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2 <br /> COLLATERAL: In this type of County installment financing, the County secures its obligations to <br /> the bondholders by a mortgage-type interest in some or all the property being acquired or <br /> improved through the financing. The County plans to secure this 2025 financing through a pledge <br /> of several County and school properties. County facilities expected to be included in the collateral <br /> package include the Whitted Building, the Orange County Library in Hillsborough and Blackwood <br /> Farm Park. <br /> County staff is working with both school boards to finalize the list of schools to be used as <br /> collateral. The following schools are under consideration: Ephesus Elementary, Culbreth Middle <br /> (from Chapel Hill — Carrboro City schools), and (from the Orange County schools) Orange Middle, <br /> New Hope, Pathways, and Orange High. The County has flexibility to release schools individually <br /> from the financing lien if that becomes appropriate in the future. <br /> Bondholders generally require that the County offer collateral equal to at least 50% of the loan <br /> amount (for example, at least $5 million of collateral for a $10 million loan). The County expects <br /> to offer collateral with a value equal to at least 100% of the loan amount. The prospective collateral <br /> package has an approximate value of$160.0 million. <br /> TARIFF ISSUE <br /> The municipal bond market has experienced volatility due to rising concerns over new tariffs and <br /> international trade tensions. These tariffs are causing uncertainty in the broader economy and <br /> leading a few investors to re-evaluate their investment strategies. This has resulted in short-term <br /> fluctuations in bond yields (interest rates). Staff is working with the County's financial advisors to <br /> ensure the County remains well positioned for a successful June 2025 bond issuance. The <br /> financing team will closely monitor this situation and will update accordingly if borrowing costs <br /> become a material concern. Recent North Carolina bond financings appear to indicate a return to <br /> stability. <br /> FINANCIAL IMPACT: There is no financial impact related to this action. However, there will be <br /> a financial impact in proceeding with the financing. A preliminary estimate of maximum debt <br /> service applicable to this financing would require the highest debt service payment of <br /> approximately $8.63 million in FY 2027 (based on market interest rate estimates and the $78.0 <br /> million estimated financing amount). The tax rate equivalent for the estimated highest Series 2025 <br /> debt service payment based on the new value of a penny ($3,299,538) is approximately 2.62 <br /> cents. <br /> ALIGNMENT WITH STRATEGIC PLAN: This item supports: <br /> • GOAL 1: ENVIRONMENTAL PROTECTION AND CLIMATE ACTION <br /> • GOAL 5: PUBLIC EDUCATION/LEARNING COMMUNITY <br /> • GOAL 6: DIVERSE AND VIBRANT ECONOMY <br /> RECOMMENDATION(S): The Manager recommends that the Board: <br /> 1) Conduct the public hearing; <br /> 2) Close the public hearing; and <br /> 3) Adopt the resolution supporting the application to the Local Government Commission for <br /> approval of the financing. <br />