Travis County Commssioners Court
October 29, 2002
The Closed Caption log for this Commissioners Court agenda item is provided by Travis County Internet Services. Since this file is derived from the Closed Captions created during live cablecasts, there are occasional spelling and grammatical errors. This Closed Caption log is not an official record the Commissioners Court Meeting and cannot be relied on for official purposes. For official records please contact the County Clerk at (512) 854-4722.
Item 32
32. Consider adoption of an order authorizing the issuance of sale of Travis
County Texas limited tax refunds and bonds series 2002. Leveeing a tax in
payment thereof; approving the official statement; and enacting other provisions
relating thereto, and take appropriate action.
>> good morning judge, commissioners. Lad patillo your financial
advisor. We are here with good news about how the refunding of the series
91 a and 91 b refunding bonds worked out. This is something we have been following
for about a year because it's only eligible by a federal [papers shuffling
- audio interference] to be funded on the first of December of this year.
And we can sell the bond that -- today and close on the third of December
and trigger that. It worked out very well. I want to introduce the people
with me, gary kimball to my right from first southwest company, senior managing
underwriter that you appointed, glen opel bond counsel and on my left robert
t.arina with hinojosa out of san antonio. The third underwriting firm, mr.
Richard, could not be with us. I would like to turn it over quickly to gary
kimball and let him tell you how the numbers work out. I believe you all have
the book.
>> thank you, lad. Judge, members of the court. I would like
to walk you through this briefly and then obviously take any questions that
you might have along the way. The first page is simply a reflection of tax
exempt interest rates over the last 10 years to give you some idea that --
that, you know, relatively speaking this is a very good time to -- to trigger
a refunding. Rates have been above current levels over -- approximately 90%
of the time over the past 10 years. It's obviously a good time to take advantage
of this opportunity. The second page is really where I would like to focus
your attention in terms of -- of what we were able to achieve at the bottom
of the page you can see a true interest cost on the traps action of 3-point
-- transaction of 3.31 serious, that is the true interest -- 3.31%, that is
the true interest cost of the refunding we have asked you to consider today.
That compares with over 5.7% average coupon on the bonds that are being refunded.
Almost 2.4% reduction in the cost of capital on this particular set of bonds
that we are refinancing. The next page is a comparison of yields for other
triple a rated transactions of similar size that can to the market last week.
I won't bore you with the details other than to point out on front end you
were significantly better off than any other transaction of comparable size
and credit quality in the market last week of all of these various maturities
that were priced, only two were -- were not favorable to Travis County. In
other words, some other transaction got a slightly better interest rate, but
it was no more than two basis points. Whereas on the flip side, your advantage
to these deals, if you take a look at the first 2003 maturity, was only 25
basis points on certain maturities. So you definitely got the better of the
transactions in the market last week when we set the rates. The next page
is really sort of a global summary of the transaction and where I was -- where
I would point your attention is to the bottom right-hand column, savings is
almost $500,000 a year. Nominal dollars saved. For a total of almost $3 million.
Over the six year period. That is affected by this refinancing. The next page
is a comparison that -- that essentially brings you to today from when we
first identified the transaction back last August. At that time, because of
federal tax law restrictions, we could not price the deal except to do [inaudible]
forward refunding. The decision was made along with the financial advisor
[papers shuffling - audio interference] not trigger at that point. That seems
to be the right thing to have done. The savings at that time would have been
a little less than $2 million. In may we were again not quite up to $2 million.
We have been tracking the transaction as we move forward. When we presented
it to you in September, that was actually sort of the low water mark in the
bond market, but again because of federal tax law, we couldn't pull the trigger
on it at that point as a current refunding. We would have had to price it
as a forward. That would have introduced the forward premium, which would
have taken away much of that savings. Where went up is just under $3 million
in total. This is the first legal opportunity to be able to fix the rate and
we think it was done at an opportune time.
>> so that rate is locked in.
>> yes, sir.
>> as of [inaudible]
>> correct. With your action today, that would lock in the
rate.
>> okay.
>> the sources and uses simply outlines the way the bond
were structured. We had to factor in a slight reoffering premium, simply something
the market is demanding with particular investors who are attracted to these
short bonds and these big blocks, our institutionnal investors who very much
need a premium in today's market to make the transaction work for them and
to result in the yield that we are presenting today. Issuance costs are lower
than originally anticipated. Across the board both in terms of underwriter's
discounts and bond issuance costs. And then finally, you have the actual debt
service schedule with the semi annual principle and interest payments due
to the refunding bonds w. That I would be happy to answer any questions that
you might have.
>> any questions? For those watching what we are doing, basically
it's like a -- like a mortgage refinancing. We are checking the -- taking
the same amount of debt, basically refunding it, which produces the interest
rate and we are able to realize savings between now and when we fully pay
off the indebtedly basically.
>> that's exactly right. We are not extending maturity or
changing the characteristics of the debt in any way. But to lower the payment
by approximately $500,000 a year.
>> judge, I would like to add that to that what the bond
that we are refunding were the 1991 refunding bonds. Those bonds refunded
bonds that were issued by Travis County in the mid 1980's, some of those were
some of the first road bonds that were issued out of the 1984 bond authorization.
In 1991 we had an opportunity to reduce the interest costs on those bonds
and therefore lower the cost to Travis County taxpayers for paying for that
debt. Here once again at this current refunding indicate, the call date, March
1, we had the opportunity to even lower it further by another 3 million. So
the bonds that were issued in the mid 80s were bond that were for parks, roads,
and for probably some -- I think there was some jail bonds. And we -- for
a second time reduced the cost and I think it's a prudent thing to do. We
always look to these opportunities. One of the other things this your agenda
item is talking about approving the o.s. We did publish the official statement
and put it out. I'm proud to tell us once again up in the top right-hand corner
is a triple a from moodies and from standard forbes which we reconfirmed for
us on this issue. If you have no further questions, then I would turn it over
to glen opel and bond counsel to explain the resolution.
>> commissioners, you have before you an order authorizing
issuance of the refunding bonds that approves the official statement, authorizes
the execution of the purchase contract, which with first southwest locks in
those rates, authorizes the county treasurer as paying agent to -- to affect
the refunding, notice of the refunded bopdz, approves an rescue agreement
whereby we escrow the funds from these bonds to pay off the old bonds, they
will be called for redemption on March 1st of '03. This document incorporates
all of the pricing that you would just -- that was just discussed by mr. Kimball.
With that, open for questions or at this time it's appropriate to aadopts
the order. Adopt the order.
>> questions, comments? Move approval of the order that does
all of the things that glen just described.
>> second.
>> any more discussion? All in favor?
>> show me abstaining judge, because I have a relative who
is employed by first southwest.
>> okay.
>> so I will have to abstain on this.
>> in favor of the motion are commissioner Sonleitner, commissioner
Gomez, commissioner Moore and yours truly. Abstaining commissioner Davis for
the reason stated. Thank you all very much.
>> thank you.
>> thank you very much.
>> the taxpayers thank you.
Last Modified: Wednesday, April 2, 2003 10:25 AM