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Pre -Sale Report - 1995A Bonds <br />The use of a permanent improvement revolving fund creates additional financial <br />management demands. Using special assessments for non -debt purposes cannot take <br />away money needed for debt service. We will work with City Staff to create <br />appropriate cash flow monitoring procedures. <br />The City Council must establish the revolving fund by resolution. This resolution will <br />be presented to the Council for adoption at the December 21st meeting. <br />MARKET CONDITIONS <br />This year has been marked by generally rising interest rates. The graph on the <br />following page shows the trends in the Bond Buyer's 20 -Year G.O. Index (BBI) since <br />1990. While interest rates have risen sharply from historic lows in 1993, current rates <br />still mirror conditions found several years ago. Rates increases in October and <br />November have moderated with the BBI falling the past four weeks. <br />The proposed finance plan is designed, in part, to capture favorable market <br />conditions. In recent years, January has been a favorable time to issue municipal <br />bonds. The demand of tax - exempt debt at the beginning of the year has, in the past, <br />pushed rates down. We are also facing the potential for higher interest rates. The <br />Federal Reserve seems determined to keeping increasing interest rates to prevent. <br />inflation. Another rate hike has appears likely in December or January. It is unclear <br />when rates may begin to decline. The factors have been considered in working <br />towards a bond sale in January. <br />Page 31 <br />