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Home My WebLink About1988-05-03; City Council; Resolution 88-141r I/ 0 e 1 2 3 4 ESOLUTION NO. 88-141 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD , CALIFORNIA, APPOINTING SMITH BARNEY TO ACT AS THE CITY’ UNDERklRITER ON THE (ASSESSMENT DISTRICT NO. 86-1) PALOHAR AIRPORT ROAD-WEST ASSESSMENT DISTRICT ~ 5 hiHEREAS, the City of Carlsbad intends to issue bonds for the imI 6 of a portion of Palomar Airport Road, and 7 WHEREAS, the City requires the services of an underwriter for tl 8 /1 said bonds, and 9 11 WHEREAS, the City has selected Smith Barney to act as the City’: lo competitive pricing structure. 11 underwriter in the above transaction because of their excellent staff 12 NOW, THEREFORE, BE IT RESOL’t’ED by the City Council of the City I 13 14 as follows: 15 1. That Smith Barney shall act as underwriter in the above tra~ 2. That the fees and compensation for said services shall be a 16 17 18 19 20 21 22 23 24 25 26 27 in the attached proposals which are incorporated herein by reference, contingent on the sale of bonds. I/ I/ I/ I/ I/ I/ I/ /I I/ I/ 28 r 0 0 1 3. That the City Council reserves the right to remove Smith Bar 2 this project at any time. 3 PASSED, APPROVED AKD ADOPTED at a regular meeting of the City Cc 4 5 the City of Carlsbad held on the 3rd day of May , 1988, by the fc NOES: None 7 AYES: Council Members Lewis, Kulchin, Pettine, Mamaux and Lars' 6 vote, to wit: a 9 10 I1 ABSENT : None 12 13 ATTEST : 16 I.r I/ l8 I! l9 I/ 20 21 22 23 24 I 25 I 26 27 28 4 SMITHB~Y a e n 4 I I 4 U II R 1 M I CITY OF CARLSBAD Palomar Airport Assessment District Request to Serve as Underwriter U -II I I 1 a' 0 0 -4 SMITHBARNEY =I F?. ' 3 i, > ;.a. \\ \ ,I \\' !i\.,i i? *. ,:. April 1, 1988 dl Mr. James F. Elliott Finance Director City of Carlsbad 1200 Elm Avenue Carlsbad, CA 92008 4 -4 Dear Mr. Elliott: 4 .I 1 4 Thank you for considering Smith Barney as the City's underwriter on the Palomar Assessment District Project. We are very familiar with the project area I understand the critical need for these road improvements. This appears to be a very straight forward financing. Nonetheless, both Mark Epst I will be available to assist you in any way you find necessary. We recognize tha' not a large financing by most standards. However, we also know that good relati are developed over time, and by assisting our clients whatever their need may be. Smith Barney be selected as underwriter on this project, we will commit all resources necessary to make this a successful financing. Sincerely, s , 1 .i .> /(:-I ( ( . .'" I Robert L. Anderson Vice President RLA:mmc I I Q smnf BARNEY, 3511 CAI.II~OIINIA S7'RI:iii IlARKlS IJI'iIAhl R; CO. INC. S,ZN i~I~~\S('lS('O, CA 0410.1 41.5-055- L%XJ 0 0 B 1 CITY OF CARlLSBAD Palornar Airport Assessment District Request to Serve as Underwriter April 1, 1988 Page i 1 TABLE OF CONTENTS pal 1 ............................................................. 1 1. PEES 1 2. LOCAL PRESENCE AND EXPERIENCE WITH 1913/1915ACTDISTRICTS ....................................... .................... 1 3. PERSONNEL TO BE ASSIGNED TO THIS PROJECT -1 4. MARKETING PLAN AND CAPABILITY ............................... 5. PRICINGSTRATEGIES ............................................. 1 II 4 1 1 ]I a s1 x2s .o 329-02 ."""" ~. "-~ ~~ 1' 0 CITY OF CARLSBAD 0 R .II J 1 Palomar Airport Assessment District Request to Serve as Underwriter April 1, 1988 Page 1 1. FEES Based on our understanding of the City's financing, we believe that the following fairly reflect the cost of managing and selling this financing as of March 29, 198E fees quoted above are payable on a contingent basis. ]I TABLE 1 $3,100,000 City of Carlsbad Palomar Airport Assessment District 1 Proposed Fee Structure 1 I Management Fee Underwriting Fee Takedown Expenses GROSS SPREAD $/1,000 $1.50 SO 15.00 3.00 $20.00 1 1 1 1 1 1 1 I I ZSlx2S.1 0329-02 - CITY OF CARLSBAD 0- Palomar Airport Assessment District Request to Serve as ,Underwriter April 1, 1988 Page 2 0 " 2. LOCAL PRESENCE AND EXPERIENCE WITH 1913/1915 ACT DISTRICTS Local Presence Even though Smith Barney is one of the largest underwriters of municipal bonds in United States, we are very aware of the need to provide a timely response to our clir locally. Our commitment to the communities of the greater San Diego area is evider by the firm's decision to assign two of its California public finance bankers to service clients in this area, from this area. While some firms are "cutting back" public finr personnel, and in some instances consolidating local offices into so called major ci' we are doing the opposite. We believe in the future of San Diego and the valuc providing local people who can respond quickly to client needs. We also