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Minutes 11-26-85MINUTES OF THE SPECIAL CITY COUNCIL MEETING HELD IN COUNCIL CHAMBERS, CITY HALL, BOYNTON BEACH, FLORIDA ON TUESDAY, NOVEMBER 26, 1985 AT 5:00 P.M. PRESENT Nick Cassandra, Mayor Robert Ferrell, Vice Mayor Ezell Hester, Jr., Councilman James Warnke, Councilman Carl Zimmerman, Councilman Peter Cheney, City Manager Suzanne Kruse, Deputy City Clerk James Vance, City Attorney Mayor Cassandra called the meeting to order at 5:43 p.m. and asked if there was discussion of the agenda. City Manager Cheney said the purpose of the meeting is to adopt two resolutions and approve the purchase agreement for Utility Bonds. He introduced Mr. Clark Bennett, a representative of William R. Hough & Company, the underwriting firm. Mr. Bennett passed out lists of Comparative Issues, similar tran- sactions in a current time frame. He said the financial advi- sor's list of comparables reflects even more favorably the price at which these bonds have come in. Mr. Bennett said his firm is making a purchase proposal to the City of Boynton Beach for their Water and Sewer Revenue Bonds, including refunding the 1984 issue. He said they propose to buy the City's $20,237,812.75 worth of bonds at a price of $19,775,916.01; he brought with him a good-faith check in the amount of $200,000. The total interest cost on this issue was 8.612; he believed the financial advisor would agree this is an extremely good rate. In addition to changing some of the provisions in the resolution, he said they managed to scrape out approximately $84,000 worth of present- value savings to the City. In response to Mr. Cheney's request, Mr. Bennett explained that a CAB is a Capital Appreciation Bond, in which the interest accrues and compounds, resulting in the full principal value of the bonds coming back to the bond holder at maturity. This does not increase or exceed an agency's authorized debt limit. CAB's have become popular in the marketplace and are in great demand; they help reduce total interest costs because no current interest is paid on that obligation by the agency during the years that the bond is accreting interest. Mr. Cheney pointed out that most of these bonds, sold in $5,000 denominations, have a particular maturity date; while the bond is held, interest is received according to the schedule. A CAB, rather than being sold at $5,000, is sold for a reduced rate. No interest is received during the time the bond is held, but at maturity it is worth $5,000. Mr. Cheney said CAB's were included in this issue bgcause having some of them at the end of the 20-year issue lowers the overalI interest rate. Councilman Warnke asked about the value of a CAB in the event it was sold before maturity, and Mr. Bennett advised these accrete - 1 - ~INUTES-SPECIAL CITY COUNCIL MEETING BOYNTON BEACH, FLORIDA NOVEMBER 26, 1985 on a regular basis, but that the market dictates its worth at the time of sale. Interest rates determine what it is worth in the marketplace at that time; if interest rates are higher, the sales price of the bond would be lower. He compared it to the purchase of a savings bond and clarified that these bonds do not have a variable rate. In response to Councilman Warnke's question, Mr. Cheney said we pay an insurance premium to have a AAA rating from MBIA. Mr. David Segal, Associate Vice President of Prudential-Bache, the City's financial advisor, handed out materials addressing the major issues involved with this transaction and said his firm believes the underwriting group has offered a very good deal to the City. He said part of this finance plan is to restructure the bond ordinance to allow for additional financing flexibility to meet the future needs of the City in terms of its utility system. Additionally, a portion of the proceeds will be applied to the City's current projects. Mr. Segal said the purchase offer presented to the City by the underwriters is probably the best the Florida market will see this week. He pointed out the list of comparable Florida issues priced this week; he said November 25 was one of the busiest days in the Florida market. At least six insured issues were priced in the market, all rated AAA by Standard & Poor's Corporation and three rated Aaa by Moody's Investors Service. He said the com- parison shows that the interest rates at which the underwriters have offered to purchase the bonds are the most aggressive in the market; this is indicative of the investment community's recogni- tion that Boynton Beach has become one of the stronger credits in the State. Mr. Segal said they recommend that the City accept this purchase offer by executing the necessary documents today. Mr. Segal said it is surprising at this point in the year that the bond market has been able to turn around and show more favorable interest rates while the volume to be issued has steadily increased. In response to Mayor Cassandra's question, Mr. Segal explained that this is a negotiated sale. Investment banking firms were solicited for proposals whereby they put together information detailing their strengths; based on Prudential-Bache's review, along with City staff, a team of underwriters was developed to negotiate the purchase. Mayor Cassandra asked why the negotiated sale is considered more advantageous than competitive in this instance. Mr. Segal replied