COMMISSIONERS RECOMMEND USING DESIGN-BID-BUILD OPTION FOR NEW SCHOOLS
The Wayne County Board of Commissioners voted unanimously Tuesday to accept Interim County Manager George Wood’s recommendation that the Design-Bid-Build Option be used for
the financing and construction of two new middle schools, and
directed him to ask the Board of Education to consider the report
as it makes its decision.
The Design-Bid-Build Option should cost almost 3.377 million
less in construction and financing costs than the Capital
Lease Option proposed by the Developer.
During Tuesday’s Board of Commissioner meeting,
Mr. Wood outlined a number of concerns he had with
the Capital Lease Option. Those reservations led him to
strongly recommend the Design-Bid-Build option.
“Under this method (Design-Bid-Build),there is no concern
about the financial strength of a landlord over the five to 20
years, as there would be using the Capital Lease Option,”
Mr. Wood explained. “There is also no concern about a
future contract with the two electricity companies for
surplus energy sales. That would have been determined
on the front end. There would also be no concern about
the NC Department of Revenue possibly ruling that the
estimated $1,200,000 of sales tax cannot legally be
reimbursed to the BOC or BOE using the Capital
Lease Method. We know that it is legal using the
During the hour-long presentation, Mr.Wood gave
detailed information regarding the various options
available for the building and financing of the schools.
First, he stressed that the decision to be made was not
whether to build the schools.
“You have already made a commitment to building
and financing them,” he said. “We are now at the stage of
determining the best method to build and finance them.”
He went through the five methods of building and financing available by state law. Those methods include:
An Operating Lease; A Capital lease; Design-Bid-Build Method,
with financing provided using Certificates of participation
issued by the County; or a Design-Build Method, again with
financing provided with a security interest debt instrument,
such as Certificates of Participation; or through Public-Private Partnership Construction Contracts.
In February the Board of Commissioners approved
the concept of using an operating lease as proposed by
the Board of Education, subject to working out the details
and getting approval from the Local Government Commission.
The proposal was skeptically received by the LGC and
their staff made it clear they had difficulty calling the
proposal an operating lease, as they thought it was a capital lease.
The LGC strongly suggested using either a capital lease or
using the COPS financing method.
After further research, both the Board of Education
and the County decided to abandon the use of the operating lease method and looked at the other methods available.
A Capital Lease was the next option preferred by the architect/developer hired by the Board of Education.
However,the County found some issues with this option
as detailed below:
● This method has been repealed(effective July 1, 2015)
because it has not been used since it was enacted in
2006. The LGC indicated that Mecklenburg, Cumberland,
Wake and some other counties looked into the possibility
of using a capital lease but concluded COPS financing or
a general obligation bond was better.
● Fees included in the developer’s initial proposal
exceeded 19 percent of the construction costs.
Industry standard is usually between eight and nine percent.
Subsequent negotiations with the developer altered some of his demands, but not enough to quell the concerns of the County.
These concerns made it necessary for theCounty to
look seriously at the other options. The public-private partnership construction cannot be used, as an architect has already
The Design-Build option could have beenused if both
boards had agreed to its use on the front end. However, since thebuildings are now designed, it is not really an option
at this point.
Mr. Wood then recommended that the Board of
Commissioners approve the Design-Bid-Build Option.