Pender County NC Final Official Statement

NEW ISSUE
BOOK-ENTRY ONLY
Rating: Moody’s: Aa3
S&P: AA(See “Ratings” herein)
In the opinion of Bond Counsel, under existing law and subject to conditions described in the Section “LEGAL MATTERS – Tax
Treatment,” interest components of installment payments so designated and paid by the County as interest with respect to the 2015 Bonds (1) are
not includable in the recipient’s gross income for federal income tax purposes, (2) are not an item of tax preference for purposes of the federal
alternative minimum income tax imposed on individuals and corporations, and (3) are exempt from State of North Carolina income taxes.
Interest payments may also be included in the calculation of a corporation’s alternative minimum income tax, and a holder of the 2015 Bonds
may be subject to other tax consequences. See “LEGAL MATTERS-Tax Treatment.”
$24,800,000
Limited Obligation Bonds
(Pender County Public Facilities), Series 2015
Evidencing Proportionate and Undivided
Ownership Interests in the Installment Payments to be Made Pursuant to
an Installment Financing Contract between the
Pender County Public Facilities Company and the
County of Pender, North Carolina
Dated: Date of Initial Execution and Delivery
Due: As shown on inside cover
This Official Statement has been prepared by the County of Pender, North Carolina (the “County”) to provide information on the
Limited Obligation Bonds (Pender County Public Facilities), Series 2015 evidencing proportionate undivided interests in rights to receive certain
installment payments pursuant to an Installment Financing Contract (the “Contract”) between the Pender County Public Facilities Company (the
“Company”) and the County (the “2015 Bonds”). Selected information is presented on this cover page for the convenience of the user. Investors
must read the entire Official Statement to obtain information essential to the making of an informed investment decision. Capitalized terms used
in this Official Statement, unless otherwise defined herein, have the meanings set out in Appendix C hereto under “SUMMARY OF
PRINCIPAL LEGAL DOCUMENTS—DEFINITIONS.”
Security:
The 2015 Bonds outstanding under the Trust Agreement evidence proportionate undivided interests in
installment payments to be made pursuant to the Contract between the County and the Company. As security
for its obligations under the Contract, the County will execute and deliver to a deed of trust trustee for the
benefit of the Company a Deed of Trust and Security Agreement dated as of May 1, 2015 (the “Deed of Trust”),
granting, among other things, a lien of record on the Mortgaged Property (as defined herein) subject to
Permitted Encumbrances (as defined in the Contract). The Company will assign substantially all of its rights
in the Deed of Trust and the Contract (except certain rights with respect to indemnification, the payment of
certain expenses and receipt of certain notices) to the Trustee.
THE PRINCIPAL, PREPAYMENT PRICE AND INTEREST WITH RESPECT TO THE 2015 BONDS ARE
PAYABLE SOLELY FROM AMOUNTS PAYABLE BY THE COUNTY UNDER THE CONTRACT AND,
TO THE EXTENT PROVIDED IN THE TRUST AGREEMENT, CERTAIN PROCEEDS OF THE SALE OF
THE 2015 BONDS, CERTAIN INVESTMENT EARNINGS, CERTAIN NET PROCEEDS (AS DEFINED IN
THE TRUST AGREEMENT), IF ANY, AND CERTAIN AMOUNTS REALIZED FROM ANY SALE OR
LEASE OF THE MORTGAGED PROPERTY. NEITHER THE CONTRACT, THE 2015 BONDS NOR THE
INTEREST WITH RESPECT THERETO CONSTITUTES A GENERAL OBLIGATION OF THE COUNTY.
NO DEFICIENCY JUDGMENT MAY BE RENDERED AGAINST THE COUNTY IN ANY ACTION FOR
BREACH OF ANY CONTRACTUAL OBLIGATION TO MAKE INSTALLMENT PAYMENTS
PURSUANT TO THE CONTRACT, AND THE TAXING POWER OF THE COUNTY IS NOT PLEDGED
DIRECTLY OR INDIRECTLY TO SECURE ANY MONEYS DUE THE OWNERS OF THE 2015 BONDS.
THE REMEDIES AFFORDED TO THE TRUSTEE AND THE OWNERS UPON AN EVENT OF DEFAULT
RESULTING FROM THE COUNTY’S FAILURE TO MAKE INSTALLMENT PAYMENTS UNDER THE
CONTRACT ARE LIMITED IN THE CONTRACT, INCLUDING FORECLOSING UPON THE
MORTGAGED PROPERTY. See “SECURITY AND SOURCES OF PAYMENT OF 2015 BONDS” herein.
Prepayment:
The 2015 Bonds are subject to optional and mandatory sinking fund prepayment before maturity as described herein.
Purpose:
The proceeds of the 2015 Bonds will be used by the County (1) to pay, or reimburse the County for previous
expenditures, for the costs of the following projects: (i) renovations to Old Topsail High School for use as County
offices, (ii) industrial park improvements, including road work and construction of the water distribution and
wastewater collection systems, and (iii) wastewater treatment plant construction for the industrial park, (iv)
construction of three County fuel depots, (v) HVAC improvements to several County buildings and (vi) renovations
to the County’s probation and parole building and (2) to pay related financing costs.
Interest Payment Dates: April 1 and October 1 of each year, beginning October 1, 2015.
Denomination:
$5,000 and any integral multiple thereof.
Delivery Date:
On or about May 27, 2015.
Registration:
Full book-entry only; The Depository Trust Company.
Trustee:
U.S. Bank National Association, Raleigh, North Carolina.
Financial Advisor:
Davenport & Company LLC.
Bond Counsel:
Sanford Holshouser LLP, Carrboro, North Carolina.
County Attorney:
Carl W. Thurman, III, Esq., Wilmington, North Carolina.
Underwriters’ Counsel: Parker Poe Adams & Bernstein LLP, Raleigh, North Carolina.
BAIRD
RAYMOND JAMES
Date of this Official Statement is May 15, 2015
MATURITY SCHEDULE
$18,490,000 SERIAL 2015 BONDS
DUE
APRIL 1
PRINCIPAL
AMOUNT
2016
2017
2018
2019
2020
2021
2022
2023
$1,050,000
1,000,000
1,000,000
1,020,000
1,050,000
1,075,000
1,110,000
1,125,000
INTEREST
RATE
2.00%
5.00
5.00
5.00
5.00
5.00
5.00
5.00
YIELD
CUSIPC
DUE
APRIL 1
PRINCIPAL
AMOUNT
INTEREST
RATE
YIELD
CUSIPC
0.50%
1.00
1.42
1.70
1.95
2.15
2.34
2.54
706716AW7
706716AX5
706716AY3
706716AZ0
706716BA4
706716BB2
706716BC0
706716BD8
2024
2025
2026
2027
2028
2029
2030
2031
$1,165,000
1,195,000
1,220,000
1,265,000
1,290,000
1,350,000
1,375,000
1,435,000
5.00%
5.00
3.00
5.00
5.00
5.00
5.00
3.50
2.71%
2.84
3.22
3.09*
3.20*
3.28*
3.36*
3.77
706716BE6
706716BF3
706716BG1
706716BH9
706716BJ5
706716BK2
706716BL0
706716BM8
$2,960,000 4.00% Term 2015 Bonds due April 1, 2033 Yield 3.83%* CUSIPc: 706716BN6
$3,115,000 3.75% Term 2015 Bonds due April 1, 2035 Yield 4.00% CUSIPc: 706716BP1
______________
* Yield to April 1, 2025 call date.
©
CUSIP is a registered trademark of the American Bankers Association. CUSIP Global Services is managed on
behalf of the American Bankers Association by S&P Capital IQ. Copyright©2014 CUSIP Global Services. All
rights reserved. CUSIP data herein is provided by S&P Capital IQ, a division of McGraw-Hill Financial, Inc.
CUSIP data herein is provided for convenience of reference only. Neither the County, the Underwriters nor their
agents take responsibility for the accuracy of such data.
In connection with this offering, the Underwriters may over-allot or effect transactions that
stabilize or maintain the market price of the 2015 Bonds at a level above that which might otherwise
prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time.
No dealer, broker, salesman or other person has been authorized to give any information or to
make any representation other than as contained in this Official Statement, and if given or made, such
other information or representation must not be relied upon. This Official Statement does not constitute
an offer to sell or the solicitation of any offer to buy, nor shall there be any sale of the 2015 Bonds by any
person in any jurisdiction in which it is not lawful for such person to make such offer, solicitation or sale.
The information set forth herein has been obtained from the Company, the County and other sources that
are deemed to be reliable.
Neither the 2015 Bonds nor the Trust Agreement has been registered with the Securities and
Exchange Commission by reason of the provisions of Section 3(a)(2) of the Securities Act of 1933, as
amended. The registration or qualification of the 2015 Bonds and the Trust Agreement in accordance
with applicable provisions of securities laws of the states in which the 2015 Bonds and the Trust
Agreement have been registered or qualified, and the exemption from registration or qualification in other
states, shall not be regarded as a recommendation thereof.
In making an investment decision, investors must rely on their own examinations of the terms of
the offering, including the merits and risks involved. These securities have not been recommended by
any federal or state securities commission or regulatory authority. Furthermore, the foregoing authorities
have not confirmed the accuracy or determined the adequacy of this document. Any representation to the
contrary is a criminal offense.
All quotations from and summaries and explanations of laws and documents herein do not
purport to be complete, and reference is made to such laws and documents for full and complete
statements of their provisions. Any statements made in this Official Statement involving estimates or
matters of opinion, whether or not expressly so stated, are intended merely as estimates or opinions and
not as representations of fact. The information and expressions of opinion herein are subject to change
without notice, and neither the delivery of this Official Statement nor any sale of the 2015 Bonds shall
under any circumstances create any implication that there has been no change in the affairs of the County
since the date hereof.
The Underwriters have provided the following sentence for inclusion in this Official Statement:
The Underwriters have reviewed the information in this Official Statement in accordance with, and as part
of, their respective responsibilities to investors under the federal securities laws as applied to the facts and
circumstances of this transaction, but the Underwriters do not guarantee the accuracy or completeness of
such information.
TABLE OF CONTENTS
Page
INTRODUCTION ........................................................................................................................................ 1 THE COUNTY .................................................................................................................................... 1 PURPOSE ........................................................................................................................................... 1 SECURITY ......................................................................................................................................... 1 THE 2015 BONDS ............................................................................................................................. 2 ADDITIONAL BONDS ........................................................................................................................ 3 BOOK-ENTRY ONLY ......................................................................................................................... 3 TAX STATUS ..................................................................................................................................... 3 PROFESSIONALS ............................................................................................................................... 3 ADDITIONAL INFORMATION ............................................................................................................. 3 THE 2015 BONDS ....................................................................................................................................... 4 AUTHORIZATION .............................................................................................................................. 4 GENERAL .......................................................................................................................................... 4 PREPAYMENT ................................................................................................................................... 5 THE PLAN OF FINANCE ........................................................................................................................... 6 ESTIMATED SOURCES AND USES OF FUNDS .................................................................................... 7 SECURITY AND SOURCES OF PAYMENT OF 2015 BONDS .............................................................. 7 GENERAL .......................................................................................................................................... 7 INSTALLMENT PAYMENTS AND ADDITIONAL PAYMENTS ............................................................... 7 BUDGET AND APPROPRIATION ......................................................................................................... 8 TRUST AGREEMENT ......................................................................................................................... 8 DEED OF TRUST................................................................................................................................ 8 ENFORCEABILITY ............................................................................................................................. 9 ADDITIONAL BONDS ...................................................................................................................... 10 AVAILABLE SOURCES FOR PAYMENT OF INSTALLMENT PAYMENTS .................................... 10 GENERAL ........................................................................................................................................ 10 GENERAL FUND REVENUES ........................................................................................................... 10 INSTALLMENT PAYMENT SCHEDULE .............................................................................................. 11 CERTAIN RISKS OF 2015 BOND OWNERS .......................................................................................... 12 INSUFFICIENCY OF INSTALLMENT PAYMENTS ............................................................................... 12 RISK OF NONAPPROPRIATION ........................................................................................................ 12 UNINSURED CASUALTY ................................................................................................................. 12 OUTSTANDING GENERAL OBLIGATION DEBT OF THE COUNTY ..................................................... 12 ENVIRONMENTAL RISKS ................................................................................................................ 13 BANKRUPTCY ................................................................................................................................. 13 ADDITIONAL BONDS ...................................................................................................................... 13 i
Page
THE COMPANY ........................................................................................................................................ 13 THE COUNTY ........................................................................................................................................... 14 LEGAL MATTERS .................................................................................................................................... 14 LITIGATION .................................................................................................................................... 14 CONTINGENT LIABILITIES .............................................................................................................. 14 OPINIONS OF COUNSEL .................................................................................................................. 14 FINANCIAL ADVISOR ............................................................................................................................ 15 TAX TREATMENT ................................................................................................................................... 15 OPINION OF BOND COUNSEL.......................................................................................................... 15 ORIGINAL ISSUE PREMIUM............................................................................................................. 16 ORIGINAL ISSUE DISCOUNT ........................................................................................................... 16 OTHER TAX CONSEQUENCES ......................................................................................................... 17 CONTINUING DISCLOSURE .................................................................................................................. 17 UNDERWRITING ..................................................................................................................................... 20 RATINGS ................................................................................................................................................... 21 MISCELLANEOUS ................................................................................................................................... 21 APPENDIX A
APPENDIX B
APPENDIX C
APPENDIX D
APPENDIX E
THE COUNTY
MANAGEMENT’S DISCUSSION AND ANALYSIS AND THE BASIC
FINANCIAL STATEMENTS OF PENDER COUNTY, NORTH CAROLINA
SUMMARY OF PRINCIPAL LEGAL DOCUMENTS
FORM OF OPINION OF BOND COUNSEL
BOOK-ENTRY ONLY SYSTEM
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$24,800,000
Limited Obligation Bonds
(Pender County Public Facilities), Series 2015
Evidencing Proportionate and Undivided
Ownership Interests in the Installment Payments to be Made Pursuant to
an Installment Financing Contract between the
Pender County Public Facilities Company and the
County of Pender, North Carolina
INTRODUCTION
The purpose of this Official Statement, which includes the Appendices hereto, is to provide
certain information in connection with the execution, sale and delivery of the Limited Obligation Bonds
(Pender County Public Facilities), Series 2015 evidence proportionate undivided interests in installment
payments to be made pursuant to an Installment Financing Contract dated as of May 1, 2015 (the
“Contract”) between Pender County Public Facilities Company (the “Company”) and the County of
Pender, North Carolina (the “County”), in the aggregate principal amount of $24,800,000 (the “2015
Bonds”). The 2015 Bonds will be executed and delivered pursuant to a Trust Agreement dated as of
May 1, 2015 (the “Trust Agreement”) between the Company and U.S. Bank National Association, as
trustee (the “Trustee”). Capitalized terms used in this Official Statement, unless otherwise defined herein,
have the meanings set out in Appendix C hereto.
This Introduction provides only certain limited information with respect to the contents of this
Official Statement and is expressly qualified by the Official Statement as a whole. Prospective investors
should review the full Official Statement and each of the documents summarized or described herein.
This Official Statement speaks only as of its date, and the information contained herein is subject to
change.
THE COUNTY
The County is a political subdivision of the State of North Carolina (the “State”). See
Appendix A hereto for certain information regarding the County. The County’s most recent audited
financial statements are contained in Appendix B hereto.
PURPOSE
The 2015 Bonds are being executed and delivered by the Company to provide the County with
funds to: (1) to pay, or reimburse the County for previous expenditures, for the costs of the following
projects: (i) renovations to Old Topsail High School (“Old Topsail High School”) for use as County
offices, (ii) industrial park improvements, including road work and construction of the water distribution
and wastewater collection systems, and (iii) wastewater treatment plant construction for the industrial
park, (iv) construction of three County fuel depots, (v) HVAC improvements to a County administrative
building (the “Administrative Building”) and other County buildings and (vi) renovations to the County’s
probation and parole building (all such items being collectively referred to herein as the “Financed
Facilities”) and (2) pay related financing costs. See the captions “THE PLAN OF FINANCE” and
“ESTIMATED SOURCES AND USES OF FUNDS” herein.
SECURITY
As security for its obligations under the Contract, the County will execute and deliver to a deed of
trust trustee, for the benefit of the Company, a Deed of Trust and Security Agreement dated as of May 1,
2015 (the “Deed of Trust”) granting a lien of record on the Old Topsail High School and the
Administrative Building, and the sites thereon as more particularly described in Exhibit A of the Deed of
Trust (collectively, the “Mortgaged Property”), subject only to Permitted Encumbrances (as defined in
the Contract).
The Old Topsail High School was originally constructed in 1925 but was totally renovated in
2014 at a total cost of $4,882,120. The facility contains an approximately 21,000 square foot main
building and an approximately 2,600 square foot cafeteria building on the 9.5 acre site. The buildings
now serve as branch offices of the County government. Nearly 30 County employees currently occupy
the buildings. The buildings currently have a combined insured value of $4,485,700 and the related land
has a taxable value of $2,069,100.
The Administrative Building was originally constructed in 1991 as the Pender County Social
Services Building on 1.15 acres in Burgaw, North Carolina. The building now serves at the main
Administrative Building for the County. The 17,251 square foot building currently has a an insured value
of $2,628,000 and the related land has a taxable value of $150,000.
The Deed of Trust will authorize future obligations evidenced by additional limited obligation
bonds issued under the Trust Agreement (“Additional Bonds”), as described below, to be secured by the
Deed of Trust, provided that the total amount of present and future obligations secured by the Deed of
Trust at any one time does not exceed $50,000,000 and such future obligations are incurred not later than
30 years from the date of the Deed of Trust.
Pursuant to the Trust Agreement, the Company will assign to the Trustee, for the benefit of the
Owners of the 2015 Bonds and any Additional Bonds, substantially all of its rights, title and interest in
and to (1) the Contract, including its rights to receive Installment Payments, and (2) the Deed of Trust. In
addition, the Company will grant to the Trustee a lien on and security interest in all moneys held by the
Trustee in the funds and accounts created under the Trust Agreement. Pursuant to the Contract,
Installment Payments payable by the County will be paid directly to the Trustee.
The 2015 Bonds will be payable and secured by the Deed of Trust along with any Additional
Bonds hereafter executed and delivered pursuant to the Trust Agreement. See the caption “SECURITY
AND SOURCES OF PAYMENT FOR THE 2015 BONDS” herein.
If a default occurs under the Contract, the Trustee for the Owners of the 2015 Bonds can direct
the Deed of Trust Trustee to foreclose on the Mortgaged Property and apply the proceeds received as a
result of any such foreclosure to the payment of the amounts due to the Owners of the 2015 Bonds subject
to the rights of the Owners of any Additional Bonds. NO ASSURANCE CAN BE GIVEN THAT ANY SUCH
PROCEEDS WILL BE SUFFICIENT TO PAY THE PRINCIPAL AND THE INTEREST WITH RESPECT TO THE 2015
BONDS. IN ADDITION, NO DEFICIENCY JUDGMENT CAN BE RENDERED AGAINST THE COUNTY IF THE
PROCEEDS FROM ANY SUCH FORECLOSURE SALE (TOGETHER WITH OTHER FUNDS THAT MAY BE HELD BY
THE TRUSTEE UNDER THE TRUST AGREEMENT) ARE INSUFFICIENT TO PAY THE 2015 BONDS IN FULL.
NEITHER THE 2015 BONDS NOR THE COUNTY’S OBLIGATION TO MAKE PAYMENTS UNDER THE
AGREEMENT CONSTITUTE A PLEDGE OF THE COUNTY’S FAITH AND CREDIT WITHIN THE MEANING OF ANY
CONSTITUTIONAL PROVISION. See the caption “SECURITY AND SOURCES OF PAYMENT OF
2015 BONDS” herein.
THE 2015 BONDS
The 2015 Bonds will be dated their date of initial execution and delivery. Interest is payable on
April 1 and October 1 of each year, beginning October 1, 2015, at the rates set forth on the inside cover
2
page of this Official Statement. Principal is payable on April 1 in the years and in the amounts set forth
on the inside cover page of this Official Statement.
ADDITIONAL BONDS
Under the conditions described in the Trust Agreement, without the approval or consent of the
Owners of the then-outstanding 2015 Bonds and without notice to such Owners, Additional Bonds may
be delivered and secured on parity with the 2015 Bonds to provide funds (a) to expand or improve the
Financed Facilities, (b) to refund any Outstanding Bonds, (c) to pay financing costs or establish reserves
in connection with the issuance of Additional Bonds, (d) for any other purpose that may be allowed by
law from time to time, including the acquisition and construction of additional public facilities, whether
or not any such facility is related to the Financed Facilities, or (e) for any combination of such purposes.
BOOK-ENTRY ONLY
The 2015 Bonds will be delivered in book-entry form only, without physical delivery of bonds.
Payments to beneficial owners of the 2015 Bonds will be made by the Trustee through The Depository
Trust Company, New York, New York (“DTC”) and its participants. See “BOOK-ENTRY ONLY
SYSTEM” in Appendix E hereto.
TAX STATUS
In the opinion of Bond Counsel, under existing law and subject to conditions described in the
Section “LEGAL MATTERS – Tax Treatment,” interest components of installment payments so
designated and paid by the County as interest with respect to the 2015 Bonds (1) are not includable in the
recipient’s gross income for federal income tax purposes, (2) are not an item of tax preference for
purposes of the federal alternative minimum income tax imposed on individuals and corporations, and (3)
are exempt from State of North Carolina income taxes. Interest payments may also be included in the
calculation of a corporation’s alternative minimum income tax, and a holder of the 2015 Bonds may be
subject to other tax consequences. See “LEGAL MATTERS-Tax Treatment.”
PROFESSIONALS
Robert W. Baird & Co., on its own behalf and on behalf of Raymond James & Associates, Inc.
(together, the “Underwriters”) are underwriting the 2015 Bonds. U.S. Bank National Association,
Raleigh, North Carolina, is serving as Trustee with respect to the 2015 Bonds. Sanford Holshouser LLP
is serving as Bond Counsel to the County. Carl W. Thurman, III, Esq., is serving as County Attorney and
counsel to the Company. Parker Poe Adams & Bernstein LLP is serving as counsel to the Underwriters.
Davenport & Company LLC is serving as financial advisor to the County.
ADDITIONAL INFORMATION
Summaries of the Contract, the Deed of Trust and the Trust Agreement, including a list of
definitions of certain terms, are included as Appendix C. All quotations from and summaries and
explanations of the Contract, the Deed of Trust and the Trust Agreement contained in this Official
Statement, including in Appendix C, do not purport to be complete. Reference is made to such
documents for full and complete statements of their respective provisions.
Additional information and copies in reasonable quantity of the principal financing documents
may be obtained during the offering period from Robert W. Baird & Co., 380 Knollwood Street, Suite
440, Winston-Salem, North Carolina 27103. After the offering period, copies of such documents may be
obtained from the Trustee at 5540 Centerview Drive, Suite 200, Raleigh, North Carolina 27606.
3
The County will undertake in the Contract to provide continuing disclosure of certain annual
financial information and operating data and material events as are necessary for the County to comply
with SEC Rules 15c2-12(b)(5). See the caption “CONTINUING DISCLOSURE” herein.
THE 2015 BONDS
AUTHORIZATION
The 2015 Bonds will be executed and delivered pursuant to the Trust Agreement. The 2015
Bonds evidence proportionate undivided interests in installment payments to be made pursuant to the
Contract (the “Installment Payments”). The 2015 Bonds are payable solely from the Installment
Payments and certain other moneys as provided in the Trust Agreement.
The County is entering into the Contract under the provisions of Section 160A-20 of the General
Statutes of North Carolina, as amended. The Board of County Commissioners (the “Board”) authorized
the County’s execution and delivery of the Contract in a resolution adopted on March 16, 2015.
In addition, the County’s execution and delivery of the Contract received the required approval of
the North Carolina Local Government Commission (the “LGC”) on May 5, 2015. The LGC is a division
of the State Treasurer’s office charged with general oversight of local government finance in the State. Its
approval is required for substantially all bond issues and other local government financing arrangements
in the State. Before approving an installment financing, the LGC must determine, among other things,
that (1) the proposed financing is necessary and expedient, (2) the financing, under the circumstances, is
preferable to a general obligation or revenue bond issue for the same purpose, and (3) the sums to fall due
under the proposed financing are not excessive for the local government.
GENERAL
Payment Terms. The 2015 Bonds will be dated their date of initial delivery. Interest with
respect to the 2015 Bonds is payable on each April 1 and October 1 (the “Bond Payment Dates”),
beginning October 1, 2015, at the rates set forth on the inside cover page of this Official Statement
(calculated on the basis of a 360-day year consisting of twelve 30-day months). Interest payments will be
made to the person shown as the owner of the 2015 Bond as of the applicable Record Date. “Record
Date” means the end of the calendar day on the 15th day of the month (whether or not a Business Day)
preceding a Payment Date. Principal with respect to the 2015 Bonds is payable on April 1 in the years
and amounts set forth on the inside cover page of this Official Statement. Payments will be effected
through DTC. See “BOOK-ENTRY ONLY SYSTEM” in Appendix E hereto.
Registration and Exchange. So long as DTC or its nominee is the registered owner of the 2015
Bonds, transfers and exchanges of beneficial ownership interests in the 2015 Bonds will be available only
through DTC Participants and DTC Indirect Participants. See “BOOK-ENTRY ONLY SYSTEM” in
Appendix E hereto. The Trust Agreement describes the provisions for transfer and exchange applicable if
a book-entry system is no longer in effect. These provisions generally provide that the transfer of the
2015 Bonds is registrable by the Owners thereof, and the 2015 Bonds may be exchanged for an equal
aggregate, unprepaid principal amount of 2015 Bonds of denominations of $5,000 or any integral
multiple thereof and of the same maturity and interest rate, only upon presentation and surrender of the
2015 Bonds to the Trustee at the designated corporate trust office of the Trustee together with an executed
instrument of transfer in a form approved by the Trustee in connection with any transfer. The Trustee
must require from an Owner requesting exchange or transfer the payment of any tax or other
governmental charge required to be paid with respect to such exchange or transfer, but the Trustee must
not impose any other charge.
4
PREPAYMENT
Optional. The 2015 Bonds maturing on April 1, 2026, and thereafter will be subject to
prepayment at the option of the County, either in whole or in part, on any date on or after April 1, 2025, at
a prepayment price equal to 100% of the principal amount to be redeemed, plus accrued interest to the
prepayment date.
Mandatory Sinking Fund Prepayment. The 2015 Bonds maturing on April 1, 2033 are subject
to mandatory prepayment prior to maturity, upon payment of 100% of the principal amount thereof plus
interest accrued to the prepayment date, on April 1 in the years and amounts as follows:
YEAR
PRINCIPAL
AMOUNT
2032
2033*
$1,460,000
1,500,000
_______________
*Maturity
The 2015 Bonds maturing on April 1, 2035 (with the 2015 Bonds maturing on April 1, 2033, the
“Term Bonds”) are subject to mandatory prepayment prior to maturity, upon payment of 100% of the
principal amount thereof plus interest accrued to the prepayment date, on April 1 in the years and amounts
as follows:
YEAR
PRINCIPAL
AMOUNT
2034
2035*
$1,540,000
1,575,000
_______________
*Maturity
On or before the 70th day next preceding any sinking fund payment date, the County may do
either of the following:
(a)
deliver to the Trustee for cancellation 2015 Bonds that are subject to a sinking
fund prepayment, in any aggregate principal amount desired; or
(b)
instruct the Trustee to apply a credit against the County's sinking fund payment
obligation for any such 2015 Bonds that (i) previously have been prepaid (other than through the
operation of the sinking fund requirements) and canceled by the Trustee but (ii) not previously
applied as a credit against any sinking fund payment obligation.
The Trustee will credit against the County's sinking fund payment obligation on such sinking
fund payment date the amount of such Bonds so purchased, delivered or previously prepaid as described
in paragraphs (a) or (b) above.
Effect of Call for Prepayment. If on or before the date fixed for prepayment funds are
deposited with the Trustee to pay the principal, premium, if any, and interest accrued to the prepayment
date with respect to the 2015 Bonds called for prepayment, the 2015 Bonds, or portions of the 2015
Bonds, called for prepayment will cease to accrue interest from and after the prepayment date, will no
longer be entitled to the benefits provided by the Trust Agreement and will not be deemed to be
Outstanding under the Trust Agreement.
5
Notice of Prepayment. The Trustee, at the County’s direction and upon being satisfactorily
indemnified with respect to expenses, will send notice of prepayment no less than 30 nor more than 60
days prior to the prepayment date, as follows:
(i)
If DTC or its nominee is the registered owner of all the Bonds being called for
prepayment, to DTC, in whatever manner may be provided for under DTC’s then-current
standard rules and procedures (and if the Trustee is unable to determine those rules, by registered
or certified mail, return receipt requested), or
(ii)
With respect to any Bonds for which no book-entry-only system of registration is
in effect, to each of the registered owners of those Bonds at their addresses as shown on the
Trustee's registration books, by registered or certified mail,
but failure to receive any such notice or any defect in such notice will not affect the validity of the
proceedings for the prepayment of such 2015 Bonds or portions thereof with respect to registered owners
who receive proper notice. In addition, notice of prepayment will also be given to the Municipal
Securities Rulemaking Board for posting on the “EMMA” continuing disclosure system, or any successor
system, and to the LGC.
Any prepayment notice, except a prepayment notice in respect of a sinking fund payment date,
may state that the prepayment to be effected is conditioned upon (i) the Trustee’s receipt on or prior to the
prepayment date of moneys sufficient to pay the principal of and premium, if any, and interest on the
2015 Bonds to be prepaid; or (ii) any other condition not unacceptable to the Trustee. If such notice
contains such a condition and the Trustee either (i) does not receive moneys sufficient to pay the principal
of and premium, if any, and interest on the Bonds on or prior to the prepayment date or (ii) the stated
condition is not fulfilled, in the either case on or prior to the prepayment date, then prepayment will not
be made and the Trustee will, within a reasonable time, give notice in a manner in which the prepayment
notice was given that such moneys were not so received (or condition was not fulfilled) and the
prepayment was not made.
Selection. If less than all of the 2015 Bonds are to be optionally prepaid as described above, they
will be prepaid as among maturities in any manner as the County may elect. If less than all of the 2015
Bonds of any maturity are to be prepaid, the Trustee will select the 2015 Bonds to be prepaid by lot;
provided, however, that so long as a book-entry system with DTC is used for determining beneficial
ownership of 2015 Bonds, if less than all of the 2015 Bonds the maturity are to be prepaid, DTC will
determine which of the 2015 Bonds within any such maturity are to be prepaid in accordance with DTC’s
then current rules and procedures.
In any case, (i) the portion of any 2015 Bond to be prepaid will be in the principal amount of
$5,000 or some multiple thereof, and (ii) in selecting 2015 Bonds for prepayment, each 2015 Bond will
be considered as representing that number of 2015 Bonds which is obtained by dividing the principal
amount of such 2015 Bond by $5,000. If a portion of a 2015 Bond is called for prepayment, a new 2015
Bond in principal amount equal to the unpaid portion will be issued to the registered owner upon the
surrender of 2015 Bond.
THE PLAN OF FINANCE
The 2015 Bonds are being issued to provide funds for the County to (1) to pay, or reimburse the
County for previous expenditures, for the costs of the following projects: (i) renovations to Old Topsail
High School for use as County offices (approximately $4,900,000 of proceeds), (ii) industrial park
improvements, including road work and construction of the water distribution and wastewater collection
systems (approximately $3,200,000 of proceeds), and (iii) wastewater treatment plant construction for the
6
industrial park (approximately $16,000,000 of proceeds), (iv) construction of three County fuel depots
(approximately $700,000 of proceeds), (v) HVAC improvements to the Administrative Building and
other County buildings (approximately $1,500,000 of proceeds) and (vi) renovations to the County’s
probation and parole building (approximately $175,000 of proceeds) and (2) to pay related financing
costs.
ONLY OLD TOPSAIL HIGH SCHOOL, THE ADMINISTRATIVE BUILDING AND THEIR RELATED REAL
ESTATE WILL CONSTITUTE THE MORTGAGED PROPERTY AND SERVE AS SECURITY FOR THE COUNTY’S
OBLIGATIONS UNDER THE CONTRACT. NONE OF THE OTHER FINANCED FACILITIES WILL SERVE AS
SECURITY FOR THE COUNTY’S OBLIGATIONS UNDER THE CONTRACT.
See “INTRODUCTION—SECURITY” for more information concerning the Old Topsail High
School and the Administrative Building.
ESTIMATED SOURCES AND USES OF FUNDS
The following table presents information as to the estimated sources and uses of funds:
AMOUNT
Sources of Funds:
Par Amount of 2015 Bonds
Net Original Issue Premium
TOTAL
$24,800,000
2,079,465
$26,879,465
Uses of Funds:
Project Costs
Costs of Issuance1
TOTAL
$26,429,061
450,404
$26,879,465
_______________
1
Includes legal fees, printing costs, Underwriters’ discount, rating agency fees and other miscellaneous transaction
costs.
SECURITY AND SOURCES OF PAYMENT OF 2015 BONDS
GENERAL
The 2015 Bonds are payable from payments to be made by the County under the Contract, and
from certain interest earnings and certain amounts realized from any sale or lease of the Mortgaged
Property.
INSTALLMENT PAYMENTS AND ADDITIONAL PAYMENTS
Under the Contract, the County is required to pay Installment Payments directly to the Trustee.
Under the Trust Agreement, the Trustee will deposit all Installment Payments in the Payment Fund. The
Trustee will deposit the interest component of the Installment Payments for the 2015 Bonds into the
Interest Account of the Payment Fund and the principal component of the Installment Payments for the
2015 Bonds into the Principal Account of the Payment Fund. The County is required to pay Installment
Payments semiannually on or before the date that is 25th day of the month preceding each April 1 and
October 1 in amounts sufficient to provide for the payment of the principal and interest with respect to the
2015 Bonds on such dates. Installment Payments payable for any period are reduced by certain
investment earnings and other amounts on deposit in the Payment Fund available to pay the principal or
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interest with respect to the 2015 Bonds. Each of the funds and accounts held by the Trustee have been
assigned to the Trustee as security for the 2015 Bonds.
The County is obligated to pay Additional Payments in amounts sufficient to pay the fees and
expenses of the Trustee, taxes or other expenses required to be paid pursuant to the Contract. Additional
Payments are to be paid by the County directly to the person or entity to which such Additional Payments
are owed.
BUDGET AND APPROPRIATION
In connection with both Installment Payments and Additional Payments, the appropriation of
funds therefor is within the sole discretion of the Board of County Commissioners. In the Contract, the
County agrees to cause the Budget Officer to include in the initial proposal for each the County’s annual
budgets the amount of all Installment Payments and estimated Additional Payments coming due during
the Fiscal year to which such budget applies. Notwithstanding that the initial proposed budget includes
an appropriation for Installment Payments and Additional Payments, the Board of County Commissioners
may determine not to include such an appropriation in the final County budget for such Fiscal Year.
Further, the Board of County Commissioners may amend an adopted budget to reduce or delete an
approved appropriation.
IN CONNECTION WITH THE INSTALLMENT PAYMENTS AND THE ADDITIONAL PAYMENTS, THE
APPROPRIATION OF FUNDS THEREFOR IS WITHIN THE SOLE DISCRETION OF THE BOARD OF COUNTY
COMMISSIONERS.
TRUST AGREEMENT
Under the Trust Agreement, the Company will assign to the Trustee for the benefit of the Owners
of the 2015 Bonds (1) all rights of the Company under the Contract (except its rights to indemnification,
the payment of certain expenses and the receipt of certain notices), including the right to receive
Installment Payments made by the County, (2) all rights of the Company as beneficiary under the Deed of
Trust, including its right, title and interest in the Mortgaged Property (except its rights in respect of
indemnification and the receipt of certain notices) and (3) all moneys and securities from time to time
held by the Trustee under the Trust Agreement.
DEED OF TRUST
General. The County will also execute the Deed of Trust conveying the Mortgaged Property to
the Deed of Trust Trustee as security for its obligations under the Contract. The Deed of Trust will
constitute a lien of record on the Mortgaged Property, subject only to Permitted Encumbrances (as
defined in the Contract). The lien of record will be insured by a title insurance policy.
The Deed of Trust permits future obligations evidenced by Additional Bonds to be secured by the
Deed of Trust, provided that the total amount of present and future obligations secured by the Deed of
Trust at any one time does not exceed $50,000,000 and such future obligations are incurred not later than
30 years from the date of the Deed of Trust.
Release of Security. So long as no Event of Default is continuing, the Company and the Deed of
Trust Trustee shall, upon the County’s request and at any time, execute and deliver all documents
necessary to effect the release of all or a portion of the Mortgaged Property from the lien of the Deed of
Trust upon the County’s compliance with the following requirements:
8
(a)
In connection with the release of a portion (but less than all) of the Mortgaged
Property, the County must file with the Company and the Deed of Trust Trustee evidence that the
appraised, tax or insured value of that portion of the Mortgaged Property that is proposed as the
portion that is to remain subject to the lien of the Deed of Trust is not less than 50% of the
aggregate outstanding principal component of the Installment Payments.
(b)
In the case of a proposed release of all the Mortgaged Property, the County must
pay to the Trustee (or other fiduciary) an amount (i) which is sufficient to provide for the
payment in full of all Outstanding Bonds in accordance with the Trust Agreement and (ii) which
is required to be used for such payment.
(c)
In any event, the County must file with the Company and the Deed of Trust
Trustee (i) a certified copy of a County Board resolution stating the purpose for which the County
desires the release, giving a brief and general description of the portion of the Mortgaged
Property to be released and requesting the release, (ii) a copy of the proposed instrument of grant
or release, including a complete legal description of the property to be released, (iii) a written
application signed by a County Representative requesting such instrument, and (iv) a certificate
executed by a County Representative that no Event of Default is continuing and that the grant or
release will not materially impair the intended use of the Mortgaged Property.
In addition to the provisions for release described above, the County may from time to time grant
easements, licenses, rights-of-way and other similar rights with respect to any part of the Mortgaged
Property, and the County may release such interests, with or without consideration, and the County may
dispose of any inadequate, obsolete, worn-out, undesirable or unnecessary Fixture.
See “THE DEED OF TRUST-- Releases; Grants of Easements” in Appendix C hereto.
ENFORCEABILITY
The enforceability of the parties’ obligations under the Trust Agreement, the Deed of Trust and
the Contract are subject to bankruptcy, insolvency, reorganization and other laws related to or affecting
the enforcement of creditors’ rights generally and, to the extent that certain remedies under such
instruments require or may require enforcement by a court, to such principles of equity as the court
having jurisdiction may impose.
