The Honorable Board of Supervisors
County of Los Angeles
383 Kenneth Hahn Hall of Administration
500 West Temple Street
Los Angeles, California 90012
Dear Supervisors:
1. Approve the Fiscal Year 1999-2000 tax-exempt Tax and Revenue Anticipation Notes short-term borrowing program.
2. Adopt the Resolution of the Board of Supervisors of the County of Los_Angeles, California providing for the issuance and sale of 1999-2000 Tax and Revenue Anticipation Notes in an aggregate principal amount not to exceed $1,350,000,000.
Adoption of the attached Resolution will authorize the execution and delivery of the 1999-2000 TRANs and will permit this office to proceed with the program's implementation.
Since 1977, the County has issued tax-exempt Tax and Revenue Anticipation Notes (TRANs) as a cash flow management device for the upcoming fiscal year. This short-termborrowing program has reduced the need for interfund borrowing by the General Fund and has enhanced interest earnings of the Treasury Pool of which the County is the largest single participant.
Based on cash flow assumptions for Fiscal Year 1999-2000, we are recommending a maximum issue size of $1.35 billion. As in past years, the final issue size will be adjusted to conform with the budget recommendations and will comply with federal regulations for taxexempt offerings. We expect the initial offering to be approximately $850_million, which is the same as last year's issuance. In no event, however, will the outstanding issue size exceed $1.35_billion.
The cost of the program is dependent on market conditions at the time of the sale. The Resolution provides that the interest rate on these Notes cannot exceed six percent (6%).
Expenses related to this program, such as the costs of issuance and interest payments, are included in the Proposed 1999-2000 Budget.
Based on current assessments of the interest rate market over the next several months, we expect the TRANs to be sold as a twelve month fixed rate note. The Resolution provides the flexibility to issue either fixed and/or variable rate notes. These marketing decisions will be made based on market conditions at the time of sale, which is anticipated in late June. Funds from the sale will be available by July_1, 1999.
We are recommending a negotiated transaction to provide better control over the timing of the issuance and to retain marketing and structuring flexibility to react quickly to changes in market conditions. Based on an evaluation of nine proposals submitted in response to a Request for Proposal, it is recommended that Banc of America Securities_LLC be appointed as Lead Manager. We are also recommending the following firms to complete the financing team: as Co-Senior Managers: Lehman Brothers Inc.; Prudential Securities Incorporated; and, as CoManagers: Rideau Lyons & Co.; Samuel A. Ramirez & Co., Inc.; and Siebert Brandford Shank & Co., LLC.
As in prior years, the Resolution also provides for the issuance of additional notes should unforeseen cash deficits beyond the County's control occur past the statutory deadline for interfund borrowing. The financing could be structured as a bank line of credit or a public or private note issuance. While additional financing could be immediately available, this office would not utilize this option without prior notification to your Board. In no event would the total outstanding Notes, including the initial TRANs offering, exceed $1.35_billion without further action by your Board.
The TRANs is a cash management program which has no direct impact on current services. However, if issuance was delayed, the County would need to identify other sources of cash, such as interfund borrowing, to meet its early expenditures in the fiscal year.
After the Board has taken action on this request, please:
1. Forward one (1) stamped copy of this letter to the Treasurer and Tax Collector's Executive Office.
2. Forward two (2) certified copies of the minute order and resolution to the Treasurer and Tax Collector's Executive Office.
Respectfully submitted,
MARK J. SALADINO
Treasurer and Tax Collector
MJS:MS
Pb/board letter\99trnbos
Attachments
c: Executive Officer, Board of Supervisors
Chief Administrative Officer
County Counsel
Auditor-Controller