Travis County Commissioners Court
February 8, 2005
Item 41
One quick item related to one of the corporation items, and that is number 41 a and b . 41. A. Authorize the county staff, financial advisor and bond counsel to proceed with preparation of necessary requirements to refinance various county debt obligations; and. B. Designate appropriate underwriters. The explanation here is similar to the one that we received for the corporation.
>> judge, lad patillo once again, your financial advisor. Interleaved in the booklet that I gave you earlier is a graph that I included through that kind of explains how we got to where we are now since when we did your refunding in October. If you recall at that time we were looking at all of the county's limited and unlimited tax bonds. Of course our only unlimited tax bonds are your road bonds. At the time we told you that that refunding could be anywhere between 27 to $82 million, just depend being on the market. Well, it round up around 33 because of where the market was, what was efficient. I have once again with me jennifer douglas and gary kimball. Gary was on that previous underwriting along with first albany. Jody giles, they worked on that together. And gary has been following this, jody's had some change in his staffing, so his numbers guy is no longer there. Gary picked up the ball, has been working on this well and following it. I would like for gary to explain to you what's changed in the market over this -- over this brief period of time that makes this so much more efficient now and give you an opportunity to -- to really capture some savings. Gary?
>> thank you, lad. The graph that you have got in front of you is a comparison of yield curves between middle October and the end of last week. And what it's meant to highlight is the change in the shape of the yield curve. In other words, if you look at those two overlays, you will see that -- that compared with the middle of October, we now have short-term interest rates, which are dramatically higher than they were in October. Yet long-term rates have come down slightly. That is exactly what you need to have happen in order to make an advanced refunding more efficient. Because as you recall, in an advanced refunding you issue bonds today at a lower interest rates, you put the proceeds in an escrow. The escrow stays in place until the old bonds are callable. What you are looking for are long-term rates for your refunding bond, as low as you can get them. Well, they have approved -- improved and you care about short-term yield because your escrow needs to be efficient to sit there until the call date. You don't want it generating negative arbitrage.
>> if I can add in, escrow is invested in treasury security, not tax exempt.
>> we will try to show the relationship and what you have almost got is the perfect storm relative to making efficient the number of the bonds that in October fell out of the picture. Or out of favor with respect to that particular transaction. And we can now reach out and include bonds efficiently, that is at a brief present value savings or above that we could not include back in the middle of October.
>> so that -- that applies both to your unlimited tax bonds and the limited tax bonds. We had some analysis that really is -- has even changed since last week when I presented it to jennifer -- pardon me to jessica and leroy. Because now if -- with what's happened in the mark, if we look at 3%, it could even be larger. Potentially here at today's rates, we could be saving on a total between the two unlimited and limits about gross 3 million?
>> yes.
>> and that's -- you know, that's something that we need to move forward on and see if we can capture that. That's not to say that in the next three to four weeks before we could get this issue in the market, those rates wouldn't change again. But -- but they will be what they are the day that we price them.
>> this is -- [indisernible] outstanding, what we are talking about is reducing the interest rate and generating savings?
>> exactly. Generally what we do is spread that savings over the life of the issue in an even way, so it just -- it just -- if your debt service was here, it just brings it down some. It's like lowering the payment on your house.
>> asking from the dais to authorize a team to go ahead and put the proposal together.
>> yes. Authorize us to move forward to prepare documentation to do this. As we get closer to a sale date, that number, the gross amount, par amount of the bond ir, the big dollar amount that we see on the front cover could go up or down depending on what's efficient at the time. I believe that you have these bifurcated as far as using underwriters, I would like to use the same before. I have been getting proposals of other that's worked with us in the past. None of them showed me new ideas that I haven't gotten from gary and jody. But this issue could potentially be once again back up toward 80 million. That it -- it would be helpful for us to have other firms in the deal and it just helps with the marketing. So I would recommend that estrada hinojosa who worked on our firm issues in the pass be added there, also morgan keegan.
>> okay. I think you will add the teams that can help make this happen.
>> yes, sir.
>> in the past we have always basically authorized the ones doing work to put it together to do so and earn the fees. We will be given a more specific proposal when the timing is right, so we will know approximately what the interest with the -- what the attainable interest rate is at that time, who all of the team members are.
>> well, I would ask you to designate those -- those four.
>> the four today.
>> yes. Those four with the first southwest being the senior manager. And as we -- the word negotiate, negotiate a transaction which this is doesn't apply to the interest rates, it's really to what we pay them. And we'll -- we'll arm wrestle over that, i'll make sure that it's in or below the market on what people pay underwriters to do this.
>> as usual, arm yes, sir al as though the money came out of your own pocket.
>> yes, sir.
>> second.
>> move approval.
>> and of the four --
>> first southwest --
>> estrada hinojosa and morgan keegan [multiple voices]
>> okay.
>> discussion? All in favor? Show commissions Sonleitner, Gomez, Daugherty, yours truly voting in favor. Abstaining?
>> abstaining.
>> relative that's affiliated with first southwest company and I will have an opinion affidavit to be submitted to the clerk.
>> judge, I will keep the court posted and also will -- will try to get back to you just as quick as we can get this together.
>> cool.
>> thank you very much.
>> thank you.
>> keep up the good work.
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.
Last Modified:
Wednesday, February 9, 2005 9:04 AM