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AUTHORIZE THE CITY MANAGER TO EXECUTE AGREEMENTS WITH UNDERWRITER FIRMS TO ESTABLISH A POOL FOR THE ISSUANCE OF MUNICIPAL DEBT
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RECOMMENDATION
It is recommended that the City Council approve a motion to authorize the City Manager to execute agreements with five underwriter firms to establish a vendor pool to issue bonds and other municipal debt instruments for the financing of capital facilities and infrastructure and the refinancing of existing debt issuances.
It is also recommended that the motion authorize the City Manager to take appropriate and necessary actions to carry out the purpose and intent of the motion.
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Summary
The City, on an as-needed basis, issues debt to finance the construction of capital facilities and infrastructure, and to refinance existing debt when it is advantageous to do so. The frequency varies from year to year; however, the City typically will issue debt or refinance existing debt from two to five times per year. The City usually issues several types of debt including Lease Revenue Bonds, Certificates of Participation, Revenue Bonds, and Land-secured debt (1913/15 Act assessment bonds, Mello-Roos or Marks-Roos bonds).
Entering into agreements with the five selected underwriter firms will create a pool of pre-qualified firms that will provide investment banking and underwriting services to support City debt issuances.
DISCUSSION
Background
To support its debt issuances, the City has periodically established a pool of underwriters. The City requires professional investment banking and underwriting services to effectively market and issue its debt at the lowest cost. By establishing a pool, the City is able to react quickly to financing needs based on favorable market conditions to finance projects and refinance existing debt.
The City’s most recent Underwriter Pool was established August 10, 2010, by adopting Resolution 10-0264 that authorized the execution of five-year agreements with underwriters for the issuance of municipal debt.
Present Situation
On March 16, 2017, the City released a Request for Proposals (RFP) for financial underwriting services. The RFP ensured a fair and competitive procurement of underwriting services. The City sought qualified underwriting firms with the ability to:
• Provide high-quality underwriting services for issuing debt to construct capital facilities and infrastructure, and refinancing existing debt.
• Assist in the development of a sound financial plan for the capital facility or infrastructure that is planned to be financed, and assist in the establishment of a district.
• Assist and advise the City as to the most cost-effective financing plan for the debt that is being considered and recommend innovative alternatives.
The City received responses from ten interested underwriting firms and all ten firms met the minimum qualifications. A selection committee was formed to review the submitted proposals. After careful review of each firm’s capabilities and ability to meet the City’s financing needs, the selection committee recommended the City enter agreements with five of the ten firms that submitted proposals. Five firms lacked the requisite experience and ability to provide services of a nature that would offer value across a broad spectrum of different types of debt issuances. The five firms selected to establish the City’s Underwriter Pool can provide services for all the types of financing that the City may pursue. With the establishment of this Pool, the City will have a diverse group of highly-qualified investment banking firms available.
Based on the submitted proposals and evaluations by the selection committee, it is recommended the City enter agreements with the following firms:
• Brandis Tallman LLC
• Citigroup Global Markets Inc.
• Hilltop Securities Inc.
• RBC Capital Markets, LLC
• Stifel, Nicolaus & Company, Inc.
FINANCIAL SUMMARY
All underwriting fees are paid from bond proceeds contingent upon the successful closing of bond transactions.
Fees for services will be negotiated by staff and approved by the City Council on a per transaction basis, in accordance with the provisions of the City’s Land-Based and Capital Financing Policy, and Debt Management Policy.
Attachment A - Contract with Brandis Tallman LLC
Attachment B - Contract with Citigroup Global Markets Inc.
Attachment C - Contract with Hilltop Securities Inc.
Attachment D - Contract with RBC Capital Markets, LLC
Attachment E - Contract with Stifel, Nicolaus & Company, Inc.