An Overview of Debt Financing for Florida Local

Transcript:An Overview of Debt Financing for Florida Local:
An Overview of Debt Financing for Florida Local Governments March 13, 2025 Presentation Participants Nick Rocca: PFM Financial Advisors LLC – Financial Advisor roccan@pfm.com, (407-406-5773) Michael Broschart: Nabors, Giblin & Nickerson – Bond/Disclosure Counsel mbroschart@ngn-tampa.com, (813-281-2222) 2 Presentation Overview Municipal Market/Economic Update Financing Structures Financing Team Methods of Public Bond Sale Disclosure (Initial and Continuing) Credit Ratings Tax Compliance 3 Municipal Market/Economic Update Spot Rates Municipal Interest Rate Movements (Tax-Exempt) Source: Bloomberg PFM Pricing Group 5 Source: treasury.gov PFM Pricing Group Treasury Interest Rate Movements (Taxable) 6 Municipal & Treasury Interest Rate Movements Source: Bloomberg, treasury.gov PFM Pricing Group 7 Historical Federal Funds Rate Current Fed Funds target rate is 4.25% - 5.50% 8 Source: The Federal Reserve and FRED Fed’s Updated “Dot Plot” 9 Source: Federal Reserve. Individual dots represent each Fed members’ judgement of the midpoint of the appropriate target range for the federal funds rate at each year-end. Current Municipal Topics of Discussion Threat of Tax-Exemption elimination from municipal bonds Congress looking to cut costs, removal of tax-exemption one of many proposed ideas Possible reduction/changes to Federal Grants Uncertainty around possible federal funding freeze that could impact local governments Continuing Disclosure and Timing of ACFR Filing 10 Financing Structures Why Borrow? Large capital projects often can’t be broken into smaller phases and funded out of annual budget Mitigate rising construction costs Taxpayer / Ratepayer equity – if multiple generations of tax or rate payers benefit from a capital project, then they should all pay for it Refunding for debt service savings or restructuring Historically speaking, interest rates for municipalities are low 12 13 Municipal Bonds, also called “munis,” are debt securities issued by states, cities, counties and other government entities General Obligation Bonds are bonds backed by the full faith and credit of the issuer, which has the power to tax residents to pay bondholders (require voter referendum in Florida) Revenue Bonds are bonds that are backed by revenues from a specific project or source, such as sales tax, gas tax, utility revenues, tolls, etc. Certificates of Participation are secured by annual lease payments (subject to annual appropriation) derived from a specific revenue source, basket of revenues, or any other available revenues Conduit Bonds are issued by governments on behalf of private entities such as non-profit colleges or hospitals -- these “conduit” borrowers agree to repay the issuer who in turn pays the interest and principal on