Agenda - 11-06-2014 - 6a - Laserfiche WebLink

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10 1 Board of County Commissioners appointed a Bond Education Committee to inform the 2 public of the purpose of and the components of the general obligation bond referendum 3 (Attachment c). Currently, the County and both School Districts (Chapel Hill— Carrboro City 4 Schools and Orange County Schools) have capital projects that would be included as part of 5 the general obligation bond referendum. Moreover, both school districts have older facility 6 needs totaling approximately $330 million that could potentially be addressed in part with a 7 general obligation bond referendum. 8 9 At the September 11, 2014 Board of County Commissioners Work Session, the recommended 10 sizing of the potential general obligation bond referendum was discussed at a range between 11 $100 and $125 million over a period of 20 years. At current AAA municipal bond interest rates, 12 the total combined debt service for $100 million is estimated to be $6.1.million annually. This 13 would represent 4.00 cents on the current property tax rate. At current AAA municipal bond 14 interest rates, the total combined debt service for $125 million is estimated to be $7.6 million 15 annually. This would represent 4.67 cents on the current property tax rate. Future debt capacity 16 for a potential general obligation bond referendum can increase or decrease due to the 17 following circumstances: 18 • Future increases or decreases in interest rates 19 • Future changes or modifications to the capital investment plans of the County and or 20 both School Districts (individually or collectively) 21 • Future changes of a legislative or regulatory nature 22 23 Clarence Grier said for the May 2016 date the process would need to start by August of 24 2015. He said for November 2016 date it would need to start around November or December 25 of 2015. He noted that the dates and steps for this process are outlined in the attachments. 26 Chair Jacobs asked about the ultimate tax impact 27 Clarence Grier said the tax impact for $100 million would be 4 cents on the current tax 28 rate, and $125 million would be 4.67 cents on the current tax rate. 29 Andrew Davidson asked about the ability to use staggered borrowing if a bond is 30 approved for a certain amount. 31 Clarence Grier said this can be done. He said in previous meetings there was 32 discussion of a bond schedule to initially issue $40 million, then an additional $35 million, 33 followed by the final $35 million. He said this would be staggered over two year periods of time. 34 He said this makes the debt service more affordable, so it does not have such a large impact 35 on the budget each year. 36 Commissioner McKee said this also staggers the tax increases. 37 Clarence Grier said yes. He said the County has a Triple A bond rating, so rates are 38 low. He said this will impact debt capacity and the debt service. He said a lot of debt service 39 will be declining and being paid off as soon as the debt is issued and staggered. He said, 40 depending on factors involved in selling the debt and paying off future debt, they will probably 41 be able to issue another $100 million within 7 years after the first bond. 42 Commissioner McKee said any tax increase associated with the bond would be above 43 any normal tax increase driven by increase in budget. 44 Clarence Grier said the tax increase would relate to just the debt service amounts. 45 Commissioner Gordon asked if there is any thought about when the Board of County 46 Commissioners should discuss which schedule needs to be followed. 47 Bonnie Hammersley said based on the timelines, staff would come to the Board of 48 County Commissioners to request a work session to discuss this. She said she and Clarence 49 Grier are in contact with the schools as they move forward with this process. She said there is