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HomeMy WebLinkAbout08241992 I 757 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 BRIEFING ON PURPOSE OF SPEC IAL ~1EETING PRESENTATION OF LEGAL & FINANCIAL INFORMATION COMMENTS PREVIOUS RESOLUTION RESCINDED , ADOPTION OF RESOL.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Hudson moved that the resolutibn concerning the project which was adopted by the Board on August 17, 1992, be rescinded.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. ;tt..J /.l ~ ~ t1~ d. Stewart, Chairman -:L AJ . Vanessa W. Young, Cler to Board ~, .I #~~luvLd Kay S Blanc ard, Secretary 758 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; I 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 759 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: 760 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. 761 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: 762 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 I Attest: '- . ! ",~..I.~.... (~\~ Vanessa W. Young, Clerk to the Board' .... ~ l-" \ \ J