that this is a refunding issue; these are inherently very mathematically complex and it is dif- ficult to pinpoint the exact dollar amount in bonds that have to be issued. Rarely are refunding issues done on a competitive basis. - 2 - M~NUTES-SPECIAL CITY COUNCIL MEETING BOYNTON BEACH, FLORIDA NOVEMBER 26, 1985 Councilman Warnke asked, in dollars, how much saving is realized over the years on this size of issue from one-half of a percent difference in interest. Calculations revealed that the City is saving around $100,000 by getting this lower interest rate. Proposed Resolution No. 85-ZZZ Re: Amending Resolution No. 85-YYY, Authorizing the Issuance of Water and Sewer Utility Revenue Bonds Attorney Vance said proposed Resolution No. 85-ZZZ, which amends R~solution No. 85-YYY, raises the limit not to be exceeded to $30,000,000; we are above the $20,000,000 previously allowed. At ti~e request of MBIA, we are changing the word "or" to "and" r~lating to the tests required for the issuance of additional b.)nds. The resolution we are refunding contains the word "and"; w~ attempted to liberalize it by substituting the word "or" but tl]e MBIA caught it and required that it be changed back to the original word This means we have two tests; however, they reduced the second test by five percent. We are now only required to come up with 115 percent instead of 120 percent; this is not much of a difference but is a gesture on their part. Mr. Vance read proposed Resolution No. 85-ZZZ by title only: A RESOLUTION AMENDING RESOLUTION NO. 85-YYY, ADOPTED BY THE CITY COUNCIL OF THE CITY OF BOYNTON BEACH, FLORIDA ON NOVEMBER 19, 1985, FOR THE PURPOSE OF INCREASING THE SIZE OF THE AUTHORIZED BOND ISSUE FROM NOT EXCEEDING $20,000,000 TO NOT EXCEEDING $30,000,000; PROVIDING THAT THE EARNINGS TESTS FOR THE ISSUANCE OF ADDITIONAL BONDS SHALL EACH BE APPLICABLE RATHER THAN ALTERNATIVE; REDUCING THE ALTERNATE TEST FROM 120% TO 115%; AND PROVIDING AN EFFECTIVE DATE. Councilman Warnke moved, seconded by Vice Mayor Ferrell, to adopt Resolution No. 85-ZZZ, which amends Resolution No. 85-YYY authorizing the issuance of water and sewer utility revenue bonds. The motion carried 5-0. Proposed Resolution No. 85-AAAA Re: Series Resolution Attorney Vance read proposed Resolution No. 85-AAAA, which authorizes the issuance of the bonds and the execution of the Purchase Contract, by title only: A SERIES RESOLUTION AUTHORIZING THE SERIES OF BONDS TO BE ISSUED UNDER SECTION 207 OF RESOLUTION NO. 85-YYY, ADOPTED BY THE CITY COUNCIL OF THE CITY OF BOYNTON BEACH, FLORIDA ON NOVEMBER 19, 1985, AS AMENDED IN THE AGGREGATE PRINCIPAL AMOUNT OF $20,237,813.75 FOR THE PURPOSE OF PROVIDING FUNDS, TOGETHER WITH ANY OTHER AVAILABLE FUNDS, TO PAY THE PRINCIPAL OF AND THE INTEREST ON THE OUTSTANDING BONDS (AS DEFINED IN SAID RESOLUTION NO. 85-YYY, AS AMENDED); AND TO PAY THE COST - 3 - M~NUTES-SPECIAL CITY COUNCIL MEETING BOYNTON BEACH, FLORIDA NOVEMBER 26, 1985 OF ACQUIRING AND CONSTRUCTING THE PROJECT (AS DEFINED IN SAID RESOLUTION NO. 85-YYY, AS AMENDED); FIXING THE DESIGNATION, THE DATE, THE MATURITIES OF THE SERIAL BONDS, THE CURRENT INTEREST BONDS, THE CAPITAL APPRECIATION BONDS AND ACCRETED AMOUNTS PERTAINING THERETO, THE REDEMPTION TIMES AND PRICES; DETERMINING THAT A NEGOTIATED SALE IS IN THE BEST INTERESTS OF THE CITY; ACCEPTING THE BOND PURCHASE CON:TRACT AND AWARDING THE BONDS TO THE UNDERWRITERS THEREIN NAMED, SPECIFYING THE INTEREST RATE OF EACH SUCH BOND AND DIRECTING THE AUTHENTICATION AND DELIVERY OF SAID SERIES OF BONDS TO OR UPON THE ORDER OF THE UNDERWRITERS HEREIN NAMED UPON PAYMENT OF THE PURCHASE PRICE HEREIN SET. FORTH; RATIFYING THE DISTRIBUTION OF THE PRELIMINARY OFFICIAL STATEMENTRELATING TO BONDS AND APPROVING THE ~iINAL OFFICIAL STATEMENT; AUT INSURING OF THE BONDS; PROVIDING FOR THE APP OF THE BOND PROCEEDS; PROVIDING FOR THE IS [ON OF MONEYS HELD IN THE FUNDS AND ACCOUNTS BY THE 1984 RESOLUTION (AS DEFINED IN SAID NO. 85-YY¥, AS AMENDED)APPROVING THE FORM OF THE POSIT AGREEMENT; APPOINTING THE EscROWAGENT; THE~ R D~TE; PROVIDINGiFOR INSURER TO BE TAKEN UNDER RESOLUTION NO. 85 AC EFFECTIVE DATE. Councilman Warnke moved, seconded by Councilman ~{ester, to approve proposed Resolution No. 85-AAAA. Mayor Cassandra con- firmed w~th Attorney Vance that he sees no problem with the con- tent of this resolution. The motion was voted upon and carried 5-0. Mr. Cheney explained that the maximum limit had been raised to $30,000,000; the formerly approved amount of $20,000,000 had been exceeded. He said among the documents the figure of $28,000,000 may appear; this is because, when a $5,000 CAB is sold and only about $750 is received, more CAB's must be sold in order to receive the amount of money we would have received from other bonds. The net effect on the City's books is that we are only selling $20,237,813.75 worth of bonds, but temporarily it may look as though we are selling $28,000,000 worth. Approving Sales Contract for Utility Bonds Through the process of adopting the Resolution, the Purchase Contract, the Official Statement and the Escrow Agreement were already approved. The only other requirement was the signatures. The meeting was adjourned at 6:15 p.m. - 4 - MINUTES-SPECIAL CITY COUNCIL MEETING BOYNTON BEACH, FLORIDA NOVEMBER 26, 1985 CITY OF BOYNTON BEACH ATTEST: Clerk Recording Secretary ~ (1 tape) - 5 -