Orange County NC Website
Browse       Search
2 <br /> COLLATERAL: In this type of County installment financing, the County secures its obligations to <br /> the bondholders by mortgage-type interest in some or all the property being acquired or improved <br /> through the financing. The County plans to secure this 2025 financing through a pledge of several <br /> County and school properties. County facilities expected to be included in the collateral package <br /> include the Whitted Building, the Orange County Library in Hillsborough and Blackwood Farm <br /> Park. These are the same properties that the County has used for three previous Spring <br /> installment financings. <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 expected to be used: 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. <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 prospective <br /> collateral package has an approximate value of $160 million. The collateral package secures <br /> approximately $40 million of outstanding bonds. Adding the proposed $78 million financing takes <br /> the total amount secured to $118 million, which means the collateral package value will be <br /> approximately 136% of the outstanding amount. Using this level of collateral enhances the appeal <br /> of the County's securities to investors, provides flexibility to the County for future borrowings, and <br /> allows the County to release individual schools or County facilities from the collateral package if <br /> that becomes necessary. <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 bond issuance. The financing <br /> team will closely monitor this situation and will update accordingly if borrowing costs become a <br /> material concern. Recent North Carolina bond financings appear to indicate a return to 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 on the tax rate ($3,299,538) is <br /> approximately 2.62 cents. <br /> DEBT SERVICE TO GENERAL FUND REVENUE STRATEGIES: The table below shows the <br /> most updated metrics from the model and corrects the FY 2034 table included in the presentation <br /> at the public hearing at the Board's Business meeting on May 6, 2025. <br /> In addition, the following strategies aim to mitigate this metric impact: <br /> 1. Refinance Existing Debt (as practical) <br /> • Refinancing (Refunding): If interest rates have decreased or bonds are callable, then staff <br /> will pursue refunding to lower annual debt service costs. <br />