HomeMy WebLinkAboutMINUTES - 07181995 - SD1 s Std. I
TO: BOARD OF SUPERVISORS Contra
r' c
FROM: �`_ Costa
Phil Batchelor, County Administrator :" '"" .Q
County
DATE: July �
18cuiie+
, 1995 �T
'+
SUBJECT: 1995 Tax and Revenue Anticipation Note Program
SPECIFIC REQUEST(S)OR RECOMMENDATION(S)8 BACKGROUND AND JUSTIFICATION
RECOMMENDATIONS:
1. Acknowledge receipt of report from the County Financial Advisor, Prager,
McCarthy & Sealy on the results of the $90,000,000 Tax and Revenue
Anticipation Note Program for 1995.
2. Acknowledge that Contra Costa County received the lowest cost for borrowing
out of 72 jurisdictions selling notes in California for 1995.
3. Acknowledge that of the twelve counties that have completed note sales,
Contra Costa has the lowest interest rate cost.
4. Acknowledge that Contra Costa County received the highest ratings available
for short-term borrowing from both Moody's and Standard & Poor's for the
1995 Notes, without the purchase of credit enhancements.
5. Acknowledge that counties that purchased letters of credit to guarantee
repayment at substantial additional cost (San Bernardino--$654,000) were still
unable to match the Contra Costa interest rate.
6. Express appreciation to the Underwriter, Financial Advisor, Bond Counsel,
Treasurer-Tax Collector, Auditor-Controller and County staff for the
excellent results achieved for the 1995 Note Program.
CONTINUED ON ATTACHMENT: YES SIGNATURE:
RECOMMENDATION OF COUNTY ADMINISTRATOR RECOMMENDATION OF BOARD COMMITTEE
APPROVE OTHER
SIGNATURE(S):
ACTION OF BOARD ON July 18, 1995 APPROVED AS RECOMMENDED X OTHER
VOTE OF SUPERVISORS
I HEREBY CERTIFY THAT THIS IS A TRUE
X UNANIMOUS(ABSENT 2 ) AND CORRECT COPY OF AN ACTION TAKEN
AYES: NOES: AND ENTERED ON THE MINUTES OF THE BOARD
ABSENT: Sr nth ABSTAIN: OF SUPERVISORS ON THE DATE SHOWN.
ATTESTED July 18, 1995
Contact: PHIL BATCHELOR,CLERK OF THE BOARD OF
CC. S ERVISORS AND COUNTY ADMINIST TOR
YIA�%5 W4Mt4/4-d_�DEPUTY
-2-
BACKGROUND:
The County Financial Advisor has provided a report on the results of the Tax and
Revenue Anticipation Note sales for Contra Costa County as compared to other
counties and jurisdictions in California. The Contra Costa Notes obtained the lowest
rate of any jurisdiction yet sold in California. The lower interest rate results in
decreased borrowing costs as well as the opportunity to increase revenue potential
from invested funds.
At least three other counties spent substantial funds for the purchase of credit
enhancements to guarantee repayment of the notes in order to obtain lower borrowing
costs and encourage buyers. Our county was able to obtain lower borrowing rates
without a letter of credit or other credit enhancement with the associated expense.
The State Treasurer, Matt Fong, is quoted in the Wall Street Journal on July 11,
1995 as calculating the cost for the letter of credit for San Bernardino at $654,000.
The July 10, 1995 report from Prager, McCarthy & Sealy lists several considerations
that they felt were significant in the receipt of the favorable interest rate. The most
significant factors were the early approval to proceed with the program and the
cooperation and performance by the team of staff and consultants managing the
program. It is appropriate to express appreciation to the consultants, underwriter
and County staff involved in the program.
Contact: DeRoyce Bell (646-4093)
cc: County Administrator
County Auditor-Controller
Treasurer-Tax Collector
County Counsel
SD-
PRAGER,
MCCARTHY & SEALY
INVESTMENT BANKERS
July 10, 1995
Phil Batchelor
County Administrator
County of Contra Costa
651 Pine Street, 11th Floor
Martinez, CA 94553
Dear Phil,
Enclosed are two exhibits that illustrate the results of California tax and
revenue anticipation note ("TRANs") sales covering the period from May 15
through July 10, 1995.
The first exhibit is a graph that shows a comparison of the purchase yields of
major county issues. The graph clearly shows that Contra Costa received the
lowest purchase yield among the group of counties; in fact, the County placed
first in the State in terms of the lowest purchase yield on its notes. In terms
of dollar impact, the results translate into significantly lower borrowing costs
for Contra Costa compared to the other counties. For example, the projected
extra cost paid by other Northern California counties when their note issues
are adjusted for the same term to maturity and principal amount as Contra
Costa's issue is as follows`:
Extra Cost
County Compared to CC
Marin $156,600
Sacramento $270,000
Santa Clara $1355000
I Please note that the cost comparisons exclude the costs of issuance for each county's TRANS, which costs
increase the effective all-in-cost of the TRANS. Information on the costs of issuance is not readily
available for each county, although the County's costs of issuance are believed to be among the lowest in
the State.
ONE MARITIME PLAZA 11TH FLOOR SAN FRANCISCO CALIFORNIA 94111 TEL 415 955 8151 FAx 415 956 4789
PRAGER, MCCARTHY & SEALY
INVESTMENT BANKERS
County of Contra Costa
1995-96 TRANS
Page 2
The lower purchase yield for the County is due to a number of considerations:
• Timely approval by the Board of Supervisor so that an early
sale of the Notes could be scheduled, if desirable;
• The actual execution of the sale on an early sale date, as the
financing team had monitored the market and had concluded
that conditions were favorable for the sale;
• The complete cooperation and teamwork of the Auditor-
Controller, the Treasurer, and your staff in completing the work
and cash flows on schedule;
• The excellent County rating agency presentation that resulted
in achievement of the highest possible short-term ratings and
the release of outstanding credit reports by the rating agencies
to investors;
• The strong performance by your underwriter in pre-marketing
the County's unenhanced notes; other counties (Sacramento,
Riverside) experienced difficult sales of unenhanced note
programs, and one county (Alameda) pulled their issue from
the market altogether; San Diego, Los Angeles and San
Bernardino incurred extra expense to issue credit-enhanced
TRANS to offset investor concerns about either their risky
investment pools or weak fiscal situations or both;
• The restoration by Moody's of the Al rating on the Merrithew
Memorial Hospital Replacement Project COPs, thereby
ameliorating over one and one-half years of negative investor
reaction to events surrounding the County's hospital project.
The second exhibit is a detailed table that lists the results for TRANs issued
by cities, counties, schools, and pools. This listing is not yet complete, as
some issues have yet to be sold and others have provided only sketchy
information. Nevertheless, you will note that Contra Costa has the lowest
purchase yield on the list.
SAN FRANCISCO BOSTON LOS ANGELES NEW YORK ORLANDO SEATTLE
PRAGER, MCCARTHY & SEALY
INVESTMENT BANKERS
County of Contra Costa
1995-96 TRANS
Page 3
Again, congratulations to the County on achieving such excellent results on its
1995-96 TRANs program.
Sincerely,
PRAGER, MCCARTHY &SEALY
/1 n
Arnold Mazotti Jean Buckley
Vice President Vice President
SAN FRANCISCO BOSTON LOS ANGELES NEW YORK ORLANDO SEATTLE
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