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092512mHARNETT COUNTY BOARD OF COMMISSIONERS Minutes of Special Session September 25, 2012 The Harnett County Board of Commissioners met in special session on Tuesday, September 25, 2012, in the auditorium of Benhaven Elementary School, 2815 Olivia Road, Olivia, North Carolina. Members present: Staff present: Timothy B. McNeill, Chairman Beatrice B. Hill, Vice Chairman Dan B. Andrews, Commissioner Gary House, Commissioner Jim Burgin, Commissioner Scott Sauer, County Manager Tony Wilder, Deputy County Manager Dwight Snow, County Attorney Sylvia Blinson, Finance Officer Margaret Regina Wheeler, Clerk to the Board Chairman McNeill called the meeting to order at 7:00 pm and led the pledge of allegiance and invocation. The purpose of this special session was to consider and discuss various items related to the proposed Qualified School Construction Bond (QSCB) financing for the Highland Middle School. Ted Cole, Davenport Investors, reviewed the preliminary QSCB financing schedule for the Highland Middle School. Mr. Cole noted the Approving Resolution to be considered at this meeting would be the final approval this Board would make regarding this project. Mr. Cole said they had met with the Local Government Commission (LGC) on several occasions and continue to fine -tune these documents. He said the LGC would consider approval of financing on October 2, 2012 and pending their approval, bonds would sale on November 1, 2012 with close of financing in mid - November. Mr. Cole gave an overview of the Qualified School Construction Bond program where the county issues debt to an investor and agree to pay that investor an interest rate and the federal government comes in and makes a subsidy to off -set that interest rate which costs a net cost to the county at or near zero percent. September 25, 2012 Special Session Minutes Harnett County Board of Commissioners Page 1 of 4 Mr. Cole reported, as indicated from the bond underwriters, the bonds could carry an interest rate of around 4.6% with the federal subsidy rate around 4.35% which would be a net cost of interest expense for the county at approximately .25% Mr. Cole warned of the potential for reduction of federal subsidy rates in Fiscal 2013 and talked about how this could play out. He said that federal subsidy is not an absolute guarantee and must be watched on an annual basis. Mr. Cole said they would continue to watch the market and noted there are provisions within the bonds going forward if the federal government was to not make good on their promise. He said they are working on setting up a debt schedule for 20 to 21 years but this could change to a maximum of 23 years. Mr. John Birath, Director of Facilities and Planning for Harnett County Schools, gave an update on bids received for Highland Middle School on September 20, 2012. Mr. Birath reported 10 bids were received with one being disqualified as it was incomplete. He said bids ranged from $22.5 Million to $23.8 Million with the apparent low bidder being Resolute Building Company. He noted the design team is working with Resolute to get financial data to confirm their ability to see this project through. Mr. Birath reported all permits in hand with the exception of one NC DOT permit which was delayed due to lost information which has since been rectified. It was noted that $380,000 of the project cost is to build a new access road for the school and a resolution is forthcoming to the Board to seek funds from the legislative contingency fund for the road. Commissioner House questioned why we would borrow $30 Million if the lowest bid came in at $22.5 Million. Mr. Birath responded the turn key cost for the total project is $30.9 Million which includes but is not limited to construction, materials, cost of land, design services for architects and engineers, surveyors, environmental engineers, geotechnical investigation, buses, books, and technology and furnishings that would be bid out at a later date. Commissioner Burgin said he had been contacted by a couple of contractors who have looked at the plans for the new school and say some of the finishes and enhancements are over the top and unlike any other school in Harnett County. Commissioner Burgin suggested a community committee to work with the school to review and give oversight for this project and recommended Jim Roberts with Campbell University, Lemuel Young with Young Electric and Jerry Milton as citizens interested in being involved in this process. Chairman McNeill asked to consider for approval a Resolution Approving an Installment Financing Contract and a Deed of Trust with Respect thereto and delivery thereof and providing for certain other related matters. Michael Juby, Bond Counsel with Parker Poe, was present to September 25, 2012 Special Session Minutes Harnett County Board of Commissioners Page 2 of 4 answer questions regarding the financial documents for the lender obligation bonds and the approving resolution for financing. Mr. Juby said the obligation of the County is spelled out in the resolution which approves the financing and authorizes county staff to approve the final documents which still have "moving pieces" regarding flexibility and bond pricing. Mr. Juby responded to questions from Commissioner Burgin regarding the financial documents distributed for review. Regarding $80 Million listed within the Deed of Trust as "the maximum principal amount, including present and future indebtedness, which may be secured by this Deed of Trust at any one time is $80,000,000 "; Mr. Juby explained it is simply a "future indebtedness clause" which would allows us to use the same Deed of Trust if you wanted to come back and build a second school under the same set of documents. Mr. Juby said this is standard, something we have done before and is purely an arbitrary number. Commissioner Burgin questioned what turned out to be an error of information left over on Exhibit B Form of 2012B Bond as the documents are boiler plate and the `Principal Sum' should have been blank. Commissioner Burgin questioned why information was left blank within the financing documents. Mr. Juby said it is customary for a Board to approve these kinds of documents. He said they can't go out on the market without county approval and they can't get the pricing information to finalize the documents until they go out on the market. Mr. Juby said this is necessary however they have shared their models with their best estimates. Mr. Juby stressed the resolution states the principal amount is not to exceed $31,500,000. Commissioner House moved to approve Resolution Approving an Installment Financing Contract and a Deed of Trust with Respect thereto and delivery thereof and providing for certain other related matters. Commissioner Andrews seconded the motion which passed unanimously. (Attachment 1) Commissioner Andrews moved to appoint Tony Wilder, Billy G. Pope and Ted W. Honeycutt as Board of Directors for the Harnett County Public Facilities Corporation. Vice Chairman Hill seconded the motion. Commissioner Burgin questioned why we have to have this board. Mr. Juby responded it was purely function of state law. Mr. Juby said they must have contract with a corporation stand -in. The group meets as required and will resign rights at closing. Mr. Juby said the by -laws for this group need to be amended to make them self - perpetual. The motion to appoint the three to serve as Board of Directors for the Harnett County Public Facilities Corporation passed unanimously. Chairman McNeill invited the audience to attend a joint meeting of the Harnett County Board of Commissioner and Board of Education on Thursday, October 4, 2012, at 7:00 pm at Overhills September 25, 2012 Special Session Minutes Harnett County Board of Commissioners Page 3 of 4 High School where federal, state and local representatives would be discussing the future of education in Harnett County. Chaiiivan McNeill said other than sales tax, property tax is the only other way this Board has moving forward to pay for the facilities and education of children. He noted $116 Million worth of schools still needed in Harnett County. He reported 800 new school children in Harnett County this year. Commissioner McNeill also encouraged citizens to talk to the candidates running for office. The meeting was adjourned at 7:43 pm. Timothy i AV cNeill, Chairman <L tix_. `p Ja i eeler, Clerk September 25, 2012 Special Session Minutes Harnett County Board of Commissioners Page 4 of 4 ATTACHMENT 1 Parker Poe Draft — 09/17/12 EXTRACTS FROM MINUTES OF BOARD OF COMMISSIONERS A special meeting of the Board of Commissioners (the "Board") of the County of Harnett, North Carolina was duly called and held on Monday, September 25, 2012, at 7:00 p.m. at Benhaven Elementary School, 2815 Olivia Road, Olivia, North Carolina 28368, Timothy B. McNeill, Chairman of the Board of Commissioners of the County of Harnett, North Carolina, presiding and the following Commissioners present: Commissioners Present: Commissioners Absent: None Timothy B. McNeill, Chairman Beatrice B. Hill, Vice Chairman Dan Andrews, Commissioner Jim Burgin, Commissioner Gary House, Commissioner Chaiinian McNeill introduced the following resolution, a summary of which had been provided to each Commissioner, a copy of which was available with the Clerk to the Board and which was read by title: RESOLUTION OF THE BOARD OF COMMISSIONERS OF THE COUNTY OF HARNETT, NORTH CAROLINA, APPROVING AN INSTALLMENT FINANCING CONTRACT AND A DEED OF TRUST WITH RESPECT THERETO AND DELIVERY THEREOF AND PROVIDING FOR CERTAIN OTHER RELATED MATTERS WHEREAS, the County of Harnett, North Carolina (the "County ") is a political subdivision validly existing under the Constitution, statutes and laws of the State (the "State "); WHEREAS, the County has the power, pursuant to the General Statutes of North Carolina, to (1) purchase real and personal property, (2) enter into installment purchase contracts to finance the purchase or improvement of real and personal property used, or to be used, for public purposes, and (3) grant a security interest in some or all of the property purchased or improved to secure repayment of the purchase price; WHEREAS, the Board of Commissioners of the County (the "Board") has previously determined that it is in the best interest of the County to enter into (1) an installment financing contract with the Harnett County Public Facilities Corporation, a North Carolina nonprofit corporation (the "Corporation "), in order to pay the capital costs of acquiring, constructing, furnishing and equipping a new Highland Middle School (the "Project") and (2) a deed of trust, security agreement and fixture fling (the "Deed of Trust") related to all or a portion of the County's fee simple interest in the real property on which Highland Middle School will be located, together with the improvements thereon, to provide security for the County's obligations under the Contract; WHEREAS, the Corporation will execute and deliver (1) its Limited Obligation Bonds (County of Harnett, North Carolina), Series 2012A (the "2012A Bonds "), and (2) its Taxable Limited Obligation Bonds (County of Harnett, North