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Local Government Commission Directs Staff to Negotiate Spring Lake Loan Payment
Press Release:
(Raleigh, N.C.) The Local Government Commission (LGC), on behalf of the Cumberland County town of Spring Lake, has taken steps to attempt to resolve a legal issue with a $1 million loan, used to build a fire station, that the town accepted without proper authorization.
At its meeting on Tuesday, May 3, LGC members directed staff to pursue negotiations with the South River Electric Membership Corporation on terms for a possible loan payback. South River loaned the money to the town, with an original 10-year term, deferred for two years, and eight $125,000 annual installments.
But Spring Lake never brought an application for financing before the LGC for approval, which is required under state law. That means the loan is void, and is not legally enforceable by the lender. Payments were supposed to begin this fall, at the conclusion of a two-year deferral period.
However, the LGC, which assumed control of the town's finances last October due to a variety of fiscal and governance problems, decided it would be ethically important to ensure the loan is repaid. The N.C. Electric Membership Corporation provided the loan money to South River, whose five-county service area includes Cumberland County.
At the suggestion of State Treasurer Dale R. Folwell, CPA, who chairs the LGC, commission staff would offer a longer 20-year payback period to South River, with the two-year payment deferral built in.
"You pay for a car in eight years, not an economic development project or public safety facility," Treasurer Folwell said. The longer payback period would not pinch the cash-strapped town as much as a shorter duration.
When the loan terms are finalized, the LGC will begin the typical debt-approval process that Spring Lake circumvented. Staff will file an application for financing approval since the LGC has control of the town's finances. A public hearing will be held to gather public comments, and staff will bring the proposal before the LGC for a vote.
"It would be an understatement to say this situation is unprecedented for the Local Government Commission," Treasurer Folwell said. "We didn't cause it. We found it. We're trying to save Spring Lake, not drown Spring Lake."
The commission, staffed by the Department of State Treasurer, has a statutory duty to monitor the financial well-being of more than 1,100 local government units. The commission also examines whether the amount of money units borrow is adequate and reasonable for proposed projects, and confirms the governmental units can reasonably afford to repay the debt.
In other business on the agenda, the LGC approved a request by the city of Charlotte (Mecklenburg County) for up to $425 million in revenue bonds for Charlotte Douglas International Airport. The money would pay for a series of improvements that include a major expansion to the terminal, and to refund an older bond. Several projects already are under way or about to begin construction.
The LGC also approved $300 million in bond anticipation notes for the capital improvement projects and to refinance a previous bond anticipation note. This type of temporary interest-bearing debt is issued when a project is being done in stages, and they are paid back with a larger bond note planned in the future.
The Greater Asheville Regional Airport Authority (Buncombe County) was approved to seek up to $185 million in revenue bonds to expand and modernize the terminal, ticket lobby, TSA screening, baggage claim and concessions area. Some of the money will pay for improvements to the existing terminal building and supporting infrastructure, construction of a centralized energy plant, and for an air traffic control tower. A negotiated sale is planned for May 19.
Cabarrus County received the green light for $160 million in limited obligation bonds to build and equip a 250,000-square-foot courthouse, elementary school, Emergency Medical Services headquarters, Mt. Pleasant Library/Senior Center and various school, county and recreation facility projects. The county also was given the go-ahead on $113.7 million in limited obligation refunding bonds. They will be used to pay off balances from a current draw note for projects previously approved by the LGC.
The Water and Sewer Authority of Cabarrus County was approved for $85 million in revenue bonds for the third phase of expansion of the Rocky River Regional Wastewater Treatment Facility to increase the capacity from 26.5 million to 30 million gallons per day.
The LGC approved Orange County's request for $43.2 million in limited obligation bonds for construction of the Orange County Southern Branch Library, purchase of public vehicles, and multiple school and county building projects.
Carrboro's (Orange County) request was approved for $12.6 million in installment contract financing to build a three-story, 51,884-square-foot building and 171-slot parking deck to house the Orange County Southern Branch Library, the town Recreation, Parks and Cultural Resources Program, and Orange County Skilled Development Center. WCOM Radio would occupy a small portion of the building.
