24CMOCELPSCAlternateProposal

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April 1, 2010

MEMO TO: Mayor Charles C. MeekerMayor Pro Tem James P. WestCouncilor Mary-Ann BaldwinCouncilor Thomas CrowderCouncilor Bonner GaylordCouncilor Nancy McFarlaneCouncilor John Odom

Councilor Russ Stephenson

FROM: J. Russell Allen, City Manager

SUBJECT: Alternate Proposal for Clarence E. Lightner Public Safety Center andRemote Operations Facilities

The Council spent considerable time in January, February and March reviewing all aspects of the

program and financing of these proposed public facilities. City Administration documented theresponses to all questions and shared this information with the public. In the end, the Councilvote to move forward with the financing and construction was split 4 to 4.

I continue to recommend the proposed facilities, program and financing as the most efficient andcost effective means for meeting these critical Public Safety, Public Works, Solid Waste Servicesand Parks and Recreation operational needs. I will not repeat again the benefits we havearticulated previously, as those remain the same.

I understand that one of the Council’s concerns is any proposed property tax increase, even if itdoesn’t begin until FY 11-12. Since it is impossible to accomplish this building program withouta very modest property tax increase (1 cent) along with some other revenue sources, I ampresenting this alternative to reduce the program such that a property tax increase is not required.



Immediately approve the issuance of $100 million of limited obligation bonds (COPs) to beused as follows:

$20 million - Wilder’s Grove Solid Waste Services Operations Facility (contractawarded)

$6 million - Purchase of former Stock Building Supply site for the NortheastRemote Operations Facility (already closed on purchase)

$2 million - Begin design for upfit of the Northeast Remote site and perhapsone or two other remote facilities

$72 million - GMP1 and GMP2 for the Clarence E. Lightner Public SafetyCenter

A subsequent $100 million limited obligation bond issue would be required early in FY 11-12 to fund GMP3 and complete construction of the Public Safety Center.

Upon completion of construction of the Public Safety Center, any savings generated fromvalue analysis and actual bid construction costs would be allocated to the Remote Operations

Facility building program. This would only fulfill a small portion of the critical needs of Remote Operations and would not allow the City to exit the Peace Street facilities.Subsequent funding mechanisms would need to be identified.

A General Fund Debt model simulating this scenario is attached. Note there is no proposedadditional property tax increase, but an alternate revenue source must be identified of $2million in FY 11-12, $3 million in FY 12-13 and $4 million in FY 13-14 and subsequentyears. Also note the benefit of sales proceeds from the Peace Street and West CabarrusStreet facilities has been removed from the model. No additional sources of revenue would

be required in FY 10-11.

Additionally please see the attached memo from our Treasury Manager describing a uniqueshort term opportunity which may be available through the American Recovery andReinvestment Act (ARRA) to seek an allocation of Recovery Zone Economic DevelopmentBonds in combination with our typical tax exempt financing. This could further reduce ourtotal interest cost (TIC) over the first $100 million bond issue by approximately 22% down toa TIC of 3.46%.

In conclusion, I hope this alternative will be helpful to Council if agreement and consensuscannot be reached on the original proposal.

JRA:cma

Attachments



TO: J. Russell Allen, City Manager

FROM: Jerraé Williams, Treasury ManagerCC: Perry E. James, III, CFO

DATE: March 23, 2010

SUBJECT: American Recovery and Reinvestment Tax Act (ARRA): Funding Options for CELPSC andRemote Operation Sites (North East Site & Wilder’s Grove)

MESSAGE:

The American Recovery and Reinvestment Tax Act (ARRA) of 2009, signed into law by President Obama on February 17,2009, has provisions for state and local governments to issue municipal bonds for governmental purposes. The ARRAauthorizes municipalities the ability to issue federally subsidized taxable bonds, referred to as “Build America Bonds”(BAB) no later than the end of calendar year 2010 for governmental projects (i.e. public safety center and remote operationsites). As described below, BAB are issued as taxable bonds but issuers receive federal subsidies of either 35% or 45% to

equate the costs to more traditional tax exempt rates. The higher 45% subsidy applies to BAB issued to promote economicdevelopment in distressed “recovery zones” referred to as Recovery Zone Economic Development Bonds (RZEDB).

