HomeMy WebLinkAboutItem #46 - Discussion ItemIt"
TO: Howard V. Gary DATE: June 24, 1983
City Manager
SUBJECT: Discussion of Negotiated Sale
or Competitive Bid for
FROM: Roger M. Carl advanced Refunding Bonds
Director
Department of,
On May 31, 1983 the City Commission adopted, on second reading, an ordinance
authorizing an advanced refunding of the Department's existing debt in an
amount not to exceed $16 million. Since that time, the City Attorney's
office has scheduled a Bond Validation hearing for June 30, 1983 at 9:00 a.m.
before Judge James C. Henderson.
The Department's financial advisor, Shearson American Express, Inc., in
consultation with the City's financial advisor, James J. Lowery, has
recommended that these bonds be sold by a negotiated sale. The concept of a
negotiated sale is that a managing underwriter is selected after a Request
for Proposals is advertised in the Daily Bond Buyer. A committee is
established to select the underwriter in a process comparable to the State of
Florida Competitive Consultant Negotiating Act. Once the Underwriter is
selected the Financial Advisor (Shearson American Express) works with the
Underwriter in the final preparation of the Official Statement. The
Underwriter performs a market survey to determine the price (interest rate)
for the bonds.
Normally, the underwriter would make a final offer at a joint meeting of the
City Commission and the Off -Street Parking Board. Negotiations may occur
until the final offer is made at the joint meeting. At the point the City
Commission and the Off -Street Parking Board accept the Underwriter's offer,
the bonds are legally sold. Approximately three weeks after sale of bonds
the monies are delivered to the escrow fund which is used to "defease" the
existing bonds.
Due to the summer recess and the delay requested during May by the City
Manager to allow the City's financial advisor to review the work of the
Department's financial advisor, Shearson American Express, it is necessary to
request the City Commission to approve the sale of the bonds at a maximum
interest rate not to exceed a certain amount and a maximum discount rate (to
be paid to the underwriter for marketing the bonds). This authorization of a
maximum interest rate and discount rate will allow the bonds to be sold
during the summer at a price equal to or below the maximum authorized. An
agreement with the selected underwriter and specifically stating the maximum
interest and discount rates will be scheduled for the July 28, 1983 Planning
and Zoning City Commission meeting.
Should the sale await the return of the Commission in September, economic
factors could greatly increase the price of the bonds resulting in hundreds
of thousands of dollars of additional expense over the life of the bonds due
to the delay. The recommended procedure is used by :many governments to allow
bond sales during summer recess and has been determined to be legal by the
City Attorney and the Department's bond counsel, Brown, 'good, Ivey, Mitchell
and Petty. Based upon the need to continue progress in the sale of the
Department's advanced refunding bonds, it is recommended that the discussion
of the competitive versus negotiated sale item be scheduled for the City
Commission Committee of the Whole on July 18, 1983 and the proposed agreement
with the selected underwriters be scheduled for the July 28, 1983 Planning
and Zoning City Commission meeting.