Friday, August 8, 2014

Ketchum considers refinancing offer

Zions Bank Public Finance already represents several Idaho townships

Express Staff Writer

    Zions Bank Public Finance is offering to enter into a partnership with the city of Ketchum to act as a municipal advisor and refinance two wastewater revenue bonds from 2004 and 2006.
    Cameron Arial, vice president of the bank’s public finance sector, spoke Monday at a City Council meeting in Ketchum about the proposal.
    The council elected to defer making a decision until its newly hired city administrator, Suzanne Frick, has a chance to review the offer. Frick begins work on Aug. 18, which is also when the City Council will conduct a second review of the proposal. The city would need to make a decision before Aug. 31, which is when the bond issuer would review the city’s application according to the bank’s preliminary timetable.
    “The purpose of this is to save the city money,” Arial said at the meeting.
    The bank’s public finance sector serves as financial advisors for numerous Idaho cities, including Lewiston, Twin Falls, Jerome, Pocatello and Bellevue.
    In his presentation, Arial recommended that the city use the Idaho Bond Bank Authority, or IBBA, to refinance the bonds. The IBBA is a “pooled borrowing program created by the Idaho Legislature and managed through the Idaho State Treasurer’s Office,” according to Arial’s PowerPoint presentation.
    Ketchum’s outstanding wastewater loans are valued at approximately $1,265,000 and $1,160,000 for 2004 and 2006, respectively. The interest rate of the 2004 loan averages 4 percent while the 2006 loan averages 4.4 percent. These numbers are an average of a rate that changes yearly, according to Arial, based on maturity.
    He said the current market presents an “opportune time” for refinancing or refunding the bonds, which the city is currently making payments on.
    The city has two refinancing options: to refinance the two bonds separately or together. Arial recommended the bonds be grouped together to maximize both savings and efficiency.
    Should the bond sales go through, he said, and the city chooses to group both bonds together, his department estimates a fixed yearly interest rate of 2.2 percent.
    Ketchum stands to save roughly $115,000 between now and 2025, should it enter into the partnership, according to a cost estimation done by the bank. Arial said this is a conservative estimate, with a cushion built in.
    Should the city utilize the IBBA for refinancing, there would be lower up-front insurance costs, lower interest rates, a more efficient bond-issuing process and increased marketability for competitive sales, Arial said.
    Zions Bank Public Finance would charge the city a one-time fee of $15,000 for its services. The payment would be made on Nov. 20, should the bonds go through. The IBBA authorizes bond sales on Sept. 23 and the competitive bond sale occurs on Oct. 28. If for some reason the bonds aren’t issued, Zions wouldn’t receive any money. The dates listed are preliminary, Arial said, but the IBBA’s schedule is “fairly clockwork.”
    “We will also monitor the city’s ongoing market disclosure requirements, provide municipal studies as needed and a whole host of other services,” Arial said in an email to the Idaho Mountain Express.

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