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1990/12/11 City Council Resolution (10)RESOLUTION NO. 90- 289 RESOLUTION OF THE COUNCIL OF THE CITY OF ROHNERT PARK APPROVING AN UNDERWRITING AGREEMENT WITH THE FIRM OF STONE & YOUNGBERG (CERTIFICATES OF PARTICIPATION- PUBLIC SAFETY FACILITY) WHEREAS, the City is desirous of constructing a public safety facility; and WHEREAS, the City proposes to sell Certificates of Participation to finance the construction of said facility; and WHEREAS, staff has determined that the City's interests are best served by directly negotiating with an underwriter to sell said Certificates of Participation; and WHEREAS, the City interviewed several underwriting firms and obtained proposals for said services; and WHEREAS, the attached agreement entitled "Underwriting Agreement" dated December 3, 1990 as submitted by Stone & Youngberg was determined to be the most favorable for the City. NOW, THEREFORE, BE IT RESOLVED, by the Council of the City of Rohnert Park that certain agreement entitled "Underwriting Agreement" dated December 3, 1990 as submitted by Stone & Youngberg be approved and the Mayor is hereby authorized to execute said agreement for and on behalf of the City. DULY AND REGULARLY ADOPTED this 11th day of December, 1990. ATTEST A-- - -------- 11 -- Deputy City Cle CITY OF ROHNERT PARK Mayor AYES: (4) Councilmembers Hopkins, Reilly, Spiro and Eck NOES: (0) None ABSENT: (1) Councilman Hollingsworth 9 0' 00411: STONE & YOUNGBER,G MEMBERS: PACIFIC STOCK EXCHANGE UNDERWRITING AGREEMENT December 3, 1990 City of Rohnert Park Suite B 100 Enterprise Drive Rohnert Park, California 94927 Attn: Mike Harrow Re: Underwriter's Agreement Members of the Board: This letter will serve as an agreement between the City of Rohnert Park/Community Development Agency (the "Issuer ") and Stone & Youngberg (the "Underwriter ") to serve as Underwriter to the Issuer until the parties enter into actual Purchase Contracts regarding the negotiated sale of bonds or certificates of participation to be issued by the Issuer. You have informed us that the Issuer intends to issue bonds or certificates of participation (the "Bonds ") to provide funds for financing various public improvements, including the Public Safety Building, and for this purpose requires the services of the Underwriter to assist in the structuring of the financings and to enter into Purchase Contracts that are agreeable to the Issuer. The financing may include a lease, a tax increment pledge, including refinancings if applicable. As Underwriter we will use our best efforts to bring the Bonds to market at reasonable rates under then existing conditions. The Underwriter agrees to undertake the below listed services and functions: A. Underwriter's Services The Underwriter shall perform all of the services set forth in Exhibit A attached hereto and incorporated herein by reference. This Exhibit A refers to relevant sections in the proposal presented to the City of Rohnert Park dated November 16, 1990. In addition to those services set forth in Exhibit A, the underwriter shall do the following: ONE CALIFORNIA STREET • SAN FRANCISCO, CALIFORNIA 94111 • (415) 981 -1314 City of Rohnert Park December 3, 1990 Page 2 1. Assist in arranging the selection of a Trustee at the most competitive costs. 2. At the designated time for the sale of the Bonds, the Underwriter will submit an offer to the Issuer to purchase the Bonds, subject to pertinent resolutions, the Official Statement, and all other necessary documents, approvals, and proceedings governing such Bonds having been determined by bond counsel, the Issuer, and the Underwriter to be satisfactory in all respects for financing purposes. It is intended that, once purchased, the Bonds will be re- offered to the public on the basis of an immediate "bona fide public offering ". The Underwriter may form a group of investment banking firms for the purpose of underwriting and selling the Bonds. 3. At least one day prior to the submission of any such formal offer to the Issuer for the purchase of the Bonds, the Underwriter will indicate to the Issuer the interest rate or rates, the purchase price from the Issuer, and public offering price of the Bonds which we then estimate will be included in such offer. If, after negotiations in good faith, the Issuer and the Underwriter fail to agree on the terms of sale of the Bonds, and upon written notice to the Underwriter the Issuer may then offer the Bonds for sale to others. 4. Assist the Issuer in arranging for investment of bond proceeds in compliance with California law regarding investment of public funds, the Issuer's investment policies and federal arbitrage requirements. B. General Provisions Relating to the Issuer and the, Underwriter 1. The Issuer agrees to make available to the Underwriter without cost, sufficient copies of any applicable reports, agreements, contracts, resolutions, and other relevant documents pertaining to the project, the Issuer or the Bonds as reasonably may be required from time to time for the prompt and efficient performance by the Underwriter of its obligations hereunder. 2. The Underwriter shall pay its own out -of- pocket and other expenses, including the cost of Underwriter's Counsel (if applicable), and any advertising expenses in connection with the public offering of the Bonds. The Underwriter's discount for these financings shall be as set forth in Exhibit B attached hereto and incorporated herein. This Exhibit B refers to the proposal submitted to the City of Rohnert Park on November 16, 1990. 