its outstanding notes.
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5. The proposed financing Contract as contemplated by the
Board, under the circumstances attendant thereto, is preferable to
a revenue bond issue for several reasons, including but not limited
to the following:
a. While the funds received by County from the sale of
water provide sufficient revenue to pay all expenses
associated with ownership, operation and
maintenances bf the facilities proposed to be
acquired, such revenues would not be sufficient,
without substantial rate increases, to permit a
revenue bond financing which would achieve
investment grade ratings from nationally recognized
rating agencies.
b. Rates for revenue bonds will not be substantially
different from those rates likely to be applicable
under the proposed Contract, particularly in light
of the restrictions, covenants and credit terms to
be placed on County in a revenue financing.
6. While the cost of financing under the proposed Contract
is greater that the cost of issuing general obligation bonds, the
use of the proposed Contract is adequately justified by the
offsetting considerations set forth in the findings numbered 3 and
4 above.
7. The sums to fall due under the proposed Contract are
adequate and not excessive for the reason that the principal and
interest payments to fall due under the Contract are approximately
$300,000 per year for sixteen (16) years and are less than the
funds currently budgeted for payments due pursuant to the Lease.
8. The projected net revenues of County's water sales upon
acquisition of the facilities will be sufficient to meet the sums
to fall due under the proposed Contract.
9. As evidenced by the annual audits of County, the debt
management policies of County have been carried out in strict
compliance with the law and the same shall henceforth be so carried
out.
10. The County does not intend to increase the property tax
rate of County to raise sums to fall due under the proposed
Contract. The County expects to pay all sums coming due under the
Contract from water revenues. During the budget making process and
prior to the public hearing thereon, all municipalities in the
County will be notified as to all sources of revenues to be used
to pay the sums due under the Contract.
11. County is not in default in meeting any of its debt
service or contract obligations.
12. The attorney for County responsible for its public
utilities matters has rendered an opinion that the proposed Project
and financial undertaking are authorized by law and are purposes
for which public funds may be expended pursuant to the Constitution
and laws of North Carolina.
AND BE IT FURTHER RESOLVED that:
1. The Board hereby authorizes the Project, and in connection
therewith:
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a. Authorizes the County Manager, upon the advice of
the Local Government Commission, to employ a
qualified appraiser to provide appraisals as
required for the Project's implementation; and
b. Authorizes the County Manager, upon the advice of
the Local Government Commission, to employ a
qualified environmental consultant to provide a
Phase I Environmental Study as required for the
Project's implementation.
2. The Harnett County Public Utilities Attorney is hereby
designated as representative of County for the purpose of seeking
the approval of the proposed Contract, and with respect thereto is
directed to submit an application for the Local Government
Commission's approval of the Contract pursuant to N.C. Gen. Stat.
S 160A-20 and S 159-148.
3. The County Finance Officer is hereby authorized and
directed to execute a sworn statement of debt of the County
pursuant to N.C. Gen. Stat. S 159-150 in connection with the
Contract and the financing of the Project.
4. The appropriate representatives of the County are hereby
authorized and directed to apply for municipal bond insurance with
respect to the Contract.
5. The appropriate representatives of the County are hereby
authorizeQ and directed to proceed with the preparation of an Asset
Purchase Agreement to be executed by County and District and to
proceed with the preparation of the Contract and other financial
documents.
6. The Chairman of the Board, the Clerk to the Board, the
County Mana~er, the County Finance Officer and the County Public
Utilities Attorney and such other representatives of the County as
are required are hereby authorized to otherwise proceed with the
Project and the plan of financing associated therewith, provided
that the costs thereof do not exceed $3,100,000, and to take any
and all such further action as may be necessary or advisable to
carry out the intent of this Resolution.
Duly adopted this 24th day of August, 1992 upon motion made
by Commissioner Hudson, seconded by Commissioner Shaw and adopted
by the following vote:
Ayes 3
Noes 2
Absent 0
Boa=d of Commissioners of
the County of Harnett
By~/7/4~
Llo G. Stewart,
eha rman of the Board
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Attest:
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Vanessa W. Young,
Clerk to the Board'
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