THE CONTRACT DOES NOT DIRECTLY OR INDIRECTLY OR CONTINGENTLY OBLIGATE THE COUNTY
TO MAKE ANY PAYMENTS BEYOND THOSE APPROPRIATED IN THE SOLE DISCRETION OF THE COUNTY IN
ANY FISCAL YEAR IN WHICH THE CONTRACT IS IN EFFECT. If the County fails to make Installment
Payments required under the Contract, the Trustee may declare the entire unpaid principal portion of the
Installment Payments to be immediately due and payable and direct the Deed of Trust Trustee to institute
foreclosure proceedings under the Deed of Trust and may in accordance with law dispose of such
Mortgaged Property and apply the proceeds of any such disposition toward any balance owing by the
County under the Contract to make Installment Payments. No assurance can be given that such proceeds
will be sufficient to pay the principal and interest with respect to the 2015 Bonds. IN ADDITION, SECTION
160A-20(F) OF THE NORTH CAROLINA GENERAL STATUTES PROVIDES THAT NO DEFICIENCY JUDGMENT
MAY BE RENDERED AGAINST THE COUNTY FOR ANY AMOUNTS THAT MAY BE OWED BY THE COUNTY
UNDER THE CONTRACT AND THAT THE TAXING POWER OF THE COUNTY IS NOT AND MAY NOT BE
PLEDGED DIRECTLY OR INDIRECTLY OR CONTINGENTLY TO SECURE ANY MONEYS DUE BY THE COUNTY
UNDER THE CONTRACT. See “THE FINANCING CONTRACT—Default and Remedies under
Financing Contract” and “THE DEED OF TRUST--Defaults and Remedies; Foreclosure” in
Appendix C hereto and the caption “CERTAIN RISKS OF 2015 BOND OWNERS” herein.
9
ADDITIONAL BONDS
Under the conditions described in the Trust Agreement, without the approval or consent of the
Owners of the then outstanding 2015 Bonds, Additional Bonds may be delivered and secured on parity
with the 2015 Bonds. See “THE TRUST AGREEMENT--Additional Bonds” in Appendix C hereto.
AVAILABLE SOURCES FOR PAYMENT OF INSTALLMENT PAYMENTS
GENERAL
The County may pay its Installment Payments from any source of funds available to it in each
year and appropriated therefor during the term of the Contract.
GENERAL FUND REVENUES
The County’s general fund revenues for the audited Fiscal Year ended June 30, 2014 were
$50,689,706. The County’s general fund revenues for the Fiscal Year ending June 30, 2015 are budgeted
at $50,350,838. General fund revenues are derived from various sources including property taxes, which
generate approximately 65.47% of the general fund revenues, sales taxes, intergovernmental revenues,
and fines and forfeitures. For the Fiscal Year ended June 30, 2014, the County imposed a property tax of
$0.512 per $100 of assessed value and for the Fiscal Year ending June 30, 2015, the County imposed a
property tax of $0.512 per $100 of assessed value. A rate of $0.512 per $100 of assessed value in the
Fiscal Year ended June 30, 2014, generated approximately $32,608,582. For the Fiscal Year ending
June 30, 2015, at a rate of $0.512 per $100 of assessed value, the County has budgeted for $32,964,251 to
be generated from property tax sources. The General Statutes of North Carolina permit counties to
impose property taxes of up to $1.50 per $100 of assessed value for certain purposes without the
requirement of a voter referendum. See Appendix B hereto for a description of the uses of the County’s
general fund revenues for the Fiscal Year ended June 30, 2014.
10
INSTALLMENT PAYMENT SCHEDULE
The following schedule sets forth for each Fiscal Year of the County ending June 30 the amount
of principal and interest required to be paid under the Contract with respect to the 2015 Bonds. Totals
may not foot due to rounding.
FISCAL YEAR
ENDING JUNE 30
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
TOTAL
2015 BONDS
INTEREST
PRINCIPAL
$ 1,050,000
1,000,000
1,000,000
1,020,000
1,050,000
1,075,000
1,110,000
1,125,000
1,165,000
1,195,000
1,220,000
1,265,000
1,290,000
1,350,000
1,375,000
1,435,000
1,460,000
1,500,000
1,540,000
1,575,000
$24,800,000
$
923,854
1,073,038
1,023,038
973,038
922,038
869,538
815,788
760,288
704,038
645,788
586,038
549,438
486,188
421,688
354,188
285,438
235,213
176,813
116,813
59,063
$11,981,316
11
TOTAL
$ 1,973,854
2,073,038
2,023,038
1,993,038
1,972,038
1,944,538
1,925,788
1,885,288
1,869,038
1,840,788
1,806,038
1,814,438
1,776,188
1,771,688
1,729,188
1,720,438
1,695,213
1,676,813
1,656,813
1,634,063
$36,781,316
CERTAIN RISKS OF 2015 BOND OWNERS
INSUFFICIENCY OF INSTALLMENT PAYMENTS
If Installment Payments by the County are insufficient to pay the principal and interest with
respect to the 2015 Bonds as the same become due or if another event of default occurs under the
Contract, the Trustee may accelerate the 2015 Bonds and all unpaid principal amounts due by the County
under the Contract, direct the Deed of Trust Trustee to foreclose on the Mortgaged Property under the
Deed of Trust, take possession of the Mortgaged Property and attempt to dispose of the Mortgaged
Property. See “THE FINANCING CONTRACT” in Appendix C hereto. Zoning restrictions and other
land use factors relating to the Mortgaged Property may limit the use of the Mortgaged Property and may
affect the proceeds obtained on any disposition by the Deed of Trust Trustee. THERE CAN BE NO
ASSURANCE THAT THE MONEYS AVAILABLE IN THE FUNDS AND ACCOUNTS HELD BY THE TRUSTEE AND
THE PROCEEDS OF ANY SUCH DISPOSITION OF THE MORTGAGED PROPERTY WILL BE SUFFICIENT TO
PROVIDE FOR THE PAYMENT OF THE PRINCIPAL AND INTEREST WITH RESPECT TO THE 2015 BONDS.
SECTION 160A-20(F) OF THE GENERAL STATUTES OF NORTH CAROLINA PROVIDES THAT NO DEFICIENCY
JUDGMENT MAY BE RENDERED AGAINST THE COUNTY FOR ANY AMOUNTS THAT MAY BE OWED BY THE
COUNTY UNDER THE CONTRACT, AND THE TAXING POWER OF THE COUNTY IS NOT AND MAY NOT BE
PLEDGED DIRECTLY OR INDIRECTLY OR CONTINGENTLY TO SECURE ANY MONEYS OWING BY THE COUNTY
UNDER THE CONTRACT. THE REMEDIES AFFORDED TO THE TRUSTEE AND THE OWNERS OF THE 2015
BONDS ON A DEFAULT BY THE COUNTY UNDER THE CONTRACT ARE LIMITED, INCLUDING FORECLOSING
ON THE DEED OF TRUST.
RISK OF NONAPPROPRIATION
The appropriation of moneys to make the Installment Payments is within the sole discretion of the
Board of County Commissioners. If the Board of County Commissioners fails to appropriate such
moneys, the only sources of payment for the 2015 Bonds will be the moneys, if any, available in certain
funds and accounts held by the Trustee under the Trust Agreement and the proceeds of any attempted
foreclosure on the County’s interest in the Mortgaged Property under the Deed of Trust. The amount of
such proceeds will be affected by (1) the condition of the Mortgaged Property, (2) potential releases of
portions of the Mortgaged Property from the lien as provided in the Deed of Trust and (3) the occurrence
of any damage, destruction or loss of the Mortgaged Property which is not repaired or replaced and for
which there are not received or appropriated moneys from insurance policies or from the County’s risk
management program.
UNINSURED CASUALTY
If all or any part of the Mortgaged Property is partially or totally damaged or destroyed by any
casualty or taken by any governmental authority, the County must, under the Contract, apply any Net
Proceeds from insurance or condemnation to repair, restore or rebuild the Mortgaged Property. If the
County applies any Net Proceeds to repair, restore or rebuild the Mortgaged Property and such Net
Proceeds are insufficient to repair, restore or rebuild the Mortgaged Property to its condition prior to such
damage, destruction or taking, then the value of the Mortgaged Property would be reduced. The Contract
requires that certain insurance be maintained with respect to the Mortgaged Property. Such insurance
may not, however, cover all perils to which the Mortgaged Property is subject and is nevertheless subject
to the general limitation on enforceability provided for in the Contract.
OUTSTANDING GENERAL OBLIGATION DEBT OF THE COUNTY
The County has general obligation bonds outstanding and may issue additional general obligation
bonds and notes in the future. The County has pledged and will pledge its faith and credit and taxing
12
power to the payment of its general obligation bonds and notes issued or to be issued. See the caption
“THE COUNTY--DEBT INFORMATION” herein for a description of the County’s outstanding and
authorized but unissued general obligation bonds and notes. FUNDS WHICH MAY OTHERWISE BE
AVAILABLE TO PAY INSTALLMENT PAYMENTS OR ADDITIONAL PAYMENTS OR TO MAKE OTHER
PAYMENTS TO BE MADE BY THE COUNTY UNDER THE CONTRACT MAY BE SUBJECT TO SUCH FAITH AND
CREDIT PLEDGE BY THE COUNTY AND THEREFORE MAY BE REQUIRED TO BE APPLIED TO THE PAYMENT OF
ITS GENERAL OBLIGATION INDEBTEDNESS.
ENVIRONMENTAL RISKS
The sites to be included as the Mortgaged Property are currently owned by the County. Phase I
and Phase II environmental assessments of the Old Topsail High School have been conducted. Those
reports indicated that certain underground storage tanks and other filtration issues existed at the Old
Topsail High School. The County has had such issues resolved to the satisfaction to the North Carolina
Department of Environment and Natural Resources, which issued a no action letter dated
February 13, 2013. Otherwise, the environmental assessments reported no material environmental
contamination on the Old Topsail High School site to be included as the Mortgaged Property. No
representation is made regarding the Administrative Building. Undiscovered or future environmental
contamination could have a material adverse affect on the value of the Mortgaged Property; however, the
County is required under the Contract to keep the Mortgaged Property, and the activities at the Mortgaged
Property, in compliance with all such environmental laws and regulations.
BANKRUPTCY
Under existing North Carolina law, a local governmental unit may not file for bankruptcy
protection without the consent of the LGC. If bankruptcy proceedings were initiated by the County with
the consent of the LGC, the bankruptcy proceedings could have adverse effects on owners of the 2015
Bonds, including (a) delay in enforcement of their remedies, (b) subordination of their claims to claims of
those supplying goods and services to the County after the initiation of bankruptcy proceedings and to the
administrative expenses of bankruptcy proceedings and (c) imposition without their consent of a plan of
reorganization reducing or delaying payment of the 2015 Bonds. The effect of the provisions of the
United States Bankruptcy Code on the rights and remedies of the owners of the 2015 Bonds cannot be
predicted and may be affected significantly by judicial interpretation, general principles of equity
(regardless of whether considered in a proceeding in equity or at law) and considerations of public policy.
In addition to its consent to bankruptcy filings by local government units, North Carolina law
vests authority in the LGC to intervene in the financial affairs, including taking full control of the
financial affairs, of local government units, including the County, if the unit defaults, or in the opinion of
the LGC will default, on a future debt service payment if financial policies and practices are not
improved.
ADDITIONAL BONDS
The Company may execute and deliver Additional Bonds under the Trust Agreement that are
secured by the Mortgaged Property, thereby diluting the relative value of the collateral with respect to the
2015 Bonds.
THE COMPANY
The Pender County Public Facilities Company is a nonprofit corporation incorporated under the
Nonprofit Corporation Act of the State of North Carolina on September 11, 2012. The Company’s
13
purpose, as stated in its Articles of Incorporation, is to promote the general welfare of the citizens of the
County by assisting the County in the financing of capital projects.
The Company’s role in the financing described in this Official Statement will be limited. The
Company’s officers, directors and counsel will have the opportunity to review this Official Statement and
the principal financing documents and to assist in their preparation. The Company’s counsel will deliver
certain legal opinions in connection with the transaction. The Company and the County expect, however,
that the Company will have no continuing responsibilities or involvement with respect to the financing, or
with respect to monitoring or providing for compliance with the terms of any of the financing documents.
The Company has no taxing power, no assets and no employees. The Company will not be liable to make
any payments of principal, premium or interest with respect to the 2015 Bonds.
THE COUNTY
See Appendix A for a description of the County and Appendix B for financial information
regarding the County.
LEGAL MATTERS
LITIGATION
No litigation is now pending or, to the best of the County’s knowledge, threatened, against or
affecting the County which seeks to restrain or enjoin the authorization, execution or delivery of the 2015
Bonds or which contests the County’s creation, organization or corporate existence, or the title of any of
the present officers thereof to their respective offices or the authority or proceedings for the County’s
authorization, execution and delivery of the Contract, or the County’s authority to carry out its obligations
thereunder or which would have a material adverse impact on the County’s condition, financial or
otherwise.
In addition, no litigation is now pending or, to the best of the Company’s knowledge, threatened,
against or affecting the Company which seeks to restrain or enjoin the authorization, execution or delivery
of the 2015 Bonds or Contract or which contests the validity or the authority or proceedings for the
adoption, authorization, execution or delivery of the 2015 Bonds or the Company’s creation, organization
or corporate existence, or the title of any of the present officers thereof to their respective offices or the
authority or proceedings for the Company’s authorization, execution or delivery of the 2015 Bonds, the
Trust Agreement or the Contract, or the Company’s authority to carry out its obligations thereunder.
CONTINGENT LIABILITIES
The County is not aware of any contingent liabilities that would materially adversely affect the
County’s ability to meet its financial obligations.
OPINIONS OF COUNSEL
Legal matters related to the execution, sale and delivery of the 2015 Bonds are subject to the
approval of Sanford Holshouser LLP, Bond Counsel. The opinion of Sanford Holshouser LLP, as Bond
Counsel, substantially in the form set forth in Appendix D hereto, will be delivered at the time of the
delivery of the 2015 Bonds. Certain legal matters will be passed on for the County and the Company by
Carl W. Thurman, III, Esq., County Attorney, and for the Underwriters by their counsel, Parker Poe
Adams & Bernstein LLP.
14
Bond Counsel’s approving legal opinion expresses Bond Counsel’s professional judgment as to
the legal issues explicitly addressed in the opinion. By rendering a legal opinion, an opinion giver does
not become an insurer or guarantor of that expression of professional judgment, of the transaction opined
upon, or of the future performance of parties to the transaction. Additionally, the rendering of an opinion
does not guarantee the outcome of any legal dispute that may arise out of the transaction, and a bond
opinion is not a statement (either expressly or by implication) concerning the marketability, value or
likelihood of payment of the bonds, or as to the suitability of the 2015 Bonds as an investment for any
investor.
Bond Counsel has not been engaged to investigate the County’s operations or condition or the
County’s ability to provide for payments on the 2015 Bonds. Bond Counsel will express no opinion (1)
as to the County’s financial condition or its ability to provide for payments on the 2015 Bonds, or (2) as
to the accuracy, completeness or fairness of any information that may have been relied on by anyone in
making a decision to purchase 2015 Bonds, including this Official Statement. In this transaction, Bond
Counsel serves only as bond counsel to the County.
Parker Poe Adams & Bernstein LLP, counsel to the Underwriters, has represented the
Underwriters as counsel in other financing transactions. Neither the County nor the Underwriters have
conditioned the future employment of this firm in connection with any proposed financing issues for the
County or for the Underwriters on the successful execution and delivery of the 2015 Bonds.
FINANCIAL ADVISOR
Davenport & Company LLC, Raleigh, North Carolina, has acted as financial advisor to the
County, in connection with the issuance of the 2015 Bonds.
TAX TREATMENT
OPINION OF BOND COUNSEL
In the opinion of Sanford Holshouser LLP, Carrboro, North Carolina, Bond Counsel for the
County (“Bond Counsel”), under existing law, interest components of the Installment Payments under the
Contract so designated and paid by the County and then paid as interest with respect to the 2015 Bonds
(1) are not included in gross income for federal income tax purposes, (2) are not a specific item of tax
preference for purposes of the federal alternative minimum income tax imposed on individuals and
corporations; however, with respect to corporations (as defined for federal income tax purposes), interest
payments will be taken into account in determining adjusted current earnings for purposes of computing
the alternative minimum income tax on corporations, and (3) are exempt from State of North Carolina
income taxation. Bond Counsel will express no other opinion regarding the federal or North Carolina tax
consequences of the ownership of or the receipt or accrual of interest on the 2015 Bonds.
Bond Counsel’s opinion does not address the tax-exempt status of payments on the 2015 Bonds
derived from parties other than the County, even if those payments are denominated as interest with
respect to the 2015 Bonds.
Bond Counsel will give its opinion in reliance upon certifications by County representatives and
others as to certain facts relevant to the opinion. The County has covenanted to comply with the
provisions of the Internal Revenue Code of 1986, as amended (the “Code”), regarding, among other
matters, the use, expenditure and investment of the proceeds derived from the sale of the 2015 Bonds and
the timely payment to the United States of any arbitrage profit with respect to the 2015 Bonds. The
County’s failure to comply with such covenants could cause interest on the 2015 Bonds to be included in
gross income for federal income tax purposes retroactively to the date of issuance of the 2015 Bonds.
15
ORIGINAL ISSUE PREMIUM
The 2015 Bonds maturing on April 1, 2016 through 2025, inclusive, 2027 through 2030,
inclusive, and 2033 (collectively, the “Premium Bonds”) are being sold at an initial offering price in
excess of the principal amounts payable at maturity. Under the Code, the difference between (a) the
initial offering prices to the public (excluding bond houses and brokers) at which a substantial amount of
each maturity of the Premium Bonds is sold and (b) the principal amount payable at maturity of such
Premium Bonds constitutes “original issue premium”. Original issue premium is not deductible for
federal income tax purposes.
For an owner of a Premium Bond, the amount of the original issue premium which is treated as
having accrued over the term of such Premium Bond is reduced from the owner’s cost basis of such
Premium Bond in determining, for federal income tax purposes, the gain or loss upon the sale, redemption
or other disposition of such Premium Bond (whether upon its sale, redemption or payment at maturity).
Bond Counsel’s opinion will not specifically address any issues relating to the treatment of
premiums paid on Premium Bonds. Owners of Premium Bonds should consult their tax advisors with
respect to the tax consequences of owning or disposing of a Premium Bond.
ORIGINAL ISSUE DISCOUNT
The 2015 Bonds maturing on April 1, 2026, 2031 and 2035 (collectively, the “Discount Bonds”)
are being sold at initial offering prices which are less than the principal amounts payable at maturity.
Under the Code, the difference between (a) the initial offering prices to the public (excluding bond houses
and brokers) at which a substantial amount of each maturity of the Discount Bonds is sold and (b) the
principal amount payable at maturity of such Discount Bonds constitutes original issue discount treated as
interest which will be excluded from the gross income of the owners of such Discount Bonds for federal
income tax purposes.
In the case of an owner of an Discount Bond, the amount of original issue discount on such
Discount Bond is treated as having accrued daily over the term of such Discount Bond on the basis of a
constant yield compounded at the end of each accrual period and is added to the owner’s cost basis of
such Discount Bond in determining, for federal income tax purposes, the gain or loss upon the sale,
redemption or other disposition of such Discount Bond (including its sale, redemption or payment at
maturity). Amounts received on the sale, redemption or other disposition of an Discount Bond which are
attributable to accrued original issue discount on such Discount Bond will be treated as interest exempt
from gross income, rather than as a taxable gain, for federal income tax purposes, and will not be a
specific item of tax preference for purposes of the federal alternative minimum tax imposed on
corporations and individuals. However, it should be noted that with respect to certain corporations (as
defined for federal income tax purposes), a portion of the original issue discount that accrues to such
corporate owners of an Discount Bond in each year will be taken into account in determining the adjusted
current earnings for the purpose of computing the federal alternative minimum tax imposed on such
corporations and may result in other collateral federal income tax consequences for certain taxpayers in
the year of accrual. Consequently, corporate owners of an Discount Bond should be aware that the
accrual of original issue discount on any Discount Bond in each year may result in a federal alternative
minimum tax liability or other collateral federal income tax consequences, even though such corporate
owner may not have received any cash payments attributable to such original issue discount in such year.
Original issue discount is treated as compounding semiannually (which yield is based on the
initial public offering price of such Discount Bond) at a rate determined by reference to the yield to
maturity of each individual Discount Bond. The amount treated as original issue discount on an Discount
Bond for a particular semiannual accrual period is equal to (a) the product of (1) the yield to maturity for
16
such Discount Bond (determined by compounding at the close of each accrual period) and (2) the amount
which would have been the tax basis of such Discount Bond at the beginning of the particular accrual
period if held by the original purchaser, less (b) the amount of interest payable on such Discount Bond
during the particular accrual period. The tax basis is determined by adding to the initial public offering
price on such Discount Bond the sum of the amounts which have been treated as original issue discount
for such purposes during all prior accrual periods. If an Discount Bond is sold between semiannual
compounding dates, original issue discount which would have accrued for that semiannual compounding
period for federal income tax purposes is to be apportioned in equal amounts among the days in such
compounding period.
The Code contains additional provisions relating to the accrual of original issue discount in the
case of owners of the Discount Bonds who subsequently purchase any Discount Bonds after the initial
offering or at a price different from the initial offering price during the initial offering of the 2015 Bonds.
Owners of Discount Bonds should consult their own tax advisors with respect to the precise determination
for federal and state income tax purposes of the amount of original issue discount accrued upon the sale,
redemption or other disposition of an Discount Bond as of any date and with respect to other federal, state
and local tax consequences of owning and disposing of an Discount Bond. It is possible that under the
applicable provisions governing the determination of state or local taxes, accrued original issue discount
on an Discount Bond may be deemed to be received in the year of accrual even though there will not be a
corresponding cash payment attributable to such original issue discount until a later year.
Bond Counsel’s opinion will not address issues relating to the treatment of original issue
discounts on Discount Bonds. Owners of Discount Bonds should consult their tax advisors with
respect to the tax consequences of owning or disposing of a Discount Bond.
OTHER TAX CONSEQUENCES
In addition to the matters addressed above, prospective purchasers of the 2015 Bonds should be
aware that the ownership of tax-exempt obligations may result in collateral federal income tax
consequences to certain taxpayers, including without limitation financial institutions, property and
casualty insurance companies, certain S corporations, certain foreign corporations subject to the branch
profits tax, corporations subject to the environmental tax, recipients of Social Security or Railroad
Retirement benefits and taxpayers who may be deemed to have incurred or continued indebtedness to
purchase or carry tax-exempt obligations. Prospective purchasers of the 2015 Bonds should consult their
tax advisors as to the applicability and impact of such consequences.
Interest on the 2015 Bonds may or may not be subject to state or local taxation in jurisdictions
other than North Carolina. Prospective purchasers of the 2015 Bonds should consult their own tax
advisors as to the status of interest on the 2015 Bonds under the tax laws of any such jurisdiction other
than North Carolina.
CONTINUING DISCLOSURE
The County agrees in the Contract, in accordance with Rule 15c2-12 (the “Rule”) promulgated by
the Securities and Exchange Commission (the “SEC”), to provide to the Municipal Securities Rulemaking
Board (the “MSRB”):
(1)
by not later than seven months after the end of each Fiscal Year, beginning with
the Fiscal Year ending June 30, 2015, to the MSRB, the audited financial statements of the
County for the preceding Fiscal Year, if available, prepared in accordance with Section 159-34 of
the General Statutes of North Carolina, as it may be amended from time to time, or any successor
statute, or if such audited financial statements are not then available, unaudited financial
17
statements of the County for such Fiscal Year to be replaced subsequently by audited financial
statements of the County to be delivered within 15 days after such audited financial statements
become available for distribution;
(2)
by not later than seven months after the end of each Fiscal Year, beginning with
the Fiscal Year ending June 30, 2015, to the MSRB, (a) the financial and statistical data as of a
date not earlier than the end of the preceding Fiscal Year for the type of information included
under the captions “– Debt Information” and “– Tax Information” (including subheadings
thereunder) in Appendix A to this Official Statement (excluding any information on overlapping
or underlying units) and (b) the combined budget of the County for the current Fiscal Year, to the
extent such items are not included in the audited financial statements referred to in paragraph (1)
above;
(3)
in a timely manner not in excess of 10 Business Days after the occurrence of the
event, to the MSRB notice of any of the following events with respect to the 2015 Bonds:
(a)
principal and interest payment delinquencies;
(b)
non-payment related defaults, if material;
(c)
difficulties;
unscheduled draws on debt service reserves reflecting financial
(d)
difficulties;
unscheduled draws on credit enhancements reflecting financial
(e)
perform;
substitution of any credit or liquidity providers, or their failure to
(f)
adverse tax opinions, the issuance by the Internal Revenue Service of
proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form
5701-TEB) or other material events affecting the tax status of the 2015 Bonds;
(g)
if material;
modifications of the rights of the Beneficial Owners of the 2015 Bonds,
(h)
call of any of the 2015 Bonds, if material, and tender offers;
(i)
defeasance of any of the 2015 Bonds;
(j)
release, substitution, or sale of any property securing repayment of the
2015 Bonds, if material;
(k)
rating changes;
(l)
bankruptcy, insolvency, receivership or similar event of the County;
(m)
the consummation of a merger, consolidation, or acquisition involving
the County or the sale of all or substantially all of the assets of the obligated person, other
than in the ordinary course of business, the entry into a definitive agreement to undertake
such an action or the termination of a definitive agreement relating to such actions, other
than pursuant to its terms, if material;
18
(n)
appointment of a successor or additional trustee or the change of name of
a trustee, if material; and
(4)
in a timely manner, to the MSRB, notice of a failure of the County to provide
required annual financial information described in (1) or (2) above on or before the date specified.
The County agrees in the Contract that its undertaking described above is intended to be for the
benefit of the Owners and the beneficial owners of the 2015 Bonds and is enforceable by the Trustee or
by any of them, including an action for specific performance of the County’s obligations described above,
but a failure to comply will not be an Event of Default under the Contract and will not result in
acceleration of the principal component of Installment Payments. An action must be instituted, had and
maintained in the manner provided in the Contract for the benefit of all of the Owners and beneficial
owners of the 2015 Bonds.
The County may modify from time to time, consistent with the Rule, the information provided or
the format of the presentation of such information, to the extent necessary or appropriate in the judgment
of the County, but:
(1)
any such modification may only be made in connection with a change in
circumstances that arises from a change in legal requirements, change in law or change in the
identity, nature or status of the County;
(2)
the information to be provided, as modified, would have complied with the
requirements of the Rule as of the date of this Official Statement, after taking into account any
amendments or interpretations of the Rule as well as any changes in circumstances;
(3)
any such modification does not materially impair the interest of the Owners or
the beneficial owners, as determined by nationally recognized bond counsel or by the approving
vote of the Owners of a majority in principal amount of the 2015 Bonds pursuant to the Trust
Agreement as may be amended from time to time.
Any annual financial information containing modified operating data or financial information will
explain, in narrative form, the reasons for the modification and the impact of the change in the type of
operating data or financial information being provided.
All documents provided to the MSRB as described above are to be provided in an electronic
format as prescribed by the MSRB and accompanied by identifying information as prescribed by the
MSRB. The County may discharge its undertaking described above by transmitting those documents or
notices in a manner subsequently required by the SEC in lieu of the manner described above.
The provisions of this paragraph terminate on payment, or provision having been made for
payment in a manner consistent with the Rule, in full of the principal of and interest with respect to the
2015 Bonds.
The County has on several occasions since 2008 made covenants to comply with the continuing
disclosure requirements of Rule 15c2-12 of the SEC and the MSRB. In September 2012, the County also
made a disclosure in a bond offering document that it was in material compliance with its previous
continuing disclosure obligations. Since that time, the County has failed to make timely filings of its
financial statements and other continuing disclosure information.
The County’s fiscal year ends on June 30, and County’s continuing disclosure obligations
required that the County’s financial statements and continuing disclosure information be posted on the
19
MSRB’s electronic municipal marketplace access system (“EMMA”) by January 31 of the following year.
If the audited financial statements are not available by January 31, the County is to post equivalent
unaudited information and to post the audited information within 15 days of that information becoming
available to the County.

The audited continuing disclosure information for the year ended June 30, 2012, which
was due to be posted by January 31, 2013, was posted on January 30, 2014. This posting
was more than 15 days after the date that the audited information became available to the
County.

The audited continuing disclosure information for the year ended June 30, 2013, which
should have been posted by January 31, 2014, was posted on August 11, 2014.

For each of these two years, the County posted financial information before the end of the
January following the end of the fiscal year, but it is unlikely that this information would
qualify as the type of unaudited financial information contemplated by Rule 15c2-12.

The audited continuing disclosure information for the year ended June 30, 2014, which
was due to be posted by January 31, 2015, was posted on March 4, 2015. This posting
was, however, within 15 days of the County’s receipt of the audited statements, and the
County has posted unaudited financial information before the end of January 2014.

The County has also failed to file certain ratings upgrades with respect to certain of the
County’s bonds and certain ratings changes with respect to certain insured bonds of the
County.
These late postings of audited information resulted from substantial delays in the preparation of
the County’s financial statements. The delays in preparing the financial statements, in turn, resulted from
significant failures of members of the County’s finance staff to carry out their responsibilities. These
failures became apparent to the County’s governing body beginning in the summer and fall of 2014. For
example, the County discovered widespread failures to reconcile bank statements, to post revenues and
expenses to the proper budget and financial statement items, to obtain proper authorizations for budget
changes and fund transfers, and to accurately record revenues and expenses as received or spent. None of
these failures has related to, or revealed, any theft or other diversion of County funds for an improper
personal benefit. See also “AUDIT ISSUES” in Appendix A.
The County has responded to the discovery of these failures by undertaking significant changes to
its staff and its financial policies. It has also filed a material event notice on EMMA with respect to such
failures.
The County believes that the steps it has taken will allow the County to prepare its financial
statements in a timely manner and therefore also comply with its continuing disclosure obligations.
UNDERWRITING
The Underwriters have agreed to purchase the 2015 Bonds at a purchase price that reflects an
Underwriters’ discount of $172,374.00. The Underwriters are committed to take and pay for all of the
2015 Bonds if any are taken. The Underwriters may offer and sell the 2015 Bonds to certain dealers
(including dealers depositing the 2015 Bonds into investment trusts) and others at prices different from
the initial public offering prices stated on the inside cover page hereof. The public offering prices may be
changed from time to time by the Underwriters.
20
RATINGS
Moody’s Investors Service, Inc. and Standard & Poor’s Ratings Services, a Standard & Poor’s
Financial Services LLC business have assigned a rating of “Aa3” and “AA-,” respectively, to the 2015
Bonds. Such rating reflects only the view of such rating agencies at the time the rating was given, and
neither the County nor the Underwriters make any representations as to the appropriateness of such
ratings.
The rating is not a recommendation to buy, sell or hold the 2015 Bonds and should be evaluated
independently. There is no assurance that such rating will not be withdrawn or revised downward by such
agencies. Any such action may have an adverse effect on the market price of the 2015 Bonds. Neither
the County nor the Underwriters have undertaken any responsibility after the execution and delivery of
the 2015 Bonds to assure maintenance of the ratings or to oppose any such revision or withdrawal.
The County has sought no other ratings on the 2015 Bonds.
MISCELLANEOUS
All quotations from and summaries and explanations of the Contract and the Trust Agreement
contained herein or in Appendix C hereto do not purport to be complete, and reference is made to such
documents for full and complete statements of their respective provisions. The Appendices attached
hereto are a part of this Official Statement.
The information contained in this Official Statement has been compiled or prepared from
information obtained from the County and other sources deemed to be reliable and, although not
guaranteed as to completeness or accuracy, is believed to be correct as of this date. Any statements
involving matters of opinion, whether or not expressly so stated, are intended as such and not as
representations of fact.
21
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APPENDIX A
THE COUNTY
TABLE OF CONTENTS
Page
THE COUNTY............................................................................................................................................. 1
GENERAL DESCRIPTION .................................................................................................................... 1
DEMOGRAPHIC CHARACTERISTICS .................................................................................................. 3
COMMERCE AND INDUSTRY ............................................................................................................. 3
Economic Outlook............................................................................................................... 4
Employment ........................................................................................................................ 5
GOVERNMENT AND MAJOR SERVICES.............................................................................................. 7
Government Structure ......................................................................................................... 7
Education ............................................................................................................................. 7
Transportation ..................................................................................................................... 8
Hospital and Medical Services ............................................................................................ 9
Human Services................................................................................................................... 9
Public Service Enterprises ................................................................................................... 9
Developing and Expanding Water and Sewer Infrastructure. ............................................. 9
Cultural, Arts, and Recreational Facilities ........................................................................ 10
DEBT INFORMATION ....................................................................................................................... 11
Legal Debt Limit ............................................................................................................... 11
Outstanding General Obligation Debt. .............................................................................. 11
General Obligation Debt Ratios. ....................................................................................... 11
General Obligation Debt Service Requirements. .............................................................. 12
General Obligation Bonds Authorized and Unissued........................................................ 13
General Obligation Debt Information for Underlying Units as of
June 30, 2014. ................................................................................................................ 13
Other Long-Term Commitments ....................................................................................... 13
Debt Outlook. .................................................................................................................... 13
TAX INFORMATION ......................................................................................................................... 14
General Information. ......................................................................................................... 14
Tax Collections.................................................................................................................. 14
Ten Largest Taxpayers for Fiscal Year Ended June 30, 2014. .......................................... 15
2013-14 FINANCIAL PERFORMANCE AND 2014-15 BUDGET OUTLOOK ......................................... 15
AUDIT ISSUES ................................................................................................................................. 15
PENSION PLANS .............................................................................................................................. 16
OTHER POST-EMPLOYMENT BENEFITS .......................................................................................... 17
CONTINGENT LIABILITIES............................................................................................................... 18
i
THE COUNTY
GENERAL DESCRIPTION
The County is located in southeastern North Carolina and encompasses approximately 875 square
miles. Burgaw, the County seat, is approximately 100 miles southeast of Raleigh, the State capital, on a
section of Interstate 40 which opened in 1991 connecting Raleigh and the Port of Wilmington, which lies
26 miles to the south of Burgaw. The County is a combination of primarily rural inland areas and resortvacation areas along the coast and on the Atlantic barrier islands, including Topsail Island which includes
the Pender towns of Topsail Beach and Surf City.
The County is a large coastal county in the Cape Fear Region (bordered by seven counties) of
southeastern North Carolina. It is bounded on the north by Duplin County, on the west by Sampson and
Bladen Counties, on the south by Columbus, Brunswick and New Hanover Counties, and on the east by
Onslow County and the Atlantic Ocean. Approximately 15 miles of the County fronts on the ocean. The
elevation of the County ranges from sea level to 110 feet above, and the topography is level to gently
rolling, with dominantly flat upland areas. The coastal corridor is traversed by the Atlantic Intracoastal
Waterway and a coastal habitat playground.
The first explorers to see what is now called Pender County coasted on-shore in 1524. They
reported on the numerous varieties of game, particularly wild turkeys, found in the area. A century later
in 1663, the Barbados Commissioners, in attempting to settle the Lower Cape Fear, explored the northeast
branch of the Cape Fear River. The Commissioners named the community “Rocky Point”, the name
which it retains today.
Although settled by 1725, the County itself was not formed from New Hanover until 150 years
later. While the Moores opened up the area to the south at New Brunswick, the Lord Proprietors laid out
a tract to the north for Welsh settlers. They came seeking good bottom land and tidal river transportation.
Brisk commercial success followed and large plantations were built during this period of prosperity.
The people of Pender were ardent patriots during the Revolution and it was here, at Moore’s
Creek, that they defeated the Scottish Highlanders sent from Fayetteville by Flora McDonald, the Scottish
heroine. In the War Between the States, this area sent nearly 4,000 troops to battle and gave the
Confederacy its youngest general, William D. Pender, for whom the County was named. Still a part of
New Hanover after the war, Pender’s prosperous plantation system was swept away during the
Reconstruction years. However, it was out of Reconstruction politics that the County was born in 1875.
Wilmington, overrun with carpetbaggers was under corrupt rule. By popular vote, and despite strong
Republican opposition, the County was created with the City of Watha as the first County seat. Burgaw,
the present County seat was chartered in 1879 and received its name from a local tribe of Indians.
A-1
New York, New York 500 Miles
50 MILE RADIUS
Washington, D.C. 315 Miles
Raleigh, N. C. 85 Miles
Atlanta, Georgia 375 Miles
A-2
DEMOGRAPHIC CHARACTERISTICS
The County has been one of the most rapidly growing counties in North Carolina (in terms of
percentage population growth) over the last several years.
According to the United States Department of Commerce, Bureau of the Census, the population
of the County has been recorded to be as follows:
1990
2000
2010
28,855
41,082
52,217
In addition, the North Carolina Office of State Budget and Management has estimated the
County’s 2014 population as 55,698.
Note:
The County’s substantial tourist industry results in the County’s having a large seasonal population. The
influx of tourists to Topsail and Surf City beaches in the summer months increases the Topsail Island
population by approximately 30,000 at peak periods.
Per capita income figures for the County and the State are presented in the following table:
YEAR
COUNTY
STATE
2009
2010
2011
2012
2013
$30,404
30,922
29,564
30,833
31,090
$34,942
35,435
36,508
38,538
38,683
_______________
Source: United States Department of Commerce, Bureau of Economic Analysis. Most recent available
data.
COMMERCE AND INDUSTRY
The County is rural and agricultural. Its industrial base lies in diversified light manufacturing,
including wood products, vitamins, plastic components, health and beauty products, urethane foam, and
emergency lighting and safety systems. Tourism is important throughout the County and is the major
economic base for the coastal areas. As indicated by rapid, increasing population and student enrollment
growth, the County is changing from a retirement community to one with a younger, working populace.
A-3
Total taxable sales in the County for the five fiscal years ended June 30, 2010 through 2014 are
shown in the following table:
FISCAL YEAR
ENDED/ENDING
JUNE 30
TOTAL TAXABLE
SALES
INCREASE
(DECREASE) OVER
PREVIOUS YEAR
$236,830,852
263,642,919
286,409,398
294,332,860
313,074,552
8.7%
11.3
8.6
2.8
6.4
2010
2011
2012
2013
2014
______________
Source: North Carolina Department of Revenue, Sales and Use Tax Division.
The following table illustrates building activity in the County:
NUMBER
CALENDAR
YEAR
PERMITS
2010
2011
2012
2013
2014
2015*
542
551
601
704
761
408
OF
RESIDENTIAL COMMERCIAL INDUSTRIAL
433
466
509
596
645
347
108
82
90
106
114
61
1
3
2
2
2
0
VALUE
$27,191,556
27,176,493
38,890,567
49,158,867
59,588,580
25,758,665
______________
Source: County Building Inspector’s Office. This data reflects permits issued by the County Inspector’s
office only, and does not include permits issued by the inspectors’ office for Burgaw.
* Permits issued through February 2015.
Economic Outlook. The 2014 population estimate is 55,698, up from 52,217 in 2010, a 6.7%
increase in 4 years. Commercial and residential building permits issued have increased from 542 for
2010 to 761 in 2014. Tax base growth has been stagnant the last three years. The County’s
unemployment has fallen from 12.1% in January 2011 to 5.4% as of December 2014. The County's
poverty rate still hovers above 10%, and wages still fall short of the Wilmington MSA and State averages.
