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: May 23, 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
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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 $10,500,000. 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.
In addition to holding the public hearing, City Council is requested to consider adoption of the attached Resolutions as follows:
1. Resolution Accepting the Proposal of Truist Bank in Connection with an Installment Financing Agreement for the City of Fayetteville, North Carolina
2. Resolution Making Certain Findings and Determinations Regarding the Proposed Financing by the City of Fayetteville, North Carolina for the Construction and Equipping of a New Fire Station for the City of Fayetteville, North Carolina, and Requesting the Local Government Commission to Approve the Financing Arrangement
3. Resolution Authorizing the Execution and Delivery of an Installment Financing Agreement, a Deed of Trust, a Project Fund Agreement, a Wire Transfer Agreement and Related Documents in Connection with the Financing of a New Fire Station for the City of Fayetteville, North Carolina
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 $10,500,000. 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 May 13, 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 $10,500,000 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.
Selection of Truist Bank as the Financing Institution to Provide the Financing: City Council is also requested to adopt the attached Resolution Accepting the Proposal of Truist Bank in Connection with an Installment Financing for the City of Fayetteville, North Carolina.
A request for proposals (RFP) was issued on March 14, 2022 with a due date of May 2, 2022. The RFP requested 15 year and 20 year options. The RFP stated that the financing agreement would be tax-exempt, but will not be “bank qualified” under Section 265(b)(3) of the Internal Revenue Code. Eight proposals were received from JPMorgan, TX Bank, Pinnacle Bank, Truist Bank, Webster Bank, Capital One, Signature Public Funding and First National Bank. A summary of proposals prepared by First Tryon Advisors, the City’s financial advisor, is attached. Truist Bank offered the lowest 20 year non-bank qualified option, 3.29% fixed interest rate. JPMorgan offered the lowest 15 year non-bank qualified option, 2.48% fixed interest rate.
Staff recommends accepting Truist Bank’s 3.29%, 20 year non-bank qualified proposal.
Local Government Commission Application: City Council is also requested to ratify, 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 is also requested to adopt the attached Resolution Authorizing the Execution and Delivery of an Installment Financing Agreement, a Deed of Trust, a Project Fund Agreement, and Related Documents in Connection with the Financing of a New Fire Station for the City of Fayetteville, North Carolina.
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. The City will execute and deliver a project fund agreement between the City and Truist Bank.
Drafts of the Installment Financing Agreement, the Deed of Trust, and the Project Fund Agreement are attached to this agenda item.
The interest rate payable under the Installment Financing Agreement shall be 3.29% per annum, and the final maturity shall not exceed May 1, 2042.
Issues/Analysis:
As discussed above, and shown on the attachments, Truist Bank is the lowest cost provider for a 20 year option of this proposed financing agreement.
The not to exceed principal amount of $10,500,000 will provide funds for the construction and equipping of Fire Station 4 and to pay the fees and expenses related to this financing.
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:
As discussed above, and shown on the attachments, Truist Bank is the lowest cost provider for a 20 year option of this proposed financing agreement.
The not to exceed principal amount of $10,500,000 will provide funds for the construction and equipping of Fire Station 4 and to pay the fees and expenses related to this financing.
f
Recommended Action:
Approve Options 1 above
Attachments:
City Council Proceedings -
Summary of Bids
Resolution Accepting Proposal
Preliminary Resolution
Approving Resolution
Installment Financing Agreement
Deed of Trust
Project Fund Agreement
Wire Transfer Agreement