Agenda - 11-04-2010 - 6a - Laserfiche WebLink

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Branch Banking & Trust (BB&T) is expected to be the purchaser of this issuance and was also the issuer of the previous QSCB issuance for the Carrboro High School Arts Wing. The current approach for this type of financing is to negotiate terms directly with the purchaser. Based on recent conversations with BB&T, the tax credit rates issued by the US Treasury have fallen from the 6.1-6.3% range during the first half of 2010 to a 5.27 - 5.5% range over the past three months. BB&T requires a 5.27% or higher tax credit in order to sustain a QSCB financing at 0% interest. In order for a QSCB financing to be acceptable to BB&T for an issuer with a credit rating similar to Orange County's, a supplemental interest coupon of 1.00% would be necessary. The approximate annual payment fora $9.899 million/15 year financing loan with a supplemental coupon rate of 1.0% would be $714,000 per year, with a net interest cost of approximately $810,335 over the life of the loan. All QSCB financing for the funds allotted for 2010 must occur by December 31, 2010 in order to retain the allotment. This issuance of QSCB financing must follow the required steps through the Local Government Commission (LGC). There will be a number of entities seeking to issue this type of financing prior to the end of the year. There are at most two potential financing sources, and it is anticipated there will be many discussion items at the December LGC meeting. Therefore, staff and bond counsel believe it would be prudent to put the County in the position to complete the financing as early as possible. Staff and bond counsel are proposing a schedule (see attached) which would enable this financing to be presented to the LGC for approval at its November meeting, which occurs November 16, 2010. FINANCIAL IMPACT: There is no financial impact until the Board gives final approval to the financing. There will be a financial impact as noted above with the authorization to proceed with the issuance of the bonds. RECOMMENDATION(S): The Manager recommends that the Board: 1) Open the public hearing and receive comments from the public; 2) Close the public hearing; and 3) Offer direction to staff on the issuance of the Qualified Schools Construction Bonds for the Chapel Hill -Carrboro City Schools and Orange County Schools systems.