BAB are taxable bonds that, combined with the federal subsidies, provide low cost financing to municipalities as analternative to traditional tax exempt bonds. Within the BAB taxable structure the issuer is entitled to receive a cash paymentfrom the federal government in the form of a direct subsidy equal to 35% of the interest payable on the bonds on eachinterest payment date (45% subsidy for RZEDB). Direct Subsidy BAB can only be issued to finance capital expenditures(and not working capital). Capital expenditures are defined as the cost incurred to acquire, construct, or improve land,building, and equipment.

The State of North Carolina was allocated $418 million for Recovery Zone Bonds with $7.38 million initially allocated tothe City of Raleigh for RZEDB. The State recently created a process to retrieve and reallocate the unused bondauthorization so it could be fully utilized by December 31, 2010. As of March 2010, $184 million of RZEDB has beenreallocated--approximately $70 million remains to be allocated. These amounts do not include RZEDB allocations directedto North Carolina local governments by the federal government, but the allocations waived that have been subject toreallocation by the North Carolina Tax Reform Allocation Committee. This process is a “first-come, first-served’ and thebonds must be issued within 90 days



Proposed Funding Structure:

To achieve the most cost effective financing, the City proposes to utilize a hybrid structure that incorporates RZEDB,traditional BAB, and traditional tax exempt debt. The amounts designated for each structure will be determined by the

RZEDB amount allocated to the City. You have asked us to model plans that have a first issuance in June 2010 for $100million to fund two years of cash flows for CELPSC, reimbursement of the North East Site purchase, and the Wilder’sGrove Solid Waste Transfer Station (details below).

CELPSC $72,533,064Wilder’s Grove $21,166,936North East Site $ 6,300,000

$100,000,000

Based on a 30-year market analysis of tax exempt interest rates, the City will issue at the lowest rate in this 30-year period.Using this proposed hybrid structure will lower the net cost of funds and mitigate the impact of interest rate risk more thanusing any of these debt structures alone. The proposed hybrid structure is projected to have a lower interest rate comparedto a typical fixed rate tax exempt issue.

Requirements of Issuers Utilizing BAB:

Inform the underwriting bank of our intention of incorporating BAB into our debt structure

Complete the federal form requesting the subsidy payment (Form 8038-CP Return Credit Payments to Issuers of Qualified Bonds filed 45-90 days before a scheduled interest payment), (Form 8038-G Return for Tax-ExemptGovernment Obligations), and (8038-B Return for BAB and RZEDB)

Obtain placement of selected projects on the Local Government Commission agenda by the May 4, 2010 meeting.

In addition to the above, RZEDB require:

Designation of a Recovery Zone Designation of entire City of Raleigh as a recovery zone to cover all current and future projects

Resolution on 12/1/2009 designated the Urban Progress Zone. A copy of the resolution and mapof the designation area are in the agenda packet.

File ‘Notice of Intent to Issue Recovery Zone Bonds’ with the North Carolina Department of Commerce andprovide descriptions for all projects under consideration by April 9, 2010 (Next committee meeting is April 19,2010). A copy of this form is in the agenda packet. The projects are the CELPSC and Remote Operations Sites(NE Site and Wilder’s Grove Solid Waste Station)

Comply with Federal Davis-Bacon wage rules

Recommendations:

1) Approve resolution designating the entire City of Raleigh as a Recovery Zone;

2) Authorize the City Manager to proceed with the administrative steps necessary to achieve issuance of theBAB/Recovery Zone Economic Development Bonds, based on an evaluation of the most advantageous financingstructure and applicable project cost inclusion as approved by the City Council;

3) Approve Resolution of making certain findings and determinations regarding the financing of the capital facilitiesusing Limited Obligation Bonds.