The distressed economy is not unique to Pender County but is common to all counties in the state
and nation. The negative impact on the County's budget and its ability to provide services has been
significant, while at the same time the demand for services for many county functions (such as public
health and social services) increases during economically challenging times.
Despite the short term impacts of a distressed economy, the long-term economic outlook for the
County is positive. The Board of County Commissioners (the “Board”) has committed to making
investments and policy decisions to put the County in an enviable position to accommodate and attract
new growth and development in the future. Developing industrial product to market, expanding water and
sewer utilities, putting into place new land use plans and regulations, and taking a positive approach to
business and industry development are proactive measures the Board has initiated in the past few years.
These efforts combined with the County’s assets including major highways, skilled labor force, access to
A-4
airport and sea port facilities, and lower cost land, put the County in a good position for when the
economy gets back on track.
A vital element for the economic viability of the County long term is success with economic
development. In simple terms, economic development is the creation of wealth in a county through the
creation of jobs and investment. Central to creating jobs and investment is creating a climate that is
attractive to new business and industry, and for the expansion of existing industry. The county's proximity
to major transportation corridors, the Wilmington port, the airport, and the Wilmington metropolitan area
is a major asset for economic development. The Board has been committed to creating industrial product
to attract industrial clients, evidenced by the purchase of over 750 acres of industrial land in the recent
years on the US 421 corridor near the New Hanover County line. This industrial site is named Pender
Commerce Park (the “Park”) and is shovel-ready for development.
The County, together with Pender Progress Corporation, Four County EMC, Wilmington
Industrial Business Development and the Town of Burgaw constructed an industrial shell building in
Pender Progress Industrial Park in Burgaw. This 40,000 square foot building is expandable to 80,000
square feet, and is currently being marketed.
Sixty percent of the county’s workforce commutes out of the County to work. The Board
understands that economic development is a process, and the Board will continue to devote time, effort
and resources along with its economic development partners to attract and recruit industrial development,
jobs and investment into the County. Strategies for the next two years include evaluating opportunities
for creating business and tourism development incentives, securing and preparing additional sites for
industrial development and facilitating development of additional shell building product.
RC Creations, a unit of Brooklyn-based Acme Smoked Fish Corporation, began operations in the
Park in February 2015 and currently employs approximately 50 new workers and anticipates growing to
120 workers.
Private sewer development is occurring in the coastal portions of the County which should
encourage residential and non-residential development.
The County is home to over 350 farms comprising over 61,571 acres, according to 2007 figures
from the North Carolina Department of Agriculture. The County farm operations cover a wide range of
activities. The County ranked 10th among the State’s counties for the value of production for vegetables,
fruits, nuts and berries in 2012. Overall, cash receipts from farming in the County totaled over $160
million in 2012.
Employment. The County is currently the location of the United States headquarters of two
international companies and the home location for several other firms. Therefore, a mix of employment is
provided to include management, engineering, marketing and production positions. Approximately half
of the County’s labor force, however, commutes to work in neighboring counties.
The following table provides information about current major employers located in the County.
PRODUCT/SERVICE
COMPANY/INSTITUTION
Pender County Board of Education
Caroline’s Blueberries LLC
Gomez Harvesting LLC
Education & Health Services
Natural Resources and Mining
Natural Resources and Mining
A-5
APPROXIMATE NUMBER
OF FULL-TIME
EMPLOYEES
1000+
500-999
250-499
COMPANY/INSTITUTION
PRODUCT/SERVICE
Pender County NC
Public Administration
Dept. of Public Safety
Public Administration
Pender Memorial Hospital Inc.
Education & Health Services
Ease Services LLC
Professional & Business Services
Food Lion
Trade, Transportation & Utilities
L L Building Products (A Corp)
Manufacturing
Coastal Power & Electric
Construction
Woodbury Wellness Center Inc.
Education & Health Services
Pender Volunteer Ems And Rescue Inc.
Education & Health Services
Lowes Home Centers Inc.
Trade, Transportation & Utilities
Daybreak Of Wilmington Inc.
Leisure & Hospitality
Harris Teeter
Trade Transportation & Utilities
Huntington Health Care & Retirement
Education & Health Services
Lewis Nursery & Farms, Inc.
Natural Resources and Mining
Smithfield Foods Inc.
Manufacturing
Hardee’s
Leisure & Hospitality
Lowes Food Stores Inc.
Trade, Transportation & Utilities
Mainsail Restaurant
Leisure & Hospitality
Town of Surf City NC
Public Administration
US Postal Service
Trade, Transportation & Utilities
Johnson Nursery
Trade, Transportation & Utilities
Wireless Generation Inc.
Financial Activities
_______________
Source: Wilmington Business Development, most current data available – March 2014 2 nd Quarter.
APPROXIMATE NUMBER
OF FULL-TIME
EMPLOYEES
250-499
250-499
250-499
250-499
100-249
100-249
100-249
100-249
100-249
100-249
100-249
100-249
100-249
100-249
50-99
50-99
50-99
50-99
50-99
50-99
50-99
50-99
The following table lists the major employers located in neighboring New Hanover County:
PRODUCT/SERVICE
COMPANY/INSTITUTION
New Hanover Regional Medical Center
Education & Health Services
New Hanover County School System
Education & Health Services
University of North Carolina at Wil
Education & Health Services
Ppd Development, LP
Professional & Business Services
County of New Hanover
Public Administration
Cellco Partnership
Information
Wal-Mart Associates Inc.
Trade, Transportation & Utilities
Cape Fear Community College
Education & Health Services
City of Wilmington
Public Administration
Coming Incorporated
Manufacturing
GE Hitachi Nuclear Americas LLC
Manufacturing
Harris Teeter
Trade, Transportation & Utilities
Food Lion
Trade, Transportation & Utilities
Wha Medical Clinic Pllc
Education & Health Services
Global Network Fuel – Americas
Manufacturing
General Electric Corp
Manufacturing
Real Time Staffing Services
Professional & Business Services
Carolina Healthcare Associates Inc.
Education & Health Services
Mcanderson Inc.
Leisure & Hospitality
Lowes Home Centers Inc.
Trade, Transportation & Utilities
Forever 21 Retail Inc.
Trade, Transportation & Utilities
C N Davis Health Care Center
Education & Health Services
Rbus Inc.
Professional & Business Services
Marine Terminals Corporation- East
Trade, Transportation & Utilities
Mundy Industrial Contractors Inc.
Construction
______________
Source: Wilmington Business Development. Most current data available – March 2014 2 nd Quarter.
A-6
APPROXIMATE
NUMBER OF FULL-TIME
EMPLOYEES
1000+
1000+
1000+
1000+
1000+
1000+
1000+
1000+
1000+
500-999
500-999
500-999
500-999
500-999
500-999
500-999
500-999
250-499
250-499
250-499
250-499
250-499
250-499
250-499
250-499
The North Carolina Employment Security Commission has estimated the percentage of
unemployment in the County to be as follows:
January
February
March
April
May
June
2012
2013
2014
2015
12.1%
11.8
11.3
10.7
11.1
11.2
11.5%
10.9
9.9
9.4
9.8
10.4
8.1%
7.6
7.7
6.8
7.3
6.8
6.3%
6.1
July
August
September
October
November
December
2012
2013
2014
11.3%
10.8
10.0
9.8
10.0
10.6
10.2%
9.4
8.7
8.7
8.1
8.0
7.4%
7.5
6.5
5.8
5.5
5.4
2015
%
_____________________
Source: North Carolina Employment Security Commission website.
GOVERNMENT AND MAJOR SERVICES
Government Structure. The County has the Commissioner/County Manager form of government
with five commissioners who file by district, but run County-wide and serve four-year staggered terms.
Partisan elections are held in even-numbered years; the Chairman serves as presiding officer and is a
voting member as well as ceremonial leader. Pender County government is a full service one. There are
19 County departments. The County Manager serves as the coordinative and catalytical arm for the
effective interface amongst departments.
Education. The County has a single public school system. An elected, non-partisan, fivemember Board of Education serves as its policy making authority. The administrative responsibility is
vested in a Board-appointed superintendent, who is the chief executive officer and secretary to the Board
of Education.
The following table illustrates the number of schools and school enrollment, by average daily
membership (ADM), in the County system:
GRADES 9-12
GRADES K-8
SCHOOL YEAR
NUMBER
2009-10
2010-11
2011-12
2012-13
2013-14
12
12
12
12
12
ADM
6,280
5,682
5,619
6,328
6,270
NUMBER
ADM
4
4
4
4
4
1,851
2,559
2,656
2,430
2,403
_______________
Note: ADM is determined by actual records at each school. ADM is computed in North Carolina on a uniform
basis for all public school units. The ADM computations are used as a basis for teacher allotments.
The Pender County Board of Education operates 16 schools, central office, maintenance
department, and transportation department. There are 67 permanent buildings, 68 modular classrooms
located on a combined total of approximately 637 acres of land. The total value of all school facilities
and equipment is estimated at June 30, 2014 by the North Carolina Division of Insurance at
$234,726,248.
Funds for operating the County schools are allocated from Federal, State, and local sources. For
the fiscal year ending June 30, 2014, State funds provided approximately 67% of total operating funds,
A-7
Federal funds provided approximately 10%, and local funds provided the remaining 23%. The County
appropriated $12,974,623 and $13,077,356 for school system current expenses in each of the fiscal years
June 30, 2014 and 2015, respectively. The County has appropriated an additional $1,110,000 and
$1,442,000 in each of the fiscal years June 30, 2014 and 2015, respectively, for capital outlay projects.
These funds will come from a combination of State sales tax revenues allocated to the County for capital
projects for public schools and ad-valorem taxes.
North Carolina law provides for a basic minimum educational program for each school
administrative unit or district. The minimum program provides funds for operational costs only;
therefore, the operation of public school facilities is primarily the responsibility of the local Board of
Education. Local funds for educational facilities and supplemental operation costs are budgeted to the
Board of Education by the Board of County Commissioners.
Cape Fear Community College serves the County and industries by offering classes at several
locations in the County. Many County residents also attend classes on the College’s campuses in New
Hanover County.
Some County residents also enroll in classes at other community colleges in adjacent counties
including James Sprunt Community College (Duplin County) and Coastal Carolina Community College
(Onslow County.) The University of North Carolina at Wilmington provides County residents with
opportunities for undergraduate and graduate education.
All of the above-referenced institutions are supported by the State of North Carolina. The County
has no obligation to provide support for any campuses located outside the County. The County provides
maintenance, housekeeping, and other expenses such as electricity, telephones, etc., incidental to the
operation of the County satellite campus of Cape Fear Community College, but the annual obligation for
operations is approximately $457,210.00.
Transportation. The County is accessible by several main routes. Interstate 40 (“I-40”) runs
through the middle of the County. There are three interchanges along this route. Exit #390 provides
access to US 117, which in turn leads to the Wallace and Wilmington areas. Exit #398 provides access to
NC 53, which is a primary east-west route through the County. This route can be used to reach
Jacksonville, Burgaw, or other western locations. Exit #408 provides access to NC 210 and the Pender
Beach communities. Other primary routes include US 421, NC 50, NC 11 and NC 133. US 17 runs
north-south through the County and is a multi-lane facility that connects to the Wilmington Outer Loop.
Recent construction on US 17 is part of the North Carolina Department of Transportation’s (“NCDOT’s”)
long term effort to widen it to multi-lanes from the Virginia to South Carolina State Lines.
The NCDOT is responsible for major expansion, maintenance and betterment of primary and
secondary highways and roads within the County. The State maintains approximately 200 miles of
primary roads and 500 miles of secondary roads in the County. The County has no financial obligation
with respect to the construction and maintenance of roads.
Commercial air service is available approximately 35 miles south of Burgaw in Wilmington,
North Carolina. The Wilmington airport is served by Allegiant, USAir and Delta Air Lines. General
aviation facilities are provided through the Henderson Airport, which is located in the County, outside the
Town of Wallace. Greyhound provides bus service in the County. A wide variety of commercial carriers
provide freight service.
A-8
Hospital and Medical Services. The County leases a hospital facility to Pender Memorial
Hospital (the “Hospital”) with 43 general acute care beds of which four are intensive care unit beds. In
addition the Hospital has a 43-bed skilled nursing facility and owns and operates a home health care unit.
The Hospital provides 24-hour emergency service. The Hospital was founded in 1951 and expanded its
skilled nursing facility in 1996 to its present 43 beds. New Hanover Regional Medical Center operates
the Hospital under an agreement which became effective July 1999. The lease payments are $1 a year
through July 17, 2019.
Mental health services are provided by the Southeastern Area Mental Health Program, a joint
program of Pender, Brunswick, and New Hanover Counties. The program provides evaluation, treatment,
consultation and education in a multitude of areas, including mental health, developmental disabilities,
substance abuse and other specialty disability programs. The operations located in the County provide
primarily outpatient, consultation and education services, but inpatient, crisis services, hospital
psychiatric services and all other mental health services are available and arranged by the Programs’ staff.
Human Services. Human services programs in the State are financed by a combination of
federal, state and local funds. On the County level, these services are classified as public assistance,
public health services and mental health services. In the fiscal year ending June 30, 2014, the County has
appropriated $5,831,485. In the adopted 2014-15 budget, the appropriation for these services is to be
$6,127,662.
Public Service Enterprises. Two incorporated towns in the County, Surf City and Burgaw,
provide water and sewer service to their citizens.
Local telephone service is provided in the County by Embarq and Bell South.
Electric service is provided by the Jones-Onslow Electric Membership Corporation in the extreme
northern portion of the County, by the Four County Electric Membership Corporation in the central rural
portions, and by Progress Energy in the remainder of the County.
The County closed its landfill in April, 1994. The County has a 8-year contract to 2018 with
Waste Industries, Inc., for management and disposal of municipal solid waste (“MSW”) and construction
and demolition debris (“C&D”) generated in the County. This consists of 12 convenience center sites and
one transfer station (with scales). Ultimately, all County waste is disposed of in the Waste Industries
owned and operated landfill in Sampson County.
Developing and Expanding Water and Sewer Infrastructure.
The vision and priority of expanding water and sewer infrastructure within the County has been
many years in development and implementation. Subsequently, numerous infrastructure related projects
have now come to fruition or are near completion.
The Surface Water Treatment Plant has now been online for over 18 months and provides all the
drinking water for the Rocky Point/Topsail and Scotts Hill Water & Sewer Districts. The plant is
designed to upgrade to 6 mgd with little additional investment and will operate to serve the current and
future water districts with safe drinking water supply for the next 10 to 15 years.
Planning, design, and permitting activities are underway for the installation of water mains and
services to the Moores Creek and Central Pender Water & Sewer Districts. The original customer base
has been identified and the final design work and permitting is currently underway. Construction is
A-9
scheduled to begin in September 2015 and be completed by November 2016. The County is anticipating
an additional 1,200 to 1,500 water customers upon completion of the project.
Construction of the Park infrastructure began in December 2013 and was completed in December
2014. Improvements included water distribution, sewer collection, stormwater management, street
lighting, sidewalks, street trees, and over a mile of roadway construction to serve the entire Commerce
Park. The Park currently has public water and sewer service available to serve current and new tenants
within the Park.
In order to provide wastewater treatment and disposal for development of the Commerce Park on
US Highway 421, a new state-of-the-art wastewater treatment facility [began][is also] under construction
as of March 2014. The project has been divided into two phases. Phase I consists of the influent plant
pump station and an equalization basin that will be incorporated as part of a pump and haul operation.
Completion of this phase is scheduled for May 2015. Phase II of the project includes the remaining
wastewater treatment facilities and processes that will be constructed semi-concurrently with Phase I as
construction begins in May 2015. The final facility will have a treatment capacity of 500,000 gallon per
day and will utilize an NPDES permit that was acquired via inter-local agreement with the Cape Fear
Public Utility Authority in New Hanover County. The NPDES provides for a point discharge to the Cape
Fear River of up to 4 million gallons per day; however, permit provisions allow for construction in
incremental capacities as demand increase. Final completion of the 0.5 MGD facility is scheduled for
September 2016.
To accommodate the anticipated high-strength waste stream and provide a unique and sustainable
facility, the process has been designed as an Adaptive Eco-System utilizing Hydroponics (plants) and
moving bed bioreactors (MBBR). This “Adaptive Ecosystem” Wastewater Treatment Plant is estimated
to cost approximately $19.9 Million to construct. The County received approval for $3,925,000 in Grant
Funding for the project from both state and federal economic development agencies.
Cultural, Arts, and Recreational Facilities. The County has Topsail and Surf City beaches, the
intracoastal waterway behind the beaches, and over 100 miles of largely undeveloped shoreline along the
Cape Fear River and its tributaries.
The Pender Arts Council sponsors a series of professional performances in the public school
system as well as an evening series in Burgaw, Hampstead and Topsail Island. The council also lends
support to other organizations such as the Pender Children’s Theater.
Historical societies are active in Burgaw and on Topsail Island gathering artifacts, sponsoring
exhibits and lectures. The Pender County Historical Museum in Burgaw contains important papers and
artifacts while a barn on the grounds contains a permanent exhibit of antique farming implements. Poplar
Grove Plantation, in Scotts Hill, is an antebellum mansion featuring crafts demonstrations of life in the
1800’s, and a full calendar of regular historic and cultural offerings annually.
The County has many small communities which host numerous events and festivals to benefit
local causes and support regional agriculture and tourism. The North Carolina Spot Festival in
Hampstead has been a local draw for over 20 years, followed by Autumn in Topsail Festival and Sunfest
featuring the best in local flavor and artistry. The North Carolina Blueberry Festival is the only one-day
regional festival held in the County, and showcases the County’s largest fruit crop.
The County residents also have access to the cultural amenities of Wilmington and New Hanover
County.
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DEBT INFORMATION
Legal Debt Limit. In accordance with the provisions of the State Constitution and The Local
Government Bond Act, as amended, the County had the statutory capacity to incur additional net general
obligation debt in the approximate amount of $457,936,000 as of June 30, 2014. For a summary of
certain constitutional, statutory and administrative provisions governing or relating to the incurrence of
debt by units of local government of the State, see Appendix B.
Outstanding General Obligation Debt.
GENERAL OBLIGATIONS BONDS
Refunding Bonds
School Bonds
Water Bonds
Total Bonds
Water Bond Anticipation Notes
Total Debt Outstanding
______________
1
Bonds Issued:
PRINCIPAL OUTSTANDING AS OF
JUNE 30, 2013
JUNE 30, 2014
JUNE 30, 2012
$ 9,315,000
48,735,0001
—
58,050,000
17,500,000
$75,550,000
$ 7,730,000
46,055,000
22,455,0001
76,240,000
—
$76,240,000
$ 6,070,000
43,600,000
22,455,000
72,125,000
—
$72,125,000
2011-12 $25,860,000 General Obligation School Refunding Bonds, Series 2012, 8.31 years average
maturity, 1.99289% true interest cost.
2012-13 $9,500,000 Water Bonds, Series 2012A sold to United States Department of Agriculture (USDA)
at 3.50% net interest cost.
$7,000,000 Water Bonds, Series 2012B sold to USDA at 3.50% net interest cost.
$4,955,000 Water Bonds, Series 2012C sold to USDA at 2.75% net interest cost.
$1,000,000 Water Bonds, Series 2012D sold to USDA at 2.75% net interest cost.
$2,040,000 Refunding Bonds, Series 2012, 1.96% net interest cost.
General Obligation Debt Ratios.
AT JULY 1
TOTAL GO
DEBT
ASSESSED
VALUATION
2011
2012
2013
2014
78,295,000
75,550,000
76,240,000
72,125,000
4,859,950,000
6,487,692,577
6,342,800,587
6,512,081,837
TOTAL GO
DEBT TO
ASSESSED
VALUATION
POPULATION1
1.22
1.18
1.20
1.11
53,437
54,259
55,568
55,698
______________
1
Estimated by North Carolina Office of State Budget and Management.
A-11
TOTAL GO
DEBT PER
CAPITA
1,465.18
1,392.40
1,372.01
1,294.93
General Obligation Debt Service Requirements.
EXISTING DEBT
FISCAL YEAR
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
2048
2049
2050
2051
2052
PRINCIPAL
$ 4,457,000
4,445,000
4,400,000
4,311,000
4,247,000
4,220,000
4,231,000
4,298,000
4,301,000
4,269,000
4,248,000
2,987,000
2,306,000
2,347,000
488,000
504,000
520,000
538,000
554,000
573,000
592,000
611,000
631,000
653,000
674,000
696,000
719,000
742,000
767,000
793,000
820,000
846,000
874,000
903,000
932,000
963,000
996,000
669,000
$72,125,000
A-12
PRINCIPAL &
INTEREST
$ 6,965,922.50
6,790,212.50
6,584,603.50
6,369,107.50
6,192,315.00
6,016,052.50
5,839,365.00
5,704,332.50
5,548,452.50
5,388,290.00
5,226,170.00
3,857,257.50
3,068,035.00
3,010,770.00
1,051,850.00
1,051,775.00
1,051,162.50
1,052,020.00
1,050,277.50
1,050,997.50
1,051,090.00
1,050,547.50
1,050,370.00
1,051,522.50
1,050,942.50
1,050,665.00
1,050,655.00
1,049,870.00
1,050,317.50
1,050,935.00
1,051,680.00
1,050,525.00
1,050,497.50
1,050,535.00
1,049,595.00
1,049,685.00
1,050,735.00
690,682.50
$101,419,818.50
General Obligation Bonds Authorized and Unissued.
PURPOSE
Refunding
School
DATE
APPROVED
AUTHORIZED AND
UNISSUED
04/02/2012
11/04/2014
$ 3,140,000
75,000,000
______________
Note: The County does not intend to issue the remaining authorized and unissued Refunding Bonds.
General Obligation Debt Information for Underlying Units as of June 30, 2014.
2013
UNIT
ASSESSED
VALUATION
POPULATION
Atkinson
Burgaw
Central Pender
Water &
Sewer District
Maple Hill
Water District
Moore’s Creek
Water &
Sewer District
Rocky
Point/Topsail
Water &
Sewer District
3181
3,9891
8,2872
$
BONDS AUTHORIZED
AND UNISSUED
UTILITY
OTHER
TAX
RATE
PER $100
13,078,032
264,446,768
824,050,679
$.37
.48
—
9442
86,815,396
5,0842
28,1722
$
TOTAL GO DEBT3
UTILITY
OTHER
TOTAL GO
DEBT PER
CAPITA
—
—
27,000,000
$—
$—
—
$ 737,500
515,852
—
$—
$—
—
$2,319.18
129.32
—
—
—
—
195,000
—
207.23
377,704,482
—
45,000,000
—
—
—
—
4,075,251,653
—
—
—
18,665,000
—
662.54
_______________
1
Estimate of North Carolina Office of State Budget and Management.
2
Estimate of the County.
3
Does not include obligations other than general obligation bonds.
Other Long-Term Commitments. Over the last few years the County has chosen to operate on a
pay-as-you-go basis or requiring vendors to agree to terms that commit the County for only a short period
of time. In addition, in October 2012, the County issued $22,330,000 in limited obligation bonds secured
with general obligation bonds of the water and sewer districts set forth above. Such bonds are serviced by
the revenues of such water and sewer districts.
The County provides management services to the Pender County Housing Authority which owns
an eight unit apartment complex near Currie, North Carolina. The complex, known as “Country Court”,
is financed by a note held by the Department of Agriculture’s Rural Development (RD) Section and
receives Rental Assistance subsidy. The note is fully collateralized by the real property and is supported
by project revenue. Payments are due in remaining annual payments of $7,865 through June 30, 2031 at
1.0%. At June 30, 2014, the total principal outstanding was $122,076.
Debt Outlook.
The regional water plant on US Highway 421 in the new industrial park that will eventually
produce 6 mgd of drinking water was completed in November 2012. The County secured $22,455,000 in
low interest loans and $7,594,000 in grants to make this project a reality.
A-13
The County will begin issuing $75,000,000 in general obligation school bonds in calendar year
2015.
The County is reviewing plans for the acquisition of land for a proposed Jail/Law Enforcement
Facility.
Other improvements to County facilities are likely to be made on a “pay-as-you-go” basis, as
planned in the County’s five-year capital improvement program and related five-year financial forecast.
The County actively reviews its capital needs on a continuing basis, however, and other projects requiring
financing may become evident in the future.
TAX INFORMATION
General Information.
Assessed Valuation:
Assessment Ratio1
Real Property
Personal Property
Public Service Companies2
Total Assessed Valuation
Rate per $100
Levy
2011
2012
2013
100%
$4,602,395,377
195,330,684
62,223,939
$4,859,950,000
0.650
$ 31,336,934
100%
$6,188,472,6821
195,207,053
104,012,842
$6,487,692,577
0.512
$ 32,934,154
100%
$6,020,153,294
210,491,765
112,155,528
$6,342,800,587
0.512
$ 32,691,499
2014
100%
$6,065,783,258
336,693,945
109,604,634
$6,512,081,837
0.512
$ 33,353,790
_______________
1
Percentage of appraised value has been established by statute.
2
Valuation of railroads, telephone companies and other utilities as determined by the North Carolina
Property Tax Commission.
Note 1: Revaluation of real property became effective with the 2011 tax levy.
In addition to the County-wide rate, the following table lists the levies by the County for
emergency medical services and on behalf of 11 special fire districts for the fiscal years ended June 30:
2011
County-wide
Special Fire Districts
Emergency Medical Services
Total Levy
2012
$31,336,934
2,110,316
3,384,691
$36,831,941
$32,934,154
2,059,995
4,125,430
$39,119,579
2013
2014
$32,691,499
2,857,361
4,630,244
$40,179,104
$33,353,790
3,418,958
4,753,820
$41,526,568
Tax Collections.
FISCAL YEAR ENDED
JUNE 30
2010
2011
2012
2013
2014
PRIOR YEARS’
LEVIES COLLECTED
CURRENT YEAR’S
LEVY COLLECTED
PERCENTAGE OF
CURRENT YEAR’S
LEVY COLLECTED
$ 941,204
1,218,960
1,033,455
1,097,647
905,095
$29,504,546
29,898,393
31,644,106
31,548,736
32,491,366
95.98%
95.61
95.45
96.50
97.41
A-14
Ten Largest Taxpayers for Fiscal Year Ended June 30, 2014.
NAME
Red Mountain Timber
Progress Energy Carolinas
Four County EMC
LL Building Products
Wingarten Investments
BellSouth Telephone
Jones Onslow EMC
TC&I Timber Co. LLC
Lowe’s Home Centers
First Troy SPE, LLC
TYPE OF BUSINESS
Timber
Utilities
Utilities
Communications
Timber
Utilities
Utilities
Timber
Retail
Real Estate Holdings
2014 ASSESSED
VALUATION
$51,107,088
40,102,750
33,295,819
17,534,923
11,637,418
11,500,800
10,992,530
10,937,444
10,261,512
9,677,696
PERCENTAGE
OF TOTAL
ASSESSED
VALUATION
0.86%
0.67
0.56
0.29
0.20
0.19
0.18
0.18
0.17
0.16
2013-14 FINANCIAL PERFORMANCE AND 2014-15 BUDGET OUTLOOK
The County is in sound financial health due to prudent decision-making and controlled spending
over the last several years. The total fund balance for the County's General Fund decreased slightly from
the total for the fiscal year 2012-13 from $29,248,507 to $28,957,539 for the fiscal year 2013-14 (a 0.99%
decrease). In order to meet office expansion needs and to meet an economic incentive agreement, the
County has used funds from the fund balance to start the projects being financed hereby, approximately
$3.4 million in the fiscal year 2013-14. Without advancing funds for projects, the fund balance would
have increased.
The County's approved and adopted General Fund budget for the fiscal year ending June 30, 2015
is with a $0.512 per $100 assessed valuation property tax rate (the same adopted tax rate as for the fiscal
year ending June 30, 2012, 2013, and 2014). The property tax levy is projected to increase by $355,669
from fiscal year 2013-14 adopted budget levels to the newly adopted fiscal year 2014-15 budget. Sales tax
revenues are projected to have a 10% increase ($757,626) from the fiscal year 2013-14 adopted budget.
In fiscal year 2013-14, the Board adopted a new fund balance goal, providing that undesignated
fund balance be maintained at a level of 20% of the General Fund budget. The policy also has a provision
that the percentage may fall below that level to protect or enhance the long term fiscal security of the
County. This level will be addressed by the Board to bring the undesignated fund balance back to 20%
within 36 months. In the fiscal year 2013-14, the undesignated fund balance is 15.92% of fiscal year
2015. When the County is reimbursed for up-front cost of the projects being financed hereby, the fund
balance percentage will increase to approximately 22%.
AUDIT ISSUES
The County’s auditors have reported material weaknesses in the County’s internal control over
financial reporting for fiscal years 2013 and 2014. A deficiency in internal control exists when the design
or operation of a control does not allow management or employees, in the normal course of performing
their assigned functions, to prevent or detect and correct misstatements on a timely basis. A material
weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a
reasonable material misstatement of the entity’s financial statements will not be prevented, or detected
A-15
and corrected on a timely basis. The auditors found the following to be material weaknesses in the
County’s internal controls:
1. The finance office did not prepare timely reconciliations of records.
2. The finance office did not timely record proper budget amendments and reconcile accounts.
3. The finance office did not properly monitor the County’s fixed asset records.
The County has taken, is taking or is planning to take the following corrective actions regarding
the above noted controls.
1. The previous finance officer was replaced by interim finance officers and an additional
certified public accountant has been hired. A search for a permanent finance officer is underway. In
addition, the County has hired a new permanent County Manager.
2. The bank statements and related materials have been reconciled as of the date of this Official
Statement.
3. A new process for budget amendments and account reconciliations have been implemented.
4. The County has made all appropriate prior period adjustments to accurately reflect fixed
assets. Current capital projects are being monitored for accuracy and completion.
5. The finance staff is currently attending classes offered by the University of North Carolina
School of Government as classes become available and are receiving other training.
6. The County has changed financial and budget policies and processes to allow more timely and
more accurate tracking for income and expenses, and better financial reporting accountability overall.
Notwithstanding the foregoing issues, the auditors have opined that the financial statements set
forth in Appendix B present fairly, in all material respects, the respective financial position of the
governmental activities, business-type activities, the aggregate discretely presents component units, each
major fund, and the aggregate remaining fund information of Pender County, North Carolina as of June
30, 2014, and the respective changes in financial position and cash flows, where applicable, thereof and
the respective budgetary comparison for the General Fund for the year then ended in accordance with
accounting principles generally accepted in the United States of America.
PENSION PLANS
The County participates in the North Carolina Local Governmental Employees’ Retirement
System.
North Carolina Local Governmental Employees’ Retirement System — The North Carolina
Local Governmental Employees’ Retirement System is a service agency administered through a board of
trustees by the State for public employees of counties, cities, boards, commissions and other similar
governmental entities. While the State Treasurer is the custodian of system funds, administrative costs
are borne by the participating employer governmental entities. The State makes no contributions to the
system.
A-16
The system provides, on a uniform system-wide basis, retirement and, at each employer’s option,
death benefits from contributions made by employers and employees. Employee members contribute six
percent of their individual compensation. Each new employer makes a normal contribution plus, where
applicable, a contribution to fund any accrued liability over a 24-year period. The normal contribution
rate, uniform for all employers, is currently 6.97 percent (effective 7/1/12, the new rate will be 6.74%) of
eligible payroll for general employees and 7.05 percent (effective 7/1/12, the new rate will be 6.77%) of
eligible payroll for law enforcement officers. The accrued liability contribution rate is determined
separately for each employer and covers the liability of the employer for benefits based on employees’
service rendered prior to the date the employer joins the system.
Members qualify for a vested deferred benefit at age 50 with at least 20 years of creditable
service and at age 60 after at least five years of creditable service to the unit of local government.
Unreduced benefits are available: at age 65, with at least five years of creditable service; at age 60, with
at least 25 years of creditable service; or after 30 years of creditable service, regardless of age. Benefit
payments are computed by taking an average of the annual compensation for the four consecutive years of
membership service yielding the highest average. This average is then adjusted by a percentage formula,
by a total years of service factor, and by an age factor if the individual is not eligible for unreduced
benefits.
Contributions to the system are determined on an actuarial basis.
For information concerning the County’s participation in the North Carolina Local Governmental
Employees’ Retirement System and the Supplemental Retirement Income Plan of North Carolina see the
Notes to the County’s Basic Financial Statements in Appendix D.
Financial statements and required supplementary information for the North Carolina Local
Governmental Employees’ Retirement System are included in the Comprehensive Annual Financial
Report (“CAFR”) for the State. Please refer to the State’s CAFR for additional information.
OTHER POST-EMPLOYMENT BENEFITS
The County provides certain post-employment health care and other benefits (“OPEB”) as part of
the total compensation package offered to attract and retain the services of qualified employees. These
benefits are available to retirees who participate in the North Carolina Local Government Employees
Retirement System (the “System”) and who, at the time of their retirement, meet certain service
requirements.
In June 2004, GASB issued Statement No. 45, Accounting and Financial Reporting by Employers
for Postemployment Benefits Other Than Pensions (effective for fiscal year 2007-08). GASB Statement
No. 45 will be implemented in three phases beginning in fiscal year 2007-08 and generally requires that
state and local governmental employers account for OPEBs on an accrual basis similar to the manner that
they currently account for pensions. GASB Statement No. 45 also requires disclosure of information
about the plans in which an employer participates, the funding policy followed, and the actuarial
valuation process and assumptions.
The County is considered a “Phase II” government (based on the County’s total annual revenues)
and has implemented GASB Statement No. 45 in fiscal year 2008-09. In response to the requirements of
GASB 45, the County commissioned an actuarial study of its OPEB liability and the annual required
contribution (“ARC”) required to fund that liability. The study determined that as of December 31, 2012,
the total unfunded actuarial liability was $5,836,870, and the ARC was $842,916.
A-17
Neither GASB 45 nor any other provision of State or federal law requires the County to fullyfund the liability or make any payments related to the ARC. The County has determined to continue to
fund its OPEB liabilities on a pay-as-you-go basis. The County’s actual payments for OPEBs were
$51,645 for the fiscal year ended June 30, 2013, and were $57,414 for the fiscal year ended
June 30, 2014.
CONTINGENT LIABILITIES
The County does not have any litigation pending or other contingent liability which would
materially and adversely affect the County’s ability to meet its financial obligations.
A-18
APPENDIX B
MANAGEMENT’S DISCUSSION AND ANALYSIS AND
THE BASIC FINANCIAL STATEMENTS OF
PENDER COUNTY, NORTH CAROLINA
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APPENDIX B
MANAGEMENT’S DISCUSSION AND ANALYSIS AND
THE BASIC FINANCIAL STATEMENTS OF
PENDER COUNTY, NORTH CAROLINA
MANAGEMENT’S DISCUSSION AND ANALYSIS
The Management’s Discussion and Analysis of the financial activities of the County, lifted from
the Comprehensive Annual Financial Report for the County for the fiscal year ended June 30, 2014, is
included in this Appendix. Management’s Discussion and Analysis provides an objective and easily
readable short and long-term analysis of the County’s financial activities based on currently known facts,
decisions or conditions. Management’s Discussion and Analysis is not a required part of the Basic
Financial Statements but is supplementary information required by the Governmental Accounting
Standards Board. The independent auditors of the County have applied certain limited procedures, which
consist primarily of inquiries of management regarding the methods of measurement and presentation of
the required supplementary information. However, they did not audit this information and did not express
an opinion on it.
FINANCIAL INFORMATION
The County’s basic financial statements have been audited by independent certified public
accountants for each fiscal year through June 30, 2014. Copies of these financial statements containing
the unqualified reports of the independent certified public accountants (as to the conformity of the
financial statements to generally accepted accounting principles, as applicable, consistently applied) are
available from the County at 805 S. Walker Street, Burgaw, North Carolina 28425 Attention: Finance
Director. The County’s basic financial statements and the notes thereto, drawn from the County’s
comprehensive annual financial report for the fiscal year ended June 30, 2014, are included as
Appendix B. The County has not requested nor obtained the consent of its auditor to the inclusion of
these financial statements in this Official Statement.
B-1
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B-2
PENDER COUNTY, NORTH CAROLINA
MANAGEMENT’S DISCUSSION AND ANALYSIS
As management of Pender County, we offer readers of Pender County’s financial statements this narrative overview and analysis of the financial
activities of Pender County for the fiscal year ended June 30, 2014. We encourage readers to read the information presented here in conjunction
with additional information that we have furnished in the County’s financial statements, which follow this narrative.
Financial Highlights
• The assets and deferred outflows of resources of Pender County exceeded its liabilities and deferred inflows of resources at the
close of the fiscal year by $30,482,934 (net position).
• The government’s total net position increased by $1,085,126 during the fiscal year. This included an increase of $1,503,248 from
governmental sources, and business-type funds produced a decrease of $418,122.
• As of the close of the current fiscal year, Pender County’s governmental funds reported combined ending fund balances of
$33,290,861, a decrease of $1,739,933 in comparison with the prior year. This current year decrease was offset by a prior period
adjustment of $148,721, resulting in a net increase in fund balance from the prior year of $1,591,212. Approximately 23.48% of
this total amount, or $7,815,804, is available for spending at the government’s discretion (unassigned fund balance).
• At the end of the current fiscal year, unassigned fund balance for the General Fund was $8,069,088, or 15.78% of total general fund
expenditures for the fiscal year.
• Pender County’s total debt decreased $4,964,716 (3.87%) during the current fiscal year. The key factor of this decrease was a result
of debt service payments exceeding new leases obtained during the year.
• Pender County received maintained its credit rating by Standard and Poors of AA- and maintained its Aa2 rating from Moody’s
Investors. In addition, the North Carolina Municipal Council upgraded the County's rating from 82 to 83, which is an equivalent to
an A rating.
Overview of the Financial Statements
This discussion and analysis are intended to serve as an introduction to Pender County’s basic financial statements. The County’s basic
financial statements consist of three components; 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the
financial statements (see Figure 1). The basic financial statements present two different views of the County through the use of governmentwide statements and fund financial statements. In addition to the basic financial statements, this report contains other supplemental information
that will enhance the reader’s understanding of the financial condition of Pender County.
B-3
PENDER COUNTY, NORTH CAROLINA
MANAGEMENT’S DISCUSSION AND ANALYSIS
Required Components of Annual Financial Report
Figure 1
Management’s
Basic
Discussion and
Financial
Analysis
Statements
Government-wide
Fund
Financial
Financial
Statements
Statements
Summary
Notes to the
Financial Statements
Detail
Basic Financial Statements
The first two statements (Exhibits 1 and 2) in the basic financial statements are the Government-wide Financial Statements. They provide
both short and long-term information about the County’s financial status.
