Memorandum
City of Lawrence
Finance Department
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TO: |
Thomas M Markus, City Manager
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FROM: |
Bryan Kidney, Finance Director
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Date: |
June 7, 2016
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RE: |
Revenue Bonds, Series 2016-A and General Obligation Bonds, Series 2016-A Sale Results. |
Revenue Bonds, Series 2016-A
At 11:00 this morning, the City opened bids for Revenue Bonds, Series 2016-A and General Obligation Bonds, Series 2016-A. Review bids received and approve sale of $60,310,000 water and sewage system improvement and refunding revenue bonds, series 2016-A bonds to the lowest responsible bidder. Consider declaring an emergency and adopt on first and second reading, Ordinance No. 9249 authorizing and providing for the issuance of water and sewage bonds, series 2016-A. Consider adopting Resolution No. 7164 prescribing the forms and details of and authorizing and directing the sale and delivery of water and sewage system improvement and refunding revenue bonds, series 2016-A. Both Series are described in the memo provided with tonight’s agenda.
Prior to taking bids on the Bonds, Moody’s affirmed its Aa1 rating on the City’s outstanding and Aa2 rating or revenue.
At this morning’s sale of the General Obligation Bonds, Series 2016-A, the City received eight bids from interested investment banks, with true interest costs ranging from 2.3919140% to 2.4718608%. The bids are summarized below.
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Bidder Name |
Interest |
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J.P. Morgan Securities LLC |
2.3919140% |
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Mesirow Financial, Inc. |
2.3974123% |
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Piper Jaffray |
2.4098848% |
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Robert W. Baird & Co., Inc. |
2.4340918% |
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Citigroup Global Markets Inc. |
2.4388590% |
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Morgan Stanley & Co, LLC |
2.4416194% |
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Wells Fargo Bank, National Association |
2.4474106% |
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Bank of America Merrill Lynch |
2.4718608% |
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Estimate as of April 26, 2016 |
2.61% |
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The lowest bid, submitted by J.P. Morgan Securities LLC, conforms to all of the bidding requirements established by the City. The bids are attached for your reference. This bid was approximately 22 basis points less than the most recent interest rate projections provided by the City’s Municipal Advisor, Springsted, Incorporated.
Staff and Springsted recommend awarding the bonds to J.P. Morgan Securities LLC.
As a result of the lower than anticipated interest rates and a premium bid by J.P. Morgan Securities LLC, the total principal amount of the Bonds was reduced from an estimated $67,505,000 to $60,310,000. The Bonds will be payable over the next 20 years with level annual debt service. The annual cash flow savings will be used to lower the amount of debt needed to fund future capital improvement costs
The Estimated present value savings for the refunding portions on April 26, 2016 was $3,119,421. The lower interest rates now result in a net present value savings of $3,263,770.
General Obligation Bonds, Series 2016-A
At this morning’s sale of the General Obligation Bonds, Series 2016-A the City received three bids from interested investment banks, with true interest costs ranging from 1.0675598% to 1.2522450%. The bids are summarized below.
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Bidder Name |
Interest |
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J.P. Morgan Securities LLC |
1.0675598% |
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Robert W. Baird & Co., Inc. |
1.1776582% |
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Wells Fargo Bank, National Association |
1.2522450% |
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Estimate as of April 26, 2016 |
1.36% |
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The lowest bid, submitted by J.P. Morgan Securities LLC, conforms to all of the bidding requirements established by the City. The bids are attached for your reference. This bid was approximately 29 basis points less than the most recent interest rate projections provided by the City’s Municipal Advisor, Springsted, Incorporated.
Staff and Springsted recommend awarding the temporary notes to J.P. Morgan Securities LLC. As a result of the lower than anticipated interest rates and a premium bid by J.P. Morgan Securities LLC, the total principal amount of the Bonds was reduced from an estimated $15,140,000 to $13,385,000
The Estimated present value savings on April 26, 2016 was $700,504. The lower interest rates now result in a net present value savings of $870,640.
The City’s Bond Counsel, Gilmore & Bell, P.C. has updated the draft Ordinance No. 9249 and Resolution No. 7164 to incorporate all of the final terms of J.P. Morgan Securities LLC bid and Resolution No. 7165 to incorporate all of the final terms of the J.P. Morgan Securities LLC.
Action Requested: The City Commission is requested to review bids received and approve the sale of $60,310,000 Revenue Bonds, Series 2016-A to J.P. Morgan Securities LLC and approve the sale of $13,385,000 General Obligation Bonds, Series 2016-A to J.C Morgan Securities LLC. Consider declaring an emergency and adopting Ordinance No. 9549 authorizing and providing for the issuance of Revenue Bonds, Series 2016-A and General Obligation Bonds, Series 2016-A. Consider adopting Resolution No. 7164 and No. 7165 prescribing the forms and details of and authorizing and directing the sale and delivery of Revenue Bonds, Series 2016-A and General Obligation Bonds, Series 2016-A.