While the City of New Bern has set aside more than half the money needed for construction of the new Stanley White Recreation Center, an additional $6.3 million will be necessary to complete the project, according to information presented at the board of aldermen’s July 11 meeting.
The question of how that money will be raised was taken up by Ted Cole, senior vice president and manager of public finance with Davenport & Co., a financial advisory company headquartered in Richmond, Va.
In May, the board authorized the execution of a $13,180,400 contract with T.A. Loving, a Goldsboro-based construction contractor, for construction of the new Stanley White Rec Center. According to Cole, design and other costs for the project will run to $1.1 million.
To date, the city has secured $8 million in insurance money and financial commitments from the Federal Emergency Management Agency (FEMA) for the project.
Cole said city staff and Davenport & Co. have met with the NC Local Government Commission in Raleigh to discuss the city borrowing the additional funds needed to complete the Stanley White Rec Center.
According to Cole, the plan calls for the city to borrow $10 million: a long-term $6.5 million loan which would cover the funds needed to complete construction; and an additional $3.5 million that would allow the city to have money on hand while it waits on the FEMA funds, which under the agency’s guidelines will not be distributed immediately.
Cole told the board the $3.5 million would allow for the city to have additional cash flow “so that you’re not relying completely on city reserves to front the FEMA funding.”
“You submit reimbursements to them (FEMA) and they take some period of time to process the reimbursements, so there are some cash flow considerations,” Cole told the board. “Secondly, they hold back 25% of their funding commitment until the project is complete. So as a city you need to be prepared to fund the entire project and their final 25%, which is almost $2 million, comes on the back end.”
Cole said the next step is to identify a bank to handle the borrowing process. He said the city has developed Requests for Proposals (RFPs) that Davenport & Co. will be submitting on the city’s behalf “to a wide range of lenders.”
Cole said the City of New Bern qualifies for tax exempt borrowing. He said it was likely the city could obtain a 15-20 year loan at a fixed rate, meaning the interest rate on the note would remain the same through the term of the loan.
According to the timeline presented by Cole, Davenport & Co. will bring the responses from banks back to the board by August 3.
”We’ll be looking at rates and terms and conditions and coming up with a recommendation for the city,” he said.
A public hearing on the Stanley White Recreation financing has been set for August 8 at the board’s regularly scheduled meeting. The LGC and NC General Statute 160A-20 require a public hearing be held when local governments intend to finance real or personal property by installment contract.
At that meeting the board will also consider a Preliminary Findings Resolution. The final board approval is scheduled for August 22, when Davenport & Co. will submit the proposals they received from banks and give their recommendations.
Once aldermen make a decision on which bank they will use, an application for approval must be submitted to the LGC, who will take up the matter at their September 12 meeting.
If the application is approved, Cole said the city should be able to close on the loans by the end of September.
“You’d have the money in hand and you can pay yourself back for any money you’ve already fronted for any projects,” he told the board.
By Todd Wetherington, co-editor. Send an email with questions or comments.