HomeMy WebLinkAboutItem #24 - Discussion ItemE
CITY OF MIAMI. FLORIDA
INTER -OFFICE MEMORANDUM
To. Honorable Mayor and DATE. P-lay 1, 1984 F1L2:
Members of the City
Commission SUBJECT: 1984 G.O. Bond Sale
FROM. Howard V. Gary
City Manager REFERENCES:
ENCLOSURES:
On January 30, 1984, you received a memorandum which indicated
consideration was being given to the possibility of selling $25M
in General Obligation Bonds in April or May of this year. At
that time no definite date had been established for the sale, and
the precise amount of bonds to be ;gold had not been determined.
Since that memorandum was written, rbe have had numerous
discussion,with the City 's bond advisor, J, J. Lowrey & Co. ,
investment broker-5 and others who have knowledge and experience
in bond Pales.
The determi.nz: tion cif "how mach to sell" and when to sell is
strongly governed b)' a� nur:)ber of inter--rel.itcd factors:
1 . Internal Revenue `,erg i c. e (1)(3) Ar^battraf,e�Requirements
There rcoui r iwo c orripli.cd wiG.h to en,, ure that
the toy, t_'),r'mpt {.,��it,,lt., of t,!l('. t1<and.a are maintained.
Basi.caIJ y, i,}Ic jiu;i_c c>f Itrt>i 1,r, c° requi. r-es that, t;hcre be
r'reason,,blr r;;pr=c.1.;, t:iorr" th ,t r: portion, of the borrowed
fund: will be :.dent on the project for which it was
borrowed within six months of the bond -'alc settlement
date, and all of�the funds borrowed be spent within
thirty-six months. The purpose of this Rule is to
preclude jurisdictions from excessive borrowing of
funds at long-term rates to be reinvested at short-term
rates, which are generally higher than long-term rates.
2. Ability of the City to Effectively %pend Borrowed Funds
There is a very definite number- of capital projects
that can be initiated and effectively managed by the
City at U given tine. Projects must be planned,
specifications developed and many other activities must
be accomplished to ensure effective utilization of
funds and success of the project. Historically, the
City has been able to spend approximately $20-$25M per
year on capital construction.
Page 1 of 4
H
Honorable Mayor and flay 1, 1984
Members of the City
Commission
3. Presence in the Bond Market
It is to the advantage of the City to have a consistent
and predictable presence in the New York bond market.
It is very helpful in marketing City bonds if it is
known that each year the City will be coming to the
marketplace with a specific sale. Based upon our
present assessment of the City's capital needs, it
appears that the City will probably be going to the
market to sell $25-$35M in General Obligation Bonds
each 12 to 18 months for the next several years.
4. Bond Ratings
The ratings by Standard and Poor's and by Moody's are a
very important' factor, in the marketing of City bonds.
The r<�tinF;cencies expect the City to follow a
prudent., 1 c_i' thought � out, cc7ns1s:t;oil t,, borrowing
progi-nill, r o 3 i ; (!a1 l.y �15 it r e I t.0 t.o C;enera
Obligat.ion Pond,,,', They exp<<ct jllri.�dict:"to borrow
only what. tlicy tiailen thc'y ncc:ci ? t, . " J'17nt to
know spcc:ii"ic: l,ly Dour t:,hc: fun(J., I:ri 1)c �.�: c rid i.f the
project,: t: i_:17. be completed pl<'snt7c d . Th(, rating
agencies continually evaluate. the debt I�osi.t:i.c,n of the
issuer. They are very concerned with the ratio of debt
per capita, net debt to assessed value, debt cost as a
percentage of revenues, as well as ohter- comparative
statistics. The issuance of General Obligation debt
must be done in such a manner that will be viewed in a
positive way by the rating agencies.
5. Interest Rate Expectations
An additional factor which may influence the size and
timing of a bond sale is interest rate expectations.
There is no reliable formula to predict market
behavior. The interest rates vary from Say to day and
generally follow either upward or downward trends.
When possible, one should attempt to enter the market
when interest rates are low and avoid the market, if
possible, when rates appear to be high. Although there
is some latitude in terms of size and timing of a sale,
care must be exercised to avoid attempting to "play the
market."
0
Honorable Mayor and
Members of the City
Commission
6. Long -Term Borrowin
.