The next statements (Exhibits 3 through 9) are Fund Financial Statements. These statements focus on the activities of the individual parts of
the County’s government. These statements provide more detail than the government-wide statements. There are four parts to the Fund
Financial Statements: 1) the governmental funds statements; 2) the budgetary comparison statements; 3) the proprietary fund statements; and 4)
the fiduciary fund statements.
The next section of the basic financial statements is the notes. The notes to the financial statements explain in detail some of the data contained
in those statements. After the notes, supplemental information is provided to show details about the County’s non-major governmental funds
and internal service funds, all of which are added together in one column on the basic financial statements. Budgetary information required by
the General Statutes also can be found in this part of the statements.
Following the notes is the required supplemental information. This section contains funding information about the County’s pension plans.
Government-wide Financial Statements
The government-wide financial statements are designed to provide the reader with a broad overview of the County’s finances, similar in format
to a financial statement of a private-sector business. The government-wide statements provide short and long-term information about the
County’s financial status as a whole.
The two government-wide statements report the County’s net position and how it has changed. Net position is the difference between the total
of the County’s assets and deferred outflows of resources and the total liabilities and deferred inflows of resources. Measuring net position is
one way to gauge the County’s financial condition.
B-4
PENDER COUNTY, NORTH CAROLINA
MANAGEMENT’S DISCUSSION AND ANALYSIS
The government-wide statements are divided into three categories: 1) governmental activities; 2) business-type activities; and 3) component
units. The governmental activities include most of the County’s basic services such as public safety, parks and recreation, and general
administration. Property taxes and state and federal grant funds finance most of these activities. The business-type activities are those that the
County charges customers to provide. These include the water and sewer and landfill services offered by Pender County. The final category is
the component units. Although legally separate from the County, the ABC Board is important to the County because the County is financially
accountable for the Board by appointing its members and because the Board is required to distribute its profits to the County.
The government-wide financial statements are on Exhibits 1 and 2 of this report.
Fund Financial Statements
The fund financial statements provide a more detailed look at the County’s most significant activities. A fund is a grouping of related accounts
that is used to maintain control over resources that have been segregated for specific activities or objectives. Pender County, like all other
governmental entities in North Carolina, uses fund accounting to ensure and reflect compliance (or non-compliance) with finance-related legal
requirements, such as the General Statutes or the County’s budget ordinance. All of the funds of Pender County can be divided into three
categories: governmental funds, proprietary funds, and fiduciary funds.
Governmental Funds – Governmental funds are used to account for those functions reported as governmental activities in the government-wide
financial statements. Most of the County’s basic services are accounted for in governmental funds. These funds focus on how assets can readily
be converted into cash flow in and out, and what monies are left at year-end that will be available for spending in the next year. Governmental
funds are reported using an accounting method called modified accrual accounting. This method also has a current financial resources focus.
As a result, the governmental fund financial statements give the reader a detailed short-term view that helps him or her determine if there are
more or less financial resources available to finance the County’s programs. The relationship between government activities (reported in the
Statement of Net Position and the Statement of Activities) and governmental funds is described in a reconciliation that is a part of the fund
financial statements.
Pender County adopts an annual budget for its General Fund, as required by the General Statutes. The budget is a legally adopted document that
incorporates input from the citizens of the County, the management of the County, and the decisions of the Board about which services to
provide and how to pay for them. It also authorizes the County to obtain funds from identified sources to finance these current period activities.
The budgetary statement provided for the General Fund demonstrates how well the County complied with the budget ordinance and whether or
not the County succeeded in providing the services as planned when the budget was adopted. The budgetary comparison statement uses the
budgetary basis of accounting and is presented using the same format, language, and classifications as the legal budget document. The
statement shows four columns: 1) the original budget as adopted by the board; 2) the final budget as amended by the board; 3) the actual
resources, charges to appropriations, and ending balances in the General Fund; and 4) the difference or variance between the final budget and
the actual resources and charges.
Proprietary Funds – Pender County has one kind of proprietary funds. Enterprise Funds are used to report the same functions presented as
business-type activities in the government-wide financial statements. Pender County uses enterprise funds to account for its water and sewer
activity and for its landfill operations. These funds are the same as those separate activities shown in the business-type activities in the
Statement of Net Position and the Statement of Activities.
Fiduciary Funds – Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Pender County has
seven fiduciary funds, all of which are agency funds.
Notes to the Financial Statements – The notes provide additional information that is essential to a full understanding of the data provided in
the government-wide and fund financial statements. The notes to the financial statements start after Exhibit 9.
Other Information – In addition to the basic financial statements and accompanying notes, this report includes certain required supplementary
information concerning Pender County’s progress in funding its obligation to provide pension benefits to its employees. Required
supplementary information can be found beginning at Exhibit A-1, directly after the notes.
B-5
PENDER COUNTY, NORTH CAROLINA
MANAGEMENT’S DISCUSSION AND ANALYSIS
Government-Wide Financial Analysis
As noted earlier, net position may serve over time as one useful indicator of a government’s financial condition. The County's assets and
deferred outflows of resources exceeded its liabilities and deferred inflows of resources by $30,482,934 as of June 30, 2014. The County’s net
position increased by $1,085,126 for the fiscal year ended June 30, 2014. Net position is reported in three categories: net investment in capital
assets, $59,824,582, restricted net position of $19,492,749, and unrestricted net position (deficit) of ($48,834,397).
The invested in capital assets, net of related debt, category is defined as the County's investment in County owned capital assets (e.g. land,
buildings, machinery, and equipment), less any related debt still outstanding that was issued to acquire those items. Pender County uses these
capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although Pender County’s
investment in its capital assets is reported net of the outstanding related debt, the resources needed to repay that debt must be provided by other
sources, since the capital assets cannot be used to liquidate these liabilities.
Another category of net position is restricted net position. This represents resources that are subject to external restrictions on how they may be
used.
The final category of net position is unrestricted net position. This balance may be used to meet the government's ongoing obligations to
citizens and creditors. Unrestricted net position (deficit) totaled ($48,834,397) at June 30, 2014. This deficit is a result of the situation
described in the following paragraph.
Under North Carolina law, the County is responsible for providing capital funding for the schools. The County has chosen to meet its obligation
to provide the schools capital funding by using a mixture of County funds and general obligation debt. The assets funded by the County,
however, are owned and utilized by the schools. Since the County, as the issuing government, acquires no capital assets, the County has
incurred a liability without a corresponding increase in assets. At the end of the fiscal year, approximately $52.4 million of the outstanding debt
on the County's financial statements was related to assets included in the public schools financial statements.
However, since the majority of this schools related debt is general obligation debt, it is collateralized by the full faith, credit, and taxing power
of the County. Accordingly, the County is authorized and required by State law to levy ad valorem taxes, without limit as to rate and amount, as
may be necessary to pay the debt service on its general obligation bonds.
Pender County’s Net Position
Figure 2
Governmental
Activities
2014
2013
Current and other assets
Capital assets
Total assets
Total deferred outflows
of resources
$
$
40,039,936
28,757,090
68,797,026
$
41,021,956
30,921,823
71,943,779
$
3,197,097
$
3,480,143
$
$
$
61,336,523
8,601,142
69,937,665
$
-
Long-term liabilities
Other liabilities
Total liabilities
$
57,943,834
10,777,333
68,721,167
Total deferred inflows of
resources
$
-
Net Position
Net investment in
capital assets
Restricted
Unrestricted
Total Net Position
$
$
$
Business-type
Activities
2014
2013
26,700,581 $
19,326,317
(42,753,942)
3,272,956 $
$
(3,257,187) $
77,635,104
$ 74,377,917 $
$
2014
21,972,238
75,974,211
97,946,449
$
Total
$
2013
$
36,782,749
106,392,194
143,174,943
$
62,994,194
106,896,034
169,890,228
347,038
$
358,606
$
3,544,135
$
3,838,749
$ 45,541,538
1,973,439
$ 47,514,977
$
$
$
103,485,372
12,750,772
116,236,144
$
$
67,529,004
1,565,618
69,094,622
$
128,865,527
10,166,760
139,032,287
$
$
-
$
-
$
-
-
28,056,814 $ 33,124,001 $
16,317,743
166,432
(38,888,300)
(6,080,455)
5,486,257 $ 27,209,978 $
B-6
32,203,248 $
166,432
(3,159,247)
29,210,433 $
59,824,582 $
19,492,749
(48,834,397)
30,482,934 $
60,260,062
16,484,175
(42,047,547)
34,696,690
PENDER COUNTY, NORTH CAROLINA
MANAGEMENT’S DISCUSSION AND ANALYSIS
Several particular aspects of the County’s financial operations influenced the total unrestricted governmental net position:
• Continued diligence in the collection of property taxes by maintaining a collection percentage of 97.41%, which is a slight increase
over the previous year's rate of 96.50%. This rate is slightly above the statewide average of 97.34%.
• Increased charges for services revenue due to increased use and consumption by customers and citizens.
• Continued low cost of debt due to the County’s high bond rating.
Pender County Changes in Net Position
Figure 3
Revenues:
Program revenues:
Charges for services
$
Operating grants and
contributions
Capital grants and
contributions
General revenues:
Property taxes
Other taxes
Grants and contributions
not restricted to
specific programs
Other
Total revenues
Expenses:
General government
Public safety
Economic and physical
development
Human services
Cultural and recreation
Education
Interest on long-term debt
Landfill
Water and sewer
Section 8 Housing
Country Court
Total expenses
Governmental
Activities
2014
2013
1,772,018
$
9,595,169
$
8,838,841
$
Total
11,367,187
$
2013
10,456,981
9,266,557
1,506,317
1,497,857
12,706,426
10,764,414
-
-
343,080
4,536,699
343,080
4,536,699
32,972,031
16,851,150
32,410,796
15,208,745
-
-
32,972,031
16,851,150
32,410,796
15,208,745
691,137
3,543
63,489,988
398,986
115,035
59,018,259
1,008,712
12,453,278
653,890
15,527,287
691,137
1,012,255
75,943,266
398,986
768,925
74,545,546
7,545,437
17,848,652
7,356,097
16,020,172
-
-
7,545,437
17,848,652
7,356,097
16,020,172
2,401,856
15,663,333
1,433,556
15,158,787
1,935,119
61,986,740
2,528,245
15,279,816
1,226,120
15,419,585
2,107,210
59,937,245
4,827,064
6,768,525
1,222,349
53,462
12,871,400
4,579,163
4,895,457
1,248,694
55,009
10,778,323
2,401,856
15,663,333
1,433,556
15,158,787
1,935,119
4,827,064
6,768,525
1,222,349
53,462
74,858,140
2,528,245
15,279,816
1,226,120
15,419,585
2,107,210
4,579,163
4,895,457
1,248,694
55,009
70,715,568
4,748,964
1,085,126
3,829,978
24,461,469
34,696,690
30,881,347
1,503,248
Net position, beginning
5,486,257
Prior Period Adjustment
(3,716,549)
Net position, beginning,
restated
1,769,708
$
1,618,140
2014
11,200,109
Increase (decrease) in
net position
Net position, ending
$
Business-type
Activities
2014
2013
3,272,956
(918,986)
6,419,878
(14,635)
$
(418,122)
29,210,433
(1,582,333)
6,405,243
27,628,100
5,486,257
$ 27,209,978
B-7
-
(5,298,882)
24,461,469
$
29,210,433
(14,635)
29,397,808
$
30,482,934
30,866,712
$
34,696,690
PENDER COUNTY, NORTH CAROLINA
MANAGEMENT’S DISCUSSION AND ANALYSIS
Governmental activities. Governmental activities increased the County’s net position by $1,503,248, thereby accounting for the growth in the
net position of Pender County. Key elements of this increase are as follows:
• Overall increases in operating revenues and expenditures when compared to the prior year.
Business-type activities: Business-type activities decreased Pender County’s net position by $418,122, accounting for a decline in the
government's net position. Key elements of this increase are as follows:
• Several projects were capitalized this year, resulting in a significant increase in depreciation expense.
Financial Analysis of the County’s Funds
As noted earlier, Pender County uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements.
Governmental Funds. The focus of Pender County’s governmental funds is to provide information on near-term inflows, outflows, and
balances of usable resources. Such information is useful in assessing Pender County’s financing requirements. Specifically, fund balance
available for appropriation can be a useful measure of a government’s net resources available for spending at the end of the fiscal year.
The General Fund is the chief operating fund of Pender County. At the end of the current fiscal year, Pender County's unassigned fund balance
in the General Fund was $8,069,088, while total fund balance reached $28,957,539. The Governing Board of Pender County has determined
that the county should maintain an available fund balance of 20% of general fund expenditures in case of unforeseen needs or opportunities, in
addition to meeting the cash flow needs of the County. The County currently has an available fund balance of 25% of general fund expenditures
and an unassigned fund balance of 15.78% of general fund expenditures, while total fund balance represents 56.64% of that same amount.
At June 30, 2014, the governmental funds of Pender County reported a combined fund balance of $33,290,861, a 4.97 percent decrease from
last year. The primary reason for this decrease was construction related to schools and other construction projects.
General Fund Budgetary Highlights: During the fiscal year, the County revised the budget on several occasions. Generally, budget
amendments fall into one of three categories: 1) amendments made to adjust the estimates that are used to prepare the original budget ordinance
once exact information is available; 2) amendments made to recognize new funding amounts from external sources, such as Federal and State
grants; and 3) increases in appropriations that become necessary to maintain services. Total amendments to the General Fund increased
revenues by $889,852.
Proprietary Funds. Pender County’s proprietary funds provide the same type of information found in the government-wide statements but in
more detail. Unrestricted net position of the Resource Recovery Fund at the end of the fiscal year was a deficit of $208,319, those for the Water
and Sewer Funds totaled a deficit of $5,944,325, those for the Section 8 Administration Fund equaled $29,990, and those for the Country Court
Apartments equaled $42,199. The total growth (decline) in net position for those funds was ($131,578), ($290,859), ($5,490), and $9,805,
respectively. Other factors concerning the finances of these funds have already been addressed in the discussion of Pender County’s businesstype activities.
B-8
PENDER COUNTY, NORTH CAROLINA
MANAGEMENT’S DISCUSSION AND ANALYSIS
Capital Asset and Debt Administration
Capital assets. Pender County’s capital assets for its governmental and business-type activities as of June 30, 2014, totals $106,392,194 (net
of accumulated depreciation). These assets include buildings, roads and bridges, land, machinery and equipment, park facilities, and vehicles.
Major capital asset transactions during the year include:
• Purchase of new equipment and vehicles for governmental activities.
• Continued improvement and expansion of ongoing projects.
• Construction of water and wastewater infrastructure.
Pender County's Capital Assets
(net of depreciation)
Figure 4
Governmental
Activities
2014
2013
Land
Buildings
Furniture, fixtures
and equipment
Other
Construction in Progress
Total
$
$
10,276,114
13,416,305
2,050,766
372,049
2,641,856
28,757,090
$
$
Business-type
Activities
2014
2013
10,276,114
10,596,871
$
415,193
36,753,865
2,082,036
400,229
7,566,573
30,921,823
246,752
897
40,218,397
$ 77,635,104
$
$
415,193
11,706,900
242,118
1,955
63,608,045
75,974,211
2014
$
$
Total
10,691,307
50,170,170
2,297,518
372,946
42,860,253
106,392,194
$
$
2013
10,691,307
22,303,771
2,324,154
402,184
71,174,618
106,896,034
Long-term Debt. As of June 30, 2014, Pender County had total bonded debt outstanding of $109,820,000, all of which is debt backed by the
full faith and credit of the County.
Pender County’s Outstanding Debt
Figure 5
Governmental
Activities
2014
2013
General Obligation Bonds
Limited Obligation Bonds
Revenue Bonds
Capital Leases
Installment Purchases
Unamortized Premium
Total
$
$
49,670,000
1,799,695
1,673,698
2,751,102
55,894,495
$
$
53,785,000
946,695
2,294,082
2,998,345
60,024,122
Business-type
Activities
2014
2013
$ 38,825,000
21,325,000
4,955,000
471,185
1,695,831
$ 67,272,016
$
$
39,185,000
21,685,000
4,955,000
529,747
1,752,358
68,107,105
2014
$
$
Total
88,495,000
21,325,000
4,955,000
1,799,695
2,144,883
4,446,933
123,166,511
$
$
2013
92,970,000
21,685,000
4,955,000
946,695
2,823,829
4,750,703
128,131,227
Pender County’s total debt decreased by $4,964,716 (3.87%) during the past fiscal year, primarily due to debt service payments exceeding loan
proceeds in the fiscal year.
As mentioned in the financial highlights section of this document, Pender County received maintained its credit rating by Standard and Poor's of
AA- and maintained its Aa2 rating from Moody’s Investors. In addition, the North Carolina Municipal Council maintained the County's rating
of 83, which is equivalent to an A Rating. This bond rating is a clear indication of the sound financial condition of Pender County. This
achievement is a primary factor in keeping interest costs low on the County’s outstanding debt.
The State of North Carolina limits the amount of general obligation debt that a unit of government can issue to 8 percent of the total assessed
value of taxable property located within that government’s boundaries. The legal debt margin for Pender County is $467,701,078. The County
has $72,000,000 in bonds authorized but un-issued at June 30, 2014.
Additional information regarding Pender County’s long-term debt can be found in the notes to the financial statements under Section B.
B-9
PENDER COUNTY, NORTH CAROLINA
MANAGEMENT’S DISCUSSION AND ANALYSIS
Economic Factors and Next Year’s Budgets and Rates
Economic Outlook
Pender County has been one of the fastest growing counties in North Carolina during the last decade, however, growth in population and other
indicators have slowed considerably. The 2013 census population estimate is 55,534, up 6% from the 2010 population of 52,217. Commercial
and residential building permits issued have risen from 704 for the 2013 calendar year to 761 for the 2014 calendar year. Tax base growth has
been stagnant the last three years. The County's unemployment rate has decreased slightly from from 8.3% in September 2013 to 6.5% as of
September 2014. The County's poverty rate still hovers above 10%, and Pender County wages still fall short of the Wilmington MSA and State
averages. Ironically, in 2009 the NC Department of Commerce designated Pender County as a Tier 3 County, indicating that the county is 1 of
20 counties within North Carolina being the least distressed. This designation results from the high population growth in the middle of the
decade and the assessed value of Topsail Township, and certainly is not indicative of the true county-wide economic picture.
The distressed economy is not unique to Pender County but is common to all counties in the state and nation. The negative impact on the
county's budget and its ability to provide services has been significant, while at the same time the demand for services for many county functions
(such as public health and social services) increases during economically challenging times.
Despite the short term impacts of a distressed economy, the long-term economic outlook for Pender County is positive. The Board has
committed to making investments and policy decisions to put the County in an enviable position to accommodate and attract new growth and
development in the future. Developing industrial product to market, expanding water and sewer utilities, putting into place new land use plans
and regulations, and taking a positive approach to business and industry development are proactive measures the Board has initiated in the past
few years. These efforts combined with the County's assets including major highways, skilled labor force, access to airport and sea port
facilities, and lower cost land, put the County in an enviable position for when the economy gets back on track.
Thus in summary, while the current economic climate is presenting challenges to Pender County, the Board is doing all the right things to
position itself properly for attracting and managing new growth and development that will surely present itself in the coming decade.
Encouraging Business and Industry Development
A vital element for the economic viability of Pender County long term is success with economic development. In simple terms, economic
development is the creation of wealth in a county through the creation of jobs and investment. Central to creating jobs and investment is
creating a climate that is attractive to new business and industry, and for the expansion of existing industry. The county's proximity to major
transportation corridors, the Wilmington port, the airport, and the Wilmington metropolitan area is a major asset for economic development. The
Commissioners have been committed to creating industrial product to attract industrial clients, evidenced by the purchase of over 750 acres of
industrial land in the recent years on the US 421 corridor near the New Hanover County line. This industrial site is named Pender Commerce
Park and is shovel-ready for development.
The County, together with Pender Progress Corporation, Four County EMC, Wilmington lndustrial Business Development and the Town of
Burgaw constructed an industrial shell building in Pender Progress Industrial Park in Burgaw. This 40,000 square foot building is expandable to
80,000 square feet, and is currently being marketed.
Sixty percent of the county's workforce commutes out of the county to work, and we have to reverse that ratio. Economic development is a
process, and the County Commissioners will continue to devote time, effort and resources along with its economic development partners to
attract and recruit industrial development, jobs and investment into Pender County.
Strategies for the next two years include evaluating opportunities for creating business and tourism development incentives, securing and
preparing additional sites for industrial development and facilitating development of additional shell building product.
B-10
PENDER COUNTY, NORTH CAROLINA
MANAGEMENT’S DISCUSSION AND ANALYSIS
Budget Highlights for the Fiscal Year Ending June 30, 2015
Governmental Activities: The County Commissioners approved a $54,523,327 General Fund Budget on June 23, 2014, which was included
within a total budget ordinance of $88,560,438, adopted on the same date.
The FY 14-15 General Fund Budget increased about 5.75% as compared to the FY 13-14 Adopted Budget. There was a combination of
increases and decreases over last year’s budget that resulted in a net increase of $2,963,364 over FY 13-14 budget.
The FY 14-15 General Fund Budget of $54,523,327 is in balance with a tax rate of $.512 per 100 of assessed valuation. The County-wide tax
rate remained the same as last year’s tax rate. Other funds are also in balance. The appropriation from the Fund Balance of the General Fund is
$4,230,689.
Business–type Activities: Expanding water and sewer infrastructure has been a priority for many years; however, the availability of water and
sewer capacity has been a limiting factor. To remedy this, the County is undertaking numerous infrastructure related projects.
The vision and priority of expanding water and sewer infrastructure within the County has been many years in development and implementation.
Subsequently, numerous infrastructure related projects have now come to fruition or are near completion.
The Surface Water Treatment Plant has now been online for over 18 months and provides all the drinking water for the Rocky Point/Topsail and
Scotts Hill Water & Sewer Districts. The plant is designed to upgrade to 6 mgd with little additional investment and will operate to serve the
current and future Water Districts with safe drinking water supply for the next 10 to 15 years.
Planning, design, and permitting activities are underway for the installation of watermains and services to the Moores Creek and Central Pender
Water & Sewer Districts. The seven-year General Obligation Bonds authorized in 2006 by the citizens of the two districts have been extended
for an additional 3 years to 2016. As sufficient water supply water supply wasn’t available to extend waterlines into these districts until the
same year as the Bond Authorizations would have expired (2013), we were approved by the citizens and the LGC to extend the bond
authorizations until November 2016. “Sign Up” campaigns began in February 2014 with an informational letter sent to over 9,000 property
owners in the two Districts and a Public Meeting held in March. The sign up campaign will run through July 2014 and an additional Public
Meeting is tentatively scheduled for May or June. Once the customer base is identified, the final design work and permitting can be completed.
Construction is scheduled to begin in the spring of 2015 and be completed by November 2016. PCU is anticipating an additional 1,200 to 1,500
water customers upon completion of the project.
Construction of the Pender Commerce Park infrastructure began in December 2013 and is scheduled to be complete by December 2014. These
improvements include water distribution, sewer collection, stormwater management, street lighting, sidewalks, street trees, and over a mile of
roadway construction to serve the entire Commerce Park. The Park will then have water and sewer service available to serve current and new
tenants within the Park.
In order to provide wastewater treatment and disposal for development of the Commerce Park on US Highway 421, a new state-of-the-art
wastewater treatment facility is also under construction as of March 2014. The project has been divided into two phases. Phase I consists of the
influent plant pump station and an equalization basin that will be incorporated as part of a pump and haul operation. Completion of this phase
is scheduled for September 2014. Phase II of the project includes the remaining wastewater treatment facilities and processes that will be
constructed semi-concurrently with Phase I. The final facility will have a treatment capacity of 500,000 gallon per day and will utilize an
NPDES permit that was acquired via inter-local agreement with the Cape Fear Public Utility Authority in New Hanover County. The NPDES
provides for a point discharge to the Cape Fear River of up to 4 million gallons per day; however, permit provisions allow for construction in
incremental capacities as demand increase. Final completion of the 0.5 MGD facility is scheduled for October 2015.
To accommodate the anticipated high-strength waste stream and provide a unique and sustainable facility, the process has been designed as an
Adaptive Eco-System utilizing Hydroponics (plants) and moving bed bioreactors (MBBR). This “Adaptive Ecosystem” Wastewater Treatment
Plant is estimated to cost approximately $9.7 Million to construct. To date, Pender County Utilities has received preliminary approval for
$3,925,000 in Grant Funding for the project from both state and federal economic development agencies. The project is now formally known as
the “Melinda K. Knoerzer Adaptive Ecosystem Reclamation Facility”.
Requests for Information
This report is designed to provide an overview of the County’s finances for those with an interest in this area. Questions concerning any of the
information found in this report or requests for additional information should be directed to the Director of Finance, Pender County, 805 S
Walker St, PO Box 1578, Burgaw, North Carolina 28425. You can also call (910) 259-1282, visit our website www.pendercountync.gov or
send an email to [email protected].
B-11
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B-12
BASIC FINANCIAL STATEMENTS
B-13
Exhibit 1
Pender County, North Carolina
Statement of Net Position
June 30, 2014
ASSETS
Cash and cash equivalents
Receivables (net)
Internal Balances
Inventories
Prepaid items
Governmental
Activities
$
Restricted cash and cash equivalents
Capital assets:
Land, improvements, and construction in
progress
Other capital assets, net of depreciation
Total assets
DEFERRED OUTFLOWS OF RESOURCES
Charge on refunding
Total deferred outflows of resources
Primary Government
Business-type
Activities
27,753,113
5,542,378
5,805,430
-
$
1,073,479
(5,805,430)
-
Total
$
27,753,113
6,615,857
-
Component Unit
Pender County
ABC Board
Total Reporting
Unit
$
$
710,288
163
629,107
12,865
28,463,401
6,616,020
629,107
12,865
939,015
1,474,764
2,413,779
-
2,413,779
12,917,970
15,839,120
68,797,026
40,566,820
37,068,284
74,377,917
53,484,790
52,907,404
143,174,943
6,500
70,833
1,429,756
53,491,290
52,978,237
144,604,699
3,197,097
3,197,097
347,038
347,038
3,544,135
3,544,135
-
3,544,135
3,544,135
4,525,114
578,518
60,574
1,012,316
136,749
39,367
4,023
5,537,430
715,267
39,367
64,597
632,569
-
6,169,999
715,267
39,367
64,597
5,613,127
57,943,834
68,721,167
780,984
45,541,538
47,514,977
6,394,111
103,485,372
116,236,144
632,569
6,394,111
103,485,372
116,868,713
26,700,581
33,124,001
59,824,582
77,333
59,901,915
15,232,204
14,416
485,755
300,186
230,984
3,062,772
(42,753,942)
3,272,956
166,432
(6,080,455)
27,209,978
15,232,204
14,416
485,755
300,186
230,984
3,062,772
166,432
(48,834,397)
30,482,934
153,064
566,790
797,187
15,232,204
14,416
485,755
300,186
230,984
3,062,772
153,064
166,432
(48,267,607)
31,280,121
LIABILITIES
Accounts payable and accrued expenses
Accrued interest payable
Customer deposits
Unearned revenue
Long-term liabilities:
Due within one year
Due in more than one year
Total liabilities
NET POSITION
Net investment in capital assets
Restricted
Stabilization by State statute
Economic Development
Health Department Escrow
Sheriff's Seizures
Public Safety
School Capital Projects
Working Capital
Section 8 Housing
Unrestricted (deficit)
Total net position
$
$
The notes to the financial statements are an integral part of this statement.
B-14
$
$
$
Exhibit 2
Pender County, North Carolina
Statement of Activities
For the Year Ended June 30, 2014
Program Revenues
Functions/Programs
Primary government:
Governmental activities:
General government
Public safety
Economic and physical development
Human services
Cultural and recreation
Education
Interest on long-term debt
Total governmental activities
Expenses
$
Business-type activities:
Resource Recovery Fund
Water Districts
Water Treatment Plant
Water Fund
Sewer Fund
Section 8 Housing
Country Court Apartments
Waste Water Treatment Plant
Total business-type activities
Total primary government
Component units:
Pender County ABC Board
7,545,437
17,848,652
2,401,856
15,663,333
1,433,556
15,158,787
1,935,119
61,986,740
Charges for
Services
$
4,827,064
4,505,503
1,192,275
906,925
6,311
1,222,349
53,462
157,511
12,871,400
74,858,140
$
5,146,292
370,515
1,025,252
97,793
229,181
49,277
1,772,018
Operating
Grants and
Contributions
Capital
Grants and
Contributions
Governmental
Activities
$
$
$
4,308,624
3,659,867
686,356
877,092
63,230
9,595,169
11,367,187
$
5,170,517
Net (Expense) Revenue and Changes in Net Position
Component
Primary Government
336,385
321,836
8,330,319
132,320
2,079,249
11,200,109
386,862
1,119,455
1,506,317
12,706,426
$
-
343,080
343,080
343,080
$
(49,014,613)
-
-
General revenues:
Taxes:
Property taxes, levied for general purpose
Local option sales tax
Other taxes and licenses
Grants and contributions not restricted to specific programs
Investment earnings, unrestricted
Gain (loss) on retirement of assets
Miscellaneous, unrestricted
Transfers
Total general revenues, special items, and transfers
Change in net position
32,972,031
7,798,784
9,052,366
691,137
28,359
(57,491)
32,675
50,517,861
1,503,248
Net position, beginning
Prior Period Adjustment
Net position, ending
The notes to the financial statements are an integral part of this statement.
(7,174,922)
(16,487,015)
(1,982,227)
(7,103,833)
(1,251,959)
(13,079,538)
(1,935,119)
(49,014,613)
$
B-15
Business-type
Activities
$
(131,578)
(845,636)
(162,839)
(906,925)
870,781
(102,894)
9,768
(157,511)
(1,426,834)
(1,426,834)
-
911,340
97,372
1,008,712
(418,122)
Pender
County ABC
Board
Total
$
(7,174,922)
(16,487,015)
(1,982,227)
(7,103,833)
(1,251,959)
(13,079,538)
(1,935,119)
(49,014,613)
(131,578)
(845,636)
(162,839)
(906,925)
870,781
(102,894)
9,768
(157,511)
(1,426,834)
(50,441,447)
-
$ (7,174,922)
(16,487,015)
(1,982,227)
(7,103,833)
(1,251,959)
(13,079,538)
(1,935,119)
(49,014,613)
-
(131,578)
(845,636)
(162,839)
(906,925)
870,781
(102,894)
9,768
(157,511)
(1,426,834)
(50,441,447)
24,225
24,225
382
382
24,607
32,972,031
7,798,784
9,052,366
691,137
940,081
(57,491)
130,047
51,526,955
1,109,733
772,580
35,469,270
5,486,257
29,210,433
34,696,690
(1,582,333)
(5,298,882)
$ 27,209,978
-
32,972,031
7,798,784
9,052,366
691,137
939,699
(57,491)
130,047
51,526,573
1,085,126
(3,716,549)
3,272,956
$
Total
Reporting
Unit
$ 30,482,934
$
797,187
(5,298,882)
$ 31,280,121
Exhibit 3
Pender County, North Carolina
Balance Sheet
Governmental Funds
June 30, 2014
Major Funds
ASSETS
Cash and cash equivalents
Receivables, net
Advance funding of projects
Due from other governments
Due from other funds
Restricted Cash
Total assets
LIABILITIES AND FUND BALANCES
Liabilities:
Accounts payable and accrued liabilities
Advance funding of projects
Due to other funds
Unearned revenue
Total liabilities
General
$
$
$
DEFERRED INFLOWS OF RESOURCES
Fund balances:
Restricted:
Stabilization by State statute
Economic Development
Health Department Escrow
Sheriff's Seizures
Public Safety
School Capital Projects
Committed:
Tax Revaluation
Automation Enhancement and Preservation
Capital Outlay and Improvements
Assigned:
Subsequent Year's expenditures
Unassigned:
Total fund balances
Total liabilities, deferred inflows of resources, and
fund balances
$
16,328,718
1,336,585
7,242,556
2,899,961
4,814,235
939,015
33,561,070
3,224,021
60,574
3,284,595
School Capital
Project Fund
$
$
$
789,158
789,158
389,271
343,817
733,088
Non-Major
Funds
Other
Governmental
Funds
$
$
$
Total
Governmental
Funds
5,382,360
349,607
86,547
5,818,514
$ 21,711,078
1,686,192
7,242,556
3,775,666
4,814,235
939,015
$ 40,168,742
702,027
514,422
1,216,449
$
3,926,048
903,693
343,817
60,574
5,234,132
1,318,936
-
324,813
1,643,749
15,232,204
485,755
300,186
-
56,070
14,416
230,984
3,006,702
384,251
255,366
-
-
1,278,434
4,230,689
8,069,088
28,957,539
56,070
15,232,204
14,416
485,755
300,186
230,984
3,062,772
384,251
255,366
1,278,434
4,230,689
7,815,804
33,290,861
33,561,070
The notes to the financial statements are an integral part of this statement.
B-16
$
789,158
(253,284)
4,277,252
$
5,818,514
$ 40,168,742
Exhibit 3
Pender County, North Carolina
Reconciliation of the Governmental Funds Balance
Sheet to the Statement of Net Position
Year Ended June 30, 2014
Amounts reported for governmental activities in the statement of net position are different because:
Ending fund balance - governmental funds
$
Capital assets used in governmental activities are not financial resources and, therefore, are not
reported in the funds.
Less accumulated depreciation
Net capital assets
47,119,248
(18,362,158)
28,757,090
Accrued interest receivable less the amount claimed as unearned revenue in the government-wide
statements as these funds are unavailable in the fund statements
80,520
Deferred charges related to advance refunding bond issued - included on government-wide
statement of net position but are not current financial resources
3,197,097
Internal service funds are used by management to charge the costs of certain activities, such as
insurance, to individual funds. The assets and liabilities of certain internal service funds are
included in governmental activities in the statement of net position.
439,118
Liabilities for deferred inflows of resources reported in the fund statements but not the
government-wide.
1,643,749
Liabilities that, because they are not due and payable in the current period, do not require current
resources to pay and are therefore not reported in the fund statements:
Bonds, leases, and installment financing
Capital Leases
Compensated absences
Separation allowance
Other Postemployment Benefits
Unamortized Bond Premium
Accrued interest payable
Net position of governmental activities
(51,343,698)
(1,799,695)
(1,585,561)
(547,612)
(5,529,293)
(2,751,102)
(578,518)
(64,135,479)
$
The notes to the financial statements are an integral part of this statement.
B-17
33,290,861
3,272,956
Exhibit 4
Pender County, North Carolina
Statement of Revenues, Expenditures, and Changes in Fund Balance
Governmental Funds
For the Year Ended June 30, 2014
Major Fund
REVENUES
Ad valorem taxes
Other taxes and licenses
Unrestricted intergovernmental
Restricted intergovernmental
Permits and fees
Sales and services
Investment earnings
Miscellaneous
Total revenues
General Fund
$
EXPENDITURES
Current:
General government
Public safety
Economic and physical development
Human services
Cultural and recreational
Education
Capital outlay
Debt service:
Principal
Interest and other charges
Total expenditures
Excess (deficiency) of revenues
over expenditures
OTHER FINANCING SOURCES (USES)
Transfers from other funds
Transfers to other funds
Lease Proceeds
Total other financing sources and uses
Net change in fund balance
Fund balances-beginning
Prior Period Adjustment
Fund balances-ending
School Capital
Project Fund
$
33,772,956
344,650
5,810,898
8,902,583
816,192
926,160
23,878
92,389
50,689,706
$
2,695,425
2,079,249
4,774,674
Non-Major
Funds
Other
Governmental
Funds
$
8,391,198
316,518
168,975
4,481
2,852
8,884,024
Total
Governmental
Funds
$
42,164,154
3,040,075
6,127,416
11,150,807
816,192
926,160
28,359
95,241
64,348,404
6,497,820
8,506,807
2,090,373
14,978,564
1,232,260
13,699,917
-
1,350,512
-
8,455,280
121,454
37,367
2,921,000
6,497,820
16,962,087
2,211,827
14,978,564
1,232,260
15,087,796
2,921,000
537,660
25,611
47,569,012
4,115,000
1,913,988
7,379,500
326,277
11,861,378
4,978,937
1,939,599
66,809,890
3,120,694
(2,604,826)
(2,977,354)
(2,461,486)
(4,656,936)
1,096,553
2,660,896
-
1,621,040
-
4,281,936
(4,656,936)
1,096,553
(3,560,383)
2,660,896
1,621,040
(439,689)
56,070
(1,356,314)
(1,739,933)
29,248,507
-
5,633,566
34,882,073
148,721
-
28,957,539
$
The notes to the financial statements are an integral part of this statement.
B-18
56,070
721,553
$
4,277,252
148,721
$
33,290,861
Exhibit 4
Pender County, North Carolina
Statement of Revenues, Expenditures, and Changes in Fund Balance
Governmental Funds
For the Year Ended June 30, 2014
Amounts reported for governmental activities in the statement of activities are different because:
Net change in fund balance - total governmental funds
$
Capital Outlay Expenditures recorded in the fund statements but capitalized as
assets in the statement of activities.
(1,739,933)
3,251,954
Cost of disposed capital asset not recorded in fund statements
(57,491)
Depreciation Expense, the allocation of those assets over their useful lives, that is recorded
on the statement of activities but not in the fund statements.
(1,493,926)
New debt issued during the year is recorded as a source of funds on the fund statements;
it has no effect on the statement of activities -- it affects only the government-wide
statement of net position.
(1,096,553)
Principal payments on debt owed are recorded as a use of funds on the fund statements but again
affect only the statement of net position in the government-wide statements.
4,978,937
Expenses reported in the statement of activities that do not require the use of current resources
to pay are not recorded as expenditures in the fund statements.
Difference in interest expense between fund statements (modified accrual) and government-wide
statements (full accrual)
40,283
Amortization of deferred charges resulted in an increase to interest expense of $283,046, while
amortization of bond premiums of $247,243 resulted in a decrease to interest expense.
(35,803)
Compensated absences are accrued in the government-wide statements but not in the fund
statements because they do not use current resources
(115,193)
Increase in Separation Allowance
(56,453)
Expenses for Other Postemployment Benefits are recorded on the government-wide statements
but not recorded on the fund statements.
(796,213)
Revenues reported in the statement of activities that do not provide current resources are not
recorded as revenues in the fund statements.
Increase (decrease) in deferred inflows of resources - taxes receivable - at end of year
Increase (decrease) in accrued taxes receivable at end of year
(656,486)
(144,439)
Net Revenue of Internal service funds determined to be governmental-type.
(575,436)
Change in net position of governmental activities
$
The notes to the financial statements are an integral part of this statement.
