City's pension bonds get A+ from investors
Published: December 7, 2012
THE CITY’S pension obligation
bonds to pay off more than $6 million in retirement debt hit the
market for 90 minutes Nov. 29, with buyers from across the
country competing to purchase them. The bonds are refinancing a
loan from the State of California that carries an interest rate
of 7.5 percent.
“With our price adjustments, we estimate the total refinancing
will be 2.94 percent,” including the costs of issuing the bonds,
city administrator Jason Stilwell told the city council via
email shortly after the sale last week. “Total gross
savings would be $4.2 million.”
Buyers were from California and across the country, with bids
from the County of Solano, a Los Angeles credit union, a San
Francisco Bay Area bank, a Florida city, a Minnesota city,
retailers and a money manager in Seattle, according to Stilwell.
“We had orders for $13.9 million, making us about two times
oversubscribed, which means the pricing was about right, with an
opportunity for us to tweak and lower prices in a few areas,”
Stilwell said. The city recently received a Standard &
Poor’s credit rating of AA+, which contributed to the
desirability of its bonds.
Last month, the council authorized Stilwell to execute the bond
purchase agreement and cut a check to the California Public
Employees Retirement System, which will be paid Dec. 14.
Stilwell reported the move will save the city about $100,000
this year, “which will help our tight budget.” The 2012/2013
budget relies on about $700,000 from reserves.
The bonds will be paid off in 10 years — the same term as
the 1 percent sales tax increase voters approved in November
that will take effect April 1, 2013 — with payments averaging
Stilwell congratulated the council and thanked members for “all
of your work on this item, for the special meetings and for your
timely approvals along the way.”
“This is great news for the city,” he concluded.
Vice Mayor Ken Talmage, arguably the most fiscally minded
council member, presided over the bond discussions that began
last summer, as Mayor Jason Burnett had to recuse himself due to
past business dealings with one of the consultants. This week,
he characterized the bond sale as “a positive step forward for
Carmel, especially when coupled with the passage of Measure D,
which should generate approximately $20 million in new tax
revenue over the next 10 years.”