City of Tukwila, Washington Limited Tax General Obligation Bonds, - - PowerPoint PPT Presentation

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Mar 26, 2023 35 likes •130 views

City of Tukwila, Washington Limited Tax General Obligation Bonds, 2015 April 20, 2015 Presented by: Duncan Brown, Senior Managing Consultant Public Financial Management, Inc. (206) 858 5367 brownd@pfm.com Overview of Topics 1) Completed

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City of Tukwila, Washington Limited Tax General Obligation Bonds, 2015

April 20, 2015

Presented by: Duncan Brown, Senior Managing Consultant Public Financial Management, Inc. (206) 858 5367 brownd@pfm.com

SLIDE 2

Overview of Topics

1) Completed Milestones 2) Sale Process and Market Update 3) Sale Results

SLIDE 3

Completed Milestones

City Council passed Bond Ordinance on March 16th

– Included delegation of authority to City finance director with respect to Bond sale – Included parameters limiting bond size, interest rate, final maturity, etc.

Obtained favorable credit rating

– “AA” by Standard and Poor’s

City staff, in consultation with PFM, established method of sale

– City’s first competitive sale

Finalized Preliminary Official Statement (“POS”) and distributed to

prospective investment banks (underwriters) and investors

On Tuesday, April 14th, the City sold the Bonds by competitive sale

– PFM verified the bids for mathematical accuracy and compliance with bid parameters – After awarding the Bonds to the winning bidder, PFM made minor adjustments to the Bonds to ensure substantially equal annual debt service payments

Finalizing Official Statement
Bonds expected to close Tuesday, April 28th (receipt of funds)

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Methods of Bond Sale

There are 3 different primary methods of selling bonds: competitive, negotiated, and direct placement:

In a competitive sale, the City selects an underwriter (or syndicate of

underwriters) through a sealed-bid process on the day of sale

– City receives bids from underwriters throughout the country – Bonds are awarded to the bidder offering the lowest True Interest Cost (“TIC”) – In general, competitive sales are better suited for strong, well-understood credits, with simple bond structures, and relatively stable market conditions – Strong nationwide demand for highly-rated bonds – bids may vary by as much as 0.30%

In a negotiated sale, the City selects an underwriter (or syndicate of underwriters)

in advance of the bond sale

– Negotiates interest rates with underwriter on the day of sale – Underwriter may be involved in bond structure and marketing strategy in advance of the sale – Better suited for unusual credit types, complex bond structures, and/or volatile market conditions

In a direct placement, the City sells bonds directly to a single investor, typically a

commercial bank or other financial institution

– Utilized by the City for its December 2014 Tukwila International Boulevard financings 3

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Interest Rate Environment

The chart below shows the MMD “AAA” General Obligation Index (the industry standard tax- exempt index) at various points over the last six months. The City benefitted from lower interest rates: rates declined by 0.2% to 0.3% between March and April.

0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Day of Sale 4/14/2015 1 Month Ago 3/13/2015 3 Months Ago 1/14/2015 6 Months Ago10/14/2014

6 Months Ago 3 Months Ago Day of Sale 1 Month Ago

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Summary of Bidders

Bidder Bid (TIC) Sterne, Agee & Leach, Inc. 2.573588% Piper Jaffray 2.577687% Wells Fargo Bank 2.730671% Robert W. Baird & Co., Inc. 2.775197%

A total of 8 underwriters registered to

bid on the Bonds in advance of the sale

4 underwriters submitted bids
The winning bid was submitted by

Sterne, Agee & Leach, Inc., of Birmingham, Alabama

– Determined by lowest “True Interest Cost” or “TIC” (incorporates interest rate cost and underwriter compensation)

Piper Jaffray submitted the second

place bid -- a mere 0.004% behind the winner

After sizing and adjustments, the

final TIC was 2.548145%

Registered Bidders Wells Fargo Bank FTN Financial Capital Markets BMO Capital Markets D.A. Davidson & Co. Raymond James & Associates, Inc. Robert W. Baird & Co., Inc. Sterne, Agee & Leach, Inc. Piper Jaffray 5

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Debt Service Comparison

Bonds’ Actual Debt Service Second Place Bid

Est. Debt Service

Estimated Savings $7,904,182 $7,907,000 $2,818 Bonds’ Actual Debt Service Last Place Bid

Est. Debt Service

Estimated Savings $7,904,182 $8,045,000 $140,818

The second place bid (Piper Jaffray) would have cost the City an

estimated additional $2,800 over the life of the Bonds

The last-place bid (Robert W. Baird & Co.) would have cost the City an

estimated additional $140,000 over the life of the Bonds

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Actual vs. Preliminary and Budgeted Numbers

Average annual debt service on the bonds is $390,000 – over $50,000

less than budgeted in 2015 and 2016

The Bonds’ True Interest Cost and debt service also compare favorably

to preliminary estimates prior to the sale date

TIC Average Annual Debt Service Total Debt Service Actual 2.548145% $390,000 $7,904,182 Preliminary (as of April 1st) 2.854383% $406,900 $8,138,968 Average Annual Debt Service Total Debt Service Actual $390,000 $7,904,182 Budgeted $448,000 $8,960,000 7

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