(A) There are two basic types of debt sales: competitive sale and negotiated sale. In a competitive sale, the city (along with its financial advisors and bond counsel) structures a bond or note sale internally and offers the securities for sale through a competitive bidding process. In a negotiated sale, the city selects an underwriter or team of underwriters to market and sell bonds to investors. The underwriting team negotiates the rates and other financial terms of the bonds in consultation with the city and its advisors.
(B) The city will maintain a bias toward the competitive sale format under the following conditions:
(1) On general obligation sales: The city is a highly rated entity and has a high level of market acceptance for its general obligation bonds and notes. These attributes are conducive to accessing the market via competitive bid.
(2) Stable market conditions: During periods of low volatility, market timing is less critical than when conditions are rapidly changing. The advantages of a negotiated sale are reduced during periods of stable market conditions.
(3) Traditional structure: Debt structured with level annual debt service payments or level annual principal payments are easily accommodated through a competitive sale.
(C) The city will maintain a bias toward the negotiated sale format under the following conditions:
(1) On revenue bond issues or project backed financing: The city will consider issues supported only by a specific revenue stream or the revenues of a particular project from time to time. Market acceptance may be lower on these types of financings and investor education will be beneficial on such sales. This is more easily achieved through a negotiated sale.
(2) Volatile market conditions: The city may want to access the market quickly when market conditions are volatile in order to take advantage of brief "windows of opportunity". Negotiated sales are advantageous when these conditions exist.
(3) Refinancing: When considering a refinancing opportunity, the city will generally establish a "target" level of savings. The city will want to know that its target can be met prior to offering the bonds for sale. A negotiated sale provides a higher degree of certainty with regard to timing and pricing of the bonds.
(4) "Non-traditional" structures: Whenever the debt must be structured in a tailored manner, the desired structure is best achieved through a negotiated sale. When zero coupons or variable rate securities are anticipated, the negotiated format is preferred.
(Ord. 31-16, passed 9-12-16; Am. Ord. 37-19, passed 8-26-19)