Carolina, Qualified School Construction Bonds), Series 2012B PPAB 2002518v2 (the "2012B Bonds," and together with the 2012A Bonds, the "Bonds "), in an aggregate principal amount not to exceed $31,500,000, each evidencing proportionate undivided interests in rights to receive certain Revenues (as defined in the Contract) pursuant to the Contract; WHEREAS, the County intends (1) to designate the 2012B Bonds as "qualified school construction bonds" under Section 54F of the Internal Revenue Code of 1986, as amended (the "Code ") and (2) to elect to receive a direct payment from the United States Treasury Department equal to the credit amount allowable pursuant to Section 6431 of the Code with respect to the 2012B Bonds; WHEREAS, in connection with the sale of the Bonds by the Corporation to Merrill Lynch, Pierce, Fenner & Smith Incorporated and Robert W. Baird & Co. (collectively, the "Underwriters "), the Corporation will enter into a Contract of Purchase to be dated on or about November 1, 2012 (the "Contract of Purchase") between the Corporation and the Underwriters relating to the Bonds, and the County will execute a Letter of Representation to the Underwriters with respect to the Bonds (the "Letter of Representation "); WHEREAS, there have been described to the Board the forms of the following documents (collectively, the "Instruments "), copies of which have been made available to the Board, which the Board proposes to approve, enter into and deliver, as applicable, to effectuate the proposed installment financing: (1) the Contract; (2) the Deed of Trust; (3) an Indenture of Trust dated as of November 1, 2012 (the "Indenture ") between the Corporation and U.S. Bank National Association, as trustee; (4) the Contract of Purchase; (5) the Letter of Representation; (6) a Lease dated as of November 1, 2012 (the "Lease ") between the County and the Harnett County Board of Education (the "School Board "); and (7) an Agency Agreement dated as of November 1, 2012 (the "Agency Agreement," and together with the Lease, the "School Documents ") between the County and the School Board; WHEREAS, to make an offering and sale of the Bonds, there will be prepared a Preliminary Official Statement with respect to the Bonds (the "Preliminary Official Statement"), a draft thereof having been presented to the Board, and a final Official Statement relating to the Preliminary Official Statement (together with the Preliminary Official Statement, the "Official Statement"), which Official Statement will contain certain information regarding the County; WHEREAS, it appears that each of the Instruments and the Preliminary Official Statement are in an appropriate form and is an appropriate instrument for the purposes intended; WHEREAS, the Board did conduct a public hearing on September 4, 2012, to receive public comment on the proposed Contract and the Project; and WHEREAS, the County has filed an application to the LGC for approval of the Contract; 2 PPAB 2002518v2 NOW, THEREFORE, BE IT RESOLVED BY THE BOARD OF COMMISSIONERS OF THE COUNTY OF HARNETT, NORTH CAROLINA, AS FOLLOWS: Section 1. Ratification of Instruments. All actions of the County, the Chairman of the Board (the "Chairman "), the Clerk to the Board (the "Clerk"), the County Manager, the Finance Officer of the County, the County Attorney and their respective designees, whether previously or hereinafter taken, in effectuating the proposed financing are hereby approved, ratified and authorized pursuant to and in accordance with the transactions contemplated by the Instruments. Section 2. Authorization of the Official Statement The form, terms and content of the Preliminary Official Statement are in all respects authorized, approved and confirmed, and the use of the Preliminary Official Statement and of the final Official Statement by the Underwriters in connection with the sale of the Bonds is hereby in all respects authorized, approved and confirmed. The Chairman, the County Manager and the Finance Officer are each hereby authorized and directed to deliver, on behalf of the County, the Official Statement in substantially such form, with such changes, insertions and omissions as each may approve. Section 3. Authorization to Execute the Contract. The County approves the acquisition of the Project in accordance with the terms of the Contract, which will be a valid, legal and binding obligation of the County in accordance with its terms. The form and content of the Contract are hereby in all respects authorized, approved and confirmed, and the Chairman, the Clerk and the County Manager and their respective designees are hereby authorized, empowered and directed to execute and deliver the Contract, including necessary counterparts, in substantially the form and content presented to the Board, but with such changes, modifications, additions or deletions therein as they may deem necessary, desirable or appropriate, their execution thereof to constitute conclusive evidence of the County's approval of any and all changes, modifications, additions or deletions therein from the form and content of the Contract presented to the Board. From and after the execution and delivery of the Contract, the Chairman, the Clerk, the County Manager and the Finance Officer of the County are hereby authorized, empowered and directed to do all such acts and things and to execute all such documents as may be necessary to carry out and comply with the provisions of the Contract as executed. Section 4. Authorization to Execute the Deed of Trust. The County approves the form and content of the Deed of Trust, and the Deed of