Agenda - 01-04-1993 - VIII-A - Laserfiche WebLink

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Agc5-;t V 3 We discussed the possibility of holding only two sales for the total $52 million. This would reduce some administrative costs . We would also be able to avoid arbitrage costs as long as the return on County investment of bond proceeds remains lower than the interest rate at which the bonds are sold. However , we think it best to pursue three smaller sales because of the greater flexibility we would have to respond to market conditions and changes in project timetables . We also felt that we should avoid having two sales within the same year because of the staff time required in the coordination and preparation for the sale of bonds . 2 . Interest Rates - We talked briefly about the interest rate that we have been using in all of our previous estimates ( 7%) and felt that we will more than likely get a better rate when bonds are sold in March. Currently, it is probable that our rate will be in the neighborhood of 5 . 25 to 6% . Recent bond sales of governments with similar ratings were within this range. Rates within this range also mean that the tax rate required to pay debt service will be lower than our previous estimates . If we sell $22 million of bonds in March 1993 , the approximate debt service cost in 1993-94 would be $2 . 4 million. Considering the impact of the 1993 revaluation, we estimate that the 1993-94 tax rate impact would be between 5 and 6 cents. We will monitor the bond market more closely in the coming months and keep you informed of any drastic changes . 3 . Bond Rating - Each time bonds are sold a new bond rating is required. The two major rating agencies, are Moody' s and Standard & Poor' s . As you may recall , during our last bond sale in 1991 , Moody' s upgraded our rating from Aa to Aal and S&P' s rating remained at AA. In any case both ratings are very good and we do not expect for them to change for the 1993 bond sale. However, you should be aware that major increases in indebtedness and decreases in fiscal reserves could negatively impact bond rating. It is extremely important that we keep this in mind during each year' s budget process . The rating agencies will be contacted in mid to late January. Since we did not sell bonds in 1992, it is possible that they may want a presentation. If so, we can prepare a presentation similar to the one in 1989 which was very effective. The 1989 rating presentation involved Commissioner input, so the BOCC need to be aware of this possibility.