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ORANGE COUNTY <br />BOARD OF COMMISSIONERS <br />ACTION AGENDA ITEM ABSTRACT <br />Meeting Date: December 6, 2010 <br />Action Agenda <br />Item No. 7 - b <br />SUBJECT: Update and Additional Action on the $103.6 Million Limited Obligation Bond <br />Issuance to Refund Various Debt Obligations of the County and to Finance the <br />Purchase of Equipment <br />DEPARTMENT: Financial Services PUBLIC HEARING: (Y/N) No <br />ATTACHMENT(S): <br />INFORMATION CONTACT: <br />Clarence Grier, 919-245-2453 <br />PURPOSE: To provide an update on the status and to authorize additional action on the <br />issuance of $103.6 million of Limited Obligation Bonds (LOBs) to refund various debt <br />obligations and finance equipment purchases. <br />BACKGROUND: At the October 19, 2010 meeting, the Board of County Commissioners <br />authorized staff to proceed with the necessary steps to issue $103.6 million in LOBs to refund <br />various debt obligations of the County, and to finance the purchase of Sheriff's Department <br />radios, computer equipment and software. <br />Due to market fluctuations and the Federal Reserve plan to stimulate the economy, interest <br />rates on municipal bonds have increased and the projected savings of $4.7 million in <br />September 2010 has been reduced to a little over $1.1 million. This would not meet the <br />required three percent savings for the issuance of refunding bonds as required by the Local <br />Government Commission (LGC}. <br />Staff has consulted with Davenport and Company, LLC, Financial Advisors; Bob Jessup, Bond <br />Counsel; and the LGC. All agree that interest rates may not return to the levels of September <br />2010 to provide the projected savings on the refunding as presented at the October 19, 2010 <br />meeting. Additionally, interest rates may not decrease in order to provide the necessary three <br />percent savings required by the LGC. <br />Branch Banking and Trust (BB&T) has agreed to lower the interest rate on the 2006 installment <br />Purchase Note Payable ($6.6 million balance as of November 30, 2010} from 4.39% to 2.99%. <br />This reduction in the interest rate will provide a savings of approximately $490,000 in debt <br />service over the remaining eleven years of the note agreement. <br />