Trust is in all respects authorized, approved and confirmed. The Chairman, the Clerk and the County Manager and their respective designees are hereby authorized, empowered and directed to execute and deliver the Deed of Trust, including necessary counterparts, in substantially the form and content presented to the Board, but with such changes, modifications, additions or deletions therein as they may deem necessary, desirable or appropriate, their execution thereof to constitute conclusive evidence of the County's approval of any and all changes, modifications, additions or deletions therein from the form and content of the Deed of Trust presented to the Board. From and after the execution and delivery of the Deed of Trust, the Chairman, the Clerk, the County Manager and the Finance Officer of the County are hereby authorized, empowered and directed to do all such acts and things and to execute all such documents as may be necessary to carry out and comply with the provisions of the Deed of Trust as executed. Section 5. Letter of Representation.. The form and content of the Letter of Representation are hereby in all respects approved, and the Chairman or the County Manager is authorized to execute the Letter of Representation for the purposes stated therein. Section 6. Authorization to Execute the School Documents. The County approves the form and content of each of the School Documents, and each of the School Documents is in all respects authorized, approved and confirmed. The Chairman, the Clerk and the County Manager and their respective designees are hereby authorized, empowered and directed to execute and deliver each of the School 3 PPAB 2002518v2 Documents, including necessary counterparts, in substantially the form and content presented to the Board, but with such changes, modifications, additions or deletions therein as they may deem necessary, desirable or appropriate, their execution thereof to constitute conclusive evidence of the County's approval of any and all changes, modifications, additions or deletions therein from the form and content of each of the School Documents presented to the Board. From and after the execution and delivery of the School Documents, the Chairman, the Clerk, the County Manager and the Finance Officer of the County are hereby authorized, empowered and directed to do all such acts and things and to execute all such documents as may be necessary to carry out and comply with the provisions of the each School Document as executed. Section 7. County Representative. The Chairman, the County Manager and the Finance Officer of the County are hereby designated as the County's Representative to act on behalf of the County in connection with the transactions contemplated by the Instruments and the Preliminary Official Statement, and the Chairman, the County Manager and the Finance Officer are authorized to proceed with the acquisition of the Project in accordance with the Instruments and to seek opinions as a matter of law from the County Attorney, which the County Attorney is authorized to furnish on behalf of the County, and opinions of Iaw from such other attorneys for all documents contemplated by this Resolution as required by law. The County's representatives or designees are in all respects authorized on behalf of the County to supply all information pertaining to the County for use in the Official Statement and the transactions contemplated by the Instruments or the Preliminary Official Statement. The County's representatives or their respective designees are hereby authorized, empowered and directed to do any and all other acts and to execute any and all other documents, which they, in their discretion, deem necessary or appropriate to consummate the transactions contemplated by the Instruments or the Preliminary Official Statement or as they deem necessary or appropriate to implement and carry out the intent and purposes of this Resolution. Section 8. Severability. If any section, phrase or provision of this Resolution is for any reason declared to be invalid, such declaration shall not affect the validity of the remainder of the sections, phrases or provisions of this Resolution. Section 9. Repealer. All motions, orders, resolutions and parts thereof, in conflict herewith are hereby repealed. Section 10. Effective Date. This Resolution is effective on the date of its adoption. On motion of Commissioner House, seconded by Commissioner Andrews, the foregoing resolution entitled "RESOLUTION OF THE BOARD OF COMMISSIONERS OF THE COUNTY OF HARNETT, NORTH CAROLINA, APPROVING AN INSTALLMENT FINANCING CONTRACT AND A DEED OF TRUST WITH RESPECT THERETO AND DELIVERY THEREOF AND PROVIDING FOR CERTAIN OTHER RELATED MATTERS" was duly adopted by the following vote: AYES: 5 NAYS: 0 4 PPAB 2002518v2 STATE OF NORTH CAROLINA ss: COUNTY OF HARNETT I, MARGARET REGINA WHEELER, Clerk to the Board of Commissioners of the County of Harnett, North Carolina, DO HEREBY CERTIFY that the foregoing is a true and exact copy of a resolution entitled "RESOLUTION OF THE BOARD OF COMMISSIONERS OF THE COUNTY OF HARNETT, NORTH CAROLINA, APPROVING AN INSTALLMENT FINANCING CONTRACT AND A DEED OF TRUST WITH RESPECT THERETO AND DELIVERY THEREOF AND PROVIDING FOR CERTAIN OTHER RELATED MATTERS" adopted by the Board of Commissioners of the County of Harnett, North Carolina at a special meeting held on the 25th day of September, 2012. WITNESS my hand and the corporate seal of the County of Harnett, North Carolina, this the 25th day of September, 2012. PPAB 2002518v2 i culY c61,_ T REGINA EELER Clerk he Board Coun f Harnett, North Carolina