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M M s OMB Director Joe Baird reminded the Board of the January 17, 1995 discussion regarding this matter. At that time his department's recommendation was 2% above prime of 8.5%, resulting in an interest rate recommendation of 10.5 He has reviewed the method of calculating the rates charged and feels that the prime interest rate is still the best benchmark because it is the rate charged by lending institutions to their best customers. He has also reviewed tying the rate to tax exempt paper and feels this would be very dif f icult to do. ' The tax exempt paper is largely dependent on supply and demand on the market at the time which is more volatile and a bond rating must be assumed. In December of 1994 and January of 1995, tax exempt paper was trading very high compared to taxable due to the Orange County, California situation. This paper depends a great deal upon the outlook toward local governments and the issuance costs must be factored in. Another portion of the review concerned charging a fixed rather than a variable interest rate. He felt that the fixed rate is much easier for people to deal with in that they can be advised at the beginning of the assessment what their payments will be on either a 2, 5 or 10 -year basis and budgets can be planned. The prime rate basis was a policy decision by the Board several years ago as a differential for bad debt expense. The 2%, upon review, seems a little higher than it should be and he would recommend using a fixed rate, using the prime interest rate as a benchmark, and using either 1% or zero above the prime rate. He pointed out that the prime has gone from 8.5% to 9% since the last discussion, but he would still recommend using the 8.5% as a basis for consideration. The average home equity loan in Florida last week was 9.47%. 1. Commissioner Eggert questioned whether using the cost of a bond was included in the cost of the initial assessment and Director Pinto responded that the various costs are included in the project costs. Director Baird also recommended monitoring the situation for one year to see if a hardship is created for the County. Commissioner Bird questioned whether any assessments being started this year would be locked in at the chosen rate,, and Director Baird responded in the affirmative and stated that he would like to have the option to readdress the interest rate next year should the Board elect to go with the prime rate of 8.5% for this year. BOOL( 140 FEBRUARY 14, 1995 15 L-