3. The Issuer shall pay from the proceeds of the Bonds all costs and expenses customarily paid therefrom including the cost of printing the Bonds and the Official Statement, and any other documents, the fees and expenses of its legal counsel, bond counsel, accountants, architects, engineers, rating agencies, bond insurance companies and of any other experts or consultants retained by the Issuer in connection with the financing. The Issuer shall reimburse the Underwriter for any out -of -state travel made in connection with the financings and approved in advance by the Issuer. City of Rohnert Park December 3, 1990 Page 3 4. It is expressly understood and agreed and the Issuer hereby recognize that in performing its activities the Underwriter is acting solely on its own behalf and plans to submit to the Issuer a proposal to purchase the Bonds for resale. Nothing herein shall be construed to make the Underwriter an employee or financial, fiscal or other advisor of the Issuer, or to establish any fiduciary relationship between the Issuer and the Underwriter. It is understood and agreed that the Issuer shall not be required -to compensate the Underwriter for services provided to the Issuer under this agreement if the Bonds are not sold. 5. This agreement shall extend to May 16, 1991. In the event that the Bonds are sold after May 16, 1991, or in amounts significantly different than those described in the proposal dated November 116, 1990, or if they must be sold on a taxable basis; then the Issuer and Underwriter shall renegotiate in good faith the amount of the discount. 6. Nothing herein shall prevent the Underwriter from acting as underwriter or financial advisor to the Issuer on other financings. 7. Upon termination of this agreement, the Issuer shall be under no further obligation to the Underwriter hereunder. 8. It is understood and agreed that Stone & Youngberg will use its best efforts to obtain the lowest possible cost and highest possible service from all participants in the financing including the Trustee, all consultants, vendors, providers of insurance and rating services. Upon your acceptance set forth below, this letter will constitute an agreement between the Issuer and the Underwriter. Very truly yours, STONE 8t YOUNGBERG Sohail Bengali ,___1/ Accepted this 11 thday of December '1990 CIT ROHNERT PARK By: D 6".: (WPP /0042C) SCOPE OF SERVICES TO BE PROVIDED The function of an investment banker is often times misunderstood because it is too narrowly defined. Some institutions and, unfortunately, even some investment banking firms, think of an investment banker as solely a middleman or underwriter between those in need of capital and those with funds to invest. Any number of firms have the ability to execute such a transaction, but this limited function sharply contrasts with what we at Stone & Youngberg believe are the responsibilities of an investment banking firm. A successful financing mandates a close working relationship between the issuer and the banker. In particular, it requires that the investment bankers be involved at the earliest opportunity and, advise on topics such as: the advantages and risks of various financing alternatives, including, for example, the possible advantages of financing needs on an interim basis or using cash instead of incurring debt; debt incurring capacity which, from the perspective of a potential investor, may differ from the findings of a consultant's feasibility study; and significant credit concerns of rating analysts and potential investors. The operating philosophy of a firm is of equal importance. We provide below our evaluation of the investment banker's responsibilities: • be available on a timely basis to serve the issuer and coordinate the financing with related professional; • seek innovative methods of structuring and marketing the financing on terms most advantageous to the issuer; • commit the time and professional resources required to facilitate a smooth and efficient process in completing financing requirements; • describe the financing in a manner that conveys to the investment community, the national rating services, and other interest groups, the strengths and credit - worthiness of the issuer. • market and underwrite the securities with -the widest distribution to obtain the lowest cost financing for the issuer. The above responsibilities are met through a series of specific tasks and services described below. As investment banker, Stone & Youngberg provides all of the services required to complete successfully the issuer's financing within a time period and in a manner consistent with the issuer's wishes. Development of the Plan of Finance Development of the Plan of Finance requires the coordinated attention of the banker, the issuer, bond counsel and other key parties to the transaction, as appropriate. The plan is based upon market considerations, feasibility studies relating to revenue projections, and existing legal restrictions governing the issuance of debt securities. Stone & Youngberg will perform all of the following services in developing the Plan of Finance: • Review the financial objectives of the issuer, including existing and proposed financing resources. • Make recommendations relating to possible changes or additions to existing financing resources and legal structures. • Determine the necessary amount to be issued to finance the proposed projects, the amounts needed for the debt service reserve fund, contingencies, financing costs, and all other expenses incidental to the projects. • Evaluate and make recommendations regarding the financing alternatives and options, including recommendations as to short- or intermediate -term financing prior to, or in conjunction with, long -term financing. Ratting Agency Presentation (if applicable) To ensure a fair and favorable rating review, the banker's preparatory activities will include the following: • Prepare detailed summaries of recent rating agency evaluations of other similar credits so that the issuer's representatives will be aware of the current concerns of the rating agencies. • Develop a detailed list of questions and areas of inquiry for the issuer's consideration prior to any meetings with the rating agencies. • Provide explanatory material to the rating agencies in order to enable them to evaluate the issuer's financing program in the best possible light. Role in Pre Adna the Official Statement Stone & Youngberg will assume full responsibility for preparing and distributing the Official Statement which describes all pertinent