Title
Miscellaneous Financing Items (NB)
Explanation
In considering the future borrowing needs of the Utility, staff will evaluate different financing options. One of the options staff has recommended in the past and will consider in the future is the possibility of entering into a swap instrument for all or a portion of the debt issuances. The Commission has previously approved four firms, Merrill Lynch Capital Markets, Inc., JP Morgan Chase Bank, Goldman Sachs Mitsui Marine Derivative Products, L.P., and UBS AG, to provide such services. Staff recommends that we work with our Financial Advisor, Morgan Stanley, to add a fifth firm to the pool - Bear, Stearns & Co., Inc. (Bear, Stearns). Bear, Stearns continues to bring value to the Utility in the form of solid recommendations for financing opportunities. Staff believes that Bear, Stearns would be a complement to the approved pool as this would allow an additional firm an opportunity to bid competitively for swap business. Upon approval of the above recommendation, Bear, Stearns will be added by the execution of an agreement substantially in the form of an industry standard master agreement, into which City of Gainesville specific schedules and credit support documents will be incorporated.
In 2002, the City Commission authorized the selection of JP Morgan as remarketing agent for the 2002 Series A and Series B Bonds. With the assistance of our Financial Advisor, staff has been evaluating the possibility of adding an additional remarketing agent to provide the option of using a separate remarketing agent for these bonds. Staff believes that by introducing another firm into the remarketing process, savings through the competitive environment may be realized. Therefore, it is the recommendation of your staff and Financial Advisor that we negotiate and enter into a Broker-Dealer agreement with A.G. Edwards & Sons, Inc. (A.G. Edwards). A.G. Edwards has a large presence in the financial markets, particularly in Florida. They are a well respected firm in the industry which continues to be valuable to the Utility and will complement our financing program.
The Clerk of the Commission, the General Manager or other Authorized Officers of the City (as defined in the Amended and Restated Utilities System Revenue Bond Resolution, adopted January 30, 2003) may be required to take certain other actions to finalize the above described agreements. Therefore, we recommend these officials be authorized to take other such actions that may be necessary to proceed with entering into the recommended agreement with Bear, Stearns and a Broker-Dealer agreement with A.G. Edwards.
Recommendations
The City Commission: 1) Authorize the General Manager to negotiate and enter into an agreement with Bear, Stearns & Co., Inc., subject to approval of the City Attorney as to form and legality for the purpose of providing the terms and conditions of certain potential interest rate swap transactions between the parties; 2) Authorize the General Manager to negotiate and enter into a Broker-Dealer agreement with A.G. Edwards & Sons, Inc., subject to approval of the City Attorney as to form and legality; and 3) Authorize the Clerk of the Commission, the General Manager and other Authorized Officers to execute such documents that may be necessary to consummate the agreements authorized in 1-2 above.
Fiscal Impact
Staff anticipates potential savings resulting from remarketing competition. These savings, in turn, will help hold down future debt service costs.
Drafter
Prepared by: Jennifer L. Hunt, Acting Chief Financial Officer
Submitted by: Michael L. Kurtz, General Manager