B-19
1,503,248
Exhibit 5
Pender County, North Carolina
Statement of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual - General Fund
For the Fiscal Year Ended June 30, 2014
General Fund
Original
Budget
Revenues:
Ad valorem taxes
Other taxes and licenses
Unrestricted intergovernmental
Restricted intergovernmental
Permits and fees
Sales and services
Investment earnings
Miscellaneous
Total revenues
$
Expenditures
Current:
General government
Public safety
Economic and physical development
Human services
Cultural and recreational
Intergovernmental:
Education
Debt service:
Principal retirement
Interest and other charges
Total expenditures
Revenues over (under) expenditures
Other financing sources (uses):
Lease purchase proceeds
Transfers to other funds
Fund balance appropriated
Total other financing sources (uses)
Revenues and other financing sources over
expenditures and other financing uses
Final
Budget
32,608,582
240,000
5,225,000
8,293,490
459,000
920,643
10,000
14,000
47,770,715
$
Variance
With Final
Positive
(Negative)
Actual
32,608,582
240,000
5,225,000
9,179,342
459,000
920,643
10,000
18,000
48,660,567
$
33,772,956
344,650
5,810,898
8,902,583
816,192
926,160
23,878
92,389
50,689,706
$
1,164,374
104,650
585,898
(276,759)
357,192
5,517
13,878
74,389
2,029,139
7,657,694
7,747,274
1,902,384
14,523,576
1,240,715
7,365,680
8,095,990
1,905,384
15,386,988
1,284,611
6,497,820
8,506,807
2,090,373
14,978,564
1,232,260
867,860
(410,817)
(184,989)
408,424
52,351
13,678,105
13,679,420
13,699,917
(20,497)
80,000
6,480
46,836,228
323,553
12,507
48,054,133
537,660
25,611
47,569,012
(214,107)
(13,104)
485,121
934,487
606,434
3,120,694
2,514,260
1,096,553
(4,781,936)
(3,685,383)
1,096,553
(230,000)
(3,945,502)
(3,078,949)
(4,781,936)
3,847,449
(934,487)
$
- $
(4,551,936)
3,945,502
(606,434)
-
$
Fund balance, beginning
(564,689) $
28,989,256
Prior Period Adjustment
148,721
Fund balance, ending
$
28,573,288
A legally budgeted Tax Reassessment Fund is consolidated
into the General Fund for reporting purposes:
Investment Earnings
Transfer from General Fund
Expenditures
Fund Balance, beginning of year
125,000
259,251
Fund Balance, end of year (Exhibit 4)
$ 28,957,539
The notes to the financial statements are an integral part of this statement.
B-20
(564,689)
Exhibit 6
Pender County, North Carolina
Statement of Net Position
Proprietary Funds
June 30, 2014
Enterprise Funds
Major
ASSETS
Current assets:
Cash and cash equivalents
Receivables, net
Due from other governments
Due from other funds
Prepaid expense
Restricted cash and cash equivalents
Due from Districts - Current LOBs
Total current assets
Resource
Recovery
Fund
Water
Treatment
Plant
20,960,000
20,960,000
5,947,240
10,724,663
16,671,903
40,566,820
37,068,284
20,960,000
98,595,104
-
35,272,617
21,325,000
20,596,165
107,191,104
1,038,184
303,600
303,600
-
-
43,438
43,438
347,038
347,038
-
208,598
-
3,619,052
-
2,511,213
6,338,863
-
Accounts payable and accrued liabilities
Customer deposits
Accrued interest payable
Deferred Revenue
Due to other funds
Due to County - Current portion of LOBs
General obligation bonds payable
Total current liabilities
395,584
604,182
132,689
35,561
65,785
305,000
539,035
149,913
61,772
1,577,179
409,338
5,817,254
-
334,130
3,806
9,192
4,023
3,572,145
60,000
6,646
6,501,155
1,012,316
39,367
136,749
4,023
5,149,324
365,000
780,984
13,826,626
599,066
-
Noncurrent liabilities:
Compensated absences
OPEB Payable
Due to County - Noncurrent portion of LO
Unamortized bond premium
General obligation bonds payable
Total noncurrent liabilities
Total liabilities
10,741
60,288
71,029
675,211
36,786
160,307
18,360,000
1,476,176
20,033,269
20,572,304
10,472
30,442
22,394,771
22,435,685
28,252,939
9,931
56,540
2,600,000
219,655
115,429
3,001,555
9,502,710
67,930
307,577
20,960,000
1,695,831
43,470,200
66,501,538
80,328,164
-
LIABILITIES
Current liabilities:
Advanced Funding of Projects
NET POSITION
Net investment in capital assets
Restricted
Unrestricted
Total net position
$ 1,625,072
489,274
678,906
1,046,594
3,839,846
1,375,815
1,375,815
353,921
23,960,848
24,314,769
34,265,659
1,006,958
35,272,617
1,842,707
28,154,615
-
1,375,815
(208,319)
$ 1,167,496
5,184,626
2,701,285
$ 7,885,911
-
12,468,508
(5,448,830)
$ 7,019,678
The notes to the financial statements are an integral part of this statement.
B-21
$
365,000
365,000
$
Internal
Service Fund
$ 1,038,184
-
DEFERRED OUTFLOWS OF
RESOURCES
Deferred charge on refunding
Total deferred outflows of resources
466,892
466,892
Total
$ 5,003,851
1,073,479
678,906
1,474,764
365,000
8,596,000
Total assets
$
Water Fund
3,378,779
117,313
428,170
3,924,262
Noncurrent assets:
Land and Construction In Progress
Other Capital Assets (Net)
Due from Districts - Non-current LOBs
Total noncurrent assets
$
Rocky Point
Water Fund
Non-Major
Total NonMajor
Enterprise
Funds
365,000
365,000
20,960,000
20,960,000
21,325,000
$
-
$
14,095,052
166,432
(3,124,591)
11,136,893
33,124,001
166,432
(6,080,455)
$ 27,209,978
1,038,184
-
599,066
599,066
$
439,118
439,118
Exhibit 7
Pender County, North Carolina
Statement of Revenues, Expenses, and Changes in Fund Net Position
Proprietary Funds
For the Year Ended June 30, 2014
Enterprise Funds
Major
OPERATING REVENUES
Charges for services
Dwelling rental
Other operating revenue
Sales tax refund
Premiums received
Total operating revenues
OPERATING EXPENSES
Personnel
Contracted services
Water purchases
System maintenance
Administration and housing assistance
Depreciation
OPEB Expense
Other Equipment
Total operating expenses
Operating income (loss)
Resource
Recovery
Fund
Rocky Point
Water Fund
$ 4,308,467
157
4,308,624
$ 3,183,690
3,183,690
181,097
4,541,642
74,110
21,321
8,894
4,827,064
(518,440)
NONOPERATING REVENUES (EXPENSES)
Interest revenue (expense)
Bond issuance cost
Operating Subsidy - HUD
Miscellaneous Revenue
Total nonoperating revenue (expenses)
Income (loss) before contributions and
transfers
Other Financing Sources (Uses)
Capital Contributions
Reimbursements from school
Other Reimbursements
Transfers in (out)
Total other financing sources (uses)
Change in net position
Total net position - beginning
Prior Period Adjustment
Total net position - ending
658,264
305,913
950,000
494,324
719,705
25,716
9,303
3,163,225
20,465
Water
Treatment
Plant
$
Water Fund
686,356
686,356
$
-
Non-Major
Total NonMajor
Enterprise
Funds
$
1,294,583
59,999
61,917
1,416,499
Total
$ 9,473,096
59,999
62,074
9,595,169
340,848
51,290
541,225
14,591
15,221
963,175
(276,819)
-
210,118
35,318
87,573
99,999
1,079,731
397,875
9,607
1,920,221
(503,722)
1,390,327
4,934,163
1,037,573
1,209,658
1,079,731
1,153,492
59,438
9,303
10,873,685
(1,278,516)
(1,086,375)
1,119,455
97,372
Internal
Service Fund
$
3,380,723
3,380,723
4,331,159
4,331,159
(950,436)
-
(756,128)
-
(226,513)
-
-
(103,734)
1,119,455
97,372
-
(756,128)
(226,513)
-
1,113,093
(735,663)
(503,332)
-
609,371
343,080
176,449
519,529
-
(176,449)
(176,449)
441,720
280,939
7,283
729,942
375,000
375,000
16,197
-
432,922
(418,122)
(575,436)
7,003,481
-
10,521,258
-
-
182,713
-
$ 11,136,893
(518,440)
98,640
280,939
7,283
386,862
(131,578)
1,299,074
$ 1,167,496
(735,663)
10,386,620
(1,765,046)
$ 7,885,911
$ 7,019,678
The notes to the financial statements are an integral part of this statement.
B-22
$
-
130,452
-
(1,148,064)
(950,436)
29,210,433
1,014,554
(1,582,333)
$ 27,209,978
$
439,118
Exhibit 8
Pender County, North Carolina
Statement of Cash Flows
Proprietary Funds
For The Fiscal Year Ended June 30, 2014
Enterprise Funds
MAJOR
Cash flows from operating activities:
Cash received from customers
Cash paid for goods and services
Cash paid to employees for services
Customer deposits received
Other operating revenue
Net cash provided (used) by
operating activities
Resource
Recovery
Fund
Rocky Point
Water Fund
Water
Treatment
Plant
$ 4,236,894
(4,588,028)
(178,514)
157
$ 3,115,089
(1,654,418)
(647,986)
-
$ 686,356
(494,258)
(337,363)
-
Cash flows from noncapital financing activities
Transfers in (out)
Due to/from
General Fund Advance to cover expenses
Operating Subsidy
Miscellaneous Revenue
Net cash provided (used) by capital
and related financing activities
Cash flows from capital and related
financing activities:
Acquisition and construction of
capital assets
Proceeds from Grants, Loans and Debt
Principal paid on bond maturities and
equipment contracts
Interest paid on bond maturities and
equipment contracts
Net cash provided (used) by capital
and related financing activities
Cash flows from investing activities:
Interest on investments
812,685
(145,265)
142,529
-
(37,075)
-
176,449
(156,141)
-
142,529
(37,075)
20,308
386,862
(80,328)
-
-
$
-
$
9,402,826
(8,029,630)
(1,373,530)
(4,255)
6,370
$ 3,380,723
(3,994,126)
-
-
(176,449)
37,075
2,208,263
1,119,455
97,372
2,194,651
1,119,455
97,372
375,000
-
-
3,285,716
3,411,478
375,000
(1,257,041)
343,080
-
(2,768,879)
-
(4,106,248)
729,942
-
(295,000)
(51,983)
-
(71,580)
(418,563)
-
-
(795,650)
(204,100)
(906,925)
(112,856)
(2,019,531)
-
386,862
(1,170,978)
(1,170,044)
(906,925)
(2,953,315)
(5,814,400)
-
100
-
104
(395,264)
3,066,930
$ 2,671,666
-
1,364,487
(1,292,926)
(209,667)
(4,255)
6,213
1,781
(100)
$
$
Total
Internal
Service
Fund
(136,148)
-
Net increase (decrease) in cash and
cash equivalents
Cash and cash equivalents, July 1
Cash and cash equivalents, June 30
(529,491)
Water Fund
NON-MAJOR
Total NonMajor
Enterprise
Funds
2,587
(1,292,414)
1,292,414
$
-
$
906,925
1,724
-
197,977
-
$
3,608,972
3,806,949
911,340
(1,489,801)
$
7,968,416
6,478,615
(613,403)
(238,403)
1,276,587
$ 1,038,184
(continued)
B-23
Exhibit 8
Pender County, North Carolina
Statement of Cash Flows
Proprietary Funds
For The Fiscal Year Ended June 30, 2014
Enterprise Funds
Major
Resource
Recovery
Fund
Rocky Point
Water Fund
Water
Treatment
Plant
Water Fund
NON-MAJOR
Total NonMajor
Enterprise
Funds
$
$ (276,819)
$
$
Total
Internal
Service
Fund
$ (1,278,516)
$ (950,436)
Reconciliation of operating income
to net cash provided by operating
activities:
Operating income (loss)
$ (518,440)
Adjustments to reconcile operating
income to net cash provided by
operating activities:
Depreciation
21,321
OPEB Expense
8,894
Landfill closure and postclosure
care costs
Changes in assets and liabilities:
(Increase) Decrease in accounts
receivable
(71,573)
(Increase) in prepaid items
Increase (decrease) in accounts
payable and accrued liabilities
27,724
(Decrease) in deferred revenues
(Decrease) in customer deposits
Increase (decrease) in accrued vacation
pay
2,583
Total adjustments
(11,051)
Net cash provided (used) by operating
activities
$ (529,491)
$
20,465
-
(503,722)
719,705
25,716
14,591
15,221
-
397,875
9,607
1,153,492
59,438
-
-
-
-
-
-
-
(64,762)
-
164
-
-
(3,857)
-
(140,028)
-
-
105,122
(3,839)
98,093
-
-
9,695
(39,398)
(6,799)
240,634
(39,398)
(10,638)
337,033
-
10,278
792,220
3,485
131,554
-
451
367,574
812,685
$ (145,265)
$
-
$
(136,148)
16,797
1,280,297
$
1,781
337,033
$ (613,403)
(concluded)
The notes to the financial statements are an integral part of this statement.
B-24
Exhibit 9
Pender County, North Carolina
Statement of Fiduciary Net Position
Fiduciary Funds
For the Year Ended June 30, 2014
Agency
Funds
Assets
Cash and investments
Accounts receivable
Total assets
$
Liabilities
Accounts payable
Due to other funds
Total liabilities
38,383
271,064
309,447
309,447
309,447
Net Position
Held in trust (Fiduciary net position)
$
The notes to the financial statements are an integral part of this statement.
B-25
-
PENDER COUNTY, NORTH CAROLINA
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended June 30, 2014
NOTE 1: Summary of Significant Accounting Policies
The accounting policies of Pender County and its component unit conform to generally accepted accounting principles as applicable to
governments. The following is a summary of the more significant accounting policies:
A. Description of the Reporting Entity
Pender County is located in the southeastern part of the State in the Coastal Region and has a population of approximately 48,630. The
County, which is governed by a five-member board of commissioners, is one of the 100 counties established in North Carolina under North
Carolina General Statute 153 A-10. As required by generally accepted accounting principles, these financial statements present the County
and its component unit, a legally separate entity for which the County is financially accountable.
Blended Component Units – The blended presentation method presents component units as a department or unit of the County, and offers no
separate presentation as with the discrete method.
The Pender County Housing Authority, a separate legal entity governed by the County Commissioners, exists to provide low and moderate
income residents alternatives for affordable housing. Its primary revenues are rental payments and subsidies paid by the federal government.
The Authority's operations are reported in two enterprise funds: the Section 8 Administration and Country Court Apartments Fund. Separate
financial statements are not issued for the Authority.
The Maple Hill Water District (the District) was established by the Pender County Board of Commissioners on February 21, 1989. It
includes a section of Northeast Pender County near the Onslow and Duplin County lines. Approximately 450 potential customers
(households and businesses) are within the District. The District provides potable water to the customers in the District. Under State law
[NCGS 162A-89], the Pender County Board of Commissioners also serve as the governing board of the District. This District is reported as
an enterprise fund. Separate financial statements are not issued for the district.
The Rocky Point / Topsail Water / Sewer District was established by the Pender County Board of Commissioners. The District provides
potable water and access to sewer services to the customers inside the District. Under State law [NCGS 162A-89], the Pender County Board
of Commissioners also serve as the governing board of the District. The District is reported as an enterprise fund. Separate financial
statements are not issued for the district.
The Scott's Hill Water and Sewer District (the District) was established by the Pender County Board of Commissioners on February 20,
2006. It includes a section of Southeast Pender County near the New Hanover County line. Approximately 650 potential customers
(households and businesses) are within the District. The District began the provision of potable water to the customers in the District in
November 2011. Under State law [NCGS 162A-89], the Pender County Board of Commissioners also serve as the governing board of the
District. This District is reported as an enterprise fund. Separate financial statements are not issued for the district.
Discretely Presented Component Units – Discretely presented component units are presented as if they are separate proprietary funds of the
County.
The discretely presented component unit presented below is reported in a separate column in the County's combined financial statements in
order to emphasize that it is legally separate from the County.
Pender County ABC Board
The members of the Alcoholic Beverage Control Board's governing board are appointed by the County Commissioners. The ABC Board is
required by state statute to distribute its surpluses to the General Fund of the County. The Board, as provided by North Carolina Alcoholic
Beverage Control Laws, operates four retail liquor stores. The Alcoholic Beverage Control Board, which has a June 30 year-end, is
presented as if it were a proprietary fund.
Complete financial statements for the discretely presented component units may be obtained at the administrative offices of those entities,
which are as follows:
Pender County ABC Board
207 US 117 Bypass
Burgaw, North Carolina 28425
B-26
Other Component Unit
The County's Board of Commissioners are responsible for appointing the members of the board of the Industrial Facilities and Pollution
Control Financing Authority (Industrial Authority), and the County can remove any member of the Board with or without cause. The
Industrial Authority exists to issue and service revenue bond debt for private businesses to aid in the financing of the industrial
manufacturing facilities for the purpose of providing employment and raising below average manufacturing wages and for established
industries that are in need of modernization in order to meet the pollution control requirements of the federal government, state, county and
city. The Industrial Authority has no financial transactions or account balances; therefore, it is not presented in the basic financial
statements. The Industrial Authority does not issue separate financial statements.
B. Basis of Presentation – Basis of Accounting
Basis of Presentation, Measurement Focus - Basis of Accounting
Government-wide Statements : The statement of net position and the statement of activities display information about the primary
government net position (the County) and its component unit. These statements include the financial activities of the overall government,
except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. These statements
distinguish between the governmental and business-type activities of the County. Governmental activities generally are financed through
taxes, intergovernmental revenues, and other non-exchange transactions. Business-type activities are financed in whole or in part by fees
charged to external parties.
The statement of activities presents a comparison between direct expenses and program revenues for the different business-type activities of
the County and for each function of the County’s governmental activities. Direct expenses are those that are specifically associated with a
program or function and, therefore, are clearly identifiable to a particular function. Indirect expense allocations that have been made in the
funds have been reversed for the statement of activities. Program revenues include (a) fees and charges paid by the recipients of goods or
services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a
particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues.
Fund Financial Statements : The fund financial statements provide information about the County’s funds, including its fiduciary funds and
blended component units. Separate statements for each fund category – governmental , proprietary , and fiduciary – are presented. The
emphasis of fund financial statements is on major governmental and enterprise funds, each displayed in a separate column. All remaining
governmental and enterprise funds are aggregated and reported as nonmajor funds.
Proprietary fund operating revenues, such as charges for services, result from exchange transactions associated with the principal activity of
the fund. Exchange transactions are those in which each party receives and gives up essentially equal values. Nonoperating revenues, such
as subsidies, result from non-exchange transactions. Other non-operating items such as investment earnings are ancillary activities.
The County reports the following major governmental funds:
General Fund - This is the County’s primary operating fund. It accounts for all financial resources of the general government, except those
required to be accounted for in another fund.
School Capital Project Fund – This fund is used to track revenue and expenditures for school capital outlay.
The County reports the following major enterprise funds:
Resource Recovery Fund – This fund accounts for the operation, maintenance, and development of various landfills and disposal sites
Rocky Point – Topsail Water and Sewer Fund – This fund is used to account for the operations of the water and sewer district within Rocky
Point and Topsail.
Water Treatment Plant - This fund is used to account for the construction of the Water Treatment Plant.
Water Fund - This fund is used to account for the Limited Obligation Bonds issued by the County to cover the Water District General
Obligation Bonds.
B-27
The County reports the following fund type:
Agency Funds - Agency Funds are custodial in nature and do not involve the measurement of operating results. Agency funds are used to
account for assets the County holds on behalf of others. The County maintains seven agency funds: the Tax Clearing Agency Fund; the 4 – H
Fund; Extension Education Fund; the Sea Oats Travel Fund; a Pesticide Recycling Grant; the Tourism Development Authority Fund; and the
3% Motor Vehicle Tax Collection Fund, which includes the three percent interest on the first month of delinquent motor vehicle taxes that
the County is required to remit to the North Carolina Department of Motor Vehicles. The Tax-Clearing Fund accounts for registered motor
vehicle property taxes that are billed and collected by the County for various municipalities and special districts within the County.
Measurement Focus, Basis of Accounting
In accordance with North Carolina General Statutes, all funds of the County are maintained during the year using the modified accrual basis
of accounting.
Government-wide, Proprietary, and Fiduciary Fund Financial Statements – The government-wide, proprietary, and fiduciary fund
financial statements are reported using the economic resources measurement focus, except for the agency funds which have no measurement
focus. The government-wide, proprietary fund and fiduciary fund financial statements are reported using the accrual basis of accounting.
Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows
take place. Non-exchange transactions, in which the County gives (or receives) value without directly receiving (or giving) equal value in
exchange, include property taxes, grants, entitlements, and donations. On an accrual basis, revenue from property taxes is recognized in the
fiscal year for which the taxes are levied. Revenue from grants, entitlements, and donations is recognized in the fiscal year in which all
eligibility requirements have been satisfied.
Amounts reported as program revenues include (1) charges to customers or applicants for goods, services, or privileges provided, (2)
operating grants and contributions, and (3) capital grants and contributions, including special assessments. Internally dedicated resources are
reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes.
Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result
from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The
principal operating revenues of the County enterprise funds are charges to customers for sales and services. The County also recognizes as
operating revenue the portion of tap fees intended to recover the cost of connecting new customers to the water and sewer system. Operating
expenses for enterprise funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues
and expenses not meeting this definition are reported as nonoperating revenues and expenses.
Governmental Fund Financial Statements – Governmental funds are reported using the current financial resources measurement focus and
the modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available.
Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, claims and
judgments, and compensated absences, which are recognized as expenditures to the extent they have matured. General capital asset
acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term debt and acquisitions under capital leases are
reported as other financing sources.
The County considers all revenues available if they are collected within 90 days after year-end, except for property taxes. Ad valorem
property taxes are not accrued as a revenue because the amount is not susceptible to accrual. At June 30, taxes receivable are materially past
due and are not considered to be an available resource to finance the operations of the current year. As of September 1, 2013, State law
altered the procedures for the assessment and collection of property taxes on registered motor vehicles in North Carolina. Effective with this
change in the law, the State of North Carolina is responsible for billing and collecting the property taxes on registered motor vehicles on
behalf of all municipalities and special tax districts. Property taxes are due when vehicles are registered. The billed taxes are applicable to
the fiscal year in which they are received. Uncollected taxes that were billed in periods prior to September 1, 2013 and for limited
registration plates are shown as a receivable in these financial statements and are offset by deferred inflows of resources.
Sales taxes and certain intergovernmental revenues, such as utilities franchise tax, collected and held by the State at year-end on behalf of the
County are recognized as revenue. Intergovernmental revenues and sales and services are not susceptible to accrual because generally they
are not measurable until received in cash. Expenditure-driven grants are recognized as revenue when the qualifying expenditures have been
incurred and all other grant requirements have been satisfied.
B-28
Under the terms of grant agreements, the County funds certain programs by a combination of specific cost-reimbursement grants, categorical
block grants, and general revenues. Thus when program expenses are incurred, there are both restricted and unrestricted net position
available to finance the program. It is the County’s policy to first apply cost-reimbursement grant resources to such programs, followed by
categorical block grants, and then by general revenues.
C. Budgetary Data
The County’s budgets are adopted as required by the North Carolina General Statutes. An annual budget is adopted for the General Fund,
the Emergency Telephone, Fire District, and Revaluation Special Revenue Funds, and the Enterprise Funds. All annual appropriations lapse
at the fiscal year-end. Project ordinances are adopted for Capital Reserve Special Revenue Fund, the Capital Projects funds, and the
Enterprise Capital Projects Funds, which are consolidated with the enterprise operating funds for reporting purposes.
All budgets are prepared using the modified accrual basis of accounting. Expenditures may not legally exceed appropriations at the
functional level for all annually budgeted funds and at the object level for multi-year funds. Amendments are required for any revisions that
alter total expenditures of any fund or that change functional appropriations by more than $5,000. The governing board must approve all
amendments. During the year, several material amendments to the original budget were necessary. The budget ordinance must be adopted
by July 1 of the fiscal year or the governing board must adopt an interim budget that covers that time until the annual ordinance can be
Assets, Liabilities, Deferred Inflows and Outflows, and Fund Equity
1. Deposits and Investments
All deposits of the County and the ABC Board are made in board-designated official depositories and are secured as required by G.S.15931. The County and the ABC Board may designate, as an official depository, any bank or savings association whose principal office is
located in North Carolina. Also, the County and the ABC Board may establish time deposit accounts such as NOW and SuperNOW
accounts, money market accounts, and certificates of deposit.
State Law [G.S. 159-30(c)] authorizes the County and the ABC Board to invest in obligations of the United States or obligations fully
guaranteed both as to principal and interest by the United States; obligations of the State of North Carolina; bonds and notes of any North
Carolina local government or public authority; obligations of certain non-guaranteed federal agencies; certain high quality issues of
commercial paper and bankers' acceptances; and the North Carolina Capital Management Trust (NCCMT).
The County and the ABC Board's investments are carried at fair value as determined by quoted market prices. The securities of the NCCMT
Cash Portfolio, an SEC registered (2a-7) money market mutual fund, are valued at fair value, which is the NCCMT's share price. The
NCCMT Term Portfolio's securities are valued at fair value.
2. Cash and Cash Equivalents
The County pools moneys from several funds to facilitate disbursement and investment and to maximize investment income. Therefore, all
cash and investments are essentially demand deposits and are considered cash and cash equivalents. The ABC Board considers demand
deposits and investments purchased with an original maturity of three months or less, which are not limited as to use, to be cash and cash
equivalents.
3. Restricted Assets
The unexpended bond proceeds of the District’s Bonds are classified as restricted assets within the Water and Sewer Districts because their
use is completely restricted to the purpose for which the bonds were originally issued. Customer deposits held by the County before any
services are supplied are restricted to the service for which the deposit was collected. Money in the Tax Reassessment Fund is also classified
as restricted assets because its use is restricted per North Carolina General Statute 153A-150. Money in the School Capital Projects Fund is
classified as restricted assets because its use is restricted per North Carolina General Statute 159-18 through 22.
B-29
Pender County Restricted Cash
Governmental Activities
General Fund
Tax revaluation
General Fund
AE&P Funds
General Fund
Sheriff - Federal and State Drug Seizure
$
255,366
Total Governmental Activities
Business-Type Activities
Rocky Point / Topsail Water
Rocky Point / Topsail Water
384,251
Customer Deposits
Unexpended bond/grant proceeds
299,398
$
939,015
$
35,561
1,011,033
Scotts Hill
Customer Deposits
Scotts Hill
Unexpended bond/grant proceeds
Maple Hill
Customer Deposits
1,441
Country Court Apartments
Customer Deposits
1,850
Water Treatment Plant
Unexpended bond/grant proceeds
515
Total Business-Type Activities
Total Restricted Cash
424,364
$
1,474,764
$
2,413,779
4. Ad Valorem Taxes Receivable
In accordance with State law [G.S. 105-347 and G.S. 159-13(a)], the County levies ad valorem taxes on property other than motor vehicles
on July 1, the beginning of the fiscal year. The taxes are due on September 1 (lien date); however, penalties and interest do not accrue until
the following January 6. These taxes are based on the assessed values as of January 1, 2013. As allowed by State law, the County has
established a schedule of discounts that apply to taxes, which are paid prior to the due date. In the County's General Fund, ad valorem tax
revenues are reported net of such discounts.
5. Allowance for Doubtful Accounts
All receivables that historically experience uncollectible accounts are shown net of an allowance for doubtful accounts. This amount is
estimated by analyzing the percentage of receivables that were written off in prior years.
6. Inventories and Prepaid Items
The inventories of the ABC Board are valued at cost (first-in, first-out), which approximates market. The inventory of the ABC Board
consists of materials and supplies held for consumption or resale. The cost of the inventory is recorded as an expense as it is consumed or
sold.
Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government-wide
and fund financial statements.
7. Capital Assets
Purchased or constructed capital assets are reported at cost or estimated historical cost. Donated capital assets are recorded at their estimated
fair value at the date of donation. Minimum capitalization costs are as follows: land, $10,000; buildings, improvements, substations, lines
and other plant and distribution systems, $5,000; infrastructure, $20,000; furniture and equipment, $5,000; and vehicles, $10,000. The cost
of normal maintenance and repairs that do not add to the value of the asset or materially extend assets’ lives are not capitalized.
The County holds title to certain Pender County Board of Education properties that have not been included in capital assets. The properties
have been deeded to the County to permit installment purchase financing of acquisition and construction costs and to permit the County to
receive refunds of sales tax paid for construction costs. Agreements between the County and the Board of Education give the Board of
Education full use of the facilities, full responsibility for maintenance of the facilities, and provide that the County will convey title to the
property back to the Board of Education, once all restrictions of the financing agreements and all sales tax reimbursement requirements have
been met. The properties are reflected as capital assets in the financial statements of the Pender County Board of Education.
B-30
Capital assets of the County are depreciated on a straight-line basis over the following estimated useful lives:
Years
Buildings
50
Improvements
25
Furniture and equipment
10
Vehicles
6
Computer equipment
3
Capital assets of the ABC Board are depreciated over their useful lives on a straight-line basis as follows:
Years
15 - 50
5-10
5
Property
Equipment
Vehicles
8. Deferred outflows/inflows of resources
In addition to assets, the statement of financial position will sometimes report a separate section for deferred outflow of resources. This
separate financial statement element, Deferred Outflows of Resources, represents a consumption of net position that applies to a future
period and so will not be recognized as an expense or expenditure until then. The County has one item that meets this criterion - a charge on
refunding that had previously been classified as an asset. In addition to liabilities, the statement of financial position can also report a
separate section for deferred inflows of resources. This separate financial statement element, Deferred Inflows of Resources, represents an
acquisition of net position that applies to a future period and so will not be recognized as revenue until then. The County has one item that
meets this criterion - prepaid taxes.
9. Long-Term Obligations
In the government-wide financial statements and in the proprietary fund types in the fund financial statements, long-term debt and other longterm obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund type
statement of net position.
In the fund financial statements for governmental fund types, the face amount of debt issued is reported as an other financing source.
10. Compensated Absences
The vacation policy of the County generally provides for the accumulation of up to 240 hours earned vacation leave with such leave being
fully vested when earned. Effective July 1, 1994, the County has elected to pay, upon satisfactory separation of service from the County
with over five years of service to the County, 25% of the accumulated sick leave value to the separating employee. Accumulated earned
leave pay at June 30, 2014, amounted to $1,653,491 in total, $1,585,561 of which represents the liability of the governmental funds and is
recorded in the government-wide statements and $67,930 is recorded in the Enterprise Funds. The 75% remaining unused sick leave
accumulated at the time of retirement may also be used in the determination of length of service for retirement benefit purposes. Since no
termination payment is involved, no accrual for this part of the sick leave is provided by the County.
ABC Board employees may accumulate up to two hundred forty hours earned vacation, and such leave is fully vested when earned.
Accumulated earned vacation amounted to approximately $21,166 at June 30, 2014. Employees can accumulate an unlimited amount of sick
leave. Sick leave does not vest, but unused sick leave accumulated at the time of retirement may be used in the determination of length of
service for retirement benefit purposes. Since the Board has no obligation for accumulated sick leave until it is actually taken, no accrual for
sick leave has been made.
B-31
11. Net Position/Fund Balances
Net Position
Net positions in government-wide and proprietary fund financial statements are classified as net investment in capital assets, restricted, and
unrestricted. Restricted net position represents constraints on resources that are either a) externally imposed by creditors, grantors,
contributors, or laws or regulations of other governments or b) imposed by law through State statute.
Fund Balances
In the governmental fund financial statements, fund balance is composed of five classifications designed to disclose the hierarchy of
constraints placed on how fund balance can be spent.
The governmental fund types classify fund balance as follows:
Nonspendable Fund Balance - This classification includes amounts that cannot be spent because they are either (a) not in spendable form or
(b) legally or contractually required to be maintained intact.
Restricted Fund Balance - This classification includes revenue sources that are restricted to specific purposes externally imposed by creditors
or imposed by law.
Restricted for Stabilization of State Statute - portion of fund balance that is restricted by State Statute [G.S. 159-8(a)].
Restricted for Public Safety - portion of fund balance that is restricted by revenue source for fire protection, emergency
services, and emergency telephone purposes.
Restricted for Economic Development - portion of fund balance that is restricted by revenue source for economic
development purposes.
Restricted for Health Department Escrow - portion of fund balance that is restricted by revenue source for the health
department.
Restricted for Sheriff's Seizures - portion of fund balance that is restricted by revenue source for Sheriff Seizures.
Restricted for School Capital Projects - portion of fund balance that is restricted for School Capital Projects.
Committed Fund Balance - Portion of fund balance that can only be used for specific purpose imposed by majority vote of Pender County's
governing body (highest level of decision making authority). Any changes or removal of specific purposes requires majority action by the
governing body.
Tax Reassessment - portion of fund balance that is committed for tax revaluation.
Automation Enhancement and Preservation - portion of fund balance that is committed for automation enhancement
projects.
Capital Outlay and Improvements - portion of fund balance that is committed for Capital Outlay and Improvements.
Assigned Fund Balance - portion of fund balance that the Pender County governing board has budgeted.
Subsequent year's expenditures - portion of fund balance that is appropriated in the next year's budget that is not already
classified in restricted or committed. The governing body approves the appropriation.
Unassigned Fund Balance - portion of fund balance that has not been restricted, committed, or assigned to specific purposes or other funds.
B-32
Pender County has a revenue spending policy that provides guidance for programs with multiple revenue sources. The Finance Officer will
use resources in the following hierarchy: bond proceeds, federal funds, State funds, local non-county funds, and county funds. For purposes
of fund balance classification expenditures are to be spent from restricted fund balance first, followed in-order by committed fund balance,
assigned fund balance, and lastly unassigned fund balance. The Finance Officer has the authority to deviate from this policy if it's in the best
interest of the County.
Pender County has also adopted a minimum fund balance policy for the General Fund which instructs management to conduct the business
of the County in such a manner that available fund balance is at least equal to or greater than 30% of current fiscal year expenditures.
However, effective October 2013, the County changed that policy to state that the unassigned fund balance should be equal to or greater than
20% of current fiscal year expenditures. Any portion of the General Fund balance in excess of 20% of budgeted expenditures may be
appropriated for one-time expenditures and may not be used for any purpose that would obligate the County in a future budget.
NOTE 2: Stewardship, Compliance and Accountability
A. Significant Violations of Finance-Related Legal and Contractual Provisions
1. Noncompliance with North Carolina General Statutes
In response to issues noted in the previous audit, the County hired two retired finance officers to assist them in reconciling their records.
Both of these were hired after the year end, which did not give adequate time for them to make necessary changes for the year ended June
30, 2014. With that said, the same issues were noted for the current audit, but they should be remedied during the subsequent year.
The financial records of the County were not reconciled timely. None of the reconciliation were prepared prior to the year end.
The County failed to meet some of the Budget Requirements per NC General Statute 159. A budget was approved, and amendments were
brought before the Board for approval. Most of these amendments were never recorded on the County's financial records. In addition,
expenses were paid and coded to line items that should not have had expenditures. Therefore, several line items were overspent when proper
reclassifications were made. In the general fund, public safety was overspent by $410,817, economic and physical development by
$184,989, education by $20,497, and debt service by $227,211.
There was approval in the minutes of various capital leases and projects throughout the year, but they were also not set up in the financial
records. Entries were made while reconciling the accounts, which created budget violations because the necessary amendments were not
made.
Reports were not filed timely with the State Treasurer's office, Bond Rating agencies, and grantor agencies, as the audit could not be
completed until the books were reconciled.
There were several funds that were still open in the ledger that have been closed out for several years. In addition, there are several projects
that should be closed out but are still open on the books. A significant amount of time needs to be spent cleaning up the ledger to close out
funds that do not exist anymore, and to close out projects.
2. Deficit Fund Balance or Net Position of Individual Funds
The County reported deficit fund balances in the following accounts:
Fire Service District
Rescue District
Vehicle Replacement Fund
$
$
$
164,837
88,447
214,063
These deficit balances were primarily a result of timing differences between collecting the revenue and spending the money. The County
will monitor these more closely in the future.
3. Revenue Bond Covenants
As discussed in the Revenue Bond note under the Long-Term Liability section, the County failed to meet covenants related to the Revenue
Bond. Noncompliance related to not meeting the debt coverage ratio and not filing a timely audit report. The Board is currently reviewing
the covenants to make sure that they remedy any violations of the covenants.
B-33
NOTE 3: Detail Notes on All Funds
A. Assets
1. Deposits
All of the County's and the ABC Board's deposits are either insured or collateralized by using one of two methods. Under the Dedicated
Method, all deposits exceeding the federal depository insurance coverage level are collateralized with securities held by the County's or the
ABC Board's agents in these units’ names. Under the Pooling Method, which is a collateral pool, all uninsured deposits are collateralized
with securities held by the State Treasurer's agent in the name of the State Treasurer. Since the State Treasurer is acting in a fiduciary
capacity for the County and the ABC Board, these deposits are considered to be held by their agents in the entities’ name. The amount of the
pledged collateral is based on an approved averaging method for non-interest bearing deposit and the actual current balance for interestbearing deposits. Depositories using the Pooling Method report to the State Treasurer the adequacy of their pooled collateral covering
uninsured deposits. The State Treasurer does not confirm this information with the County or the ABC Board, or with the escrow agent.
Because of the inability to measure the exact amount of collateral pledged for the County and the ABC Board under the Pooling Method, the
potential exists for the under-collateralization, and this risk may increase in periods of high cash flows. However, the State Treasurer of
North Carolina enforces strict standards of financial stability for each depository that collateralizes public deposits under the Pooling
Method.
The State Treasurer enforces standards of minimum capitalization for all pooling method financial institutions. The County and the ABC
Board rely on the State Treasurer to monitor those financial institutions. The County analyzes the financial soundness of any other financial
institution used by the County. The County complies with the provisions of G.S. 159-31 when designating official depositories and
verifying that deposits are properly secured. The ABC Board has no formal policy regarding custodial credit risk for deposits.
At June 30, 2013, the County's deposits had a carrying amount of $20,298,674 and a bank balance of $20,869,410. Of the bank balance,
$1,250,000 was covered by federal depository insurance and the remaining $19,619,410 was covered by collateral held under the Pooling
Method. Of this amount, $1,742 was cash on hand.
At June 30, 2014, the carrying amount of deposits for Pender County ABC Board was $709,488 and the bank balance was $674,546. At
June 30, 2014, the Board has a concentration of credit risk in that deposits with a carrying amount of $599,420 and bank balances of
$569,191 were on deposit in one financial institution. These exceeded the FDIC deposit limit of $250,000 for interest bearing accounts.
Both First Citizens Bank and Trust Company and Bank of America have selected the Pooling Method to secure public deposits. Cash on
hand totaled $800.
2. Investments
As of June 30, 2014, the County’s investments consisted of $9,906,601 in the North Carolina Capital Management Trust’s cash Portfolio,
which carried a credit rating of AAAm by Standard and Poor’s. The County has no policy on credit risk.
B-34
3.
