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<br /> <br /> <br />Northland Securities, Inc. Page 8 <br />Premiums <br />In the current market environment, it is likely that bids received from underwriters will include <br />premiums. A premium bid occurs when the purchaser pays the City an amount in excess of the <br />par amount of a maturity in exchange for a higher coupon (interest rate). The use of premiums <br />reflects the bidder’s view on future market conditions, tax considerations for investors and <br />other factors. Ultimately, the true interest cost (“TIC”) calculation will determine the lowest bid, <br />regardless of premium. <br />A premium bid produces additional funds that can be used in several ways: <br />• The premium means that the City needs less bond proceeds and can reduce the size of <br />the issue by the amount of the premium. <br />• The premium can be deposited in the Construction Fund and used to pay additional <br />project costs, rather than used to reduce the size of the issue. <br />• The premium can be deposited in the Debt Service Fund and used to pay principal and <br />interest. <br />Northland will work with City staff prior to the sale day to determine use of premium (if any). <br />Rating <br />A rating will be requested from Moody’s Investor Services. The City’s general obligation debt is <br />currently rated "Aa1" by Moody’s. The rating process will include a conference call with the <br />rating analyst. Northland will assist City staff in preparing for and conducting the rating call. <br />