The LGC signed off on a request from Goodwill Industries of Eastern NC, a Durham-based, tax-exempt organization, for conduit financing through the North Carolina Capital Facilities Finance Agency (NCCFFA) of up to $60 million in revenue bonds. The bonds will pay to purchase 42 retail stores and donation centers from the Goodwill Community Foundation as part of a split between the entities. The funding will be used to refinance a temporary promissory note held by the foundation.
The city of Durham (Durham County) got LGC approval for $30.5 million in general obligation refunding bonds to save $1.8 million in lowered interest costs.
Johnson & Wales University (Mecklenburg County), hit by declining enrollments in its culinary and hospitality degree programs due to the pandemic's disproportionate impacts on those industries, sought $25.5 million in revenue refunding bonds in conduit financing through the NCCFFA. The LGC approved the request. The financing will save a little over $2.2 million in reduced interest costs. In addition to Charlotte, the university has a campus in Providence, R.I.
LGC members approved a request for $21.1 million in financing sought by Rockingham County to build a Workforce Development Center at Rockingham Community College. The installment contract will be paid over time instead of in a lump sum.
Lexington (Davidson County) also is seeking approval of an installment contract, for up to $14 million. The money will be used to build a one-stop administrative building in the former Windstream building to consolidate all current customer service functions and utility payments now housed at multiple locations.
LGC members approved a number of other financing requests. They are:
Contact:
Email: press@nctreasurer.com
Phone: (919) 814-3820
Go Back
(Raleigh, N.C.) The Local Government Commission (LGC), on behalf of the Cumberland County town of Spring Lake, has taken steps to attempt to resolve a legal issue with a $1 million loan, used to build a fire station, that the town accepted without proper authorization.
At its meeting on Tuesday, May 3, LGC members directed staff to pursue negotiations with the South River Electric Membership Corporation on terms for a possible loan payback. South River loaned the money to the town, with an original 10-year term, deferred for two years, and eight $125,000 annual installments.
But Spring Lake never brought an application for financing before the LGC for approval, which is required under state law. That means the loan is void, and is not legally enforceable by the lender. Payments were supposed to begin this fall, at the conclusion of a two-year deferral period.
However, the LGC, which assumed control of the town's finances last October due to a variety of fiscal and governance problems, decided it would be ethically important to ensure the loan is repaid. The N.C. Electric Membership Corporation provided the loan money to South River, whose five-county service area includes Cumberland County.
At the suggestion of State Treasurer Dale R. Folwell, CPA, who chairs the LGC, commission staff would offer a longer 20-year payback period to South River, with the two-year payment deferral built in.
"You pay for a car in eight years, not an economic development project or public safety facility," Treasurer Folwell said. The longer payback period would not pinch the cash-strapped town as much as a shorter duration.
When the loan terms are finalized, the LGC will begin the typical debt-approval process that Spring Lake circumvented. Staff will file an application for financing approval since the LGC has control of the town's finances. A public hearing will be held to gather public comments, and staff will bring the proposal before the LGC for a vote.
"It would be an understatement to say this situation is unprecedented for the Local Government Commission," Treasurer Folwell said. "We didn't cause it. We found it. We're trying to save Spring Lake, not drown Spring Lake."
The commission, staffed by the Department of State Treasurer, has a statutory duty to monitor the financial well-being of more than 1,100 local government units. The commission also examines whether the amount of money units borrow is adequate and reasonable for proposed projects, and confirms the governmental units can reasonably afford to repay the debt.
In other business on the agenda, the LGC approved a request by the city of Charlotte (Mecklenburg County) for up to $425 million in revenue bonds for Charlotte Douglas International Airport. The money would pay for a series of improvements that include a major expansion to the terminal, and to refund an older bond. Several projects already are under way or about to begin construction.
The LGC also approved $300 million in bond anticipation notes for the capital improvement projects and to refinance a previous bond anticipation note. This type of temporary interest-bearing debt is issued when a project is being done in stages, and they are paid back with a larger bond note planned in the future.
The Greater Asheville Regional Airport Authority (Buncombe County) was approved to seek up to $185 million in revenue bonds to expand and modernize the terminal, ticket lobby, TSA screening, baggage claim and concessions area. Some of the money will pay for improvements to the existing terminal building and supporting infrastructure, construction of a centralized energy plant, and for an air traffic control tower. A negotiated sale is planned for May 19.
