TO: Mayor and Members of City Council
THRU: Douglas J. Hewett, ICMA-CM, City Manager
FROM: Jay C. Toland, CMA - Chief Financial Officer/Assistant City Manager
DATE: March 28, 2022
RE:
Title
Public Hearing on a Proposed Installment Financing Agreement for a New Fire Station for the City, Resolution Making Certain Findings, and Request the Local Government Commission to Approve the Financing
end
COUNCIL DISTRICT(S):
Council District(s)
All
b
Relationship To Strategic Plan:
Goal V: Financially Sound City Providing Exemplary City Services - Objective 5.1: Ensure strong financial management with fiduciary accountability and plan for the future resource sustainability by aligning resources with City priorities.
Executive Summary:
City Council will conduct the public hearing on an installment financing agreement in an amount not to exceed $9,000,000. The purpose of the financing will be to pay the costs of constructing and equipping a new fire station (Fire Station 4) for the City.
Background:
This public hearing has been set to receive comments on an Installment Financing Agreement to be entered into by the City pursuant to Section 160A-20 of the General Statutes of North Carolina in a principal amount not to exceed $9,000,000. The purpose of the financing is to provide funds to pay the costs of constructing and equipping a new fire station (Fire Station 4).
If the City enters into the proposed agreement, it will secure its obligations by executing and delivering a deed of trust granting a lien on the site of the new fire station, together with all improvements or fixtures located or to be located thereon, subject to permitted encumbrances.
Section 160A-20(g) of the General Statutes of North Carolina requires that the City hold a public hearing prior to entering into the agreement. A notice advertising the public hearing was published in the Fayetteville Observer on March 18, 2022.
Hold the Public Hearing
Findings and Determinations: City Council is requested to make the following findings and determinations
(a) There exists in the City a need to finance the costs of constructing and equipping a new fire station for the City.
(b) The City has determined to enter into an installment financing agreement not to exceed $9,000,000 to provide funds, together with any other available funds, to (i) pay the costs of the project and (ii) pay certain financing costs.
(c) In order to secure its obligations under the agreement, the City will execute and deliver a deed of trust granting a lien on the site of the project, together with all improvements and fixtures located or to be located thereon.
(d) It is in the best interests of the City to enter into the agreement and the deed of trust in that such transaction will result in providing financing for the project in an efficient and cost effective manner.
(e) Entering into the installment financing agreement is preferable to a general obligation bond and revenue bond issue in that:
i. the City does not have sufficient constitutional authority to issue non-voted general obligation bonds pursuant to Article V, Section 4 of the North Carolina Constitution because the City has not retired a sufficient amount of general obligation debt in the preceding fiscal year to issue a sufficient amount of general obligation bonds for the financing of the Project;
ii. the nature of the financing does not allow for the issuance of revenue bonds to finance the Project;
iii. the cost of financing the Project exceeds the amount to be prudently provided from currently available appropriations and unappropriated fund balances;
iv. the circumstances existing require that funds be available to commence the construction of the Project as soon as practicable and the time required for holding an election for the issuance of voted general obligation bonds pursuant to Article V, Section 4 of the North Carolina Constitution and The Local Government Bond Act will delay the commencement of the Project by several months; and
v. there can be no assurances that the issuance of general obligation bonds to finance the Project would be approved by the voters and the current interest rate environment dictates the financing of the Project to be accomplished in a timely and expedient manner.
(f) The costs of the financing is reasonable compared to the costs associated with other alternative means of financing and is acceptable to the City Council.
(g) Bond counsel to the City will render an opinion to the effect that the proposed undertaking as described above is authorized by law and is a purpose for which public funds may be expended pursuant to the Constitution and laws of the State of North Carolina.
(h) The debt management policies of the City have been carried out in strict compliance with law, and the City is not in default under any obligation for repayment of borrowed money.
(i) No ad valorem tax rate increase is expected to be necessary to pay principal of and interest on the agreement.
Local Government Commission Application: City Council is also requested to authorize and approve the filing of an application with the Local Government Commission for approval of the agreement and to request the Local Government Commission approve the agreement and the proposed financing.
Final Approval Resolution: City Council will be requested to adopt the final approval resolution on April 25, 2022.
Issues/Analysis:
A request for proposals was issued on March 14, 2022, with a due date of April 4, 2022. The winning bidder will be selected on or after April 4, 2022, and will be provided to the City Council with the request to adopt the final approval resolution on April 24, 2022
Budget Impact:
The FY2021-2022 budget includes sufficient funds to cover the debt service associated with financing the new fire station (Fire Station 4).
Options:
At the conclusion of the public hearing, staff recommends that Council move to:
1) Make the required findings and determinations, approved the resolution as presented, authorize and approve the filing of an application with the Local Government Commission for approval of the agreement, and request the Local Government Commission approve the proposed financing.
2) Do not make the required findings and determinations, or authorize the filing of an application with the Local Government Commission for approval, and provide alternative direction to staff
Recommended Action:
Approve Options 1 above
Attachments:
City Council Proceedings - Preliminary Resolution
Installment Financing Agreement Financing Calendar
Request for Proposals for Installment Financing Agreement