HomeMy WebLinkAboutReg 2015-04-20 Item 2A - Powerpoint Presentation Shown at Meeting - Bond Sale for Interurban Avenue and Boeing Access Road BridgeCity of Tukwila, Washington
Limited Tax General Obligation
Bonds, 2015
April 20, 2015
Presented by:
Duncan Brown, Senior Managing Consultant
Public Financial Management, Inc.
(206) 858 5367
brownd @pfm.com
Overview of Topics
1) Completed Milestones
2) Sale Process and Market Update
3) Sale Results
Completed Milestones
• City Council passed Bond Ordinance on March 16th
— Included delegation of authority to City finance director with respect to Bond sale
— Included parameters limiting bond size, interest rate, final maturity, etc.
• Obtained favorable credit rating
— "AA" by Standard and Poor's
• City staff, in consultation with PFM, established method of sale
— City's first competitive sale
• Finalized Preliminary Official Statement ( "POS ") and distributed to
prospective investment banks (underwriters) and investors
• On Tuesday, April 14th, the City sold the Bonds by competitive sale
— PFM verified the bids for mathematical accuracy and compliance with bid parameters
— After awarding the Bonds to the winning bidder, PFM made minor adjustments to the
Bonds to ensure substantially equal annual debt service payments
• Finalizing Official Statement
• Bonds expected to close Tuesday, April 28th (receipt of funds)
Methods of Bond Sale
There are 3 different primary methods of selling bonds: competitive, negotiated, and
direct placement:
• In a competitive sale, the City selects an underwriter (or syndicate of
underwriters) through a sealed -bid process on the day of sale
City receives bids from underwriters throughout the country
Bonds are awarded to the bidder offering the lowest True Interest Cost ( "TIC ")
In general, competitive sales are better suited for strong, well- understood credits, with
simple bond structures, and relatively stable market conditions
Strong nationwide demand for highly -rated bonds — bids may vary by as much as 0.30%
• In a negotiated sale, the City selects an underwriter (or syndicate of underwriters)
in advance of the bond sale
Negotiates interest rates with underwriter on the day of sale
Underwriter may be involved in bond structure and marketing strategy in advance of the
sale
Better suited for unusual credit types, complex bond structures, and /or volatile market
conditions
• In a direct placement, the City sells bonds directly to a single investor, typically a
commercial bank or other financial institution
— Utilized by the City for its December 2014 Tukwila International Boulevard financings
PFM
Interest Rate Environment
The chart below shows the MMD "AAA" General Obligation Index (the industry standard tax -
exempt index) at various points over the last six months.
The City benefitted from lower interest rates: rates declined by 0.2% to 0.3% between
March and April.
3.00%
2.50%
2.00%
1.50%
1.00%
0.50%
0.00%
1
1 Month Ago
Day of Sale
6 Months Ago
3 Months Ago
2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Day of Sale 4/14/2015 1 Month Ago 3/13/2015
3 Months Ago 1/14/2015 6 Months Ago10/14/2014
PF
Summary of Bidders
• A total of 8 underwriters registered to
bid on the Bonds in advance of the
sale
• 4 underwriters submitted bids
• The winning bid was submitted by
Sterne, Agee & Leach, Inc., of
Birmingham, Alabama
— Determined by lowest "True Interest
Cost" or "TIC" (incorporates interest
rate cost and underwriter
compensation)
• Piper Jaffray submitted the second
place bid -- a mere 0.004% behind
the winner
• After sizing and adjustments, the
final TIC was 2.548145%
Registered Bidders
Wells Fargo Bank
FTN Financial Capital Markets
BMO Capital Markets
D.A. Davidson & Co.
Raymond James & Associates, Inc.
Robert W. Baird & Co., Inc.
Sterne, Agee & Leach, Inc.
Piper Jaffray
Bidder
Bid (TIC)
Sterne, Agee & Leach, Inc. 2.573588%
Piper Jaffray
Wells Fargo Bank
Robert W. Baird & Co., Inc.
2.577687%
2.730671 %
2.775197%
=PFM
Debt Service Comparison
® The second place bid (Piper Jaffray) would have cost the City an
estimated additional $2,800 over the life of the Bonds
Bonds' Actual
Debt Service
Second Place Bid
Est. Debt Service
Estimated
Savings
$7,904,182
$7,907,000
$2,818
® The last -place bid (Robert W. Baird & Co.) would have cost the City an
estimated additional $140,000 over the life of the Bonds
Bonds' Actual
Debt Service
Last Place Bid
Est. Debt Service
Estimated
Savings
$7,904,182
$8,045,000
$140,818
Actual vs. Preliminary and Budgeted Numbers
® Average annual debt service on the bonds is $390,000 — over $50,000
less than budgeted in 2015 and 2016
Average
Annual Debt
Service
Actual $390,000
Budgeted
$448,000
Total Debt
Service
$7,904,182
$8,960,000
The Bonds' True Interest Cost and debt service also compare favorably
to preliminary estimates prior to the sale date
Actual
Preliminary
(as of April 1St)
TIC
2.548145%
2.854383%
Average
Annual Debt
Service
$390,000
$406,900
Total Debt
Service
$7,904,182
$8,138,968
T F\i
Contact Information
PFM
Public Financial Management, Inc.
Susan Musselman
Director
(360) 445 -0238
musselmans @pfm.com
Duncan Brown
Senior Managing Consultant
(206) 858 -5367
brownd @pfm.com