RESOLUTION 2009 - 37

THE CITY COUNCIL OF THE CITY OF RALEIGHRESOLUTION DESIGNATING RECOVERY ZONE

WHEREAS, the American Recovery and Reinvestment Act of 2009 (Pub. L. No. 111-5)(“ARRA”) modifies the Internal Revenue Code of 1986, as amended (the “Code”) to authorize,among others, two new types of bonds entitled “recovery zone economic development bonds” and “recovery zone facilitybonds;” and

WHEREAS, “recovery zone economic development bonds” are a subcategory of taxable build America bonds (asdefined in section 54AA(d) of the Code), issued under provisions of ARRA that have been codified as Section 1400U-2 of the Code, the proceeds of which are to be used for qualified economic development purposes in a recovery zone; and

WHEREAS, qualified economic development purpose include expenditures for the purpose of promotingdevelopment or other economic activity in a recovery zone, including capital expenditures for property located in the zoneor expenditures for public infrastructure andconstruction of public facilities in the zone; and

WHEREAS, ARRA also authorizes a new type of federally tax exempt private activitybonds entitled “recovery zone facility bonds” in Sections 1400U-1 and 1400U-3 of the Code tofinance construction, renovation, or acquisition of depreciable property by a private taxpayer of aqualified business in a recovery zone, with “qualified business” defined to include any trade orbusiness other than residential rental property and certain prohibited uses outlined in the Code;

WHEREAS, sections 1440U-2 through 1400U-3 of the Code, and related Notice 2009-50 issued by the U.S.Treasury Department (collectively, the “Recovery Zone Act”) define a recovery zone as any area designated by the City asan area of significant poverty, unemployment, rate of home foreclosure, or general distress;

WHEREAS, the City has determined that the City of Raleigh’s Urban Progress Zone has experienced significantunemployment and general distress;

WHEREAS, the City has determined that it is in the best interest of the City and its citizens to designate theUrban Progress Zone (designated as such by the City of Raleigh City Council on December 2, 2008 via Resolution No.(2008) 759) as a “recovery zone” for purposes of the Recovery Zone Act;

NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Raleigh, that:

1. The City hereby finds that there is significant unemployment and general distress in the City of Raleigh’s UrbanProgress Zone, and therefore hereby designates the City of Raleigh’s Urban Progress Zone as a recovery zone for purposesof the Recovery Zone Act.

2. The officers of the City are hereby authorized and directed to take all actions as may be required in furtheranceof the designation of the recovery zone.

Adopted: December 1, 2009



Remote Operations Facility, Northeast Site: $6,300,000

This item is for the acquisition of a new north East Remote Operations Facility for new Street Maintenance, Vehicle FleetService and Traffic Engineering facilities. This facility would be used for emergency storm operations. The estimate

includes the purchase of the building only. The site will be 123,649 square feet.



Remote Operations Facility, Wilder’s Grove: $ 21,166,936

This item is for the construction of a new Solid Waste Services Operations Facility on the existing Wilders Grove Landfill.

The estimate includes building and site work costs, off-site development costs, design development contingency, escalationand a construction contingency in the first phase. The site will be 77,000 square feet.



Clarence E. Lightner Public Safety Facility,: $72,533,064

The Public Safety Center located in the Downtown Business District will comprise an estimated 174,973 net square feetand include ECC, Emergency Operations, Traffic Signal Control, and Public Safety Center functions. This building will

also include general office space as part of a proposed 305,000 gross square foot office tower.



A regular meeting of the City Council of the City of Raleigh, North Carolina was held in the City CouncilChambers of the Avery C. Upchurch Government Complex located at 222 West Hargett Street in Raleigh, North Carolina,the regular place of meeting, at 1:00 p.m. on April 5, 2010.