Cabarrus County received the green light for $160 million in limited obligation bonds to build and equip a 250,000-square-foot courthouse, elementary school, Emergency Medical Services headquarters, Mt. Pleasant Library/Senior Center and various school, county and recreation facility projects. The county also was given the go-ahead on $113.7 million in limited obligation refunding bonds. They will be used to pay off balances from a current draw note for projects previously approved by the LGC.
The Water and Sewer Authority of Cabarrus County was approved for $85 million in revenue bonds for the third phase of expansion of the Rocky River Regional Wastewater Treatment Facility to increase the capacity from 26.5 million to 30 million gallons per day.
The LGC approved Orange County's request for $43.2 million in limited obligation bonds for construction of the Orange County Southern Branch Library, purchase of public vehicles, and multiple school and county building projects.
Carrboro's (Orange County) request was approved for $12.6 million in installment contract financing to build a three-story, 51,884-square-foot building and 171-slot parking deck to house the Orange County Southern Branch Library, the town Recreation, Parks and Cultural Resources Program, and Orange County Skilled Development Center. WCOM Radio would occupy a small portion of the building.
The LGC signed off on a request from Goodwill Industries of Eastern NC, a Durham-based, tax-exempt organization, for conduit financing through the North Carolina Capital Facilities Finance Agency (NCCFFA) of up to $60 million in revenue bonds. The bonds will pay to purchase 42 retail stores and donation centers from the Goodwill Community Foundation as part of a split between the entities. The funding will be used to refinance a temporary promissory note held by the foundation.
The city of Durham (Durham County) got LGC approval for $30.5 million in general obligation refunding bonds to save $1.8 million in lowered interest costs.
Johnson & Wales University (Mecklenburg County), hit by declining enrollments in its culinary and hospitality degree programs due to the pandemic's disproportionate impacts on those industries, sought $25.5 million in revenue refunding bonds in conduit financing through the NCCFFA. The LGC approved the request. The financing will save a little over $2.2 million in reduced interest costs. In addition to Charlotte, the university has a campus in Providence, R.I.
LGC members approved a request for $21.1 million in financing sought by Rockingham County to build a Workforce Development Center at Rockingham Community College. The installment contract will be paid over time instead of in a lump sum.
Lexington (Davidson County) also is seeking approval of an installment contract, for up to $14 million. The money will be used to build a one-stop administrative building in the former Windstream building to consolidate all current customer service functions and utility payments now housed at multiple locations.
LGC members approved a number of other financing requests. They are:
- Fayetteville State University Housing Foundation, LLC (Cumberland County), $7.45 million to finance the balance of an existing loan for construction of student housing in 2001.
- High Point (Guilford County), $7.2 million to refund existing debt at a lower interest rate to save about $160,000.
- Cape Fear Public Utility Authority (New Hanover County), $4.59 million to repair the sewer collection system, and flooding prevention measures at a wastewater treatment plant, and a $4 million increase on a state revolving loan to replace concrete pipe at a pump station.
- Tuckaseigee Water and Sewer Authority (Jackson County), $4.59 million to upgrade a wastewater treatment plant.
- New Bern (Craven County), $3.9 million to add an elevator in City Hall.
- Reidsville (Rockingham County), $3.65 million for water line construction to complement the aging transmission main.
- Waynesville (Haywood County), $1.9 million to purchase land for a fire station, tanker fire truck, refinance existing debt.
- Contentnea Metropolitan Sewer District (Pitt County), $1.6 million for wastewater treatment plant infrastructure improvements to mitigate flooding.
- Yadkin Valley Sewer Authority (Surry and Wilkes counties), $657,000 for equipment replacement at the wastewater treatment plant.
- Washington (Beaufort County), a $639,080 increase to an existing loan to pay expenses related to a police station project.
- East Yancey Water & Sewer District (Yancey County), a $315,161 increase in a state revolving loan to address contaminated soil along the installation route of sewer line replacement.
Contact:
Email: press@nctreasurer.com
Phone: (919) 814-3820
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