realize being available to assist local staff and elected officials in formulating plans or fin solutions to problems, while extremely important, is nonetheless usually more acceptc that assistance comes from local experienced professionals. With our local presence we have become part of the community and continue to ende' to involve ourselves in the issues of local government, our high schools and colle etc. This, we believe, helps us to better serve our clients, not only when we under% various bond issues, but as we sell them. With greater depth of knowledge of the a we find it much easier to explain to a potential investor the situation surrounding issuance of debt for our clients. Table 2, which follows, lists the recent experience and reference for Robert Ander who recently joined Smith Barney. TABLE 2 San Diego County 1913-1915 Act Financing Experience Negotiated Assessment District Issues Contact Issue An Warren Diven City of San Marcos Assessment District #1 $3,40f City Attorney (Nordahl Road) (619) 756-5994 James F. Elliott City of Carlsbad Assessment District #85-2 Finance Director (College Blvd.) .. Ron Null City of Vista Assessment District #86-1 City Attorney (Raceway Basin) , (619) 434-2867 (415) 756-5994 9,60C 8,20f George Simpson City of San Diego Assessment District #4007 24,80( Asst. Dir. Engineering (619) 236-7067 I :s 1 x2s .2 0 e CITY OF CARLSBAD Palomar Airport Assessment District Request to Serve as Underwriter April 1, 1988 Page 3 TABLE 3 SMITH BARNEY San Diego County 1913-1915 Act Financing Experience Assessment Districts in Progress* Expected Sale Date Issue Amou 06/15/88 San Diego County Assessment District $8,000 06/15/88 Escondido Assessment District (Valley Parkway) 3,000 07/01/88 San Diego County Assessment District 30,000 * There are many other local projects in process which are not yet developed to point where it would be appropriate to include them in this listing. ~ ~ ~ ~ ~~ ~ ~~~ TABLE 4 SMITH BARNEY Competitive Special Assessment District Financings 1986 to Date Sale Date Issuer Principal Amc Senior Managed 06/17/87 Upland - Improvement Bonds 03/09/87 Eastern Municipal Water District 11/06/86 San Diego - Wastewater Bonds 06/23/86 Upland - Improvement Bonds Subtotal $3,816 5,971 2,115 896 $12,804 Co-Managed 08/18/87 San Pablo - Refunding Bonds 0 1/0 818 7 San Diego - Municipal Improvement Bonds Subtotal $3,865 1,670 $5,535 GRAND TOTAL $18,339 Bold face indicates San Diego financings. ~ ~ ~ ~~~~~ 'Cl"7C z e e CITY OF CARLSBAD Palomar Airport Assessment District Request to Serve as Underwriter April 1, 1988 Page 4 3. PERSONNEL TO BE ASSIGNED TO THIS PROJECT San Diego Public Finance Liaison ROBERT L. ANDERSON, Vice President (619) 544-6573 Mr. Anderson received both a Bachelor and Masters degree from Colorado S' University. He has been involved in the municipal bond industry since 1964. From 1 to. 1980, he was associated with Kirchner Moore & Company in Denver, Colorado. was a principal shareholder in the company, was the executive vice president and ser on the executive committee and the board of directors of the firm. He has t acquainted with 1915 Act Bonds since 1968 and witnessed the evolution from a no marketable bond to their present status as a very accepted fixed income instrument. brings to Smith Barney many years of public finance experience, plus a knowledge of local communities of the San Diego area. San Francisco Public Finance R. MARK EPSTEIN, Associate (415) 955-1676 Mr. Epstein joined Smith Barney's San Francisco Public Finance Department in 1984 has considerable experience in managing and structuring general municipal financings California issuers statewide. Mr. Epstein served as Senior Manager for $110 millior tax-exempt offerings and Co-Manager for nearly $40 million of tax-exempt offering San Diego since 1986. Since assuming responsibility for the San Diego County region, Epstein's efforts, in large measure, account for Smith Barney's rise to the number ' . ranked underwriter of tax-exempt securities for issuers within the County for the I twelve months. His experience as senior manager includes a $52,790,000 financing ' ' the City of San Diego, a $28,360,000 Joint Powers Authority financing and a $29,360j San Diego County Capital Asset Leasing Corporation ("SANCAL") financing. He served as Co-Manager for SANCAL's $39,100,000 interim justice facility financing. SlxZS.4 329-02 0 e CITY OF CARLSBAD Palomar Airport Assessment District Request to Serve as Underwriter April 1, 1988 Page 5 Y 4. MARKETING PLAN AND CAPABILITY General The marketing of non-rated securities is perhaps the most complicated marketing effo: an underwriter can undertake. Smith Barney underwrites more California non-rat€ securities than any other firm in the nation. We know what it