Present: Mayor Charles C. Meeker, presiding, and Council Members

Absent: Council Members

Also Present:

* * * * * *

___________________ introduced the following resolution the title of which was read and copies of which had

been distributed to each Council Member:

Resolution No. 2010-____

RESOLUTION DESIGNATING A RECOVERY ZONE PURSUANT TO THE AMERICANRECOVERY AND REINVESTMENT TAX ACT OF 2009 FOR THE PURPOSE OF ISSUINGRECOVERY ZONE ECONOMIC DEVELOPMENT BONDS AND RECOVERY ZONEFACILITY BONDS; DESIGNATING CERTAIN RECOVERY ZONE PROJECTS; ANDAUTHORIZING THE CITY MANAGER TO FILE AN APPLICATION WITH THE NORTHCAROLINA TAX REFORM ALLOCATION COMMITTEE FOR AN ALLOCATION OFCAPACITY FOR RECOVERY ZONE ECONOMIC DEVELOPMENT BONDS FOR SUCHPROJECTS

WHEREAS, the American Recovery and Reinvestment Tax Act of 2009 (“ARRA”) creates several financingtechniques for State and Local Governments to finance infrastructure and other needs in addition to those previously

available, and one of those new financing techniques is the financing of facilities in “Recovery Zones” within the meaningof ARRA through the issuance of Recovery Zone Facility Bonds and Recovery Zone Economic Development Bonds(“Recovery Zone Bonds”);

WHEREAS, Recovery Zone Bonds are to be issued with respect to or to finance certain expenditures located in orattributable to an area within the jurisdiction of the City that the City Council (the “Council”) determines has a significantlevel of one or more of the following factors: poverty, unemployment, home foreclosures, or general distress (such factorsreferred to herein as the “Distress Factors”); and

WHEREAS, the Council has determined that the Distress Factors referred to in the proceeding paragraph areevident throughout the territorial area of the City and the City desires to designate the entire territorial area of the City as a“Recovery Zone” to provide for the possible issuance of Recovery Zone Bonds (such area being referred to herein as the“Recovery Zone”);

WHEREAS, the Council is determining whether to undertake continued funding of two significant projects in theCity consisting of (i) the acquisition of a new City facility to be known as the Clarence E. Lightner Public Safety Center to



Reform Allocation Committee (the “Committee”) to reallocate such unused capacity, and the Council has determined todirect the City Manager to file an application with the Committee for an additional reallocation of North Carolina’s unusedallocation; and

NOW THEREFORE, BE IT RESOLVED, by the City Council as follows:

Section 1. Underlying Conditions of Distress. The Council hereby finds and determines that the entire areawithin the jurisdictional boundaries of the City suffers from the following conditions (each an “Underlying Condition of Distress”): (i) significant increases in unemployment during calendar years 2008 and 2009, (ii) significant increases inhome foreclosures and business failures during the calendar years 2008 and 2009, (iii) a material decline (using historicalnumbers) in retail sales and (iv) a significant decline in sales tax revenues resulting in constraints on the governmentalservices provided by the City within the Recovery Zone since 2008.

Section 2. Distress Factors. The Council hereby finds and determines that, as a result of the UnderlyingConditions of Distress, the Recovery Zone has experienced a significant level of one or more of the Distress Factors (i.e.,poverty, unemployment, home foreclosures or general distress).

Section 3. Designation of Recovery Zone. Based upon the findings and determinations of the UnderlyingConditions of Distress and the resulting Distress Factors, the Board hereby designates the entire area within the jurisdictional boundaries of the City as the “Recovery Zone” for the City. Such designation is in addition to the designationmade by the Council at its meeting on December 1, 2009. The Council hereby authorizes the City Manager: (i) to take allnecessary steps to identify appropriate projects for which the issuance of bonds will further the goals established forRecovery Zone Bonds in order to cure the Distress Factors within the Recovery Zone; (ii) to identify other economicdevelopment incentives and programs which may be available under federal or North Carolina law for such projects whichwill further the goals established for Recovery Zone Bonds; and (iii) to work with the Office of Economic Development of the State of North Carolina to plan for the issuance of Recovery Zone Bonds for identified projects.

