City to research bond issue for capital projects

Chris Berendt Staff Writer

August 21, 2013

The City Council directed city managerial staff to research compiling bond referendums — encompassing any number of about $18 million in capital projects for recreation, police and fire station renovations and pedestrian and roadway upgrades — for consideration by the local community.

The board had discussed the possibility of general obligation (GO) bonds in May. On Tuesday, Council directed interim manager Shawn Purvis at a capital projects workshop to look further into the matter and bring possibilities, and tax rate impact, back to the board.

There are many “must” projects for the city, including the much-discussed elevated water tank project, water plant expansion and N.C. 24 utilities relocation necessitated by the imminent widening project. However, there are still many other projects on the horizon with large price tags — including a massive Royal Lane Park overhaul, fire station renovations, a brand new police station and a comprehensive Pedestrian Plan implementation that currently do not have financing.

The Pedestrian Plan includes N.C. 24 sidewalks, a $65,000 cost that is currently in the Capital Improvement Plan (CIP). Improvements to Elizabeth Street, Beaman Street, U.S. 701 (a study is required), Stewart Avenue, Dollar Branch Greenway and 14 different intersection upgrades have a total project cost exceeding $1.1 million.

Of the other projects, a Royal Lane Park Master Plan involves a complete $11 million renovation of the venue, including additional soccer and football fields, new and consolidated tennis and basketball courts, playgrounds, reconfigured baseball and softball fields, a new gym and a Bellamy Center addition. Purvis said that the project, a costly endeavor, would have to be phased.

The current fire station has $2 million in proposed renovations and an addition needed to meet building codes, standards and improve efficiency.

Various options were explored for a new police station, with the most cost-effective one being a new building on the existing site. Currently there is no room for adequate interrogation, evidence storage or training areas. The new building would address operational concerns as well as create efficiencies for work flow and public interaction — and would cost about $3.6 million.

During Tuesday’s workshop, Purvis discussed financing options to include seeking grants, specifically for the pedestrian and recreation projects, as well as USDA loans, private financing or pursuing GO bonds.

GO bonds require money to prepare and hold referendum, and may necessitate a tax rate increase depending on other revenue streams, Purvis told the board.

“There are some firms that do the research and could compile everything that we need and walk us through the process,” said Purvis. “We already have bond counsel on board for the revenue bonds on the water and sewer side. We would just do that contract for the general fund, for the general obligation.”

He said the city could add or subtract certain project and lump them together, as statutorily allowed, in putting them out for public consideration.

“As we go through it, there’s restrictions. You can’t group some things together and some things you have to group together,” said Purvis. “We could potentially have anywhere from two to four (bond issues). The research would tell you how much would be required for some of these projects, and that’s when you can say ‘well, we’re not comfortable with that.’”

He said the tax rate hike could mean several cents, but with the bond it would ultimately be the citizens’ choice.

“It can be anywhere from 2 cents, 3 cents, 5 cents, 10 cents,” said Purvis. “They’ll also have plans for how you phase that. Sometimes it’s not all at once, but how you issue the bonds. They factor in natural growth. They may be issued on the idea they’re going to raise (the tax rate) 6 or 7 cents, (and) they may raise it one penny or two pennies.”

City officials have pointed to the May 2014 municipal election as an option for such a bond to be placed on the ballot. The 2014 November general election would be another option. Tacking it on to an existing election would be a cheaper proposition, rather than holding a special election.

“The success rate of bond referendums over the last five years, nationwide, two-thirds to 70 percent, which is a pretty high percentage considering the recession,” Purvis noted. “And people are still saying we’re willing to pay if this is what you’re giving us.”

He said the town of Garner earlier this year did four separate bond issues that encompassed downtown revitalization, the City Hall, Police Department, pedestrian walkways and roads. “They put four on, and all four passed,” Purvis said, conceding he knew Clinton was not Garner, but could offer its citizens similar options.

“I’d be very much in favor of that,” Councilman Steve Stefanovich.

“Is everybody in favor of us moving forward with the research to see what the bond would do, what it would cost and see what you could do?” Mayor Lew Starling asked the board. “We need to figure out what we could group and what you couldn’t group.”

Purvis said he could start that process. The board directed him to move in that direction.

N.C. 24 Industrial Park

Extending water and sewer service to the N.C. 24 Industrial Park in preparation for Chemtex International Inc.’s location to the site is a $3.5 million, financing for which was a point of discussion this week.

Purvis reminded the Council of conditional Rural Center funds in the amount of $650,000 received by the city and requested to apply for an Economic Development Administration (EDA) grant in the amount of $1,758,150.

That grant would require a letter of city’s intent to cover the Rural Center grant should it become unavailable.

“We have conditionally received Rural Center funds for this. I know right now it is a little tenuous on that money, but we have been told we would receive the money because it was in a prior year’s budget. If the Rural Center money does not come through, we would finance $1.7 million versus $1.1 million,” Purvis said. “For the EDA grant, they would like us to let them know that if the Rural Center funds become unavailable, that we would still provide that $650,000 in some fashion. The Rural Center funds are (currently) part of our match.”

The total $3,516,300 project, factoring in Rural Center and EDA funding, still leaves city financing of approximately $1.1 million, however there is potential of $869,000 annually, possibly as high as $1.3 million, in revenues from Chemtex.

Purvis said Chemtex officials, as recent as Tuesday, assured him and others they were coming.

“The question is once they’re here, how long will they be here?” Purvis said. “You hope it’s longer term, but you have debt service we have to pay off — how much are we going to get in the meantime?”

Purvis said he would be meeting with Economic developer John Swope about the Chemtex matters in an effort to get some assurances on the company’s timeline and iron out any issues. Swope and Chemtex officials may speak to the City Council in September.

“We’re at the critical point where we have to decide whether we’re going to move forward or not. They’re saying they’re coming. They’ve signed off on their wetlands (studies), and they’re asking how to do permitting on wastewater. They are moving,” said Purvis. “Even if they come, what happens in year two or three, when we have a large amount of debt we have to pay off? This is a large chunk we are taking on.”

Stefanovich said he would be OK with signing off on lining up the grants, but would need to know a lot more about Chemtex’s status before the city spends money. Purvis agreed, saying none of the grants would commit the city to the project.

“Even if we’re awarded the grant, if it falls through with Chemtex, we do not have to take the money,” said Purvis.

Stefanovich made the motion to line up the EDA grant, with the stipulation it would not bind the city. It passed unanimously.

Chris Berendt can be reached at 910-592-8137 ext. 121 or via email at