takes to conduct successful sale of non-rated securities. Since 1982, Smith Barney has sold nearly $91 million of California non-rated securities - almost as much the next two firn combined. The difficulty in selling non-rated securities is that, unlike other rating categories, !'no: rated" describes a wide variety of credit worthiness from good to highly speculativ Underwriters describe non-rated bonds with good credit as "story bonds," that is bon with a good story which explains why the bonds are a good credit risk despite the fa that they are non-rated. A strong credit, such as Carlsbad's proposed Palomar Airpo Assessment District would afford an excellent story bond marketing opportunity. Marketing Plan The selling of story bonds, by its very nature, hinges upon communication between tfi managing banker and his distribution network. A story bond, after all, is only as good I must know the story. The dissemination of the story is accomplished in a variety of ways. First, we distribu' a sales memo to each of our five California assessment district specialists. The: specialists will coordinate the retail sale of the City's bonds with our 275 accoui executives located in eleven sales offices throughout California. Our sales offices are the following locations: - its story and everyone -- retail salesmen, institutional salesmen and buyers of all types Beverly Hills Newport Beach Walnut Creek Beverly Wilshire San Diego Westlake Village San Francisco Los Angeles West Los Angeles Menlo Park Santa Barbara Next, we prepare a preliminary prospectus for the assessment district for distribution 1 selected members of our high net worth group of California and national reta investors. This group, which includes individuals with municipal portfolios in excess ( $500,000 (on average $1.6 million), will be a primary area of market demand for tf City's bonds. Other areas of demand include general retail investors and limit€ institutional interest especially among casualty companies. As the sale date approaches, we will distribute a sales memorandum to our eleve California offices. We will hold a pre-pricing conference call to answer all remainin questions and the managing banker will make himself available for conference calls wit potential investors. x2s. 5 9-02 * a e CITY OF CARLSBAD Palomar Airport Assessment District Request to Serve as Underwriter April 1, 1988 Page 6 Finally, the delivery of the preliminary official statement to each prospective investor completes the pre-marketing effort. On the day of pricing the City, the managing banker and the manager of our Los Angeles Trading Headquarters will hold a conference call to set an interest rate scale for the issue. The scale may be adjusted up or down from its original level to reflect the actual market reception for the bonds. Bonds can be priced as many times as necessary to secure an interest rate which the City believes to be most advantageous to the interests of the property owners in the district. As the City approaches the scheduled pricing date we will provide our forecast of the expected near term market conditions and adjust the date of pricing to coincide with the strongest market foreseeable. Following the date of pricing, Smith Barney will commit to specific coupon rates and sign an agreement to purchase the City's bonds. .6 2 A * CITY OF CARLSBAD Palomar Airport Assessment District Request to Serve as Underwriter April 1, 1988 Page 7 e Y ~~ ~~ ~~~~~~~~ 5. PRICING STRATEGIES Our California trading department has 18 full time professionals who monitor California issues daily. We would have excellent indications of market conditions in May and check the market direction regularly as we approach the projected sale date of June. If we saw a favorable interest rate window at any time, we could quickly confirm a purchase price to the City and lock in an attractive rate. As this is a relatively small issue, and because Carlsbad is such a fine credit, it would be very easy to sell the City's bonds on a bought deal basis. If the window did not occur, we would then recommend the most appropriate time available for the City to sell its issue. Pricing strategies include not only timing and market conditions, but, most importantly, knowledge of the community, its financial condition and how well it is administered. This information plus the dynamics of the area in general must be conveyed to our people pricing the bonds, in a manner that will convince them of the merits of the bonds. We believe this can be accomplished by those people who have personal involvement in the community and local knowledge that comes from living and working in the area. For these reasons, we feel our ability to price your issue as attractively as possible cannot be matched. s.7 02