Agenda 04-07-2026; 8-q - Approval of Agreements for School Sales Tax Recapture

Browse Search

1 ORANGE COUNTY BOARD OF COMMISSIONERS ACTION AGENDA ITEM ABSTRACT Meeting Date: April 7, 2026 Action Agenda Item No. 8-q SUBJECT: Approval of Agreements for School Sales Tax Recapture DEPARTMENT: Finance and Administrative Services ATTACHMENT(S): INFORMATION CONTACT: Attachment 1. Resolution Gary Donaldson, (919) 245-2453 Attachment 2. Draft Agreements Kirk Vaughn, (919) 245-2153 Robert Jessup, (919) 933-9891 PURPOSE: To adopt a resolution approving agreements between Orange County and its two school systems to facilitate the recapture of a portion of sales taxes paid on County-funded school capital expenditures. These agreements establish a structured mechanism to maximize available financial resources and enhance the County's ability to support ongoing and future school capital investments. BACKGROUND: The County spends funds on school capital improvements for each of its school districts. Most of these funds are routed through the school boards for payments to vendors. Expenditures in future years will be higher, especially as the County rolls out spending from the proceeds of the voter-approved $300 million general obligation bonds. Under current North Carolina law, counties are eligible to recoup a portion of sales taxes paid on qualifying expenditures, whereas school boards are not. Historically, Orange County has utilized ownership transfer arrangements to enable such recapture for school-related projects, typically in conjunction with financing structures requiring collateral ization of school properties. The proposed agreements introduce a more efficient and flexible alternative through a lease/lease-back structure. This approach provides the County with a sufficient legal interest in school facilities to qualify for sales tax recapture without necessitating full ownership transfers. This model has been successfully implemented in other jurisdictions and is supported by legal counsel representing both school systems. (That law firm pioneered this approach with other clients and has suggested it for Orange County.) Key advantages of the proposed approach include: • Streamlined documentation and administrative processes; The documentation is simpler and more flexible. • Increased flexibility in incorporating additional school facilities into the recapture framework; It is simpler to bring a school facility within the regime for sales tax recapture. • Elimination of unnecessary ownership transfers, particularly relevant given that upcoming general obligation financings will not require school properties as collateral.