Receivables
Receivables at the government-wide level at June 30, 2014 were as follows:
Taxes and
Related Accrued
Interest
Accounts
Governmental Activities:
General
Other Governmental
Total Receivables
Allowance for Doubtful Accounts
Total Governmental Activities
Business Type Activities:
Maple Hill Water Fund
Sewer Fund
Resource Recovery
Section 8 Administration
Country Court
Rocky Point Water & Sewer
Water Treatment Plant
Scotts Hill Water & Sewer
Total Receivables
Allowance for doubtful accounts
Total Business-Type Activities
Due from Other
Governments
Sales Tax
$
-
$
$
-
$
1,724,274
$
190,276
47,628 $
130,666
8,649
956,554
56,716
1,200,213
(522,596)
513,829
-
$
$
$
$
677,617
$
2,369,941 $
504,807
2,874,748
(1,150,474)
513,829
(160,144)
353,685
156,016
34,260
190,276
-
Other
Total
$2,743,945
841,445
3,585,390
-
$
17,644
24,794
42,438
-
$
5,287,546
1,405,306
6,692,852
(1,150,474)
$
3,585,390
$
42,438
$
5,542,378
-
$
-
$
42,177
42,177
-
$
47,628
42,177
644,495
8,649
956,554
56,716
1,756,219
(682,740)
-
$
-
$
42,177
$
1,073,479
$
970,480
The due from other governments that is owed to the County consists of the following
4.
Local Option Sales Tax
Franchise Tax
Option 4 Redistribution
DMV - Vehicle Tax
Health Grants
DSS Grants
$2,296,169
70,210
65,080
267,965
382,825
503,141
Total
$3,585,390
Receivables - Allowances for Doubtful Accounts:
The amounts reported for County receivables are net of the following allowances for doubtful accounts
Governmental Activities:
General:
Ad Valorem Taxes
Special Revenue:
Ad Valorem Taxes
179,994
Total Governmental Activities
Business-type Activities:
Maple Hill Water Fund:
Allowance
Resource Recovery
Allowance
Special District
Rocky Point Water and Sewer Fund:
Allowance
Scott's Hill Water and Sewer Fund:
Allowance
$
1,150,474
$
19,130
17,459
160,144
467,280
18,727
$
Total Business-type Activities
B-35
682,740
5. Capital Assets
Capital asset activity for the year ended June 30, 2014, was as follows:
Beginning
Ending
Balances
Balances
July 1, 2013
Governmental Activities
Additions
Retirements
Transfers
June 30, 2014
Capital assets not being depreciated:
Land
$
Construction in Progress
Total capital assets not being depreciated
10,276,114
$
-
$
-
$
-
$
10,276,114
3,724,250
2,264,901
-
(3,347,295)
2,641,856
14,000,364
2,264,901
-
(3,347,295)
12,917,970
25,245,001
Other capital assets:
21,728,683
169,023
-
3,347,295
Intangibles
Buildings & Improvements
1,497,986
-
-
-
1,497,986
Equipment
2,918,727
31,245
-
(47,746)
2,902,226
Vehicles
Total capital assets being depreciated
3,987,965
786,785
266,431
47,746
4,556,065
30,133,361
987,053
266,431
3,347,295
34,201,278
Less accumulated depreciation for:
11,119,391
709,305
-
-
11,828,696
Intangibles
Buildings & Improvements
984,404
141,533
-
-
1,125,937
Equipment
2,320,124
150,508
-
(114,572)
2,356,060
Vehicles
2,653,253
492,580
208,940
114,572
3,051,465
17,077,172
1,493,926
208,940
-
18,362,158
3,347,295
15,839,120
Total accumulated depreciation
Total capital assets being depreciated, net
Governmental activities capital assets, net
13,056,189
$
27,056,553
Depreciation expense was charged to functions of the primary government as follows:
Governmental activities
General governmental
$
506,569
Public Safety
579,581
Human Services
259,186
Education
58,478
Economic and physical development
31,845
Cultural and Recreational
58,267
Total depreciation expense
$
1,493,926
B-36
$
(506,873) $
57,491
$
$
28,757,090
Business-type activities
Beginning
SEWER FUND
Ending
Balances
Increases
Decreases
Balances
Public Utilities Fund
Capital assets not being depreciated:
Land
$
-
Construction in progress
Total capital assets not being depreciated
$
-
$
-
$
-
-
-
-
-
-
-
-
-
Capital assets being depreciated:
Buildings and improvements
256,544
-
-
256,544
Intangibles
-
-
-
-
Vehicles
-
-
-
-
16,295
-
-
16,295
272,839
-
-
272,839
Equipment
Total capital assets being depreciated
Less accumulated depreciation for:
Buildings and improvements
146,596
6,283
-
152,879
Intangibles
-
-
-
-
Vehicles
-
-
-
-
16,295
-
-
16,295
Equipment
Total accumulated depreciation
162,891
Sewer capital assets, net
$
$
6,283
$
-
109,948
169,174
$
Beginning
Maple Hill
103,665
Ending
Balances
Increases
Decreases
Balances
Public Utilities Fund
Capital assets not being depreciated:
Land
$
Construction in progress
Total capital assets not being depreciated
4,930
$
-
$
-
$
4,930
4,553,868
-
4,426,968
126,900
4,558,798
-
4,426,968
131,830
Capital assets being depreciated:
Buildings and improvements
1,202,031
4,426,968
-
5,628,999
Intangibles
-
-
-
-
Vehicles
-
-
-
-
Equipment
-
-
-
-
1,202,031
4,426,968
-
5,628,999
Total capital assets being depreciated
Less accumulated depreciation for:
Buildings and improvements
622,352
140,283
-
762,635
Intangibles
-
-
-
-
Vehicles
-
-
-
-
Equipment
-
-
-
-
-
762,635
Total accumulated depreciation
622,352
Maple Hill capital assets, net
$
B-37
5,138,477
$
140,283
$
$
4,998,194
Business-type activities (continued):
RP/T Water
Balances
Increases
Decreases
Balances
Public Utilities Fund
Capital assets not being depreciated:
Land
$
Construction in progress
Total capital assets not being depreciated
343,493
$
-
$
-
$
343,493
19,239,361
-
19,228,933
10,428
19,582,854
-
19,228,933
353,921
7,059,454
19,228,933
-
26,288,387
9,485
-
-
9,485
390,358
80,328
-
470,686
Capital assets being depreciated:
Buildings and improvements
Intangibles
Vehicles
Equipment
Total capital assets being depreciated
33,907
-
-
33,907
7,493,204
19,309,261
-
26,802,465
1,828,998
665,030
-
2,494,028
8,766
-
-
8,766
266,929
54,675
-
321,604
Less accumulated depreciation for:
Buildings and improvements
Intangibles
Vehicles
Equipment
17,219
Total accumulated depreciation
2,121,912
RP/T capital assets, net
$
$
719,705
$
-
17,219
-
2,841,617
24,954,146
$
Beginning
Section 8
24,314,769
Ending
Balances
Increases
Decreases
Balances
Public Utilities Fund
Capital assets not being depreciated:
Land
$
Construction in progress
Total capital assets not being depreciated
-
$
-
$
-
$
-
-
-
-
-
-
-
-
-
Capital assets being depreciated:
Buildings and improvements
Intangibles
Vehicles
Equipment
Total capital assets being depreciated
-
-
-
-
9,383
-
-
9,383
15,615
-
-
15,615
-
-
-
-
24,998
-
-
24,998
Less accumulated depreciation for:
-
-
-
-
Intangibles
Buildings and improvements
8,287
938
-
9,225
Vehicles
4,945
3,123
-
8,068
-
-
-
-
-
17,293
Equipment
Total accumulated depreciation
13,232
Section 8 capital assets, net
$
B-38
11,766
$
4,061
$
$
7,705
Beginning
Country Court
Ending
Balances
Increases
Decreases
Balances
Public Utilities Fund
Capital assets not being depreciated:
Land
$
-
Construction in progress
$
-
$
-
$
-
-
-
-
-
-
-
-
-
333,617
-
-
333,617
1,200
-
-
1,200
Vehicles
-
-
-
-
Equipment
-
-
-
-
334,817
-
-
334,817
155,875
7,590
-
163,465
1,060
120
-
1,180
Vehicles
-
-
-
-
Equipment
-
-
-
-
-
164,645
Total capital assets not being depreciated
Capital assets being depreciated:
Buildings and improvements
Intangibles
Total capital assets being depreciated
Less accumulated depreciation for:
Buildings and improvements
Intangibles
Total accumulated depreciation
156,935
Country Court capital assets, net
$
$
7,710
$
177,882
$
170,172
Business-type activities (continued):
Beginning
Solid Waste
Ending
Balances
Increases
Decreases
Balances
Public Utilities Fund
Capital assets not being depreciated:
Land
$
Construction in progress
Total capital assets not being depreciated
66,770
$
-
$
-
$
66,770
-
-
-
-
66,770
-
-
66,770
Capital assets being depreciated:
Buildings and improvements
1,857,726
-
-
1,857,726
Intangibles
-
-
-
-
Vehicles
-
-
-
-
47,795
-
-
47,795
1,905,521
-
-
1,905,521
Equipment
Total capital assets being depreciated
Less accumulated depreciation for:
Buildings and improvements
527,268
21,321
-
548,589
Intangibles
-
-
-
-
Vehicles
-
-
-
-
47,887
-
-
47,887
Equipment
Total accumulated depreciation
575,155
Solid Waste capital assets, net
$
B-39
1,397,136
$
21,321
$
-
596,476
$
1,375,815
Beginning
Scott's Hill Water & Sewer
Ending
Balances
Increases
Decreases
Balances
Public Utilities Fund
Capital assets not being depreciated:
Construction in progress
$
Total capital assets not being depreciated
2,261,160
$
23,931
$
2,285,091
$
-
2,261,160
23,931
2,285,091
-
825,000
2,285,091
-
3,110,091
-
-
-
-
21,377
-
-
21,377
Capital assets being depreciated:
Buildings and improvements
Intangibles
Vehicles
Equipment
Total capital assets being depreciated
-
-
-
-
846,377
2,285,091
-
3,131,468
187,344
77,752
-
265,096
-
-
-
-
7,125
4,275
-
11,400
Less accumulated depreciation for:
Buildings and improvements
Intangibles
Vehicles
Equipment
-
Total accumulated depreciation
194,469
Scott's Hill Water & Sewer capital assets, net
$
$
82,027
$
-
-
-
276,496
2,913,068
$
Beginning
Water Treatment Plant
2,854,972
Ending
Balances
Increases
Decreases
Balances
Public Utilities Fund
Capital assets not being depreciated:
Construction in progress
$
Total capital assets not being depreciated
33,008,618
$
1,257,041
$
-
$
34,265,659
33,008,618
1,257,041
-
34,265,659
944,782
-
-
944,782
-
-
-
-
68,691
-
-
68,691
Capital assets being depreciated:
Buildings and improvements
Intangibles
Vehicles
Equipment
Total capital assets being depreciated
22,720
-
-
22,720
1,036,193
-
-
1,036,193
404
970
-
1,374
-
-
-
-
12,216
11,349
-
23,565
Less accumulated depreciation for:
Buildings and improvements
Intangibles
Vehicles
Equipment
2,024
Total accumulated depreciation
14,644
Water Treatment Plant capital assets, net
$
B-40
34,030,167
2,272
$
14,591
$
-
4,296
-
29,235
$
35,272,617
Beginning
Waste Water Treatment Plant
Ending
Balances
Increases
Decreases
Balances
Public Utilities Fund
Capital assets not being depreciated:
Construction in progress
$
Total capital assets not being depreciated
2,779,992
$
1,580,634
$
-
$
4,360,626
2,779,992
1,580,634
-
4,360,626
Capital assets being depreciated:
Buildings and improvements
3,024,206
-
-
3,024,206
Intangibles
-
-
-
-
Vehicles
-
-
-
-
Equipment
-
-
-
-
3,024,206
-
-
3,024,206
Total capital assets being depreciated
Less accumulated depreciation for:
Buildings and improvements
144,910
157,511
-
302,421
Intangibles
-
-
-
-
Vehicles
-
-
-
-
Equipment
-
-
-
-
-
302,421
Total accumulated depreciation
144,910
Waste Water Treatment Plant capital assets, net
$
$
157,511
$
5,659,288
$
Beginning
PCP Wastewater Treatment Plant
7,082,411
Ending
Balances
Increases
Decreases
Balances
Public Utilities Fund
Capital assets not being depreciated:
Construction in progress
$
-
Total capital assets not being depreciated
$
-
PCP Waste Water Treatment Plant capital assets, net
$
1,242,226
$
-
1,242,226
$
-
-
1,242,226
$
Beginning
Moore's Creek Water District
1,242,226
1,242,226
Ending
Balances
Increases
Decreases
Balances
Public Utilities Fund
Capital assets not being depreciated:
Construction in progress
$
-
Total capital assets not being depreciated
$
-
Moore's Creek Water District capital assets, net
$
106,732
$
-
106,732
$
-
-
$
Beginning
Central Pender Water District
106,732
106,732
106,732
Ending
Balances
Increases
Decreases
Balances
Public Utilities Fund
Capital assets not being depreciated:
Construction in progress
$
Total capital assets not being depreciated
-
$
105,826
105,826
$
-
$
-
105,826
105,826
Central Pender Water District capital assets, net
$
-
$
105,826
Business-type activities capital assets, net
$ 74,391,878
$
77,635,104
Construction Commitments
The government has active construction projects as of June 30, 2014. The projects include various school construction projects, as well as
water district projects. At June 30, 2014, the government’s commitments with contractors are as follows:
Project
Hampstead Annex
Pender Commerce Park
Commerce Park WWTP (Phase I)
Total
Spent-to-date
$ 1,515,220
1,242,226
439,590
$ 3,197,036
B-41
Remaining
Commitment
$
2,260,406
1,457,806
1,454,290
$
5,172,502
Discretely presented component units
Activity for the ABC Board for the year ended June 30, 2014, was as follows:
Beginning
Ending
Balances
Increases
Decreases
Balances
Capital assets not being depreciated:
Land
$
6,500
Total capital assets not being depreciated
$
-
$
-
$
6,500
6,500
-
-
6,500
Buildings
17,147
-
-
17,147
Building addition
96,564
-
-
96,564
Roof Replacement
29,695
-
-
29,695
229,698
17,215
-
246,913
20,622
-
-
20,622
393,726
17,215
-
410,941
Capital assets being depreciated:
Equipment
Vehicle
Total capital assets being depreciated
Less accumulated depreciation for:
Buildings
17,147
-
-
17,147
Building addition
66,874
1,931
-
68,805
Roof Replacement
21,941
1,980
-
23,921
192,207
17,406
-
209,613
Equipment
Vehicle
20,622
Total accumulated depreciation
318,791
ABC capital assets, net
$
$
21,317
$
-
20,622
-
340,108
81,435
$
77,333
B. Liabilities
1. Payables
Payables at the government-wide level at June 30, 2014, were as follows:
Governmental Activities:
General
Other Governmental
Internal Service
Total Governmental Activities
Business-type Activities
Maple Hill Water Fund
Sewer Fund
Resource Recovery
Section 8 Administration
Country Court Apts
Scott's Hill Water & Sewer
Water Treatment Plant
Rocky Point Water & Sewer
Wastewater Treatment Plant
Moore's Creek Water District
Total Business-Type Activities
Vendors
$
$
$
$
Salaries and
Benefits
2,422,231
700,292
3,122,523
$
801,790
1,735
599,066
$ 1,402,591
$
5,569
28
390,362
27,641
487
691
141,850
115,810
283,153
12,055
977,646
$
$
B-42
$
1,465
5,222
2,680
361
8,063
16,879
34,670
Other
Accrued Interest
$
$
578,518
578,518
$
651
8,541
61,772
65,785
136,749
$
$
$
Total
-
$
-
$
$
$
3,802,539
702,027
599,066
5,103,632
7,685
28
395,584
30,321
487
9,593
211,685
198,474
283,153
12,055
1,149,065
2. Pension Plan Obligations
a. Local Governmental Employees' Retirement System of North Carolina
Plan Description. Pender County and the ABC Board contribute to the statewide Local Governmental Employees' Retirement System
(LGERS), a cost-sharing multiple-employer defined benefit pension plan administered by the State of North Carolina. LGERS provides
retirement and disability benefits to plan members and beneficiaries. Article 3 of G.S. Chapter 128 assigns the authority to establish and
amend benefit provisions to the North Carolina General Assembly. The Local Governmental Employees' Retirement System is included in
the Comprehensive Annual Financial Report (CAFR) for the State of North Carolina. The State's CAFR includes financial statements and
required supplementary information for LGERS. The report may be obtained by writing to the Office of the State Controller, 1410 Mail
Service Center, Raleigh, North Carolina 27699-1410, or by calling (919) 981-5454.
Funding Policy. Plan members are required to contribute six percent of their annual covered salary. The County and the ABC Board are
required to contribute at an actuarially determined rate. For the County, the current rate for employees not engaged in law enforcement and
for law enforcement officers is 7.07% and 7.28%, respectively, of annual covered payroll. For the ABC Board, the current rate for
employees not engaged in law enforcement is 7.07% of annual covered payroll. The contribution requirements of members and of Pender
County and the ABC Board are established and may be amended by the North Carolina General Assembly. The County's contributions to
LGERS for the years ended June 30, 2014, 2013, and 2012 were $1,022,973, $948,947, and $938,888, respectively. The ABC Board’s
contributions to LGERS for the years ended June 30, 2014, 2013, and 2012 were $26,826, $23,844, and $26,744, respectively. The
contributions made by the County and the ABC Board equaled the required contributions for each year.
b. Law Enforcement Officers' Special Separation Allowance
1. Plan Description:
Pender County administers a public employee retirement system (the "Separation Allowance"), a single-employer defined benefit pension
plan that provides retirement benefits to the County's qualified sworn law enforcement officers. The Separation allowance is equal to .85
percent of the annual equivalent of the base rate of compensation most recently applicable to the officer for each year of creditable service.
The retirement benefits are not subject to any increases in salary or retirement allowances that may be authorized by the General Assembly.
Article 12D of G.S. Chapter 143 assigns the authority to establish and amend benefit provisions to the North Carolina General Assembly.
All full-time County law enforcement officers are covered by the Separation Allowance. At December 31, 2013, the Separation Allowance's
membership consisted of:
Retirees receiving benefits
Terminated plan members entitled
to but not yet receiving benefits
Active plan members
Total
1
0
67
68
A separate report was not issued for the plan.
2. Summary of Significant Accounting Policies:
Basis of Accounting - Financial statements for the Separation Allowance are prepared using the accrual basis of accounting. Employer
contributions to the plan are recognized when due and when the County has made a formal commitment to provide the contributions.
Benefits are recognized when due and payable in accordance with the terms of the plan.
Method Used to Value Investments - Investments are reported at fair value. Short-term debt money market debt instruments, deposits,
repurchase agreements, and the North Carolina Capital Management Trust investments are reported at cost or amortized cost, which
approximates fair value. Certain longer term United States Government and United States Agency securities are valued at the last reported
sales price.
B-43
3. Contributions:
The County is required by article 12D of G.S. Chapter 143 to provide these retirement benefits and has chosen to fund the benefit payments
on a pay as you go basis through appropriations made in the General Fund operating budget. The County's obligation to contribute to this
plan is established and may be amended by the North Carolina General Assembly. There were no contributions made by employees.
The annual required contributions for the fiscal year ended June 30, 2014 was determined as part of the December 31, 2013 actuarial
valuation using the projected unit credit actuarial cost method. The actuarial assumptions included (a) 5.00% investment rate of return (net
of administrative expenses) and (b) projected salary increases of 4.25 – 7.85% per year. Both (a) and (b) included an inflation component of
3.00%. The assumptions did not include post-retirement benefit increases. The actuarial value of assets was determined using the market
value of investments. The unfunded actuarial accrued liability is being amortized as a level percentage of projected pay on a closed basis.
The remaining amortization period at December 31, 2013 was 17 years.
Annual Pension Cost and Net Pension Obligation - The County's annual pension cost and net pension obligation to the Separation
Allowance for the current year was as follows:
Annual Required Contribution
Interest on Net Pension Obligation
Adjustments to Annual Required Contributions
Annual Pension Cost
Contributions Made
Increase (Decrease) in Net Pension Obligation
Net Pension Obligation Beginning of Year
Net Pension Obligation End of Year
$
$
$
$
77,388
24,558
(40,016)
61,930
(5,477)
56,453
491,159
547,612
3-Year Trend Information
Year Ended
6-30-12
6-30-13
6-30-14
Cost (APC)
64,219
67,049
61,930
APC Contributed
11.12%
14.07%
8.84%
Obligation
433,544
491,159
547,612
4. Funded Status and Funding Progress
As of December 31, 2013, the most recent actuarial valuation date, the plan was not funded. The actuarial accrued liability for benefits was
$531,578, and the actuarial value of assets was $0, resulting in an unfunded actuarial accrued liability (UAAL) of $581,037. The covered
payroll (annual payroll of active employees covered by the plan) was $2,382,860, and the ratio of the UAAL to the covered payroll was
24.38%.
The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents
multiyear trend information about whether the actuarial value of plan assets are increasing or decreasing over time relative to the actuarial
accrued liability for benefits.
c. Supplemental Retirement Income Plan for Law Enforcement Officers
Plan Description - The County contributes to the Supplemental Retirement Income Plan (Plan), a defined contribution pension plan
administered by the Department of the State Treasurer and a Board of Trustees. The Plan provides retirement benefits to law enforcement
officers employed by the County. Article 5 of G.S. Chapter 135 assigns the authority to establish and amend benefit provisions to the North
Carolina General Assembly. The Supplemental Retirement Income Plan for Law Enforcement Officers is included in the Comprehensive
Annual Financial Report (CAFR) for the State of North Carolina. The State’s CAFR includes the pension trust fund financial statements for
the Internal Revenue Code Section 401(k) plan that includes the Supplemental Retirement Income Plan for Law Enforcement Officers. That
report may be obtained by writing to the Office of the State Controller, 1410 Mail Service Center, Raleigh, North Carolina 27699-1410, or
by calling (919) 981-5454.
Funding Policy - Article 12E of G.S. Chapter 143 requires the County to contribute each month an amount equal to five percent of each
officer's salary, and all amounts contributed are vested immediately. Also, the law enforcement officers may make voluntary contributions to
the plan. Contributions for the year ended June 30, 2014 were $142,042, which consisted of $117,924 from the County and $24,118 from
the law enforcement officers.
B-44
d. Deferred Compensation Plan
The County offers its employees a deferred compensation plan created in accordance with Internal Revenue Code Section 457. The plan,
which is available to all County employees, permits them to defer a portion of their salary until future years. The deferred compensation is
not available to employees until termination, retirement, death or unforeseeable emergency.
The County has complied with changes in the laws which govern the County’s Deferred Compensation Plan, requiring all assets of the plan
to be held in trust for the exclusive benefit of the participants and their beneficiaries. Formerly, the undistributed amounts that had been
deferred by the plan participants were required to be reported as assets of the County. Effective for the current fiscal year and in accordance
with GASB Statement 32, "Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans, " the
County's Deferred Compensation Plan is no longer reported within the County's Agency Funds.
e. Register of Deeds' Supplemental Pension Fund
Plan Description . Pender County also contributes to the Register of Deeds' Supplemental Pension Fund (Fund), a noncontributory, defined
contribution plan administered by the North Carolina Department of State Treasurer. The Fund provides supplemental pension benefits to
any county register of deeds that is retired under the Local Government Employees' Retirement System (LGERS) or an equivalent locally
sponsored plan. Article 3 of G.S. Chapter 161 assigns the authority to establish and amend benefit provisions to the North Carolina General
Assembly. The Register of Deeds’ Supplemental Pension Fund is included in the Comprehensive Annual Financial Report (CAFR) for the
State of North Carolina. The State’s CAFR includes financial statements and required supplementary information for the Register of Deeds’
Supplemental Pension fund. That report may be obtained by writing to the Office of the State Controller, 1410 Mail Service Center, Raleigh,
North Carolina 27699-1410, or by calling (919) 981-5454.
Funding Policy. On a monthly basis, the County remits to the Department of State Treasurer an amount equal to one and one-half percent
(1.5%) of the monthly receipts collected pursuant to Article 3 of G.S. 161. Immediately following January 1 of each year, the Department of
State Treasurer divides ninety-three percent (93%) of the amount in the Fund at the end of the preceding calendar year into equal shares to be
disbursed as monthly benefits. The remaining seven percent (7%) of the Fund's assets may be used by the State Treasurer in administering
the Fund. For the fiscal year ended June 30, 2014, the County’s required and actual contributions were $5,484.
f.
Other Post-employment Benefits
Plan Description . According to a County resolution, the County administers a single-employer defined benefit Healthcare Benefits Plan
(the HCB Plan). This plan provides postemployment health care benefits to retirees of the County who participate in the North Carolina
Local Governmental Employees’ Retirement System (System) and have at least twenty years of creditable service with the County. The
County pays the full cost of coverage for these benefits through private insurers. Also, retirees can purchase coverage for their dependents at
the County’s group rates. The Board of Commissioners may amend the benefit provisions. A separate report was not issued for the plan
Membership of the HCB Plan consisted of the following at December 31, 2012, the date of latest actuarial valuation
General
Employees
Retirees and dependents receiving benefits
Terminated plan members entitled to but not yet receiving benefits
Active plan members
Total
11
0
330
341
Law Enforcement
Officers
1
0
63
64
Funding Policy . The County pays the full cost of coverage for the healthcare benefits paid to qualified retirees under a County resolution
that can be amended by the Board of Commissioners. The County's members can purchase coverage for their dependents at the County's
group rates. The County has chosen to fund the healthcare benefits on a pay as you go basis.
B-45
The current ARC rate is 6.03% of annual covered payroll. For the current year, the County contributed $57,413 or 4.15% of annual covered
payroll. The County obtains healthcare coverage through private insurers. The County's required contributions, under a Board resolution,
for employees not engaged in law enforcement and for law enforcement officers represented .41% and .12% of covered payroll, respectively.
There were no contributions made by employees. The County's obligation to contribute to HCB Plan is established and may be amended by
the Board of Commissioners.
Summary of Significant Accounting Policies . Postemployment expenditures are made from the General Fund, which is maintained on the
modified accrual basis of accounting. No funds are set aside to pay benefits and administration costs. These expenditures are paid as they
come due.
Annual OPEB Cost and Net OPEB Obligation . The County's annual other postemployment benefit (OPEB) cost (expense) is calculated
based on the annual required contribution of the employer (ARC) , an amount actuarially determined in accordance with the parameters of
GASB Statement 45. The ARC represents a level of funding that, if paid on an ongoing basis is projected to cover normal cost each year and
amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years.
The following table shows the components of the County's annual OPEB cost for the current year, the amount actually contributed to the
plan, and changed in the County's net OPEB obligation for the postemployment healthcare benefits:
Annual required contribution
Interest on net OPEB obligation
Adjustment to annual required contribution
Annual OPEB cost (expense)
Contributions made
Increase (decrease) in net OPEB obligation
Net OPEB obligation, beginning of year
Net OPEB obligation, end of year
$
$
905,701
164,792
(157,428)
913,065
(57,414)
855,651
4,981,219
5,836,870
The County's annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for 2014 were as
follows:
For Year Ended
June 30
2012
2013
2014
Annual
OPEB Cost
$ 1,090,728
$
913,065
$
913,065
Percentage of Annual
OPEB Cost Contributed
4.94%
5.70%
6.29%
Net OPEB
Obligation
$ 4,119,799
$ 4,981,219
$ 5,836,870
Funded Status and Funding Progress . As of December 31, 2012, the most recent actuarial valuation date, the plan was not funded. The
actuarial accrued liability for benefits and, thus, the unfunded actuarial liability (UAAL) was $8,112,003 The covered payroll (annual
payroll of active employees covered by the plan) was $13,978,699, and the ratio of UAAL to the covered payroll was 58.03 percent.
Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of
occurrence of events far into the future. Examples include assumptions about future employment, mortality, and healthcare trends. Amounts
determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as
actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress,
presented as required supplementary information following the notes to the financial statements, presents multiyear trend information about
whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits.
Actuarial Methods and Assumptions . Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as
understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical
pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used
include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value assets,
consistent with the long-term perspective of the calculations.
B-46
In the December 31,2012, actuarial valuation, the projected unit credit method was used. The actuarial assumptions included a 4.0 percent
investment rate of return (net of administrative expenses), which is a blended rate of the expected long-term investment returns on plan assets
and on the employer's own investments calculated based on the funded level of the plan at the valuation date. The rate included a 3.00
percent inflation assumption. The medical cost trend rate varied between 8.50 to 5.00 percent. The actuarial value of assets was determined
using techniques that spread the effects of short-term volatility in the market value of investments over a five year period. The UAAL is
being amortized as a level percentage of projected unit credit on a level percent of pay, open basis. The remaining amortization period at
December 31, 2012, was 30 years.
g. Other Employment Benefits
The County has elected to provide death benefits to employees through the Death Benefit Plan for members of the Local Governmental
Employees' Retirement System (Death Benefit Plan), a multiple-employer, State-administered, cost-sharing plan funded on a one-year term
cost basis. The beneficiaries of those employees who die in active service after one year of contributing membership in the System, or who
die within 180 days after retirement or termination of service and have at least one year of contributing membership service in the System at
the time of death are eligible for death benefits. Lump sum death benefit payments to beneficiaries are equal to the employee's 12 highest
months salary in a row during the 24 months prior to the employee’s death, but the benefit will be a minimum of $25,000 and will not exceed
$50,000. All death benefit payments are made from the Death Benefit Plan. The County has no liability beyond the payment of monthly
contributions. The contributions to the Death Benefit Plan cannot be separated between the post employment benefit amount and the other
benefit amount. The County considers these contributions to be immaterial.
3. Deferred Outflows and Inflows of Resources
The amount of deferred outflows of resources is a charge on refunding of debt of $3,544,135.
Prepaid taxes not yet earned (General)
Taxes Receivable, net (General)
Taxes Receivable, net (Special Revenue)
Total
$
$
Unavailable
Revenue
60,574
1,318,936
324,813
1,704,323
$
$
Unearned
Revenue
60,574
60,574
4. Risk Management
The County is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to
employees; and natural disasters. The County is a participant in one insurance pool administered by the North Carolina Association of
County Commissioners Liability and Property Pool, which provides property and general liability coverage.
The County obtains general, auto, and employment practices liability coverage of $2 million per occurrence, auto physical damage coverage
for owned autos at actual cash value, crime coverage of $250,000 per occurrence, and property coverage equal to replacement cost values of
owned property. The pools are audited annually by certified public accountants, and the audited financial statements are available to the
County upon request.
Beginning July 1, 2005, the County became partially self-insured for group medical and prescription drug coverage and self-insured for
group dental coverage. The County contracts with Employers Direct Health beginning in 2007 to administer the program. The contract
provides for stop-loss reinsurance protection on an aggregate and specific basis. Aggregate stop-loss insures cumulative covered claims
above the annual attachment point during any contract period. Specific stop-loss insures covered claims above $75,000 for any one
participant after the County has satisfied an additional $100,000 aggregating specific deductible in any contract period. The group dental
coverage has limited ability due to plan design and no stop-loss reinsurance is purchased.
For workers compensation claims, the County contracts with the North Carolina Association of County Commissioners to administer its
workers compensation program.
B-47
The liability of unpaid claims of the County as of June 30, 2014 is as follows:
Fiscal Year Ended June 30,
2014
2013
$
262,033 $
185,921
Unpaid claims at July 1
Incurred claims and judgments for current and prior year events
where the County has retained risk of loss
3,288,889
2,678,322
Payments on claims for current and prior year events
where the County has retained risk of loss
2,951,856
2,602,210
Unpaid claims at June 30
$
599,066
$
262,033
In accordance with G.S. 159-29, the County’s employees that have access to $100 or more at any given time of the County’s funds are
performance bonded through a commercial surety bond. The Director of Finance and the County Manager are individually bonded for
$100,000. The Tax Collector, Director of Utilities, and Register of Deeds are each individually bonded for $50,000. The Deputy Tax
Collector and Deputy Finance Director are each individually bonded for $30,000.The Housing Director is bonded for $25,000.
The County carries flood insurance through the North Carolina Association of County Commissioners, with a deductible of $25,000 per
occurrence. Flood coverage is excluded on property located in the 100 year flood zone as designated by the Federal Emergency Management
Agency.
The County continues to carry commercial insurance for all other risks of loss. There have been no significant reductions in insurance
coverage from the previous year and settled claims have not exceeded coverage in any of the past three fiscal years
6. Contingent Liabilities
The County is a defendant in various lawsuits. Management of the County and its respective legal counsel feels that these claims can be
successfully defended and intend to resist the allegations of these matters in every way and do not plan to seek out-of-court settlements. In
the event that judgments adverse to the interest of the County should be rendered, management and its legal counsel feel any liability will be
covered by existing insurance policies.
7. Long Term Debt
Capital Leases
The County has entered into various lease agreements to lease certain equipment. The lease agreements qualify as capital leases for
accounting purposes and, therefore, have been recorded at the present value of the future minimum lease payments as of the date of their
inception.
The first agreement was executed on December 15, 2012 to lease vehicles for the public works department and requires
3 annual lease payments of $139,758.
$
307,204
The second agreement was also executed on December 15, 2012 to lease vehicles for various county department
vehicles and requires 5 annual payments of $109,822.
395,938
The third agreement was executed on February 20, 2014 to lease vehicles for various county department vehicles and
requires 3 annual payments of $137,837.
408,766
The fourth agreement was also executed on February 20, 2014 to lease computer system and software equipment and
requires 4 annual payments of $37,503.
147,097
The fifth agreement was also executed on February 20, 2014 to lease vehicles for various county department vehicles
and requires 5 annual payments of $111,433.
540,690
$
Total Capital Leases
B-48
1,799,695
The following is an analysis of the assets recorded under capital leases at June 30, 2014:
Classes of Property
Vehicles
Cost
$
1,265,232
Net Book
Value
Accumulated
Depreciation
$
304,524
$
960,708
The future minimum lease obligations and the net present value of these minimum lease payments as of June 30, 2014 were as follows:
For Year Ending
June 30
2015
2016
2017
2018
2019
Total minimum lease payments
Less: amount representing interest
Present value of the minimum lease payments
$
$
$
536,354
536,354
396,596
258,758
111,433
1,839,495
39,800
1,799,695
There is $778,075 recorded in cash escrow accounts that is related to the above capital leases. As of June 30, 2014, these amounts are still
sitting in an escrow account, so there is no related capital asset to offset the lease payable.
Mortgage Notes
Pender County Housing Authority (Country Court Enterprise Fund) has outstanding two notes aggregating $122,076 due to the Farmer's
Home Administration. The notes are collateralized by an apartment complex and bear interest at 1%.
Limited Obligation Bonds
On October 10, 2012, the County Water Districts issued individual refunding bonds in the amount of $22,330,000 for each of the USDA
Bonds being refinanced. The County then issued Limited Obligation Bonds ("LOBs") to purchase these bonds; the County (and
bondholders) have a security interest in the Water District's refunding bonds. When debt service is due, each water district will remit the
debt service payments for their respective bonds to the County, who will then remit it to the bondholders. If a district does not pay, the
County has the bonds (and the District's ad valorem taxing power for the general obligation bonds) as collateral. The Limited Obligation
Bonds are appropriation-backed and require the Board to budget for the debt service annually. The payments will consists of an annual
prinicipal payment and bi-annual interest payments with a 3.73% average interest rate over the life of the term. As of June 30, 2014, the
balance of the bonds was $21,325,000. The reader should note that this debt issuance is entirely offset by the Water District's Refunding
2012 Bonds as detailed below under the General Obligation Indebtedness section.
The Water Districts are a blended component unit of the County. On the fund statements, the amounts owed to the County to make the
payments for the LOBs are classified as "Due to the County" in the Water District Funds, and as "Due from the Districts" in the Water Fund.
On the government-wide statements, these amounts are eliminated. Therefore, when Exhibit 1 debt totals are compared to the total debt in
the notes, the amount will differ by the amount eliminated for this LOB debt.
B-49
The minimum payments for the Limited Obligation Bonds as of June 30, 2014 in the Business-Type Activities are as follows:
Year Ending
June 30
2015
2016
2017
2018
2019
2020-2024
2025-2029
2030-2034
2035-2039
2040-2044
2045-2049
Total
Business-Type Activities
Principal
Interest
$
365,000 $
899,725
375,000
892,425
385,000
881,175
430,000
865,775
445,000
852,875
2,575,000
3,999,425
3,370,000
3,304,125
4,020,000
2,590,106
4,795,000
1,683,831
4,565,000
583,650
$ 21,325,000 $ 16,553,112
General Obligation Bonds
The general obligation bonds serviced by the General Fund are collateralized by the full faith, credit and taxing power of the County. The
general obligation bonds serviced by the Water Fund, and Sewer Fund are collateralized by the full faith, credit and taxing power of the
Maple Hill Water District, the Rocky Point – Topsail Water and Sewer District, and the Scott's Hill Water and Sewer District. The
following individual issues are outstanding at June 30, 2014:
Serviced by the General Fund:
General Obligation Refunding Bonds, Series 2012 $2,040,000,000 due in annual payments ranging from $385,000 to
$465,000, plus semi-annual interest payments at 1.96% through June 2017, serviced by the Special Revenue Fund.
$
1,225,000
General Obligation Refunding Bonds, Series 2010 $4,985,000 due in annual payments ranging from $10,000 to
$460,000, plus semi-annual interest payments ranging from 4.40% to 4.70% through 2022, serviced by the Special
Revenue Fund.
3,390,000
General Obligation Refunding Bonds, Series 2004 $9,815,000 due in annual payments ranging from $460,000 to
$1,125,000, plus interest ranging from 2.50% to 4.00% through 2016, serviced by the General Fund and the Special
Revenue Fund.
1,455,000
General Obligation School Bonds, Series 2005 $35,000,000 due in annual payments ranging from $1,000,000 to
$3,000,000, plus interest ranging from 3.00% to 4.75% through 2025, serviced by the School Capital Project Fund.
2,800,000
General Obligation School Bonds, Series 2007 $20,875,000 due in annual payments ranging from $900,000 to
$1,875,000, plus interest ranging from 4.00% to 6.00% through 2028, serviced by the School Capital Project Fund.
15,475,000
Refunded-General Obligation School Bonds, Series 2012 $25,860,000 due in annual installments ranging from
$155,000 to $3,010,000 plus interest at 2% through 2026, serviced by the School Capital Project Fund.
25,325,000
Total General Obligation Bonds (Governmental Activities)
B-50
$
49,670,000
Serviced by Water and Sewer Districts:
$9,500,000 Water Treatment Plant Bonds, Water Series, 2012A to USDA Rural Development, due in annual payments
ranging from $125,000 to $430,000, plus interest at 3.50% through June 2052.
$
9,500,000
$7,000,000 Water Treatment Plant Bonds, Water Series, 2012B to USDA Rural Development, due in annual payments
ranging from $87,000 to $325,000, plus interest at 3.50% through June 2052.
