HomeMy WebLinkAbout1992-07-07; City Council; 11764; Rancho Santa Fe Road AD Underwriter SelectionCIT” OF CARLSBAD - AGEN-1 BILL Jy$Lr @i/if
SELECTION OF AN UNDERWRITER FOR THE
RANCH0 SANTA FE ROAD ASSESSMENT DISTRICT CITY MGR. p-
Adopt Resolution No. Q-a03 selecting Stone and Youngberg as the City’s Underwriter
for the Ranch0 Santa Fe Road Assessment District.
I ITEM EXPLANATION:
Whenever the City intends to issue bonds to fund a major infrastructure project, the City
may elect to sell those bonds through either a competitive or a negotiated sale. In a
competitive sale the City, with the assistance of its financial advisor, offers the bonds to
the underwriting community. Bids are received, and the bonds are awarded to the firm
that offers the lowest net or true interest cost. This type of sale is used most often when
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the bonds being sold represent a relatively standard issue with very few unusual
circumstances,
A negotiated sale is one where the City selects an underwriter early in the bond issue
process, based on an agreement that the underwriter will purchase the bonds at the time
of sale. The price paid (or the interest rates set) will be negotiated between the City and
the underwriter at the time of sale depending on market conditions. This type of sale is
often used when an issuer must sell bonds that may be viewed by the market as unusual,
or in markets where a more directed sales effort may be appropriate.
The Ranch0 Santa Fe Road (RSF) Assessment District will be issuing a substantial
amount of debt into a market that is seriously analyzing each and every land backed
bond issue that comes along. Because of the district’s size, the concentration of land
ownership, the need for a detailed understanding of the City’s Growth Management
Program, and an extremely weak vacant land bond market staff is recommending that
Council authorize the hiring of an underwriter at this time. The underwriter will work with
staff, the City’s financial consultant, bond counsel and the property owners to help
structure a bond issue that will be well received by the market.
Based on the advice of the City’s financial advisor (Carl Kadie of Kadie-Jensen, Johnson
and Bodnar), and bond counsel (Mat Brown of Brown, Diven and Hentschke), as well as
the staff’s experience with past issues, staff is recommending that Council approve the
selection of Stone and Youngberg to act as underwriter for the RSF Road Assessment
District bond issue. Stone and Youngberg continues to be one of the leaders in
assessment district financing in the State even in the current weak market. According to
Mr. Kadie, Stone and Youngberg is particularly well positioned in the market to handle an
issue the size of RSF Road.
In addition to the recommendation received from our advisors, the property owners have
proposed the selection of Stone and Youngberg as underwriter for this issue.
According to Council Policy No. 33 “The . . . . underwriter may be selected by the
proponents of the district in consultation with and subject to approval of the City.” In this
particular case, the City and the proponents of the project are in complete agreement on
the recommended underwriter for the project.
Page Two of Agenda Bill No. / 4 76 Y
Staff is asking that Council adopt the attached Resolution selecting Stone and Youngberg
as the underwriter for the Ranch0 Santa Fe Road Assessment District.
FISCAL IMPACT:
Generally, the underwriter of a bond issue is compensated from the proceeds of the sale.
There is no out of pocket cost for the City related to the selection of the underwriter. If
the district should fail to issue bonds for some reason, the underwriter cannot bill the City
for any expenses. The underwriter’s compensation is determined during the negotiations
at the end of the process, and is based on the market for such services at that time. The
underwriter’s discount (compensation) will typically be between 1 l/2% and 3% of the
total issue.
EXHIBITS:
1. Resolution No. 92-203 selecting Stone and Youngberg as the City’s underwriter
for the Ranch0 Santa Fe Road Assessment District.
2. Letter from Kadie-Jensen, Johnson & Bodnar dated April 1, 1992 recommending
Stone & Youngberg to be selected as underwriter for the Ranch0 Santa Fe Road
Assessment District.
