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County controller recommends Bank of Utah for library bond to preserve refinancing flexibility
Summary
Davis County staff reviewed bids for a library revenue bond and recommended Bank of Utah because its proposal offers the lowest effective cost when factoring fees and allows the county to call (refinance) the bonds without penalty at any time. A public hearing is scheduled June 17 and staff will notify the financial advisor to proceed.
Curtis Coe, county controller, reviewed bids returned for a revenue bond tied to the library bond and told commissioners the lowest true-interest cost (AIC) bid was 4.644% but that fees and call provisions make the Bank of Utah offer the most favorable balance of cost and flexibility. Coe said he planned to notify the county's financial advisor this afternoon that "Bank of Utah is where we wanna go."
Coe told the committee that the bids differ mainly in call provisions and fees: some bids set a 10-year call date (no opportunity to refinance before year 10 without penalty), others allow earlier refinancing but with a premium for early call. He summarized the quoted AICs as follows: the lowest AIC shown on the worksheet was 4.644% (fixed), Webster Bank's AIC was about 4.825%, MBH's bid showed about 4.845% for one offer, and Bank of Utah's AIC was about 4.832%; because Bank of Utah's fees are very low, its AIC placed it ahead of some higher-rate offers.
Coe and the county's adviser emphasized that the Bank of Utah proposal would allow the county to call the bonds with no penalty at any time, giving the county the flexibility to refinance if interest rates decline. By contrast, some bidders required a multi-year lock before a call option would be available and/or imposed a percentage penalty on outstanding principal for early redemption. Coe said the financial adviser recommended taking the Bank of Utah option for the greater flexibility and that he concurred.
Coe noted a parameters resolution passed earlier gives two authorized representatives authority to execute transaction documents and said staff would confirm the authorized signatories. He also said staff expects to notice a public hearing on the bonds for June 17 and that a statutory challenge period may apply once notice is posted.
The county did not take a formal vote during the meeting; Coe said he intended to instruct the financial advisor to proceed with Bank of Utah and commissioners verbally expressed agreement. Staff will file required notices and proceed toward the scheduled public hearing.
