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TO: |
Local Advisory Council |
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THROUGH: |
Jay Fox, Executive Director |
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FROM: |
Viola Miller, CFO |
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PRESENTER(S): |
Troy Bingham, Comptroller |
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Brian Baker, Zion Public Finance |
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TITLE:
title
Proposed Escrow Substitution for the 2019 and 2021 Defeased Bond Escrows
end
AGENDA ITEM TYPE:
LAC - Consultation
RECOMMENDATION:
The Advisory Council is encouraged to provide consultation and advice to the Board of Trustees on the proposal to sell the current 2019 and 2021 escrows and re-populate them with more efficient SLGS (State and Local Government Securities).
BACKGROUND:
UTA’s finance staff and bond counsel have presented an opportunity to the Authority to consider selling the current 2019 and 2021 bond escrows and re-populating them with more efficient SLGS. State statutes governing UTA require several steps to consider a bond escrow substitution, including consultation with the Local Advisory Council. Following the Advisory Council’s consultation, the Board of Trustees will need to act on a resolution at a future meeting of the Board to set terms of the potential escrow swap and to authorize financial agents to carry out the process. Staff will then start working with Zions Public Finance (the municipal advisor), Gilmore Bell (bond counsel), and Causey, Demgen & Moore PC (bidding and verification agent) to prepare bidding and legal documents.
DISCUSSION:
In November 2019 and 2021 escrows were originally created for 2015 Bond Refundings, UTA bid out the escrow and received better results from treasury securities than State and Local Government Securities (SLGS) at that time. Currently, the shift in rates allows for a restructuring to capture savings and make the existing escrows more efficient. Present opportunities to generate cash savings are now available by doing an escrow substitution. The combined escrows hold approximately $500 million in securities that mature 15-30 days before they are needed to defease bonds in 2023-2025.
If approved by the Board, current escrow securities could be liquidated and SLGS would be purchased with those proceeds for less than the amount of the securities sold. UTA could execute the escrow substitution on any day where the bond market rallies through the day (so that the rates on the sold escrow securities will be lower compared to the available SLGS rates that were published in the morning). The difference between the price the escrow is liquidated for and the cost of the SLGS necessary to re-populate the escrow is UTA’s cash savings. SLGS rates are known at 8 AM Utah time, UTA would not actually complete the escrow liquidation unless we know the economic savings would meet desired targets.
ALTERNATIVES:
The Council is encouraged to provide input and advice to the Board during this discussion to help inform the Board’s final decision.
FISCAL IMPACT:
Desired staff targets are currently estimated at $500,000
ATTACHMENTS:
None