pages: CityCouncil/2021-10-19.pdf, 21
This data as json
body | date | page | text | path |
---|---|---|---|---|
CityCouncil | 2021-10-19 | 21 | Mr. Morales responded that he has structured the POBs to match the dollar amount of the final years; stated bonds are done in $5,000 increments; the image shown is as close as possible mathematically. Councilmember Herrera Spencer inquired whether current interest rates were used to project the amounts, to which Mr. Morales responded in the affirmative. Councilmember Herrera Spencer inquired the number used. Mr. Morales responded municipal bonds are a series of bonds; each year has a different interest rate; stated a coupon rate is included; the amounts are also priced as a spread to treasury, which is different from a tax-exemption; pricing the amount day-of, the City will have the two year treasury rate; an underwriter who sells and buys the bonds to investors will explain the bonds as market rate for 25 basis points above the two year treasury rate; the pricing will be up to the 3, 5, 7, 20 and 30 year treasury rate; all rates are indexed off the spread; there is an interest rate cushion; recent bonds have all been below 3% on the back end; a significant cushion has been given due to the required four to six month validation period. Councilmember Herrera Spencer inquired what happens to numbers if fluctuation happens. Mr. Morales responded interest rates going down result in the bottom number lowering; stated one interest rate is not used in the calculation; multiple interest rates are used; a gross spread has been presented, with an average rate of 3.33%; interest rates that increase, cause a decrease in cushion or savings; a 0.75% point cushion from current market rates is considered conservative. The City Manager stated UFI included rate a 0.75% higher than the current rate. Councilmember Herrera Spencer inquired what the cities that lost money on the same process did wrong and why the recommendation is the right thing to do. Mr. Morales responded other cities POBs were completed at much higher interest rate environments and had unideal timing; discussed case studies; stated bonds issued in 2008 were not done at a good time and had a 6% interest rate; the use of cab structures, or zero coupon bonds, extended payments and took payment holidays; a number of different things are effecting other cities, including not using the most prudent financial practices; UFI does not guarantee the financial outcome; when cities study and understand the risk, the results are substantially different. Mayor Ezzy Ashcraft stated that she is mindful of the comments provided by the City Auditor and Treasurer; Council should make sure there is as much information and outreach as possible; further steps will be taken prior to a final decision to issue POBs; expressed support for understanding the further steps; stated that she would like more flesh on the bones of the section referring to the strategy to recommended setting 50% of the POB savings creating a sinking fund to stabilize any future risks and pension obligations; she would have liked more information about the sinking fund savings; she would like to know more about the option before voting to authorize issuance of POBs; she is intrigued and has been preaching about how the City needs to set aside a portion of all unanticipated revenues once debts are paid down; she would like more information before Council embarks on the current step. Regular Meeting Alameda City Council October 19, 2021 20 | CityCouncil/2021-10-19.pdf |