7,000,000
$1,000,000 Water Treatment Plant Bonds, Water Series, 2012D to USDA Rural Development, due in annual payments
ranging from $16,000 to $41,000, plus interest at 2.75%.
1,000,000
$220,000 Maple Hill Water District Refunding Bond, Series 2012 due in annual payments ranging from $10,000 to
$15,000, plus interest ranging from 2 to 5%, through June 2031
195,000
$2,575,000 Scott's Hill Water & Sewer District Refunding Bond, Series 2012, due in annual payments ranging from
$55,000 to $150,000, plus interest ranging from 2 to 5% through June 2041.
2,465,000
$19,535,000 Rocky Point - Topsail Water & Sewer District Refunding Bond, Series 2012 due in annual payments
ranging from $295,000 to $925,000, plus interest ranging from 2 to 5% through June 2044.
18,665,000
Total General Obligation Bonds (Business-type Activities)
$
38,825,000
$
88,495,000
$960,000 note to BB&T Governmental Finance, due in annual installments of $80,000 through June 29, 2015; interest at
4.05% fixed.
$
80,000
Total General Obligation Bonds
Other Indebtedness
Installment Purchase
Serviced by the General Fund:
$655,250 note to North Carolina Department of Commerce to finance Industrial Shell Building. Interest only payments
due first two years, with first payment due July 1, 2011 and principal will amortize thereafter on July 1, 2013 until the
loan is paid in full.
441,144
$500,000 note to Four County EMC to finance the Industrial Shell Building. Principal payments will be repaid in 84
equal monthly installments, with the first installment being due July 31, 2014. Interest rate is 0%.
500,000
$1,631,386 note to BASF Corporation to finance the purchase of land. Principal payments will be repaid in 5 equal
annual installments of $326,277, with the first installment being due on December 7, 2011. Interest rate is 0%.
652,554
Total - Governmental Activities
$
1,673,698
$935,082 note to Lower Cape Fear Water and Sewer Authority to finance the purchase of water capacity for the water
treatment plant. Principal payments will be repaid in 20 equal semi-annual installments.. The interest rate was 5.25%,
but changed to 4.09% effective January 2007.
$
349,109
Serviced by Enterprise Funds
Total - Business-Type Activities
Total Installment Purchases
B-51
$
349,109
$
2,022,807
Annual maturity requirements on all long-term debt (except accrued compensated absences and unfunded pension obligations, which have
no definite maturities, and capital lease obligations, which are presented elsewhere) with no related interest as of June 30, 2014, are as
follows:
Year Ending
June 30
2015
2016
2017
2018
2019
2020-2024
2025-2029
2030-2034
2035-2039
2040-2044
2045-2049
2050-2054
Total
General Obligation Bonds
Principal
Interest
$
4,746,000 $ 3,272,385
4,742,000
3,103,465
4,705,000
2,933,751
4,659,000
2,794,055
4,608,000
2,670,618
23,437,000
10,575,108
15,221,000
6,606,783
6,108,000
4,698,226
7,269,000
3,405,421
7,495,000
1,847,008
3,476,000
720,065
129,855
2,029,000
$
88,495,000 $ 42,756,740
Installment Note
Principal
Interest
$
793,432 $
18,398
719,707
8,883
172,618
2,483
122,765
501
71,428
142,857
$ 2,022,807 $
30,265
Mortgage Notes
Principal
Interest
$
6,646 $
1,190
6,712
1,124
6,780
1,056
6,848
988
6,917
919
35,640
3,540
34,636
1,731
17,897
295
$
122,076 $
10,843
$
$
Total
8,838,051
8,581,891
7,821,688
7,584,157
7,357,882
34,194,145
21,864,150
10,824,418
10,674,421
9,342,008
4,196,065
2,158,855
133,437,731
*General Obligation Bonds above in the annual maturity schedule includes Bond Anticipation Notes as well as General Obligation Bonds.
Revenue Bond
$4,955,000 Water Revenue Bond, 2012C to USDA Rural Development, due in annual payments ranging from $75,000
to $205,000, plus interest at 2.75% through June 2052.
$
The future payments of the revenue bond are as follows:
Year Ending
June 30
2015
2016
2017
2018
2019-2023
2024-2028
2029-2033
2034-2038
2039-2043
2044-2048
2049-2053
Total
Principal
76,000
78,000
80,000
82,000
445,000
510,000
585,000
669,000
766,000
876,000
788,000
$ 4,955,000
$
B-52
Interest
136,263
134,173
132,028
129,828
614,048
549,450
475,200
390,280
293,150
181,858
54,918
$ 3,091,196
$
4,955,000
The County is not in compliance with the coventants as to rates, fees, rentals and charges in Article III of the Bond Order, authorizing the
issuance of the Water Revenue Bond, Series 2012C. Section 3.04 of the Bond Order requires the debt service coverage ratio to be no less
than 110%. The debt service coverage ratio calculation for the year ended June 30, 2014, is as follows:
$
Operating revenues
686,356
948,584
Operating expenses*
Operating income
(262,228)
83,612
Nonoperating revenues (expenses)**
Income available for debt service
Debt service, principal and interest paid (Revenue
Bond only)
Debt service coverage ratio
(178,616)
$
136,263
-131.08%
* Per rate covenants, this does not include the depreciation expense of $14,591
** Per rate covenant, this does not include revenue bond interest paid of $136,263
This was the second year of operations for the Water Treatment Plant. The covenants will be reviewed and examined to ensure that the
County is in compliance going forward.
Advance Refundings
On September 14, 2010, the County issued $4,985,000 of general obligation advance refunding bonds to provide resources to purchase U.S.
Government securities that were placed in an irrevocable trust for the purpose of general resources for all future debt service payments of
$5,000,000 of general obligation bonds. As a result, the refunded bonds are considered to be defeased and the liability has been removed
from the governmental activities column of the statement of net assets. The reacquisition price exceeded the net carrying amount of the old
debt by $296,911. This amount is being netted against the new debt and amortized over the life of the refunded debt, which has the same
maturity as the old debt. This advance refunding was undertaken to reduce total debt service payments over the next 10 years by $557,585,
and resulted in an economic gain of $260,674.
On June 12, 2012, the County issued $25,860,000 of general obligation advance refunding bonds to provide resources to purchase U.S.
Government securities that were placed in an irrevocable trust for the purpose of general resources for all future debt service payments of
$25,000,000 of general obligation bonds. As a result, the refunded bonds are considered to be defeased and the liability has been removed
from the governmental activities column of the statement of net assets. The reacquisition price exceeded the net carrying amount of the old
debt by $860,000. This amount is being netted against the new debt and amortized over the life of the refunded debt, which has the same
maturity as the old debt. This advance refunding was undertaken to reduce total debt service payments over the next 14 years by
$1,594,144, and resulted in an economic gain of $1,390,811.
On October 10, 2012, the County issued $22,330,000 of Water District Refunding bonds to provide resources to purchase U.S. Government
securities that were placed in an irrevocable trust for the purpose of general resources for all future debt service payments of $23,462,000.
This debt was issued at a premium of $1,808,886, which is included in the net debt service and is being amortized over the term of the debt.
As a result, the refunded bonds are considered to be defeased and the liability has been removed from the business-type activities column of
the statement of net position. The reacquisition price exceeded the net carrying amount of the old debt by $369,941. This amount is netted
against the new debt and amortized over the life of the refunded debt, which is the same as the life of the new debt issued. This advance
refunding was undertaken to reduce total debt service payments over the next 31 years by $4,593,729 and resulted in an economic gain of
$2,154,577.
B-53
Debt Related to Capital Activities - Of the total Governmental Activities debt listed, only $3,473,393 relates to assets the County holds title.
There was no unspent restricted cash associated with the governmental activities debt.
Long-Term Obligation Activity:
The following is a summary of changes in the County’s long-term obligations for the fiscal year ended June 30, 2014:
Governmental Activities:
General Obligation Bonds
Installment Note
Capital Leases
Unamortized Bond Premium
Unfunded Pension Obligation
Other Postemployment Benefits
Compensated Absences
Total
Balance
7/1/2013
$ 53,785,000
2,294,082
946,695
2,998,345
491,159
4,733,080
1,470,368
$ 66,718,729
Business-type Activities:
General Obligation Debt
Limited Obligation Debt
Revenue Bond
Mortgage Note
Installment Note
Unamortized Premium
Other Postemployment Benefits
Compensated Absences
Total
$ 39,185,000
21,685,000
4,955,000
128,655
401,092
1,752,358
248,139
51,133
$ 68,406,377
1,096,553
56,453
796,213
115,193
$ 2,064,412
Retirements
$
4,115,000
620,384
243,553
247,243
$
5,226,180
$
$
$
$
Additions
59,438
16,797
76,235
$
360,000
360,000
6,579
51,983
56,527
835,089
Balance
6/30/2014
$ 49,670,000
1,673,698
1,799,695
2,751,102
547,612
5,529,293
1,585,561
$ 63,556,961
Current Portion
of Balance
$
4,145,000
696,094
524,790
247,243
$
5,613,127
$ 38,825,000
21,325,000
4,955,000
122,076
349,109
1,695,831
307,577
67,930
$ 67,647,523
$
$
601,000
365,000
76,000
6,646
97,338
56,528
1,202,512
Conduit Debt Obligations
The Industrial Authority has issued industrial revenue bonds to provide financial assistance to private business for economic development
purposes. These bonds are secured by the properties financed, as well as letters of credit, and are payable solely from payments received
from the private businesses involved. Ownership of the acquired facilities is in the name of the private business served by the bond issuance.
Neither the County, the Authority, the State, nor any political subdivision thereof is obligated in any manner for the repayment of the bonds.
Accordingly, the bonds are not reported as liabilities in the accompanying financial statements. As of June 30, 2014, there were no industrial
revenue bonds outstanding.
Other
The County's legal debt margin at June 30, 2014, approximates $467,701,078. Bonds authorized but unissued at June 30, 2014, are as
follows:
Moore's Creek Water & Sewer General Obligation Bonds
Central Water & Sewer District General Obligation Bonds
Total Bonds Authorized but unissued
$ 45,000,000
27,000,000
$ 72,000,000
B-54
C. Interfund Balances and Activity
Interfund Receivables and Payables
Amounts classified on the balance sheet as "Due from other funds" and "Due to other funds" at June 30, 2014, include the following
interfund gross receivables and payables:
General Fund
School Capital Fund
Rocky Point / Topsail Water & Sewer
Scott's Hill Water & Sewer
Water Treatment Plant
Waste Water Treatment Plant
Receivables
4,814,235
678,906
-
$
Total
$
5,493,141
Payables
$
343,817
678,906
1,577,179
2,893,239
$
5,493,141
The County Board is currently in discussion as to whether the Water Treatment Plant and Waste Water Treatment Plant will be required to
pay back the amount recorded as a Due to the General Fund and to Rocky Point / Topsail Water and Sewer District. Money was originally
set aside as seed money, and some administrations treated funding as loans. The board will decide the proper treatment and either transfer
the money from the General Fund or create a repayment plan based on the Board's decision.
Interfund Transfers
Interfund transfers and transfers from component unit during the year ended June 30, 2014, can be summarized as follows:
From the General fund to the Public School Capital fund to fund Debt Service.
$
From the General Fund to the Capital Project fund to fund projects.
2,660,896
1,621,040
From the General fund to the Worker's Comp fund to pay workers compensation premiums.
375,000
From the General fund to the Reassessment fund to provide resources.
125,000
From the Capital Reserve fund to the Water Treatment Plant capital project fund.
176,449
All interfund receivables and payables resulted from transfers used to supplement other funding sources.
D. Net Investment in Capital Assets
Capital Assets
less: long-term debt
add: unexpended bond proceeds
Governmental
$ 28,757,090
(2,056,509)
-
Business-Type
$ 77,635,104
(45,947,015)
1,435,912
Net investment in capital assets
$ 26,700,581
$
B-55
33,124,001
$
4,958,385
E. Fund Balance
Pender County has a revenue spending policy that provides guidance for programs with multiple revenue sources. The Finance Officer will
use resources in the following hierarchy: bond proceeds, federal funds, State funds, local non-county funds, and county funds. For purposes
of fund balance classification expenditures are to be spent from restricted fund balance first, followed in-order by committed fund balance,
assigned fund balance, and lastly unassigned fund balance. The Finance Officer has the authority to deviate from this policy if it's in the best
interest of the County.
The following schedule provides management and citizens with information on the portion of General fund balance that is available for
appropriation:
Total Fund Balance - General Fund
Less:
Stabilization by State statute
Health Department Escrow
Sheriff's Seizures
Tax Revaluation
Automation Enhancement and Preservation
Appropriated Fund Balance in 2015 Budget
Working Capital / Fund Balance Policy
Remaining Fund Balance
$
28,957,539
$
15,232,204
485,755
300,186
384,251
255,366
4,230,689
10,225,879
(2,156,791)
The outstanding encumbrances are amounts needed to pay any commitments related to purchase orders and contracts that remain
unperformed at year-end. The General Fund had outstanding encumbrances of $257,803.
Pender County has adopted a minimum fund balance policy for the General Fund which instructs management to conduct the business of the
County in such a manner that available fund balance is at least equal to or greater than 20% of budgeted expenditures, effective October 21,
2013. The County was in compliance with the 20% requirement at June 30, 2014. Per the policy, they have 36 months to reinstate the fund
balance to meet the 20% requirement if they fail to obtain the stated amount of available fund balance.
Total Fund Balance - General Fund
Less: Restricted
Available Fund Balance
$
General Fund Expenditures
Transfers Out
Lease Proceeds
Adjusted General Fund Expenditures
$
$
$
Available Fund Balance as % General Fund Expenditures
28,957,539
(16,018,145)
12,939,394
47,569,012
4,656,936
(467,258)
51,758,690
25.00%
NOTE 4: Joint Venture
The County, in conjunction with the State of North Carolina, New Hanover County and the Pender County and New Hanover County Boards
of Education, participates in a joint venture to operate Cape Fear Community College. Each of the three participants appoints four members
of the thirteen-member board of trustees of the Community College. The president of the community college's student government serves as
an ex officio nonvoting member of the community college's board of trustees. The community college is included as a component unit of the
State. The County has the basic responsibility for providing funding for the facilities of the Community College and also provides some
financial support for the community college's operations. The County has an ongoing financial responsibility for the community college
because of the statutory responsibilities to provide funding for the Community College's facilities. The County contributed $225,000 to the
Community College operating purposes during the fiscal year ended June 30, 2014. The participating governments do not have any equity
interest in the joint venture; therefore, no equity interest has been reflected in the County's financial statements at June 30, 2014. Complete
financial statements for the Community College may be obtained from the Community College's administrative offices at 321 North Front
Street, Wilmington, North Carolina 28401.
B-56
The County, in conjunction with New Hanover and Brunswick Counties, participates in a joint venture to operate Southeastern Center for
Mental Health Development Disabilities, and Substance Abuse Services (Center). Each of the Counties appoints three Board members. The
Center is not considered a component unit of any other government. The County has ongoing responsibility for the Center or would
otherwise have to provide mental health services itself. The County contributed $156,000 to the Center during the year ended June 30, 2014,
and provides the Center use of space at its government complex center in Burgaw. The County has no equity interest in the joint venture;
therefore, no equity interest has been reflected in the County's financial statements at June 30, 2014. Complete copies of the Center's
financial statements may be obtained at the Center's administrative offices on South 17th Street in Wilmington, North Carolina.
NOTE 5: Related Organizations
The County commissioners are responsible for appointing the members of the Industrial Pollution Control and Financing Authority, but the
County's accountability for this organization does not extend beyond making these appointments. The Authority exists to aid in the
financing of industrial and manufacturing facilities in the area for the general economic benefit of the area. As of June 30, 2014, the
Authority has no debt issues outstanding.
NOTE 6: Jointly Governed Organizations
The County, in conjunction with other counties and municipalities, established the Cape Fear Council of Governments (Council). The
participating governments established the Council to coordinate various funding received from federal and State agencies. Each
participating government appoints one member to the Council's governing board. The County paid membership fees of $21,203 to the
Council during the fiscal year ended June 30, 2014.
The County, along with the City of Wilmington and four other counties in southeastern North Carolina established the Lower Cape Fear
Water and Sewer Authority (Authority). The Authority was formed to help facilitate water and sewer services in southeastern North
Carolina. Pender County Commissioners appoint two of thirteen members of the Authority's Board of Directors. The County paid its annual
system development charge in the amount of $103,966 to the Authority during the year ended June 30, 2014. The balance due to the
Authority at June 30, 2014 is $349,109.
NOTE 7: Benefit Payments Issued by the State
The amounts listed below were paid directly to individual recipients by the State from federal and State moneys. County personnel are
involved with certain functions, primarily eligibility determinations, that cause benefit payments to be issued by the State. These amounts
disclose this additional aid to County recipients that do not appear in the basic financial statements because they are not revenues and
expenditures of the County.
Federal
307,264
41,392,753
940,687
690,860
229,100
$ 43,560,664
Temporary Assistance to Needy Families
Medicaid
Health Choice
WIC
Energy Assistance
Adult Assistance
Total
$
$
State
22,837,578
296,782
343,942
$ 23,478,302
NOTE 8: Summary Disclosure of Significant Contingencies
Federal and State Assisted Programs
The County has received proceeds from several federal and State grants. Periodic audits of these grants are required and certain costs may
by questioned as not being appropriate expenditures under the grant agreements. Such audits could result in the refund of grant monies to
the grantor agencies. Management believes that any required refunds will be immaterial. No provision has been made in the accompanying
financial statements for the refund of grant monies.
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NOTE 9: Prior Period Adjustment
There was a prior period adjustment of $148,756 recorded in the general fund to reflect lease amounts that were recorded and expensed in
the previous year. However, the amounts were received but not spent at 6/30/13. When the fund statements are converted to the government
wide statements in Exhibits 1 and 2, this prior period adjustment nets to $125,774, which includes a cumulative adjustment to adjust the
fixed asset schedules to the correct balance.
There was a prior period adjustment in the Waste Water Treatment Plant Fund to adjust depreciation for an asset that was being depreciated
using a useful life that was less than it should have been. This adjustment increased net position by $182,713 in this fund.
There was a prior period adjustment of $300,000 in the Rocky Point Water District to adjust for a capital project that was originally
recorded and paid out of the governmental capital project fund. The CIP amount had to be transferred to the Rocky Point Water District
Fund to be capitalized. There was also a prior period adjustment of $2,065,046 to correct the carryforward CIP balance for the Rocky Point
projects. Amounts were capitalized in previous years that were never removed from the CIP schedules.
There was a prior period adjustment in the government-wide statements to adjust construction in process by capitalizing projects that should
be closed and writing off expenses that should not have been capitalized over the years. This adjustment resulted in a decrease in net
position of $3,957,685.
NOTE 10:Significant Effects of Subsequent Events
Budget Resolutions were adopted to create the operating budgets for the new funds (i.e. Moore's Creek, Central Pender, and PCP
Wastewater Treatment Plant) in October 2014. They have been set up as of the report date, but they were not approved prior to the year end,
so those budgets are not shown in these financial statements.
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APPENDIX C
SUMMARY OF PRINCIPAL LEGAL DOCUMENTS
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APPENDIX C
SUMMARY OF PRINCIPAL LEGAL DOCUMENTS
The following is a brief summary of some of the provisions of the Financing Contract, the
Trust Agreement and the Deed of Trust (together, the “Documents”). This summary is not intended
to be complete or definitive, and it is qualified in its entirety by reference to the complete
Documents. See the section of the Official Statement entitled “INTRODUCTION -- Additional
Information” for information on obtaining copies of the Documents.
A list of certain definitions used in the Documents is set out at the end of this Appendix.
Other capitalized terms have the definitions assigned in the main text of this Official Statement.
THE FINANCING CONTRACT
The Financing Contract generally provides for the advance of funds to the County, and for
the County’s obligation to repay the advance to provide funds for payments on the Bonds.
Advance
The Company advances the net proceeds of the sale of the 2015 Bonds to the County.
County Payments
In the Financing Contract, the County agrees to pay (a) the Installment Payments set forth in
the Financing Contract (which are designed to be due at times and in amounts sufficient to pay all
principal of and interest on the 2015 Bonds), and (b) all the Additional Payments, in each case
except as otherwise provided for in the Financing Contract.
The County must make its Installment Payments on the 25th day of the month before the
corresponding Bond payment date. The County receives a credit against future Installment
Payments for any earnings made from the temporary investment of Installment Payment amounts
between the County’s payment dates and the corresponding Bond payment dates.
County’s Limited Obligation
Notwithstanding any other provision of the Financing Contract, the parties intend that the
transaction comply with North Carolina General Statutes Section 160A-20. No deficiency judgment
may be entered against the County in violation of such Section 160A-20.
No provision of the Financing Contract is to be construed or interpreted as creating a pledge
of the County's faith and credit within the meaning of any constitutional debt limitation. No
provision of the Financing Contract is to be construed or interpreted as an illegal delegation of
governmental powers or as an improper donation or lending of the County's credit within the
meaning of the North Carolina constitution. The County's taxing power is not and may not be
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pledged directly or indirectly or contingently to secure any moneys due under the Financing
Contract.
No provision of the Financing Contract is to be construed to pledge or to create a lien on
any class or source of the County's moneys (other than the Net Proceeds and the funds and
accounts established pursuant to the Trust Agreement as may be provided in the Trust
Agreement), nor to restrict the County's future issuance of any of its bonds or other obligations
payable from any class or source of the County's moneys (except to the extent the Documents
restrict the incurrence of additional obligations secured by the Mortgaged Property).
Prepayments
The County may prepay principal components of Installment Payments to the extent
corresponding installments of principal with respect to the Bonds are prepayable pursuant to the
Trust Agreement. See the section of the Official Statement entitled “THE 2015 BONDS –
Prepayment Provisions.”
No Abatement of Payments
The County is not entitled to any abatement or reduction of the Installment Payments or
Additional Payments to be paid by the County for any reason, including, but not limited to, any
defense, recoupment, setoff, counterclaim, or any claim arising out of or related to the Project Sites
or the Financed Facilities. The County assumes and bears the entire risk of loss and damage to the
Project Sites and the Financed Facilities from any cause whatsoever.
Appropriation of Payments
The County will cause the officer who prepares the draft County budget initially submitted
to the County Board for its consideration to include in the initial proposal each year the amount of
all Installment Payments and estimated Additional Payments coming due during the Fiscal Year to
which such budget applies. Notwithstanding that the initial proposed budget includes such an
appropriation, the County Board may determine not to include such an appropriation in the final
County budget for such Fiscal Year. Further, the County Board may amend an adopted budget to
reduce or delete an approved appropriation.
If within 15 days after the beginning of any Fiscal Year the County has not appropriated an
amount equal to the Installment Payments and estimated Additional Payments coming due during
that Fiscal Year, then the County must send a notice to this effect to the Trustee and the LGC and
also must provide for a similar notice to be posted with respect to the Bonds on the MSRB’s
“EMMA” system (or any successor system).
County’s Responsibilities for the Mortgaged Property
The County must use the Mortgaged Property in a careful and proper manner. The
County must keep Mortgaged Property in good condition, repair, appearance and working order
for the purposes intended. The County must pay all charges for utility services furnished to or
used on or in connection with the Mortgaged Property. The County bears all risk of loss to and
condemnation of the Project Sites and the Financed Facilities. The County is to be solely
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responsible for the operation of the Mortgaged Property, and is not to contract with any other
person or entity for the operation of the Mortgaged Property.
The County has the right to repair, maintain and remodel the Mortgaged Property or
make substitutions, additions, modifications and improvements to the Mortgaged Property at its
own cost and expense. The County may also, from time to time in its sole discretion and at its
own expense, install machinery, equipment and other tangible property in or on the Mortgaged
Property. The County’s rights in each of these cases are subject to limitations imposed under the
Financing Contract.
Environmental Indemnification
To the extent permitted by law, the County will indemnify and hold the Company and the
Deed of Trust Trustee harmless from and against (a) any and all damages, penalties, fines,
claims, liens, suits, liabilities, costs (including clean-up costs), judgments and expenses
(including attorneys', consultants' or experts' fees and expenses) of every kind and nature
suffered by or asserted against the Company or the Deed of Trust Trustee as a direct or indirect
result of any of the County’s representations or warranties as to environmental matters made in
the Deed of Trust being false or untrue in any material respect, or (b) any requirement under any
law or regulation which requires the elimination or removal of any hazardous materials,
substances, wastes or other environmentally regulated substances by the Company, the County or
any transferee or assignee of the County of the Company.
Property Damage Insurance.
The County must, at its own expense, acquire, carry and maintain broad-form extended
coverage property damage insurance with respect to the Pledged Facilities in an amount equal to
the estimated replacement cost. This property damage insurance must include standard
mortgagee coverage in favor of the Trustee.
All insurance must be maintained with generally recognized responsible insurers and may
carry reasonable deductible or risk-retention amounts. In the alternative, the County may
maintain this property damage insurance by one or more blanket or umbrella insurance policies
or by means of an adequate self-insurance fund or risk-retention program, or by participation in a
group risk pool or similar program.
Title; Liens
Title to the Mortgaged Property and any and all additions, repairs, replacements or
modifications thereto will at all times be in the County, subject to the lien of the Deed of Trust
and to the Permitted Encumbrances.
The County must not permit any mechanic's or other lien to be perfected or remain
against the Mortgaged Property or any portion thereof, with certain exceptions provided for
under the Financing Contract.
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Damage, Destruction and
Condemnation; Use of Net Proceeds
Damage, Destruction or Condemnation.
The County will promptly notify the
Company and the Trustee if (a) the Mortgaged Property, or any portion of it, is destroyed or
damaged by fire or other casualty, (b) any governmental authority takes, or notifies the County
of any intent to take, title to, or the temporary or permanent use of the Mortgaged Property or
any portion of it, or the estate of the County or the Company in the Mortgaged Property, or any
portion thereof, under the power of eminent domain, (c) a material defect in the construction of
the Pledged Facilities becomes apparent, or (d) title to or the use of all or any portion of the
Mortgaged Property is lost by reason of a defect in title.
Each notice must describe generally the nature and extent of the damage, destruction or
taking. The County must provide any additional information concerning the matter as the
Company or the Trustee may reasonably request.
The County must file its claims under insurance coverages and claims for awards or
payments in the nature of condemnation awards resulting from any such damage, destruction or
taking. The County must prosecute all claims in good faith and with due diligence. Any Net
Proceeds received by the County as a result of claims must be used as provided in the Financing
Contract.
Security Interest in Net Proceeds; Deposit and Disbursement. Under the Financing
Contract, the County grants a security interest in the Net Proceeds to the Trustee (as the
Company’s assignee) to secure the County’s obligations under the Financing Contract. All Net
Proceeds remain subject to that security interest until expended in compliance with the
requirements of the Financing Contract.
If the amount of Net Proceeds received by the County from any single event or any single
series of related events is less than $1,000,000, then the County has no obligation to account to
the Company or any other person or entity with respect to the use of the Net Proceeds.
If the amount of Net Proceeds received by the County from any single event or any single
series of related events is at least $1,000,000, the County must cause the Net Proceeds to be paid
to the Trustee.
Use of Net Proceeds Deposited with Trustee. The County may elect to use Net Proceeds
deposited with the Trustee, and other funds provided by the County, to defease the 2015 Bonds in
whole (but not in part) pursuant to the Trust Agreement. The County may also elect to use Net
Proceeds to provide for the optional redemption of the 2015 Bonds as provided in the Trust
Agreement.
Nothing in the Financing Contract, however, creates an option in the County or any other
party to provide for the early payment of Bonds other than pursuant to the regular optional
redemption provisions; there are no redemption provisions triggered by any casualty or other event
giving rise to Net Proceeds.
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The County may also elect to use Net Proceeds deposited with the Trustee to repair or
restore that portion of the Pledged Facilities with respect to which the Net Proceeds relate. The
County must act with due diligence and in a commercially reasonable manner to provide for the
repair and restoration.
In the case of Net Proceeds used to repair or restore the Mortgaged Property, the County
will not be entitled to any reimbursement of any funds paid, nor will the County be entitled to any
postponement or diminution of its obligation to make Contract Payments as a result of any
contribution. Any repair or replacement paid for in whole or in part out of such Net Proceeds will be
the County's property and will be part of the Mortgaged Property.
Tax Covenants
The County covenants that it will not take or permit, or omit to take or cause to be taken,
any action that would cause its obligations under the Financing Contract to be "arbitrage bonds"
or "private activity bonds" within the meaning of the Code. The County also covenants that if it
should take or permit, or omit to take or cause to be taken, any such action, then the County will
take or cause to be taken all lawful actions within its power reasonably necessary to rescind or
correct such actions or omissions promptly upon having knowledge of the effect of such actions.
Default and Remedies under Financing Contract
Events of Default. An "Event of Default" under the Financing Contract is any of the
following:
(a)
The County’s failure to make any Installment Payment by the due date.
(b)
The occurrence of an Event of Nonappropriation.
(c)
The County breaches or fails to perform or observe any term, condition or
covenant of the Documents on its part to be observed or performed, other than as referred to in
paragraphs (a) or (b) above, including payment of any Additional Payment, for a period of 90
days after written notice specifying such failure and requesting that it be remedied has been
given to the County, unless the Company agrees in writing to an extension of such time prior to
the expiration of the 90-day period; provided, however, that if the failure stated in the notice
cannot reasonably be the corrected within the period and the County institutes corrective action
within the applicable 90-day period, no Event of Default will be deemed to have occurred so
long as the County diligently pursues the corrective action.
(d)
Any warranty, representation or statement made by the County in the Documents
is found to be incorrect or misleading in any material respect as of the Closing Date.
(e)
Any lien, charge or encumbrance (other than Permitted Encumbrances) prior to or
affecting the validity of the Deed of Trust is found to exist, or proceedings are instituted to
enforce any lien, charge or encumbrance against the Mortgaged Property and such lien, charge or
encumbrance would be prior to the lien of the Deed of Trust.
C-5
Remedies on Default. Upon the continuation of any Event of Default, the Company
may, without any further demand or notice, exercise any one or more of the following remedies:
(a)
Declare the unpaid principal components of the Installment Payments, and the
accrued interest thereon, immediately due and payable;
(b)
Proceed by appropriate court action to enforce performance by the County of the
applicable covenants of the Documents or to recover for the breach; and
(c)
Avail itself of all available remedies under the Deed of Trust, including foreclosure
on the Mortgaged Property and recovery of attorneys' fees and other expenses, and of all other
remedies available at law or in equity.
The Company’s ability to realize the benefits of these remedies will be limited by the
nature of the County’s obligation under the Financing Contract. See the section of these
summaries above captioned “THE FINANCING CONTRACT – County’s Limited Obligation.”
Assignments
County's Assignments. The County may not sell or assign any interest in the Financing
Contract without the Company’s prior written consent.
Company's Assignment. The Company will assign substantially all of its rights under
the Financing Contract, including rights to receive and enforce Contract Payments (but excluding
the Company's rights to indemnification and payment of costs and its rights to receive notices),
to the Trustee pursuant to the Trust Agreement, without recourse against the Company.
THE TRUST AGREEMENT
The Trust Agreement generally provides for the execution and delivery of, and security
for, the Bonds.
Form, Payment and Prepayment of Bonds
The Trust Agreement provides for the form of the 2015 Bonds, and for the payment,
prepayment and exchange of the 2015 Bonds as described in the section of the Official Statement
entitled “THE 2015 BONDS.”
Additional Bonds
Additional Bonds may be executed and delivered under the conditions and limitations set
out in the Trust Agreement to provide funds (a) to expand or improve the Financed Facilities, (b)
to refund any Outstanding Bonds, (c) to pay financing costs or establish reserves in connection
with the execution and delivery of Additional Bonds, (d) for any other purpose that may be
allowed by law from time to time, including the acquisition and construction of additional public
facilities, whether or not those facilities are related to the Financed Facilities, or (e) for any
combination of these purposes.
C-6
Any Additional Bonds so issued may be secured by a lien on the Mortgaged Property
ranking equally with the lien on such property securing the 2015 Bonds.
Funds and Accounts
The Trust Agreement provides for the creation and the Trustee’s custody of several
different funds and accounts.
Project Fund. The Trustee will deposit into the “Project Fund” created under the Trust
Agreement the amounts specified under the Trust Agreement, including certain net proceeds
from the sale of the Bonds, and all other amounts paid to it for deposit in the Project Fund.
The Trustee will disburse moneys in the Project Fund from time to time, either to pay
Project Costs or Financing Costs directly or to reimburse the County for previous expenditures
on Project Costs or Financing Costs, upon receipt by the Trustee of a requisition substantially in
the form provided for under the Trust Agreement.
Upon receipt of notice from the County that there are no more Project Costs to be paid
from the Project Fund, the Trustee will withdraw all remaining moneys in the Project Fund and
deposit those moneys in the Payment Fund for application to the payment of principal and
interest with respect to the 2015 Bonds as directed by a County Representative.
Payment Fund. The Trustee will establish and maintain a Payment Fund, and therein an
Interest Account, a Principal Account and a Prepayment Account. The Trustee will hold in this
Fund (in the appropriate account, as determined under the Trust Agreement) amounts paid to it
for use in making payments and prepayments on the Bonds.
Net Proceeds Fund. The Trustee will establish and maintain a Net Proceeds Fund. The
Trustee will hold in this Fund Net Proceeds paid to it pending the use of Net Proceeds for repair
or restoration of the Mortgaged Property, as provided for in the Financing Contract and the Trust
Agreement.
Security Provisions
Assignment of Rights under Financing Contract. Under the Trust Agreement, the
Company transfers and absolutely assigns to the Trustee, for the benefit of the Owners and
without recourse against the Company, all the Company's rights under the Financing Contract,
including, without limitation, (a) the right to receive and collect all of the Installment Payments,
(b) the right to take all actions and give all consents under the Financing Contract, (c) the right to
enforce the indemnification provisions in favor of the Trustee, and (d) the right to exercise rights
and remedies conferred on the Company pursuant to the Financing Contract as may be necessary
or convenient (i) to enforce payment of the Contract Payments and any other amounts required to
be deposited in any Fund established under the Trust Agreement, or (ii) otherwise to protect the
Owners' interests if the County defaults under the Financing Contract. The Company must
deposit with the Trustee any Installment Payments the Company collects or receives within five
Business Days after receipt.
C-7
Assignment of Rights under Deed of Trust. Under the Trust Agreement, the Company
transfers and absolutely assigns to the Trustee, for the benefit of the Owners and without
recourse against the Company, all of the Company's rights as beneficiary under the Deed of
Trust.
Assignment of Moneys and Investments. Under the Trust Agreement, the Company
absolutely assigns to the Trustee, for the benefit of the Owners and without recourse against the
Company, all moneys and investments thereof held by the Trustee in the Funds and Accounts
under the Trust Agreement. The Trustee will hold all such moneys in trust, and apply them to the
purposes specified in the Trust Agreement and in the Financing Contract.
The Trust Agreement provides that the assignments described above are absolute, and not
for the purpose of security.
Notwithstanding the foregoing, the Company retains its rights to notices, indemnification
and payment of costs under the Financing Contract and the Deed of Trust.
Investments
Subject to the provisions of the Trust Agreement, the Trustee is to invest and reinvest
moneys in the Funds and Accounts established under the Trust Agreement in Legal Investments
pursuant to written instructions from the County. If the County does not provide the Trustee with
written direction as to any investment or reinvestment, the Trustee will invest or reinvest those
moneys in the North Carolina Capital Management Trust (or its successor).
The Trustee may purchase or sell, to itself or to any affiliate, as principal or agent,
investments of funds held under the Trust Agreement. The Trustee may act as purchaser or agent
in the making or disposing of any investment, and may make any investment through its bond or
investment department.
Discharge of the Trust Agreement
Any Bond will be deemed paid for all purposes of the Trust Agreement when (a)
payment of the principal, premium, if any, and interest with respect to that Bond to the due date
of such amounts (whether at maturity, upon prepayment or otherwise) either (i) has been made in
accordance with the terms of the Bonds or (ii) has been provided for by irrevocably depositing
with the Trustee or other fiduciary in escrow (A) cash sufficient to make the payments or (B)
Federal Securities maturing as to principal and interest in such amounts and at such times as will
ensure, without reinvestment, the availability of sufficient moneys to make those payments and
which are not subject to redemption or purchase prior to maturity at the option of anyone other
than the holder, and (b) all compensation and expenses of the Trustee pertaining to each Bond in
respect of which such deposit is made have been paid or provided for to the Trustee's
satisfaction.
The sufficiency of the deposit referenced above must be evidenced or verified by a
certificate or other writing, in form and substance satisfactory to the Trustee, of an accountant, or
firm of accountants, or other person or entity experienced in making these calculations, in any case
as selected by the County and acceptable to the Trustee.
C-8
When a Bond is deemed paid, it will no longer be secured by or entitled to the benefits of
the Trust Agreement, and all rights to payment of that Bond will be limited to payment from
moneys or Federal Securities under (a)(ii) above, and except that it may be transferred,
exchanged, registered or replaced as provided in the Trust Agreement.
Notwithstanding the foregoing, the County may make no deposit under clause (a)(ii)
above until the County has furnished the Trustee an Opinion of Bond Counsel to the effect that
the deposit of cash or Federal Securities will not cause the Bonds to become "arbitrage bonds"
within the meaning of the Code. Also, if a Bond is to be prepaid prior to maturity, notice of
prepayment of the Bond must be given in accordance with the Trust Agreement for the deposit to
be deemed a payment of such Bond. If the Bond is not to be paid or prepaid within the next 60
days, the County must give the Trustee, in form satisfactory to the Trustee, irrevocable
instructions (A) to provide notice to the Bondholders, as soon as practicable, in accordance with
the Trust Agreement, that the deposit required by (a)(ii) above has been made with the Trustee,
that the Bond is deemed to be paid under the Trust Agreement and stating the maturity or
prepayment date upon which moneys are to be available for the payment of the principal with
respect to the Bond, and (B) to give notice of prepayment not less than 30 nor more than 60 days
prior to the prepayment date for such Bond as provided in the Trust Agreement.
When all Outstanding Bonds are deemed paid under the Trust Agreement, the Trustee
will, upon the County’s request, acknowledge the discharge of the lien of the Trust Agreement
and the Deed of Trust and repay any excess amounts remaining on deposit in the Funds
established under the Trust Agreement to the County; provided, however, that the obligations
under the Trust Agreement in respect of the transfer, exchange, registration, discharge from
registration and replacement of Bonds will survive the discharge of the lien of the Trust
Agreement, and further provided that in the case of a deposit made under (a)(ii) above, the Bonds
will continue to constitute proportionate and undivided interests in Installment Payments arising
under the Financing Contract.
No deposit must be made or accepted, and no use made of any such deposit, that would
cause any Bonds to be treated as "arbitrage bonds" within the meaning of the Code.
Defaults and Remedies under Trust Agreement
Events of Default. An "Event of Default" under the Trust Agreement is any of the
following:
(a)
Default in the payment of the principal with respect to any Bond when the same
becomes due and payable, whether at the stated maturity thereof or upon proceedings for
mandatory (but not optional) prepayment.