Section 4. Designation of Projects as Recovery Zone Projects. The Council hereby designates the Clarence E.Lightner Public Safety Center and the “remote operations facilities” referenced above to be Recovery Zone Projects that theCity may finance with Recovery Zone Economic Development Bonds. The Council hereby directs the City Manager to filean application with the Committee for allocation of North Carolina’s authority to issue Recovery Zone EconomicDevelopment Bonds to finance all or a portion of such projects.

Section 5. This resolution shall take effect upon its passage.

Upon motion of Council Member ________________, seconded by Council Member_________________________, the foregoing resolution entitled “RESOLUTION DESIGNATING A RECOVERY ZONEPURSUANT TO THE AMERICAN RECOVERY AND REINVESTMENT TAX ACT OF 2009 FOR THE PURPOSE OFISSUING RECOVERY ZONE ECONOMIC DEVELOPMENT BONDS AND RECOVERY ZONE FACILITY BONDS;DESIGNATING CERTAIN RECOVERY ZONE PROJECTS; AND AUTHORIZING THE CITY MANAGER TO FILEAN APPLICATION WITH THE NORTH CAROLINA TAX REFORM ALLOCATION COMMITTEE FOR AN

ALLOCATION OF CAPACITY FOR RECOVERY ZONE ECONOMIC DEVELOPMENT BONDS FOR SUCHPROJECTS” was passed by the following vote:

Ayes:



I DO HEREBY FURTHER CERTIFY that proper notice of such regular meeting was given as required by NorthCarolina law.

WITNESS my hand and official seal of said City this __ day of April, 2010.



A regular meeting of the City Council of the City of Raleigh, North Carolina was held in the City Council

Chambers of the Avery C. Upchurch Government Complex located at 222 West Hargett Street in Raleigh, North Carolina,

the regular place of meeting, at 1:00 p.m. on April 5, 2010.

Present: Mayor Charles C. Meeker, presiding, and Council Members

Absent: Council Members

Also Present:

* * * * * *

___________________ introduced the following resolution the title of which was read and copies of whichhad been distributed to each Council Member:

Resolution No. 2010-____RESOLUTION MAKING CERTAIN FINDINGS AND DETERMINATIONS REGARDING THEFINANCING OF CERTAIN ADDITIONAL CAPITAL FACILITIES FOR THE CITY WITHTHE PROCEEDS OF LIMITED OBLIGATION BONDS ISSUED PURSUANT TO A TRUSTAGREEMENT AND SUPPLEMENTAL TRUST AGREEMENT THERETO AND REQUESTINGTHE LOCAL GOVERNMENT COMMISSION TO APPROVE THE FINANCINGARRANGEMENT

BE IT RESOLVED by the City Council (the “City Council”) for the City of Raleigh, North Carolina (the“City”) as follows:

Section 1. The City Council does hereby find and determine as follows:

(a) In order to acquire, construct and equip certain capital improvements including, but not limited to, (i) the

acquisition of a new City facility to be known as the Clarence E. Lightner Public Safety Center to provide needed

administrative and operating facilities for the City police and fire departments and emergency response, traffic management

and other City departments and (ii) the construction of new City facilities commonly referred to as the “remote operations

facilities” to be constructed on several existing sites now owned by the City, or sites to hereafter be acquired by the City,

such facilities to be used by the City as support facilities in performing its City services and programs (together, the

“Project”), the City has entered into a Trust Agreement, dated as of October 1, 2009 (the “Trust Agreement”), between the

City and U.S. Bank National Association, as trustee (the “Trustee”), as supplemented from time to time pursuant to

supplements thereto, pursuant to which the City will issue limited obligation bonds (the “Bonds”) for the purposes

described therein. Such Trust Agreement and the related plan of finance constitute an installment contract financing



(c) The determination to finance the various components of the capital improvements to be financed under the

Trust Agreement shall be made from time to time by the City Council pursuant to a resolution with regard to the given

component. The City Council has determined to proceed at this time with the further financing of the acquisition,

construction and equipping of the Clarence E. Lightner Public Safety Center and the remote operations facilities described

above.

