Saturday, March 25, 2023

NHC commissioners to consider borrowing $25M against collateral for capital projects

New Hanover County will consider an amendment to installment financing for $25 million to be used for capital projects. (Port City Daily/file)

NEW HANOVER COUNTY — The county is looking to fund a handful of projects before the end of the fiscal year and is requesting approval for the financing structure.

The New Hanover County Board of Commissioners will vote Monday on a resolution authorizing $25 million of installment financing to cover large capital improvements.

READ MORE: NHCS aims to cut millions from budget, important repairs lack funding

The county will borrow the tens of millions of dollars against collateral from a decades-old contract in place. It was for $50 million and covered refinancing for the government center, the building and expansion of the judicial building, and the construction of a new juvenile justice facility. 

“The county can borrow against assets that were originally pledged for collateral back in 2010,” chief financial officer Eric Credle wrote to Port City Daily. “In this way, the county can leverage collateral to provide for additional financing for county projects without having to put additional liens on other assets.”

The judicial building, constructed in 2001, is appraised at $18.3 million, according to county property records. The government center is valued at $36.2 million.

The county has until 2040 to borrow against the 2010 assets. It’s considered a “common borrowing structure” widely used in municipalities across the state, according to Credle.

The county has a history of similar limited obligation debt issuances since 2010, ranging from $4.5 million up to $75.5 million approved in 2021. The most recent, for $16.3 million, covered the costs of water and sewer lines and road improvements to Blue Clay Business Park, renovations and improvements to county parks and recreation facilities and purchasing IT and communications equipment.

With the new millions, the county plans to purchase vehicles and equipment for various departments — the bulk going to the sheriff’s office. It also will cover construction needs for Hanover Pines Nature Park, improve a number of county buildings, expand the county’s maintenance facility, replace the current New Hanover County Sheriff’s Office detective and vice facility and purchase a downtown building for Cape Fear Community College.

Some of the work is already underway, such as the $2.8-million Hanover Pines Nature Park, the $6.6-million modular sheriff’s office site for detective and vice units, and the agreement on the $11.9-million purchase of property for CFCC to expand its nursing and allied health programs. 

Commissioners have already greenlit the projects and improvements in its fiscal year 2023 budget; Monday’s item would be to approve the financing method to cover the $25 million. Any cost overruns would come from the county’s available funds.

The county will have to seek Local Government Commission approval to move forward. The county is aiming to be heard by the committee overseeing local government’s finances June 6, so installment financing can occur prior to the end of the fiscal year, June 30.

Using the amended financing contract would be less expensive than issuing general obligation bonds, according to the county, since the latter requires special election by state law. Also, that route would take longer to acquire, causing a delay in the start of projects.

The downside is this type of financing generally has a higher interest rate — by about 0.25% to 0.3% — than a general obligation bond, Credle said.

A property tax increase from the current 45.5 cents per $100 valuation is not expected to coincide with the new financing. 

The exact breakdown of the project details and associated costs will be provided at the meeting, according to county spokesperson Alex Riley.

New Hanover County has held a Triple-A bond rating — the highest rating a municipality can achieve — since 2010. It keeps the county in the top 3% of counties nationwide for ratings and creditworthiness, according to a county press release from 2021. Due to the top rating, the county receives the best possible interest rates for financing capital projects, in turn saving taxpayers.

For the financing to take place, a public hearing has to be scheduled. Commissioners are asked to sign on it for May 1 at 4 p.m. to provide the community an opportunity to offer feedback.

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