Agenda - Council - 03/25/1980 - Laserfiche WebLink

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SPRINGSTED l, ~ INCORPORATED / -~ PUBLIC FINANCE /_!ADVISORS INFORMATION BULLETIN TO SPRINGSTED INCORPORATED CLIENTS IRE: Interest [:{ate l_imitatlon Legislation Bond sales within the present 7% statutory limit are currently impossible for any Minnesota municipality. With the prime rate moving to 18~% and the Bond Buyer Index at 9.08% there is no room for optimism lhat the market will provide relief in at least the near-term. Confidence that the Legislature would expeditiously respond to the crisis by increasing or removing the role limitation is being replaced with concern as to whether in fact any relief will be provided. The present forerunner of legislative proposals is to raise the limit to 10% but with a "sunset" provision which would extend the 10% limit only to April I, 1981. We are not at all confident 10% will take care of everyone and have misgivings about the sunset. Our worry about the sunset is it will mean that if rates are still high in 1981 no one may make plans which will require financing after April I, 1981 until the Legislature again considers the matter. Major obstacles to early passage, or any passage, of any rate legislation are two amendments being proposed or discussed. One is the proposal to have the Attorney General act as bond counsel for all bond issues and the second is to provide that the State shall issue ail general obligation bonds. It requires no imagination to realize the impact of either of these proposals upon local autonomy. But whatever their merit may be it is difficult to see their relationship to the role legislation. Both of these proposals are being seriously'considered. Not only could either or both of these proposals be enacted, either separately or as amendments, but they could cause nothing being. done about the interest rate limit. If the Legislature is to take the action you want it to take with respect to each of these measures it is critical that the senators and representatives hear from you - again, if they've already heard once. Let the League of Cities (612/222-2861 - Ar]in Waelti) know too of your wishes. Dona]d S]ater, Executive Director and Arlin and their co]leagues are doing a great job but they need your support. To give you on idea of what is happening in the market here are some recent soles of general obligations: _Municipality Clarkfield, Minnesota Lombard, Texas Oregon Veterans Welfare Boston, Massachusetts Net Final Moody's Interest Amount Maturity IRatinq Cost $ 1,835,000 2005 Baa 9.~t8%~+ '$ 5,500,000 1996 Aa 8.5~t% $300,000,000 2008 Aaa 9.16% $ 25,000,000 2000 Baa 10.L~9% * These are General Obligation Nursing Home Revenue Bonds not subject to the 7% limit. 91-day Treasury Bills auctioned on Monday had an average bond equivalent yield of 16.23%. Again we caution against the award of any project construction contracts requiring funding by the issuance of bonds until you have been able to actually sell bonds. 14March 1980 800 asham Building, Saint Paul, Minnesota 55102 (612) 222-4241