(d) Under the proposed plan of finance, the further financing of the Project would be financed under a Second

Supplemental Trust Agreement, to be dated as of April 1, 2010 (the “Second Supplemental Trust Agreement”), between the

City and the Trustee supplementing the Trust Agreement, pursuant to which the City will issue its Limited Obligation

Bonds (Governmental Facilities Project), Series 2010 (the “2010 Bonds”).

Section 2. The City Council hereby approves the filing of an application with the Local GovernmentCommission for approval of the Second Supplemental Trust Agreement and the issuance of the 2010 Bonds andrequests the Local Government Commission to approve such Second Supplemental Trust Agreement and the issuanceof the 2010 Bonds and the proposed financing relating thereto. In connection therewith the City Council hereby findsand determines that:

(a) entering into the Second Supplemental Trust Agreement and issuing the 2010 Bonds is preferable to a general

obligation bond or revenue bond issue in that (i) the City does not have the 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 debt in the preceding fiscal year to issue a sufficient amount of general obligation bonds for

the Project without an election; (ii) the nature of the Project and the facilities to be financed are such that a revenue bond

financing under The State and Local Government Revenue Bond Act is not feasible; (iii) the cost of 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 continue 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 continuation of construction and

acquisition of the Project by several months; and (v) the necessity of the Project for the public safety of the citizens of the

City and the efficient administration by the City of its municipal services dictates that the Project be financed by a method

that assures that the Project will be constructed in an expedient manner;



(d) 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; and

(e) an increase in taxes necessary to pay debt service on the 2010 Bonds will not be excessive.

Section 3. The City Council hereby determines that it is in the City’s best interest to proceed at this time withthe continued financing of the Project through the issuance of the 2010 Bonds as described above. No provision of theTrust Agreement or the 2010 Bonds shall be construed or interpreted as creating a pledge of the faith and credit of theCity within the meaning of any constitutional debt limitation. No provision of the Trust Agreement or the 2010 Bondsshall be construed or interpreted as creating a delegation of governmental powers nor as a donation by or a lending of the credit of the City within the meaning of the constitution of the State. The Trust Agreement and the 2010 Bondsshall not directly or indirectly or contingently obligate the City to make any payments beyond those appropriated in thesole discretion of the City Council for any fiscal year; provided, however, that any failure or refusal by the CityCouncil to appropriate funds which results in the failure by the City to make any payment coming due with respect tothe 2010 Bonds will in no way obviate the occurrence of the event of default resulting from such nonpayment. Nodeficiency judgment may be rendered against the City in any action for breach of a contractual obligation under theTrust Agreement or the 2010 Bonds and the taxing power of the City is not and may not be pledged directly orindirectly or contingently to secure any moneys due under the Trust Agreement or the 2010 Bonds.

Section 4. This resolution shall take effect immediately upon its passage.

Upon motion of Council Member ________________, seconded by Council Member_________________________, the foregoing resolution entitled “RESOLUTION MAKING CERTAIN FINDINGS

AND DETERMINATIONS REGARDING THE FINANCING OF CERTAIN ADDITIONAL CAPITALFACILITIES FOR THE CITY WITH THE PROCEEDS OF LIMITED OBLIGATION BONDS ISSUEDPURSUANT TO A TRUST AGREEMENT AND SUPPLEMENTAL TRUST AGREEMENT THERETO ANDREQUESTING THE LOCAL GOVERNMENT COMMISSION TO APPROVE THE FINANCINGARRANGEMENT” was passed by the following vote:

Ayes:

Noes:

* * * * * *I, Gail G. Smith, CMC, City Clerk of the City of Raleigh, North Carolina, DO HEREBY CERTIFY that theforegoing is a true copy of so much of the proceedings of the City Council of said City at a regular meeting held onApril 5, 2010, as it relates in any way to the passage of the foregoing resolution and that said proceedings are recordedin the minutes of said City Council.

I DO HEREBY FURTHER CERTIFY that proper notice of such regular meeting was given as required byNorth Carolina law.

WITNESS my hand and official seal of said City this __ day of April, 2010.

City Clerk

[SEAL]

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