03-24-14 Regular Meeting of La Porte City Council

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City of La Porte, Texas March 17, 2014 Page 3 Given the advance refunding nature of the issue, which is timing and interest rate sensitive, it is our recommendation that the debt be sold by the negotiated sale method. Given the size of the issue, it is our recommendation that the City utilize a two handed underwriting syndicate for maximum distribution. The City has historical relationships with two underwriting firms including Coastal Securities and BOSC, Inc. and has indicated a desire to utilize those firms with Coastal Securities as the lead underwriter. We concur with that decision. It is also our recommendation, in order to minimize costs of issuance, that the City once again only utilize one rating agency. In the previous two refundings, each of which were under $10.0 million in par, the T: IMING General Obligation Refunding Bonds do not require any special notices or public hearings. There are two methods for handling council approval. The first is the more traditional in that the Council approves a plan of finance and authorizes the Director of Finance, working with the Financial Advisor, to proceed with rating presentations, document preparation and set a predetermined date to sell the bonds and bring to the Council an ordinance complete with interest rates for Council approval. The second method has become popular in the past 3-, an ordinance authorizing the issuance of the debt is presented to council that does not set out the final interest rates of the issue but instead delegates the authority to negotiate such final terms to one or more City officials; typically the City Manager and/or the Director of Finance, SO LONG AS CERTAIN PARAMETERS APPROVED BY THE COUNCIL ARE MET. The parameters set out in the ordinance included a maximum amount of debt to be issued, the maximum level of interest rates that can be approved, a maximum maturity of the debt and a minimum level of savings that must be achieved. Finally, the ordinance would put a time limit on the authorization. In this manner, City administration has the latitude to monitor the market as preparations are made and to choose the market conditions in which to enter rather than being forced to accept whatever market conditions exist at the time of a predetermined sale date. Given the timing of document preparation, rating agency availability and City Council meetings, we believe and expect the traditional method will work and it is our expectation to use that method. Should unforeseen circumstances arise, we may reconsider the parameters resolution method. The attached timetable of events reflects this recommendation with the expectation that the complete ordinance would be adopted on March 24, 2014. S: UMMARY Interest rates are at very attractive level and give the City the opportunity to lock in substantial savings without incurring interest rate risk. We recommend that the City not only move forward with the refunding but, given the projected capital improvement projects, utilize the proposed structure to accommodate a potential new money debt issuance in 2015. 303 Pearl Parkway, Suite 220 (210) 805-1118 RBC Capital Markets San Antonio, TX 78215 Member NYSE/SIPC