Travis County Commissioners Court
April 6, 2010,
Item 5
Number 5 is to consider authorizing staff and consultants to move forward with Travis County's 2010 debt issue answer program and approve method of sale.
>> good morning, judge, Commissioners, I am lad, advisor on the bond issues and to come forward today on operation of the sale of obligation of public improvement bonds and the road bonds you have authorized and I sent to you and have given today an updated memo.
it only changes in the date and some other minor things.
my recommendation to you on the method of sale.
this is a larger issue than you have had in the past and we have had a lot of volatility and uncertainty in the market over the last year or so and I believe that it would be, in my professional opinion, much better for you to do a negotiated sale in this and I explained in the memo I supplied in the a back up, the difference between negotiate and competitive sale.
throughout the time I have been the financial advisor for the county we have had all new money issues, competitive bids and as I told you, judge, and your predecessor, that is intuitively the best -- you can usually get the best bid.
with this side of apissue and with the uncertainty in the markets, I don't believe that is the case.
in this day, I would think around, when we say per bond, we mean per thousand dollars.
i believe that it would cost you somewhere in the 7-dollar range per thousand on an underwriter's discount and we can negotiate this issue with underwriters, means we would select them ahead of time, say, major best efforts and work with the staff and mr.
patillo and indicate the price down and my indication is I could get it $5 or less and save you quite a bit of money and also give san opportunity to sell the issue in such a way -- an opportunity to sell the issue with the pbo and auditor's office we can massage maturity amounts to level out peaks and valleys in the debt service curve which is better for the county in the budget planning process.
you can't do that on a competitive sale.
on the competitive sale you state amounts that are being sold on each mature and allow the underwriting community to bid on that so you get what you get.
so it is my recommendation we move ahead of this, on an negotiated basis, and also in the past when we have negotiated deals for refinancing, what e we have done, over the past 20 years at least, the people who bring us ideas and really show an interest in our bonds, for that reason, I would recommend that we give a signal today to underwriting group consisting of first southwest company, estrada hinojosa who have been following our bonds for -- for refundings over the last self years.
i believe that first southwest is done about six of the last 7 and estrada brings us a lot of ideas, strong Texas firms and add to that, three other firms with the presence in Texas, samco from dallas, apex securities from houston which is minority-owned firm and morgan keegan who does the housing bonds and they all do an excellent job which would give us the sales force necessary to cover the retail and institutional market and I believe get the very best prices possible for the county.
>> judge.
>> yes, sir.
>> since I need to separate -- it is not that I don't support this but I need to separate the motion, especially with the method of sale.
i support the method of sale, but -- but now I have to abstain on who -- the recommendation for southwest, mostly because of the fact that I have a relative that is employed by southwest, so I have to abstain on this, so I could divide -- have that motion divided?
>> okay.
>> I do support the health of sale but I -- themethod of sell sale but I can't support the other part.
>> to be honest I thought this item was for the method of sale than for the consultants.
>> it is but need a green light to move forward and you don't have a contract with these folks until they bring you a bond purchase agreement on the day of the sale, but it is my recommendation that this is a strong time that we start working toward the sale with and part of the reason I recommend it -- I know the conflict that Commissioner Davis has -- first southwest company as I have mentioned in the past, has bid on last 8 issues and one five of them on the competitive business, they are strong and support your bonds very well.
>> I am looking at the language but also looking at the back up.
my question is whether the language is sufficient to allow us to really authorize selection of a team of consultants.
i thought we would decide whether it would be a negotiated sale or like a public, you know, bid, choosing one or the other.
>> we can make that selection next week, if you'd like.
>> that would be better for me.
it would be consistent with the back up and what I anticipate we would do today.
>> okay.
>> but, what you are saying is that the negotiated sale not only gives us a better deal financially, but we are also able to diversify the team.
>> yes.
>> the other thing is some of these firms we work with recently, and I guess even today when I look at the names of them, some of them we have worked with in the past, but they have been sort of distant, but these are the ones that have delivered for us.
so it's not like we are out there gambling.
>> yes, sir.
>> and I have a question, there are three underwriters.
>> five.
>> five, sorry.