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RESOLUTION NO. 92-203
RESOLUTION OF THE CITY COUNCIL OF THE CITY
OF CARLSBAD, CALIFORNIA, SELECTING STONE &
YOUNGBERG TO ACT AS UNDERWRITER FOR THE
RANCH0 SANTA FE ROAD ASSESSMENT DISTRICT
(ASSESSMENT DISTRICT 91-l)
WHEREAS, the City Council of the City of Carlsbad, California anticipates
the creation of a 1913 Act Assessment District to pay for public improvements
related to Ranch0 Santa Fe Road; and
WHEREAS, the City anticipates issuing bonds under the 1915 .4ct to
finance all or part of the Ranch0 Santa Fe Road improvements; and
WHEREAS, in accordance with Council Policy 33, the property owners
have recommended the selection of Stone & Youngberg to act as underwriter for
the Ranch0 Santa Fe Road Assessment District; and
WHEREAS, the City staff in consultation with the City’s bond counsel and
financial advisor concur with the selection of Stone & Youngberg to act as
underwriter for said bond issue; and
WHEREAS, the City Council finds that the firm of Stone & Youngbcrg is
well-qualified to underwrite the Ranch0 Santa Fe Road Assessment District bond
issue,
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of
Carlsbad, California, as follows:
1. That the above recitations are true and correct.
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2. That the Mayor is hereby authorized to execute the attached
Underwriting Agreement between the City of Carlsbad and Stone & Youngberg
for the underwriting of the Ranch0 Santa Fe Road Assessment District bond issue
(Assessment District 91-l).
PASSED, APPROVED, AND ADOPTED at a regular meeting of the City
Council of the City of Carlsbad, California on the 7th day of
July , 1992, by the following vote, to wit:
AYES: Council Members Lewis, Kulchin, Larson, Stanton and Nygaard
NOES: None
ABSENT: . None
I ATTEST:
STONE & YOUNGBERG
MEMBERS PACIFIC STGCK EXCHANGE
UNDERWRITING AGREEMENT
4350 La Jolla Wage Drwe
Sulle 840
San Diego. Calrfornra 92122
Telephone (619) 452-0504
Facslmlle (619) 452-6131
April 6, 1992
City of Carlsbad 1200 Elm Avenue Carlsbad, CA 9200% 1989
Attn: Mr. James Elliott Finance Director
Rf2: Underwriter’s Agreement for City of Carlsb.pd Assessment District Bonds (Zones 11 and 12)
Members of the City Council:
This letter will serve as an agreement between the City of Carlsbad (the “City”) and Stone & Youngberg (the “Underwriter”) to serve as Underwriter to the City until the parties enter into an actual Purchase Contract regarding the negotiated sale of securities to be issued by the City pursuant to the Improvement Bond Act of 1915.
You have informed us that the City intends to issue a series of Bonds to provide funds for financing various public improvements and for this purpose requires the services of the Underwriter to assist in structuring the financing and to enter into a Purchase Contract for the securities which is acceptable to the City.
As Underwriter, we will use our best efforts to bring the Bonds to market at competitive interest rates practicable under the market conditions existing at the time of their sale. The Underwriter agrees to undertake the below listed services and functions:
A. Struchuing the Financing
1. The UndeNvriter will work with the City to create the most feasible and efficient structure for financing the necessary improvements given the expected sequencing of the proposed developments and the provision of the required public facilities.
SAN FRANCISCO (415) 981-1314 l LOS ANGELES (818) 789-2663
City of Carlsbad Re: Underwriting Agreement April 6, 1992 Page 2
2. The Underwriter will work with the City’s bond counsel and other professionals in recommending specific terms and conditions affecting the Bonds.
