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Regular City Council Meeting <br />August 7, 2003 <br />Page 2 <br /> <br />Index the previous week was 4.83%. When the city last sold bonds on August <br />8, 2002, the total interest cost was 4.31%, and at that time, the interest rates <br />were 5% of the Buyer Index. <br /> <br />Mr. Almon said that the city did market as ~Triple A" bonds by means of <br />AMBAC Insurance and had an Underlying Rating of ~A2" reaffirmed by <br />Moody' s. <br /> <br />Mr. Almon advised that they were able to get all five major bond insurance <br />companies that insure traditional type municipal bonds to accept the city's <br />application and qualify for insurance. Mr. Almon said they sent this out and <br />asked for competitive bids, and they picked the most cost effective bid. He <br />advised that XLCA had the slightly lower bid, but they have only been a <br />~Triple A" insurer for a year and half. He said the marketplace still requires <br />a five to ten extra basis points yield on their insurance, even though they are <br />~Triple A,' because of some resistance over and above the other four major <br />~Triple A" insurers. He explained that if they are substantially below their <br />premium, the underwriters can market one of the other four insurance <br />companies that are ~Triple A", and it will not cost effective a lower yield in <br />essence. He said that the most cost effective choice is to pick AMBAC. <br /> <br />Mr. Almon advised there were not a lot of good comparables for two reasons. <br />One was there was no other bank qualified product selling at competitive sales <br />the last couple days; and number two, when you sell the tail end of a 20-year <br />old bond issue that has 10 years maturity behind and 10 years left, you end up <br />with a short average life and the average life of this issue is 6.4 years. <br /> <br />Mr. Almon said on page 3, they show the source and use and you can see that <br />you are selling bonds in the amount of $7,130,000.00, plus the underwriters are <br />paying your premium of $15,249.00in order to get the effective rate down, and <br />model some of the yields that they are giving the investors. They are also <br />paying you the accrued interest from the date of the bonds to the date of <br />delivery, which is the $9,342.00. He said the city is using this money primarily <br /> <br /> <br />