Page 117 - CityofBurlesonFY26Budget

FIXED INTEREST VERSUS VARIABLE INTEREST

The City generally issues fixed rate bonds primarily to protect the City against
interest rate risk. The City has the option to issue variable rate bonds if market
conditions warrant and the Council approves it.

METHODS OF SALE

A. Competitive Sale

In a competitive sale, bonds are awarded in a sealed bid sale to an underwriter or
syndicate of underwriters that provides the lowest True Interest Cost (TIC) bid. TIC
is defined as the rate, which will discount the aggregate amount of debt service
payable over the life of the bond issue to its present value on the date of delivery.

It is customary for bids to be submitted electronically through a secure website.

B. Negotiated Sale

In a negotiated sale, the City chooses an underwriter or underwriting syndicate
that is interested in reoffering a particular series of bonds to investors. The terms
of the sale, including the size of the underwriter’s discount, date of sale, and

other factors, are negotiated between the two parties. Although the method of
sale is termed negotiated, individual components of the sale may be
competitively bid. The components are subject to a market analysis and reviewed

prior to recommendation by staff. Negotiated sales are more advantageous when
flexibility in the sale date is needed or when less conventional bond structures are
being sold. Negotiated sales are also often used when the issue is particularly
large or if the sale of the debt issuance would be perceived to be more successful

with pre-marketing efforts.

C. Private Placement

A private placement is a negotiated sale of debt securities to a limited number of
selected investors including financial institutions, government agencies, or
authorities. The City may engage a placement agent to identify likely investors if

deemed necessary. A private placement may be beneficial when the issue size is
small, when the security of the bonds is somewhat weaker, or when a

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