Agenda - 04-18-2017 - 8-a - Minutes

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21 1 o In the current Scenario 3 v9 C, all of these borrowings would be associated with 2 Orange County expenditures. 3 4 Commissioner McKee referred to the interest, and said the information shows $1.2 5 billion interest and financing costs for TIFIA; $642,960,000 for the LOBs and the GANs; and 6 $47,916,000 for the state of good repair. He said this is an approximate $1.942 billion in 7 interest and fees paid on a $1.4 billion project. 8 Ted Cole said the $642 million of total pay back is for principle plus interest, and the 9 same is for the other numbers. 10 Commissioner McKee said then his figures are wrong. 11 Commissioner Marcoplos asked if the collateral on the borrowings for the state of the 12 good repair would be the system itself. 13 Ted Cole said GoTriangle is expected to issue all of these borrowings through 14 generically and installment financing, secured by the assets that are being built or bought. 15 Commissioner Marcoplos said the loan goes through GoTriangle, and asked what would 16 happen to Orange County's credit if there is a default on the loan. 17 Ted Cole said what is the credit that will ultimately be developed and used to issue this 18 debt. He said Go Triangle will be the issuer of all debt, and all is expected to be secured by the 19 system. He said, at this point, there is no expectation of an explicit support agreement by the 20 counties; however, in his opinion, it is some time before this will be known definitively. He said 21 one of GoTriangle's next steps is to embark upon a more detailed discussion with the rating 22 agencies, which will go a long way to shaping that credit. He said some of that will be 23 determined by the state statutes; the kind of support agreements that Orange and Durham 24 Counties can provide, if they so choose; and how do the rating agencies look at the project. He 25 said two investment grade ratings must be secured in order to get the TIFIA loans. 26 Commissioner Jacobs said it will take a while to resolve all of these borrowing issues 27 with GoTriangle, and he is concerned about Orange County's fiscal health. He asked if the 28 County is still on the trunk of the tree, or is it out on a limb. 29 Ted Cole said the County is still on the trunk, but as the conversation evolves, the key 30 questions will be what is the County committed to, if it approves that transit plan and the cost 31 share agreement, and where are opportunities to take a step back and reassess. He said he 32 does not know the answer to these questions. 33 Richard Marvin, PFM-Financial Advisor to GoTriangle, said there is a requirement for 34 investment grade ratings. He said the way to achieve this with the LOB concept is to only 35 pledge the revenues of the system and the sales taxes. He said this is what will be used to 36 establish the investment grade rating, and by establishing this rating will lead people to buy the 37 bonds. He said they are restricted to the value of the system itself, and the revenues coming 38 in. He said there is no legal backstop from the Counties. 39 Commissioner McKee asked if this means that the County has absolute immunity from 40 any impact on the County's credit rating or the County's obligations to make sure these get 41 paid. 42 Richard Marvin said as far as getting them paid, yes there is immunity. He said there 43 would only be an adverse action to the County's rating, if the County became unable to raise ad 44 valorem taxes, or affected the economics of the County. 45 Commissioner McKee read a statement out of the Davenport report: "if there is a 46 significant shortfall, Orange County may be required or decide to contribute additional revenue 47 in order to maintain the viability of the project, regardless of whether there is a contractual 48 requirement to do something." He said this statement seems to be at odds with what Richard 49 Marvin is saying.