(b)
Default in the payment of any installment of interest with respect to any Bond
when the same becomes due and payable.
(c)
The occurrence of any Event of Default as defined in the Financing Contract.
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The Trustee must notify the Owners and the LGC within 15 days after having notice of an
Event of Default.
The Trustee will not be held to have any notice of an Event of Default as defined in (c) above
unless either (i) a Trust Officer has actual knowledge of the event or (ii) the Trustee has received
notice of the Event from either the County, the Corporation, the Trustee or Bondholders holding
at least 10% of the Outstanding Bonds by principal amount (either by a single notice or
aggregated notices). In the absence of either case, the Trustee may in good faith assume the
absence of any Event of Default.
In the Trust Agreement, the term “Trust Officer” means any employee of the Trustee
who, in the course of regular duties, carries out functions related to the Trustee’s obligations
under the Trust Agreement.
Acceleration. If any Event of Default is continuing, then (a) the Trustee, by notice to the
County, or (b) the Majority Owners, by notice to the County and the Trustee, may declare the
principal of and accrued interest with respect to the Bonds to be due and payable immediately,
and that principal and interest will thereupon become immediately due and payable. The Trustee
must immediately give notice of any acceleration to all Owners. The Trustee may rescind an
acceleration and its consequences if all existing Events of Default have been cured or waived, if
the rescission would not conflict with any judgment or decree.
Other Remedies. If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect the principal or interest
with respect to the Bonds or to enforce the performance of any provision of the Bonds or the
Documents. The Trustee may maintain a proceeding even if it does not possess any of the Bonds
or does not produce any of them in the proceeding.
Waiver of Past Defaults. The Majority Owners, by notice to the Trustee, may waive an
existing Event of Default and its consequences. When an Event of Default is waived, it is cured
and stops continuing, but no such waiver extends to any subsequent or other Event of Default or
impair any right consequent to it.
Control of Remedies. The Majority Owners, upon satisfactory indemnification of the
Trustee, may direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or of exercising any trust or power conferred on it. The Trustee,
however, may refuse to follow any direction that it reasonably believes conflicts with law or the
Trust Agreement or, subject to the provisions of the Trust Agreement, that the Trustee
determines is unduly prejudicial to the rights of other Owners or would involve the Trustee in
personal liability.
Limitation on Suits. An Owner may not pursue any remedy with respect to the Trust
Agreement or the Bonds (except as otherwise provided in the Trust Agreement) unless (a) the
Owner gives the Trustee notice stating that an Event of Default is continuing, (b) the Majority
Owners make a written request to the Trustee to pursue the remedy, (c) that Owner or Owners
offer to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense,
and (d) the Trustee does not comply with the request within 60 days after receipt of the request
and the offer of indemnity.
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An Owner may not use the Trust Agreement to prejudice the rights of another Owner or
to obtain a preference or priority over the other Owners.
Rights To Receive Payment.
The right of any Owner to receive payment of
principal, premium, if any, and interest with respect to a Bond, on or after the due dates
expressed in the Bond, or to bring suit for the enforcement of any such payment on or after such
dates, is preserved under the Trust Agreement and may not be impaired or affected without that
Owner's consent.
Collection Suit by Trustee. If an Event of Default occurs and is continuing, the Trustee
may recover judgment in its own name and as trustee of an express trust against the County for
the whole amount remaining unpaid.
Trustee May File Proofs of Claim. The Trustee may file any proofs of claim and other
papers or documents as may be necessary or advisable in order to have the claims of the Trustee
and the Owners allowed in any judicial proceedings relative to the County, the Company, their
creditors or their property and, unless prohibited by law or applicable regulations, may vote on
behalf of the Owners in any election of a trustee in bankruptcy or other person performing
similar functions.
Priorities. If the Trustee collects any money pursuant to a collection or enforcement
action, it must deposit the same in a special account in the Payment Fund and pay out that money
in the following order:
(a)
If the principal with respect to all Bonds has not become or will not have been
declared due and payable, all that moneys in the Payment Fund will be applied as follows:
First, Costs and Expenses: to the payment of the costs and expenses of the Trustee and of
the Owners in declaring the Event of Default, including reasonable compensation to its or their
agents, attorneys and counsel;
Second, Interest: to the payment to the persons entitled thereto of all installments of
interest then due in the order of the maturity of the installments, and, if the amount available is
not sufficient to pay in full any installment or installments coming due on the same date, then to
the payment thereof ratably, according to the amounts due thereon, to the persons entitled
thereto, without any discrimination or preference; and
Third, Principal: to the payment to the persons entitled thereto of the unpaid principal
with respect to any Bonds which have become due, whether at maturity or by call for
prepayment, in the order of their due dates, with interest on the overdue principal at a rate equal
to the rate paid with respect to the Bonds, and, if the amount available is not sufficient to pay in
full all of the amounts due with respect to the Bonds on any date, together with the required
interest, then to the payment thereof ratably, according to the amounts of principal due on such
date to the persons entitled thereto, without any discrimination or preference.
(b)
If the principal with respect to all Bonds has become or has been declared due and
payable, all such money will be applied (i) first to pay the Trustee’s fees and expenses, and then
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(ii) to the payment of principal and interest then due with respect to the Bonds, without
preference or priority of principal or interest, or of any installment of interest over any other
installment of interest, or of any Bond over any other Bond, ratably according to the amounts due
respectively for principal and interest, to the persons entitled thereto without any discrimination
or privilege.
(c)
If the principal with respect to all Bonds has been declared due and payable and if
such declaration has thereafter been rescinded and annulled under the provisions of the Trust
Agreement, then, subject to the provisions of (b) above, if the principal with respect to all Bonds
later becomes due and payable or is declared due and payable, the money then remaining in and
thereafter accruing to the Payment Fund must be applied in accordance with the provisions of (a)
above.
The Trustee may fix a payment date for any payment to the Owners under the provisions
described above.
Undertaking for Costs. In any suit for the enforcement of any right or remedy under the
Trust Agreement or in any suit against the Trustee for any action taken or omitted by it as
Trustee, a court in its discretion may require the filing by any party litigant in the suit of an
undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorneys' fees, against any party litigant in the suit, having due
regard to the merits and good faith of the claims or defenses made by the party litigant. This
paragraph, however, does not apply to a suit by the Trustee or any authorized suit by any Owner
or Owners.
The Trustee
Rights and Duties. If an Event of Default is continuing, the Trustee must exercise its
rights and powers and use the same degree of care and skill in their exercise as a prudent person
would exercise or use under the circumstances in the conduct of such person's own affairs.
Except during the continuance of an Event of Default:
(a)
the Trustee need perform only those duties that are specifically set forth in
the Trust Agreement and no other; and
(b)
in the absence of bad faith on its part, the Trustee may conclusively rely,
as to the truth of the statements and the correctness of the opinions expressed, upon
certificates or opinions furnished to the Trustee and conforming to the requirements of
the Trust Agreement which the Trustee actually and in good faith believes to be genuine
and to have been signed or presented by the proper person. The Trustee, however, must
examine the certificates and opinions to determine whether they conform to the
requirements of the Trust Agreement.
The Trustee may not be relieved from liability for its own negligent action, its own
negligent failure to act or its own willful misconduct, except that:
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(i)
this paragraph does not limit the Trustee’s obligation to act prudently
during the continuation of an Event of Default;
(ii)
the Trustee will not be liable with respect to any action it takes or omits to
take in good faith in accordance with a direction from the Majority Owners received by it
pursuant to the Trust Agreement;
(iii) no provision of the Trust Agreement requires the Trustee to expend or risk
its own funds or otherwise incur any financial liability in the performance of any of its
duties under the Trust Agreement or in the exercise of any of its rights or powers, if it has
reasonable grounds for believing that repayment of such funds or adequate indemnity
against the risk or liability is not reasonably assured to it; and
(iv)
the Trustee will not be liable with respect to any information contained in
any offering documents (except to the extent of information about the Trustee provided
by the Trustee specifically for inclusion in the offering document).
Eligibility. The Company and the County will maintain a Trustee for the Trust
Agreement that is a corporation organized and doing business under the laws of the United States
or any state or the District of Columbia, is authorized under such laws and the laws of the State
to exercise corporate trust powers, is subject to supervision or examination by the United States,
any state or the District of Columbia and has a combined capital and surplus of at least
$100,000,000 as set forth in its most recent published annual report of condition.
Resignation; Removal; Replacement.
The Trustee may resign at any time by
delivering notice of its resignation to the County at least 30 days prior to the effective date of the
resignation. The County may remove the Trustee at any time by delivering notice of the removal
to the removed Trustee at least 30 days prior to the effective date of the removal, so long as no
Event of Default is continuing at the time the County sends the notice. The Majority Owners
may remove the Trustee at any time by delivering notice of the removal to the County and the
removed Trustee at least 30 days prior to the effective date of the removal, and may at the same
time (or at any time during the 30-day notice period) appoint a new Trustee by notice to the
County and the removed Trustee.
If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any
reason, the County must promptly appoint a successor Trustee (except when that right is
exercised by the Majority Owners as described in the preceding paragraph). If a successor
Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the
retiring Trustee, the County or the Majority Owners may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
Amendments of and Supplements to Trust Agreement,
Bonds, Financing Contract or Deed of Trust
Without Owners' Consent. The Company and the Trustee may amend or supplement
the Trust Agreement or the Bonds without notice to or consent of any Owner for the following
purposes:
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(a)
to cure any ambiguity, inconsistency or formal defect or omission;
(b)
to grant to the Trustee for the benefit of the Owners additional rights, remedies,
powers or authority;
(c)
to subject to the Trust Agreement additional collateral or to add other agreements
of the Company or the County;
(d)
to modify the Trust Agreement or the Bonds to permit qualification under the
Trust Indenture Act of 1939 or any similar federal statute at the time in effect, or to permit the
qualification of the Bonds for sale under the securities laws of the United States or of any state of
the United States;
(e)
to provide for Bonds in certificated, registered form pursuant to the Trust
Agreement, or for the execution and delivery of Additional Bonds;
(f)
(g)
any Owner.
to evidence the succession of a new Trustee; or
to make any other change that does not materially adversely affect the rights of
In addition, the Company may enter into, and the Trustee may consent to, any
amendment of or supplement to the Financing Contract or the Deed of Trust, without notice to or
consent of any Owner, if the amendment or supplement is required or permitted (i) by the
provisions of the Financing Contract or the Trust Agreement, (ii) to cure any ambiguity,
inconsistency or formal defect or omission, (iii) in connection with any authorized amendment of
or supplement to the Trust Agreement, or (iv) to make any other change that does not materially
adversely affect the rights of any Owner.
With Owners' Consent. If the Trust Agreement does not permit a particular amendment
of or supplement to any of the Documents or the Bonds without any consent of Owners, the
Company and the Trustee may enter into such amendment or supplement with the consent of the
Majority Owners.
Without the consent of each Owner affected, however, no amendment or supplement to
the Documents or the Bonds may (i) extend the maturity of the principal or interest with respect
to any Bond, (ii) reduce the principal amount of, or rate of interest on, any Bond, (iii) effect a
privilege or priority of any Bond or Bonds over any other Bond or Bonds, (iv) reduce the
percentage of the principal amount of the Bonds required for consent to such amendment or
supplement, (v) impair the exclusion of interest on the Bonds from the federal gross income of
the Owner of any Bond, (vi) eliminate any mandatory prepayment of the Bonds, extend the due
date for any call for mandatory prepayment, reduce the prepayment price or otherwise change
the prepayment terms of Bonds, (vii) create a lien ranking prior to or on a parity with the lien of
the Trust Agreement on the property pledged under the Trust Agreement (except with respect to
a parity pledge for the benefit of the Owners of Additional Bonds), or (viii) deprive any Owner
of the lien created by the Trust Agreement on such property.
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In addition, if moneys or Federal Securities have been deposited or set aside with the
Trustee pursuant to the Trust Agreement for the payment of Bonds and those Bonds have not in
fact actually been paid in full, no amendment to the provisions of those particular provisions of
the Trust Agreement may be made without the consent of the Owner of each Bond affected.
Consent of County and LGC Required. No amendment or supplement to the
Documents will become effective unless the County and the LGC deliver to the Trustee their
respective prior written consents to the amendment or supplement.
THE DEED OF TRUST
Grant of Security Interest in Facilities, Site and Fixtures
In the Deed of Trust, the County grants a security interest in the Mortgaged Property,
including the Pledged Facilities, the Pledged Site, and the Fixtures to secure the County’s
performance of its obligations under the Documents, the bonds and any Additional Bonds
executed and delivered pursuant to the Trust Agreement (up to a maximum aggregate principal
amount of $50,000,000).
Releases; Grants of Easements
So long as no Event of Default is continuing, the Company and the Deed of Trust Trustee
will, upon the County’s request and at any time, execute and deliver all documents necessary to
effect the release of Mortgaged Property from the lien of the Deed of Trust upon the County’s
compliance with the requirements of the Deed of Trust.
In connection with the release of a portion (but less than all) of the Mortgaged Property,
the County must file with the Company and the Deed of Trust Trustee evidence that the
appraised, tax or insured value of that portion of the Mortgaged Property that is proposed as the
portion that is to remain subject to the lien of the Deed of Trust is not less than 50% of the
aggregate outstanding principal component of the Installment Payments.
In the case of a proposed release of all the Mortgaged Property, the County must pay to
the Trustee (or other fiduciary) an amount (a) which is sufficient to provide for the payment in
full of all Outstanding Bonds in accordance with the defeasance provisions of the Trust
Agreement and (b) which is required to be used for that payment.
In addition to the provisions for release described above, the County may from time to
time grant easements, licenses, rights-of-way and other similar rights with respect to any part of
the Mortgaged Property, and the County may release such interests, with or without
consideration. The County must send notice of any such grant or release to the Company, along
with a certificate that a grant or release will not materially impair the intended use of the
Facilities.
The County may dispose of any undesirable or unnecessary Fixture, subject to certain
limitations and conditions on disposition set out in the Deed of Trust.
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Advances for Performance of County's Obligations.
If the County fails to perform any of its obligations under the Documents, the Deed of
Trust Trustee and the Company are authorized, but not obligated, to perform or cause to be
performed such obligation. All such expenditures, together with interest thereon at the rate of
4.00% per year, will be secured as obligations under the Deed of Trust.
Substitute Trustees
If the Deed of Trust Trustee dies, becomes incapable of acting or renounces its trust, or if
for any reason the Company desires to replace the Deed of Trust Trustee, then the Company has
the unqualified right to appoint one or more substitute or successor Deed of Trust Trustees. Any
removal or appointment may be made at any time without notice, without specifying any reason
and without any court approval. Any appointee becomes vested with title to the Mortgaged
Property and with all rights, powers and duties conferred upon the Deed of Trust Trustee by the
Deed of Trust in the same manner and to the same effect as though such Deed of Trust Trustee
were named as the original Deed of Trust Trustee.
Defaults and Remedies; Foreclosure
Defaults and Remedies. Upon the continuation of an Event of Default, the Company
may pursue its rights and remedies as provided under the Financing Contract and the Deed of
Trust.
Foreclosure; Sale under Power of Sale.
Right to foreclosure or sale. Upon the continuation of an Event of Default, at the
Company's request, the Deed of Trust Trustee must foreclose the Deed of Trust by judicial
proceedings or, at the Company's option, the Deed of Trust Trustee must sell (and is empowered
to sell) all or any part of the Mortgaged Property at public sale to the last and highest bidder for
cash (free of any equity of redemption, homestead, dower, curtesy or other exemption, all of
which the County in the Deed of Trust expressly waives to the extent permitted by law) after
compliance with applicable State laws relating to foreclosure sales under power of sale. The
Deed of Trust Trustee will execute and deliver a proper deed or deeds to the successful purchaser
at such sale. Any foreclosure sale of a portion of the Mortgaged Property is not intended to
adversely affect the lien created by this Deed of Trust against the remainder.
Company's Bid. The Company may bid and become the purchaser at any sale under the
Deed of Trust. Instead of paying cash, the Company may make settlement for the purchase price
by crediting against the Obligations the sale price net of sale expenses, including the Deed of
Trust Trustee's commission, and after payment of any taxes and assessments as may be a lien on
the Mortgaged Property superior to the lien of the Deed of Trust (unless the Mortgaged Property
is sold subject to those liens and assessments, as provided by law).
County's Bid. The County may bid for all or any part or parts of the Mortgaged Property
at any foreclosure sale, but the County may not bid less than an amount sufficient to provide for
full payment of the Obligations unless the Company otherwise consents in writing.
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Successful bidder's deposit. At any sale the Deed of Trust Trustee may, at its option,
require any successful bidder (other than the Company) immediately to make a deposit with the
Deed of Trust Trustee against the successful bid in the form of cash or a certified check in an
amount of up to 5% of the sale price. Notice of any such requirement need not be included in the
advertisement of the notice of such sale.
Application of sale proceeds. The Deed of Trust Trustee must apply the proceeds of any
foreclosure sale in the manner and in the order prescribed by State law. The expenses of any sale
will include a commission to the Deed of Trust Trustee equal to one-half of one percent of the
gross sales price (but not exceeding a total of $25,000) for all services performed by the Deed of
Trust Trustee under the Deed of Trust. Any proceeds of any sale remaining after the payment of
all Obligations and the prior application thereof in accordance with State law will be paid to the
County.
Possession of Mortgaged Property.
At any time during the continuation of any
Event of Default, the Company, to the extent permitted by law, may (a) take possession of the
Mortgaged Property, with or without legal action, (b) lease the Mortgaged Property, (c) collect
all rents and profits therefrom, with or without taking possession of the Mortgaged Property, and
(d) after deducting all costs of collection and administration expenses, apply the net rents and
profits to the payment of necessary maintenance and insurance costs, and then apply any
remaining amounts to the County's account and in reduction of the Obligations in accordance
with the provisions of the Trust Agreement. The Company will be liable to account only for rents
and profits it actually receives.
DEFINITIONS
The following are definitions of certain terms used in the Financing Contract, the Trust
Agreement and the Deed of Trust.
"2015 Bonds" means the 2015 Bonds issued pursuant to the Trust Agreement.
"Additional Bonds" means any Bonds delivered pursuant to the Trust Agreement after the
initial delivery of the 2015 Bonds.
"Additional Payments" means the reasonable and customary fees and expenses of the
Company or the Trustee, any of the Company's or the Trustee's expenses (including legal fees) in
prosecuting or defending any action or proceeding in connection with the Financing Contract and
any taxes or any other expenses, including, but not limited to, the Company's administrative or
legal costs (including costs of maintaining its existence and good standing), licenses, permits,
state and local sales and use or ownership taxes or property taxes which the Company is required
to pay as a result of the Financing Contract, inspection and reinspection fees, or any other
amounts payable by the County as a result of its covenants under the Documents (together with
interest that may accrue on any of the above if the County fails to pay the same, as set forth in
the Financing Contract).
"Bond Counsel" means such attorney or firm of attorneys nationally recognized on the
subject of municipal obligations as the County may select in its reasonable discretion.
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"Bonds" means, together, the 2015 Bonds and all Additional Bonds.
"Business Day" means any day (a) other than a day on which banks in New York, New
York, or the city to which notices to the Trustee under the Trust Agreement are to be sent, are
required or authorized to close, and (b) on which the New York Stock Exchange is not closed.
"Closing Date" means the date on which the Financing Contract is first executed and
delivered by the parties.
"Code" means the Internal Revenue Code of 1986, as amended, including regulations,
rulings and revenue procedures promulgated under that Code or under the Internal Revenue
Code of 1954, as amended, as applicable to the Bonds or the County's obligations under the
Financing Contract. Reference to any specific Code provision will be deemed to include any
successor provisions thereto.
"Contract Payments" means Installment Payments and Additional Payments.
"County Board" means the County's governing board as from time to time constituted.
"County Representative" means the County Manager, County finance officer or any other
person or persons at the time designated, by a written certificate furnished to the Trustee and signed
on the County's behalf by the County Manager or the presiding officer of the County Board to act
on the County's behalf for the purpose of performing any act (or any specified act) under the
Financing Contract. In addition, for the purpose of signing requisitions under the Trust
Agreement, the County’s Utilities Director is a County Representative.
“Event of Default” has the meaning set forth in the Financing Contract. See the section in
these summaries above captioned “THE FINANCING CONTRACT -- Default and Remedies
under Financing Contract – Events of Default.”
"Event of Nonappropriation" means a determination by the County Board not to include
an appropriation for Contract Payments in the County budget for any Fiscal Year, or any
subsequent action by the County Board to delete or reduce such an appropriation from an
approved County budget, all as contemplated under the Financing Contract.
"Federal Securities" means, to the extent the following are legal investments for the
County's funds at the time of purchase, (a) direct obligations of the United States of America for
which its full faith and credit are pledged, or (b) securities or obligations evidencing direct
ownership interests in specified portions (principal or interest) of obligations described in (a).
“Financed Facilities” means the Pledged Facilities and all other public improvements and
facilities financed pursuant to the Financing Contract and its related transactions, especially
including those described in the Financing Contract.
“Financing Costs” means all professional and administrative costs related to the
authorization and execution and delivery of the Bonds, including printing and publication costs
and legal, accounting, advisory and other fees and expenses.
C-18
"Fiscal Year" means the County's fiscal year beginning July 1, or such other fiscal year as
the County may later lawfully establish.
“Fixtures” means all articles of personal property attached or affixed to the Pledged
Facilities, including but not limited to all apparatus, machinery, motors, elevators, fittings and all
plumbing, heating, lighting, electrical, laundry, ventilating, refrigerating, incinerating, airconditioning, fire and theft protection and sprinkler equipment, including all renewals and
replacements thereof and all additions thereto, and all articles in substitution thereof, and all
proceeds of all the foregoing in whatever form.
"Independent Counsel" means an attorney duly admitted to the practice of law in the
State that is selected by the County in its reasonable discretion.
"Installment Payments" means the payments payable by the County pursuant to the
Financing Contract to repay the advance to the County of the proceeds from the sale of the 2015
Bonds.
"Legal Investments" means such investments as from time to time are legal investments
for the County's funds, as determined at the time of investment.
“LGC” means the North Carolina Local Government Commission, or any successor to
its functions.
“Majority Owners” means, as of any date, the Owners of at least a majority in principal
amount of the Bonds then Outstanding.
"Mortgaged Property" has the meaning assigned in the Deed of Trust, and generally
includes the Pledged Site and the Pledged Facilities.
"Net Proceeds" means all payments and proceeds derived from (a) claims made on account
of insurance coverages required under the Financing Contract, (b) any exercise of condemnation or
eminent domain authority related to all or any portion of the Mortgaged Property, (c) proceeds of
title insurance related to the Mortgaged Property, or (d) any sale of the Mortgaged Property, as well
as all judgments, settlements or other payments in lieu of any of the foregoing, in any case reduced
by the sum of (i) all expenses (including attorneys' fees and costs) incurred in the collection of such
proceeds and (ii) all amounts expended by the County, the Company or the Trustee to remedy the
event giving rise to such proceeds, all of which amounts will be paid or reimbursed from the gross
proceeds.
"Obligations" means all amounts payable by the County under the Financing Contract and
the Deed of Trust.
"Opinion of Counsel" or “Opinion of Bond Counsel” means a written opinion of
Independent Counsel or Bond Counsel, as appropriate.
"Outstanding," when used with reference to Bonds, or "Bonds Outstanding," means all
Bonds that have been authenticated and delivered by the Trustee under the Trust Agreement and not
yet paid, except the following:
C-19
(a) Bonds canceled or purchased by or delivered to the Trustee for cancellation;
(b) Bonds that have become due (at maturity or on prepayment, acceleration or otherwise)
and for the payment of which, including interest accrued to the due date, the Trustee holds sufficient
moneys;
(c) Bonds deemed paid in accordance with the defeasance provisions of the Trust
Agreement; and
(d) Bonds in lieu of which others have been authenticated under the provisions of the Trust
Agreement relating to registration and exchange of Bonds or relating to mutilated, lost, stolen,
destroyed or undelivered Bonds.
"Owner," when used with reference to Bonds, means the person in whose name such Bond
is registered on the registration books maintained by the Trustee.
"Permitted Encumbrances" means, as of any particular time, (a) the “Existing
Encumbrances,” as defined in the Deed of Trust, (b) liens for taxes and assessments not then
delinquent, or liens which may remain unpaid pursuant to the Financing Contract, (c) the Deed
of Trust, (d) any lien or encumbrance made by its terms expressly subordinate to the lien of the
Deed of Trust, and (e) easements and rights-of-way granted by the County pursuant to the Deed
of Trust.
“Pledged Facilities” has the meaning ascribed to that term in the Deed of Trust, and
generally includes the Old Topsail High School property in Hampstead, North Carolina, and the
Pender County Administration Building in Burgaw, North Carolina.
“Pledged Sites” has the meaning ascribed to that term in the Deed of Trust, and generally
includes the real property upon which the Pledged Facilities are located.
"Project Costs" means all costs of the design, planning, constructing, acquiring,
installing, equipping and improving the public facilities described in the Financing Contract, all
as determined in accordance with generally accepted accounting principles and that will not
adversely affect the exclusion from gross income for federal income tax purposes of the
designated interest component of Installment Payments payable by the County under the
Financing Contract. “Project Costs” include (a) sums required to reimburse the County or its
agents for advances made for any costs otherwise described in this definition, (b) interest during
the period of acquisition and construction of the Financed Facilities and for up to six months
thereafter, and (c) all costs related to the financing of the Financed Facilities, the issuance of the
2015 Bonds and all related transactions.
“Project Sites” means the locations of the Financed Facilities.
"State" means the State of North Carolina.
"Trustee" means U.S. Bank National Association, and its successors as Trustee under the
Trust Agreement.
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APPENDIX D
FORM OF OPINION OF BOND COUNSEL
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SanfordHolshouser
209 Lloyd Street, Suite 350|Carrboro, NC 27510
www.sanfordholshouserlaw.com
May ___, 2015
Pender County, North Carolina
$24,800,000
Limited Obligation Bonds
(Pender County Public Facilities), Series 2015
Ladies and Gentlemen:
We have acted as bond counsel to Pender County, North Carolina (the "County"), in
connection with the County's execution and delivery today of the following documents:
(a)
An Installment Financing Contract dated as of May 1, 2015 (the "Financing
Contract"), between the County and Pender County Facilities Company (the “Company);
and
(b)
A Deed of Trust and Security Agreement dated as May 1, 2015 (the “Deed of
Trust”), from the County to a deed of trust trustee (the “Deed of Trust Trustee”) for the
Company’s benefit.
We have examined the applicable law and certified copies of proceedings and
documents relating to this execution and delivery.
The County is and has been our only client in this transaction.
The Company will advance funds to the County pursuant to the Financing Contract.
The County will use those funds to provide for the acquisition, construction and improvement
of various County facilities, as well as to pay financing costs. The County has agreed in the
Financing Contract to repay the amount advanced, with interest, by making Installment
Payments (as defined in the Financing Contract). As security for its obligations under the
Financing Contract, the County has granted certain security interests pursuant to the
Financing Contract and the Deed of Trust.
s¶h
D-1
Sanford Holshouser LLP
May ___, 2015
page 2
The Company will obtain the funds for its advance under the Financing Contract by
providing for the delivery of the above-captioned limited obligation bonds (the “Bonds”)
pursuant to a Trust Agreement dated as of May 1, 2015 (the “Trust Agreement”), between
the Company and a corporate trustee (the “Trustee”). Under the Trust Agreement, the
Company has assigned to the Trustee some of the Company’s rights under the Financing
Contract and as beneficiary under the Deed of Trust, including the Company’s rights to
receive Installment Payments.
Reference is made to the Bonds and the Official Statement dated May 15, 2015 (the
"Official Statement"), related to the offering of the Bonds, for additional information
concerning the details of the Bonds, their payment and prepayment provisions, their purposes
and the proceedings pursuant to which they are executed and delivered.
Without undertaking to verify the same by independent investigation, we have
relied on representations and certifications by representatives of the County, the Company,
the North Carolina Local Government Commission and others as to certain facts relevant
to both our opinion and requirements of the Internal Revenue Code of 1986, as amended
(the "Code"). The County has made certain covenants (the "Covenants") to comply with the
provisions of the Code regarding, among other matters, the use, expenditure and investment
of the proceeds made available to the County pursuant to the Financing Contract and the
timely payment to the United States of any arbitrage rebate required under the Code, all as set
forth in the proceedings and documents providing for the authorization, execution and
delivery of the Financing Contract and the Bonds.
We have assumed the capacity of all natural persons, the genuineness of all
signatures, the authenticity of all documents submitted to us as originals and the
conformity to authentic original documents of all documents submitted to us as copies or
specimens. We have assumed the enforceability of the Trust Agreement against the Trustee
and the Trustee’s due authentication and delivery of the Bonds. As to the Company’s due
authorization, execution and delivery of the Financing Contract, the Trust Agreement and
the Bonds, we have relied on an opinion dated today of the Company’s counsel.
We have not examined the title to any property that the Deed of Trust purports to
encumber. We therefore express no opinion as to title or perfection or priority of liens,
including any matters related to the recording of the Deed of Trust. Similarly, we express no
opinion, whether expressly or by implication, as to the enforceability of any remedy to the
extent enforceability depends on any matters of title, perfection or priority. We direct your
attention to the title insurance policy to be issued in connection with this financing by The
Title Company of North Carolina, which addresses some of these matters.
D-2
Sanford Holshouser LLP
May ___, 2015
page 3
Based on the foregoing, as of today and under existing law, we are of the following
opinions:
1.
The County has duly authorized, executed and delivered the Financing
Contract. The Financing Contract is a legal, valid and binding obligation of the County,
enforceable against the County in accordance with its terms.
2.
The County has duly authorized, executed and delivered the Deed of Trust.
The Deed of Trust is a legal, valid and binding obligation of the County, enforceable against
the County by the Company, the Trustee (as the Company’s assignee under the Trust
Agreement) and the Deed of Trust Trustee in accordance with its terms.
3.
The Financing Contract and the Trust Agreement are legal, valid and binding
obligations of the Company, enforceable against the Company in accordance with their
respective terms.
4.
The Bonds have been validly executed and delivered. The Bonds represent
proportionate and undivided interests in the County’s repayment obligations under the
Financing Contract, as provided in the Trust Agreement. The Bonds are secured as provided
in the Financing Contract, the Trust Agreement and the Deed of Trust.
Our opinions as set forth in paragraphs 1 through 4 above are subject to the effect (a)
of bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting
creditors' rights, and (b) of general principles of equity, regardless of whether applied in a
proceeding in equity or at law.
The County’s obligations under the Financing Contract are not general obligations
of the County. Pursuant to the terms of the Deed of Trust, the Financing Contract and
Section 160A-20 of the North Carolina General Statutes, no deficiency judgment may be
rendered against the County in violation of that Section 160A-20.
5.
Interest components of Installment Payments so designated and paid by the
County pursuant to the Financing Contract and then paid as interest with respect to the Bonds
("Interest Payments") (a) are not includable in the recipient’s gross income for federal income
tax purposes and (b) are not an item of tax preference for purposes of the federal alternative
minimum income tax imposed on individuals and corporations; however, with respect to
corporations (as defined for federal income tax purposes), Interest Payments are taken into
account in determining adjusted current earnings for purposes of computing the alternative
minimum income tax on corporations. The County's failure to comply with the Covenants
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Sanford Holshouser LLP
May ___, 2015
page 4
could cause Interest Payments to be included in gross income for federal income tax purposes
retroactively to the Financing Contract’s date of delivery.
6.
Interest Payments are exempt from State of North Carolina income taxes.
We express no opinion regarding other tax consequences of the ownership of or
receipt or accrual of interest with respect to the Bonds.
Our services as bond counsel have been limited to rendering the foregoing opinions
based on our review of such proceedings and documents as we have deemed necessary. We
have not made any investigation concerning the County's operations, condition or financial
resources. We express no opinion here (a) as to the County's ability to provide for
payments due under the Financing Contract or otherwise with respect to the Bonds, (b) as
to the accuracy, completeness or fairness of any information that may have been relied on
by anyone in making a decision to purchase Bonds, including the Official Statement, or (c)
as to any party's compliance with any terms or conditions precedent to any purchase of
Bonds.
This opinion is based on constitutional and statutory provisions and judicial
decisions existing today. We assume no responsibility to update this opinion or take any
other action with regard to changes in facts, circumstances or the applicable law.
Very truly yours,
[To Be Signed,
“Sanford Holshouser LLP”]
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APPENDIX E
BOOK-ENTRY ONLY SYSTEM
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APPENDIX E
BOOK-ENTRY ONLY SYSTEM
THE DEPOSITORY TRUST COMPANY
A SUBSIDIARY OF THE DEPOSITORY TRUST & CLEARING CORPORATION
1.
The Depository Trust Company (“DTC”), New York, NY, will act as securities
depository for the 2015 Bonds. The 2015 Bonds will be issued as fully-registered securities registered in
the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an
authorized representative of DTC. One fully-registered bond will be issued in the aggregate principal
amount of each maturity of the 2015 Bonds and will be deposited with DTC. SO LONG AS CEDE & CO. IS
THE REGISTERED OWNER OF THE 2015 BONDS, AS DTC’S PARTNERSHIP NOMINEE, REFERENCE HEREIN TO
THE OWNERS OR REGISTERED OWNERS OF THE 2015 BONDS SHALL MEAN CEDE & CO. AND SHALL NOT
MEAN THE BENEFICIAL OWNERS OF THE 2015 BONDS.
2.
DTC, the world’s largest securities depository, is a limited-purpose trust company
organized under the New York Banking Law, a “banking organization” within the meaning of the New
York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the
meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the
provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset
servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt
issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct
Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct
Participants of sales and other securities transactions in deposited securities, through electronic
computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the
need for physical movement of the 2015 Bonds. Direct Participants include both U.S. and non-U.S.
securities brokers and dealers, banks, trust companies, clearing corporations, and certain other
organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation
(“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed
Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users
of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and
non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear
through or maintain a custodial relationship with a Direct Participant, either directly or indirectly
(“Indirect Participants”). DTC has a Standard & Poor’s rating of AA+. The DTC rules applicable to its
Participants are on file with the Securities and Exchange Commission. More information about DTC can
be found at www.dtcc.com and www.dtc.org.
3.
Purchases of 2015 Bonds under the DTC system must be made by or through Direct
Participants, which will receive a credit for the 2015 Bonds on DTC’s records. The ownership interest of
each actual purchaser of the 2015 Bonds (“Beneficial Owner”) is in turn to be recorded on the Direct and
Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their
purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of
the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant
through which the Beneficial Owner entered into the transaction. Transfers of ownership interests with
respect to the 2015 Bonds are to be accomplished by entries made on the books of Direct and Indirect
Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive bonds
representing their ownership interests in 2015 Bonds, except in the event that use of the book-entry
system for the 2015 Bonds is discontinued.
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4.
To facilitate subsequent transfers, all 2015 Bonds deposited by Direct Participants with
DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may
be requested by an authorized representative of DTC. The deposit of 2015 Bonds with DTC and their
registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial
ownership. DTC has no knowledge of the actual Beneficial Owners of the 2015 Bonds; DTC’s records
reflect only the identity of the Direct Participants to whose accounts such 2015 Bonds are credited, which
may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible
for keeping account of their holdings on behalf of their customers.
5.
Conveyance of notices and other communications by DTC to Direct Participants, by
Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to
Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time. Beneficial Owners of 2015 Bonds may wish to take
certain steps to augment the transmission to them of notices of significant events with respect to the 2015
Bonds, such as redemptions, tenders, defaults, and proposed amendments to the security documents. For
example, Beneficial Owners of 2015 Bonds may wish to ascertain that the nominee holding the 2015
Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative,
Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies
of notices be provided directly to them.
6.
Redemption notices shall be sent to DTC. If less than all of the 2015 Bonds within a
maturity are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each
Direct Participant in such maturity to be redeemed.
7.
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with
respect to 2015 Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI
Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Trustee as soon as possible
after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those
Direct Participants to whose accounts 2015 Bonds are credited on the record date (identified in a listing
attached to the Omnibus Proxy).
Because DTC is treated as the owner of the 2015 Bonds for substantially all purposes under the
Trust Agreement, Beneficial Owners may have a restricted ability to influence in a timely fashion
remedial action or the giving or withholding of requested consents or other directions. In addition,
because the identity of Beneficial Owners is unknown to the County, to the Company, to DTC or to the
Trustee, it may be difficult to transmit information of potential interest to Beneficial Owners in an
effective and timely manner. Beneficial Owners should make appropriate arrangements with their broker
or dealer regarding distribution of information regarding the 2015 Bonds that may be transmitted by or
through DTC.
8.
Redemption proceeds, distributions, and interest payments on the 2015 Bonds will be
made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC.
DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding
detail information from the Trustee, on the payable date in accordance with their respective holdings
shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing
instructions and customary practices, as is the case with securities held for the accounts of customers in
bearer form or registered in “street name,” and will be the responsibility of such Participant and not of
DTC, the Trustee, the County or the Commission, subject to any statutory or regulatory requirements as
may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend
payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of
DTC) is the Trustee’s responsibility, disbursement of such payments to Direct Participants will be the
responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the
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responsibility of Direct and Indirect Participants. THE COUNTY AND THE COMPANY CANNOT AND DO NOT
GIVE ASSURANCE THAT DIRECT AND INDIRECT PARTICIPANTS WILL PROMPTLY TRANSFER PAYMENTS TO
BENEFICIAL OWNERS.
9.
DTC may discontinue providing its services as depository with respect to the 2015 Bonds
at any time by giving reasonable notice to the Commission, the County and the Trustee. Under such
circumstances, in the event that a successor depository is not obtained, 2015 Bond certificates are
required to be printed and delivered.
10.
The County may decide to discontinue use of the system of book-entry-only transfers
through DTC (or a successor securities depository). In that event, 2015 Bond certificates will be printed
and delivered to DTC.
11.
The information in this section concerning DTC and DTC’s book-entry system has been
obtained from sources the County and the Company believe to be reliable, but the County and the
Company take no responsibility for the accuracy thereof.
The County, the Company and the Trustee have no responsibility or obligation to DTC, the Direct
Participants, the Indirect Participants or the Beneficial Owners with respect to (1) the accuracy of any
records maintained by DTC or any Participant, or the maintenance of any records; (2) the payment by
DTC or any Participant of any amount due to any Beneficial Owner in respect of the 2015 Bonds, or the
sending of any transaction statements; (3) the delivery or timeliness of delivery by DTC or any Participant
of any notice to any Beneficial Owner which is required or permitted under the Trust Agreement to be
given to Owners; (4) the selection of the Beneficial Owners to receive payments upon any partial
prepayment of the 2015 Bonds; or (5) any consent given or other action taken by DTC or its nominee as
the registered owner of the 2015 Bonds, including any action taken pursuant to an omnibus proxy.
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