issues with respect to a financing. Pricing and Underwriting of Securiti es At the time of the sale of the securities, Stone & Youngberg will provide the City with a detailed pricing book which identifies all recent, comparable municipal transactions in the California market, including their interest rates and selling price. Based upon this analysis and under negotiation with the City staff we will present our proposed interest rates to the City. We plan to have the City staff involved throughout the pre -sale and marketing period as discussed under the section "Marketing & Pricing Strategy" herein. Upon concurrence with the City, we would then commit to underwrite the securities. Other Services In addition, Stone & Youngberg will provide these other services: • Prepare a preliminary timetable for the financi . The timetable will be drafted to facilitate coordination and planning among all parties involved in the financing. • Conduct an indenture study. An indenture study of key financial covenants, terms and conditions that have been used in recent similar offerings will be conducted. This study will provide a basis for determining those financial covenants which will be appropriate for the iissuer's particular needs. • Analyze financing alternatives and structure financial terms. Specialized financial analyses will be conducted in order to achieve the best terms for the issue. • De i n and implement a marketing Drogram. Stone & Youngberg will design and implement a marketing program which includes (i) presale education of potential investors, (ii) appropriate advertising, (iii) preparation of Sales Points Memorandum summarizing the offering's most salient facts and attractive investment features, and (iv) effective coordination with regional securities dealers. Price new issues. The issuer's staff will be kept informed of market trends and economic conditions which may have an impact on its financing program. On the day of the sale, we will utilize a variety of pricing tools and the combined judgment of our investment banking team to determine final offering terms. Provide post -sale services. Stone & Youngberg will provide (if requested) a tailored plan for reinvestment in the money and government securities markets, an Analysis of Distribution to aid in the development of future financing programs, and active participation in the secondary market to ensure liquidity of the issuer's securities. Provide continued investment banking services. As part of our continuing service to the issuer, Stone & Youngberg will provide on -going banking advisory services once sale of the issue is completed. FEES The total underwriting discount proposed by Stone & Youngberg for the City of Rohnert Park's public safety building project is set forth below. The total, as well as its four components, are indicated. The proposed fee assumes that the City will issue a long term, fixed -rate lease financing, a tax increment based financing, or a combination of both. We have indicated the not -to- exceed limit of our fee structure for both a Baa -rated issue and an insured AAA/Aaa -rated issue (if bond insurance is a viable option), for a financing size of approximately $6,000,000. Not-to-Exceed Total Underwriting Discount ($/$1,000 Par Amowrt) We would like to emphasize that these fees are bused on the current market and are applicable if the financing is issued within 6 months of the date of this proposal. We would like the opportunity to discuss our fees with City staff if the financing is delayed and would like the opportunity to renegotiate, in good faith, the "risk" component of the fees if the capital markets become volatile as a result of a major national or international political emergency. We would also like to emphasize that the City staff evaluate a proposal based not only on the proposed underwriting discount but also on the ability of a firm to deliver aggressive interest rates. For example, a very small change of 5 basis points (0.05 %) in the average coupon rate for the City's financing is equivalent to approximately a 0.5% difference in the underwriting discount! Stone & Youngberg has a long, established history of delivering aggressive market rates for our issuer's financings. Our firm is used as a benchmark by most of our competitors in pricing their financings, and we plan to bring the same level of expert, aggressive marketing in the pricing of your securities. In addition to the underwriter's discount the City will incur other fees by other consultants it retains. We have estimated such fees in our "financial analysis" section. Baa Rated AAA-Rated Pram Program Sales $9.75 $8.50 Management 1.50 1.50 Expenses 1.50 1.50 Risk 1.00 0.75 Total $13.75 $11.75 1.375% 1.175% We would like to emphasize that these fees are bused on the current market and are applicable if the financing is issued within 6 months of the date of this proposal. We would like the opportunity to discuss our fees with City staff if the financing is delayed and would like the opportunity to renegotiate, in good faith, the "risk" component of the fees if the capital markets become volatile as a result of a major national or international political emergency. We would also like to emphasize that the City staff evaluate a proposal based not only on the proposed underwriting discount but also on the ability of a firm to deliver aggressive interest rates. For example, a very small change of 5 basis points (0.05 %) in the average coupon rate for the City's financing is equivalent to approximately a 0.5% difference in the underwriting discount! Stone & Youngberg has a long, established history of delivering aggressive market rates for our issuer's financings. Our firm is used as a benchmark by most of our competitors in pricing their financings, and we plan to bring the same level of expert, aggressive marketing in the pricing of your securities. In addition to the underwriter's discount the City will incur other fees by other consultants it retains. We have estimated such fees in our "financial analysis" section.