The City has a long-term capital program which it
expects to fund, in part, by the sale of General
Obligation Bonds. Projects included are those approved
by the City Commission because of their importance to
the well-being of the community. Delaying the funding
for needed projects which are part of a long-term
capital improvement program simply causes a "doubling
up" of funding requirements in future years. What you
don't borrow this year you will have to borrow next
year.
As a general rule, as a regular, long-term capital
funds borroucr, the Cite should go the market "for only
what is needed when it is needed."
RECOMMENDATION'S
In assessin , tlic Cit.}a1J_ of the above factors were
considered. 1',C 4 r°C that the City sell $30.2M in
General 0b3_i.f-2,, 1., can Plonci.> c:,n Jun(� 1)1, 1984.
Specifically, ve airc, racem(imending that bonds be sold for the
purpose and the amount;, indicated below:
A. Storm Drain Project - $314
These funds will be utilized to complete and/or initiate
seven projects.
B. Highways and Streets - $7.1M
$5M will be utilized for nine projects throughout the
City.
$2.1M will be utilized on the Overtown-Parkwest project.
C. Housing - $18.1M
$7M will be used to complete the purchase of land for the
$65M Multi -Family Housing Program.
$11.1M will be utilized for land acquisition in the
Overtown-Parkwest area.
� � I
Honorable Mayor and
Members of the City
Commission
D. Fire Facilities - $2M
-4-
May 1, 1984
These funds will be utilized for approved data processing
and communication enhancements.
The date of June 14 was selected because it is the earliest date
that we can be ready to go to the market. Bond interest rates
are on an upward trend and all expectations are that this trend
will continue until at least the end of the year. Expectations
are that after the Congress recesses, activity will increase in
the tax exempt market. Additionally, it is felt that the market
may be more stable at that time and if we are able to sell on
June 14, we will be in the market before the volume increases
which may cause interest rates to be higher.
Attachment
1:
Projects to be Funded
with 1984 Bond Sale
Attachment
2:
Bonds Authorized and
Not Issued
• CITY OF MIAMI, FLORIDA
INTER -OFFICE MEMORAyDUM ATTACHMENT 1
TO. Randolph Rosencrantz DATE: April 25 , 1 o.8,4 FILE:
Assistant City Manager
SUBJECT: Projects to be funded
with 184 Bond Sale
Carlos E. Garcia
FROM: Director of Finance REFERENCES:
ENCLOSURES:
Proceeds of the 1984 - $30.2M G.O. Bond Sale are projected to be
as follows;
Housing Bonds
Affordable Housing $ 7,000,000
Overtown Park West 11 100 000
1T1100,000
Streets & HiE?hways
City wide I', wing
$ 250t000
—_ Design P3 aza
500,000
Manor i3igliway Improvement
700,000
S.W. 27Gh Avenue
70,000
Allapattah Industrial Area
1,0001000
Grand Avenue Sidewalk
200,000
Overtown Highway
400,000
E. Litble Havana Highway
1,000,000
S.W. 16th Street Highway
880,000
Overtown Parkwest
2,100,000
7,100,000
Storm Sewers
Flagler Storm Mods.
200,000
Local Drainage E-54
800,000
Riverview P.S. Mods.
50,000
Orange Bowl P.S. Mods
100,000
Manor
600,000
Shenandoah
420,000
LeJeune Station
830,000
3,000,000
Fire Bonds
New Communications System 2,000,000
Total $ 30,200,000
N
ATTACHMENT 2
G. 0. Bonds
Authorized & Issued
9/30/83
s
- Date
Purpose
AMT
Issued
Balance
6/30/70
Highways
$ 811475,000
$ 75,100,000
- $6,375,000*
Pollution Control
9/28/76
Sanitary Sewers
25,000,000
22,000,000
3,000,000
Fire
10,000,000
101000, 000
--0--
.3/9/76
Housing
25,000,000
6,900,000
18,100,000
3/7/78
Storm Sewer
15,000,000
12,000,000
3,000,000
10/7/80
Sanitary Sewer
45,000,000
-0-
45,000,000
Streets
3010001000
6,000,000
24,000,000
11/3/81
Fire
21,000,000
8,000,000
13,000,000
3/12/84
Police
20,000,000
-0-
20,000,000
Sewer
30 000 000
-0-30000.0,
000
302, 75� 0
1 0,000,000
2 75,000