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ORANGE COUNTY <br />BOARD OF COMMISSIONERS <br />ACTION AGENDA ITEM ABSTRACT <br />Meeting Date: January 24, 2005 <br />Action Agendas <br />Item No. 5-/ <br />SUBJECT: Refinancing BB&T Installment Purchase Agreements <br />DEPARTMENT: Finance PUBLIC HEARING: (YIN) No <br />ATTACHMENT(S): <br />Modification Agreement <br />Resolution <br />BB&T Letter <br />INFORMATION CONTACT: <br />Ken Chavious / Bob Jessup, ext 2453 <br />TELEPHONE NUMBERS: <br />Hillsborough 732-8181 <br />Chapel Hill 968-4501 <br />Durham 688-7331 <br />Mebane 336-227-2031 <br />PURPOSE: To consider approving a modification agreement for installment purchase contracts <br />entered into with BB&T to finance school facilities that will result in savings to the County. <br />BACKGROUND: During the past 10 years, the County has effectively used installment <br />purchase contracts as an alternative financing source to fund a number of capital facilities for <br />both School and County projects. Similar to bonds, staff periodically reviews these agreements <br />to assess the potential for savings through refinancing these loans in low interest rate <br />environments. There is an agreement with BB&T Governmental Finance that analysis reveals <br />could result in savings if the County were to pursue a refinancing. On August 17, 2004, the <br />Board approved a modification to the BB&T agreement and authorized the Finance Director to <br />proceed with the refinancing. However, the timing of the closing would have required the <br />County to pay a substantial amount of accrued interest. Therefore, the refinancing was delayed <br />to the next payment due date which is February 1, 2005. <br />Since there has been a change in interest rates, the savings calculation presented to the Board <br />in August are slightly different in the updated refinancing proposal. In August, staff reported <br />that the estimated annual savings would be approximately $60,000. Savings in the updated <br />proposal are estimated at approximately $58,600. In order to accomplish the refinancing, the <br />Board is required to adopt a resolution and approve an agreement that modifies the existing <br />arrangement. The agreement under consideration includes the installment purchase contract <br />for the construction of Scroggs Elementary School. This financing was accomplished in two <br />parts beginning in December 1996 with $5,000,000 and finalized in March 1997 with the <br />addition of another $9,000,000. The remaining balance on this financing is approximately $8.2 <br />million as of February 1, 2005. The original interest rate on this financing was 4.92%. The new