>> normally it is what you see on this, on the recent toll road issue, I think we had 6 or 7.
>> okay.
>> so --
>> Texas syndicate.
>> and so with regard to -- with regard to the -- if this were to go on the competitive market, what you are asserting in the memorandum there would be a bidding syndicate, anyway, the negotiation, is this a negotiation where we are handpicking the syndicate?
>> yes, you pick the syndicate ahead of time and negotiate with them and it gives you the ability to adjust couponing and the amounts as you do the sale.
>> are these five existing syndicates?
>> no, the syndicates are on a day-to-day basis, they get together and sell bonds together, some say let's all three go on bonds together
>> it is a fluid circumstance, because we are voting, the proposal is that we handpick who it is.
>> yes and based on performance in the past and interest they have show shown in competitively bid bonds in the past, other than using some other criteria.
>> I see.
thanks for that clarification.
>> and the other thing I mention in the negotiated sale, I did mention the recent issue on the 183a on the toll road I was involved in.
there was so much interest in several of those maturities, one was 6 times over subscribed in one hour.
we were able to go back and lower the coupon on that maturity by ten bases points.
>> hmo.
>> by negotiating?
>> and you can't do that in a competitive sale.
>> so you know what -- what's competitive market is like, based on what you see?
and if you cannot negotiate a better deal, then you think the market will provide, I guess you can always fall back to the competitive deal?
>> you can.
i wouldn't recommend that at this time because interest rates are beginning to rise.
so --
>> so we really are banking on the negotiated sale, giving us a much better bargain?
>> yes, judge, and I -- and I believe that 100%, that it will, because on a large issue, what you will have is self of those historical sipped syndicates, Commissioner, will bind together and instead of six bend, you get two and it is for them to be able to manage their risk and minimize their risk.
what happens is when we sell these bonds at 10 in the morning and receive bids abi cam down here and you reward it by 10:45 or 11 and you call them back.
they don't begin to esl sell the bonds until they've won -- if the market is moving against them we will build risk premium into their bid to make sure they don't lose money that afternoon or the next day in trying to sell bonds.
with a negotiated sale, the underwriters know they have the deal and then I am arm wrestling with them to keep their prices down and their fees down but they can begin to call their customers an tell them about it days ahead and gauge interest and have those orders, as in the case of the examples I gave you, we were 7 times oversubscribed.
>> next week can we get more information about the five?
>> yes, I will be happy to.
>> I would move -- I would move that we go ahead with this -- that issuance under this method of sale.
>> negotiated?
>> yes.
negotiated.
>> second by Commissioner Gomez.
discussion?
Commissioner.
just method of sale?
>> yes.
>>
>> [indiscernible] we are bringing back.
now, my question is whether -- do you have more leverage by negotiating with the members of the syndicate and then us later approving that, or should we in open court approve the ones that we think ought to be included next week?
>> that is a very good point.
it is a good point.
>> thank you.
>> because -- because that can tie my hands a little bit but if somebody in the syndicate doesn't want to work for 4 bucks a bond or 4:50, we can always say you are not on the team, then.
>> can you do that in a week or will it take two.
>> negotiating the price works down to the they of the sale -- because the market can change in the next month in such a way that I could maybe get 460 today and there may be risks in the market or things going on that it may be 495 by may 4th.
you just don't know.
i don't like to tie hands like that.
>> perhaps we could complete -- for informational purposes next week -- hear about the five suggested participants without taking a vote that binds lad.
>> do it in open court, though.
>> we could allow -- you could authorize any combination of those five up to the five.
>> let's put together a backup and see how it looks.
>> okay.
and if one would drop and suggest a substitute, we can come back to court any time prior to the fourth of may and make a change, so that's why I did it in this way, it is kind of just a green light to move ahead with that.
but I -- my -- I am very confident in my suggestion to you, that it will be the best way for you to go.
>> okay.
the motion is for us to select the negotiated sale as the method of sale.
any more discussion?
all those in favor?
this passes by unanimous vote.
we will have an item on next week and try to figure out what additional information we need.
okay.
>> thank you.
>> thank you.
>> unanimous vote.
did I say it?
okay.
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Last Modified:
Tuesday, April 6, 2010 12:53 PM
