HomeMy WebLinkAboutIR 7175 I ITI-VIFFORMAL REPORT TO CITY COUNCIL MEMBERS No.- 7175
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j VOR1. To the Mayor and Members of the City Council February 17, 1987
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X Subject: Bond Sale Proposed for March 11, 1987
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On today's agenda, the Council is being asked to adopt the ordinance
approving and authorizing the Notice of Intention to Issue $17,000,000
Water and Sewer Revenue Bonds. This action is being requested today
because of the required publication notice for revenue bonds which must
appear in the newspaper for two consecutive weeks prior to the sale of
bonds on March 11, 1987.
As discussed at the Pre-Council session on February 3rd, a $23,000,000
General Obligation Bond issue is also being proposed for the same date. On
March 3rd, the Council will be requested to adopt an M&C authorizing this
sale for the following purposes:
Purpose Date Authorized Amount
Street Improvements May 22, 1982 $ 60,000
Street Improvements March 22, 1986 15,150,000
Library Improvements March 22, 1986 625,000
Public Safety March 22, 1986 665,000
Park and Recreation
Improvements March 22, 1986 6,500,000
TOTAL GENERAL PURPOSE BONDS $23,000,000
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At the same February 3rd meeting, the Council was also advised that current
market conditions were favorable to advance refunding a portion of the 1985
General Purpose Refunding Bonds. Approximately $87,000,000 high coupon
bonds of the 1985 Refunding can now be refunded generating approximately
$400,000 annual savings in debt service. Because it is important to
proceed quickly with this refunding if advantage is going to be taken of
-the current interest rate scenario, the staff and the City's Financial
Advisor, First Southwest Co. , recommend the advance refunding and the
$23,000,000 General Purpose sale be combined and sold at a negotiated sale.
The City ordinarily conducts competative sales for General Purpose Bonds;
however, the nature of advance refundings require that they be done on a
negotiated basis. A combined negotiated sale is being recommended for
three reasons as follows:
1. Issuance costs can be kept to a minimum by combining the sales as
opposed to having two separate sales.
2. Two sales of similar securities within 30 days of each other poses
potential risk to the underwriters which can mean higher interest
rates to the City. If interest rates rise while the second sale is
in progress, previous sales from the first issue could cancel out
and commit to the higher rates on the second issue, leaving the
first underwriter holding bonds of reduced value. It is also not
advisable to have two separate underwriting groups marketing
identical securities during the same time period. It would
result in a less than favorable reaction from bidders and most
likely result in higher interest rates to the City.
IS ED BY THE CITY MANAGER FORT WORTH, TEXAS
INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 7175-2
to R)§ To the Mayor and Members of the City Council February 17, 1987
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Subject: Bond Sale Proposed For March 11, 1987
3. For any similarly secured bonds delivered to the purchaser within
30 days of each other, tax law requires a yield blending for
escrow earnings purposes on the refunding portion. This presents
no problem if yields remain unchanged; however, any change in
rates can have negative implications on the escrow depending
on which issue is sold first. If this occurred savings on the
refunding would be reduced.
Direction from the Council is requested today so that if a negotiated sale
is to be pursued the Financial Advisor can proceed with developing an
underwriting syndicate to be recommended to Council.
Dougla"arman
City Manager
ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS