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HomeMy WebLinkAbout2003 03 10 Regular A City's 1993 Revenue Refunding Bonds in 2003 COMMISSION AGENDA ITEM A CONSENT INFORMA TIONAL PUBLIC HEARING REGULAR X M9rch 10, 200~ Meeting MGR {J-" inEPT '-j----::+- A lIthori7.~ti()n REQUEST: The City Manager Requesting the Commission Approve Moving Forward with a Current Refunding of the City's 1993 Revenue Refunding Bonds in 2003 and Select Gardnyr Capital as the Lead Underwriter for the Refunding Issue. PURPOSE: The purpose of this agenda item is to request Commission approval for the refunding of the City's 1993 bonds and select an underwriting team. CONSIDERATIONS: . The Cities Financial Advisor recommends that the City move forward with processing the necessary paperwork to refund the Cities 1993 Revenue Refunding Bonds to take advantage of lower interest rates. An analysis of the Cities options related to the refunding of this bond issue is presented in the attached memo from our Financial Advisor. The recommended option will result in savings of$472,681 or 5.66% of par. . Additionally, the Financial Advisor recommends that we utilize Gardnyr Capital as the lead underwriter for this issue as they are the only one of our three underwriting firms that has presented a proposal regarding this issue to the City. . The City currently utilizes three underwriting firms and to date have rotated them as the lead and two co-leads on each issue - new and refunding. However, our Financial Advisor informed the City that a pure rotation is normally used in other municipalities in new issues only and refundings are normally awarded to the firm that is "working" the issues in terms of alternatives that the City may find advantageous. . If the City maintains its past policy of a strict rotation regardless of the type of issue then the underwriting firm of Hanifen is next in line to be the lead underwriter and Gardnyr and Hough would be co-leads. ATTACHMENTS: Memo from David Moore, City Financial Advisor with Public Financial Management. RECOMMENDATION: The City Manager recommends the City move forward with the necessary paperwork to refund the City" 1993 bonds in 2003 and designate Gardnyr Capital as the lead underwriter for the issue and Hanifen and Hough as co-lead underwriters. COMMISSION ACTION: DRAFT #1 '~PFM , ,.J Public Financial Management ~- Financial and Investment Advisors Suite 720 201 South Orange Avenue Orlando, FL 32801-3470 407 648-2208 407-648-1323 fax www.pfm.com February 10, 2003 Memorandum To: Louise Frangoul, Finance Director From: David Moore, Senior Managing Consultant Rebecca Peterson, Consultant CC: Ron McLemore, City Manager Re: City of Winter Springs Series 2003 Refunding of Improvement Refunding Revenue Bonds, Series 1993 Public Financial Management ("PFM"), in its capacity as the financial advisor to the City of Winter Springs (the "City"), has evaluated the City's Improvement Refunding Revenue Bonds, Series 1993 for refunding opportunities (the "1993 Bonds"), The purpose of this memo is to summarize the City's options to refund the 1993 Bonds. Currently, the 1993 Bonds have $8,350,000 of par outstanding and are callable on October 1, 2003 with a call premium of 102% of the outstanding par amount. PFM's refunding analysis incorporates three (3) refunding scenarios: I. Current refunding pricing mid/late May and closing on July 3,2003 II. Forward refunding pricing in April and closing on July 3, 2003 III. Current refunding pricing late June 2005 and closing on July 3, 2005 to avoid call premium of 20/0 of outstanding par amount (assuming interest rates remain at current levels). PV Savings Savings as % of Par New Avg. Coupon% Refunded Par Old Av . Cou on % Based on the assumptions listed above, the results of the refunding analysis are as follows: ~ I. Current Refundin in 2003 $472,681 5.66% 3.94% $8,350,000 5.21% II. Forward Refundin in 2003 $326,631 3.91% 4.14% $8,350,000 5.21% III. Current Refundin in 2005 $604,438 7.29% 3.68% $8,295,000 5.21% We recommend that the City move forward with scenario 1, a current refunding later this spring. - .:= PFM -- - -- -- ~- Louise Frangoul February 10, 2003 Page 2 One of the City's underwriters, Gardnyr Michael Capital, Inc., has submitted a refunding proposal that allows the City to accomplish the refunding now instead of waiting until May of this year. We have reviewed the Contingent Bond Purchase Agreement proposal, which is a concept that allows the City to complete the transaction as a forward refunding. While the proposal allows the City to complete the refunding in a fairly cost effective manner, it also introduces a modest amount of risk. It also eliminates the ability of the City to capture any benefit if interest rates decrease further between now and May. The transaction proposed by Gardnyr Michael would take approximately 45 to 60 days to complete because we would still need to secure a bond insurance commitment for the transaction that would occur in October. This means we would not be prepared to lock in the savings until mid April. Since the traditional refunding can be completed as early as mid-May we believe the additional complexity and risk associated with the Contingent Bond Purchase Agreement is not warranted. eWe recommend that the CiJ:y begin preparing the necessary financing documents that will allow the .t!J City to refunding the Bonds in mid-May. It is commonplace in our industry for municipalities to allow the underwriter that proposes a refunding transaction to serve as the Senior Manager for the transaction. Since Garclnyr Michael isalready a part of the City's underwriting team, the City could select Garclnyr Michael to serve in this capacity. [At the same time, since there has been some turnover in personnel at some of the other firms that serve the City, it may make sense to use this asIan opportunity to soljcit proposals from underwriters and reconstruct the City's underwriting team.]