AG 2006 05 15 - Laserfiche WebLink

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2. Proceed with financing the jail annex with COPs, and fmance the Sheriff's Office and Detention Center with GO bonds, if approved. The first step of this option is to approve a COPs resolution in an amount sufficient to finance the jail annex (e.g., $16 million). Then the LGC will allow the issuance of COPs in an amount equal to that of the contract with Turner for construction of the jail annex. There will be no delay in constructing the jail annex due to the financing method employed. The next step is to hold a referendum on financing the Sheriff's Office and Detention Center with GO bonds. Assuming the referendum is held concurrent with the November general elections, and it is approved, construction of the project will be delayed at least three months. Turner Constrnction estimates that the projeet cost wiD escalate by about $2.5 million as a result of the three month delay. If the referendum on GO bond financing fails, then the only remaining financing alternatives are to hold another referendum in the future or employ COPs financing. If the Board chooses to use COPs, a resolution for COPs financing of the Sheriff's Office and Detention Center could be approved at the November Board meeting. The process of preparing to issue COPs will take approximately three to four months, leading to a delay in the construction of the Sheriff's Office and Detention Center of an additional four months. The total delay in this scenario compared to option number 1 is about seven months. Turner Construction estimates that the project cost will escalate by over $5 million as a result of the seven month delay. The county's financial advisor for bonds and COPs, Joe Niggel, offers the following analysis of the use of COPs versus GO bonds: "Including all costs associated with the issuance of the general obligation bonds or COPs, the Cabarrus County COPs financing will only have an approximate 0.20"10 higher interest borrowing cost. The COPs financing can be completed approximately four to six months sooner than a general obligation bond sale. Thus, a 0.20% rise in interest rates during this time period would eliminate the lower borrowing cost of general obligation bonds versus COPs. Interest rates have already risen approximately 0.40% since January 1st. Interest rates are generally expected to rise throughout the rest of the year as the Federal Reserve continues to increase short term interest rates. The County may have to levy additional taxes to cover the increased interest expense on the general obligation financing should interest rates rise more than 0.20"10 due to a delay caused by (1) a failed referendum or (2) the additional time required to complete the referendum process even if successful. " E- \