3. The Underwriter will prepare an Official Statement on behalf of the City (preliminary and final versions, respectively) for sale of the Bonds in accordance with the standards of Rule 15~2-12 of the Securities Exchange Commission and other applicable securities laws. Although it will be the responsibility of the Underwriter to prepare the Official Statement, the City agrees to participate in its preparation by providing pertinent information to be included therein and agrees to review the Official Statement for accuracy relating to matters concerning the Bonds, the Improvement District, the overlying Community Facilities District and the City. The execution and delivery of the Official Statement will be duly authorized by the City for use in marketing the Bonds.
B. Marketing the Bonds
1. At the designated time for sale of the Bonds, the Underwriter will submit an offer to the City 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 City 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 public offering. The Underwriter may form a group of investment banking firms for the purpose of underwriting and selling the Bonds.
2. At least one day prior to the submission of any such formal offer to the City for the purchase of the Bonds, the Underwriter will indicate to the City the interest rate or rates, the purchase price from the City, and the public offering price of the Bonds that we then estimate will be included in such offer. If, after negotiations in good faith, the City and the Underwriter fail to agree on the terms of sale of the Bonds, and upon written notice to the Underwriter, the Cityimay then offer the Bonds for sale to others without any further obligation to the Underwriter.
City of Carlsbad Re: Underwriting Agreement April 6, 1992 Page 3
C. General Provisions Relating to the City and the Underwriter
1. The City 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 improvement project, the overlying Community Facilities District, the City 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 will pay its own out-of-pocket and other expenses, including the cost of Underwriter’s Counsel (if applicable), Blue Sky and Investment Memorandum, assignment of CUSIPs and any advertising expenses in connection with the public offering of the Bonds. I
3. The City will pay from the proceeds of the Bonds all of its costs and expenses customarily paid therefrom, including the cost of printing the Bonds and the Official Statements, and any other documents, the fees and expenses of its legal counsel, bond counsel, accountants, architects, engineers, and of any other experts or consultants retained by the City in connection with the financing. .
.4. It is expressly understood and agreed and the City hereby recognizes that in performing its activities the Underwriter is acting solely on its own behalf and plans to submit to the City 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 City, or to establish any fiduciary relationship between the City and the Underwriter. It is understood and agreed that the City shall not be required to compensate the Underwriter for services provided to the City under this agreement if the bonds are not sold to the Underwriter.
5. This agreement shall extend to the date of sale of the last series of Bonds as contemplated herein, unless earlier terminated by the City for cause set forth in a written notice.
6. Nothing herein shall prevent Stone & Youngberg from acting as underwriter or financial advisor to the City of Carlsbad or the Carlsbad Redevelopment Agency on other financings.
7. Upon termination of this agreement, the City will be under no further obligation to the Underwriter hereunder.
8. It is understood and agreed that Stone & Youngberg will be represented by L. William Huck and John H. Gibson as the principal investment bankers to the City of Carlsbad.
City of Carlsbad Re: Underwriting Agreement April 6, 1992 Page 4
Upon your acceptance set forth below, this letter will constitute an agreement between the City and the undersigned. Thank you for the opportunity to be of service to the City of Carlsbad.
Very truly yours,
L. William Huck Partner
Accepted this pday of , 1992.
CITY OF CARLSBAti
&.$
By:
Title: CLAUDE A. LEWIS, Mayor
LWH:am
KADIE - JENSEN, JOHNSON h BODNAR
Municipal Financing Consultants, Inc.
April 1, 1992
Mr. Jim Elliott Financial Management Director CITY OF CARLSBAD 1200 Carlsbad Village Drive Carlsbad, CA 92008-1989
CARL KADIE
ELEANOR JENSBN 7801 MISSION CENTER CT. SAN DIEGO. CALIFORNIA 92108 (619) 2961450 FAX (619) 2963783
WILLOUGHBY C. JOHNSON P.O. BOX 1320 402 W. OJAI AVENUE OJAI, CALIFORNIA 93023 (SOS) M-7206
FAX (605) 646-4792
ERNEST B. BGDNAB 233 DEXTER PLACE SAN RAMON, CALIFORNIA 94583
(415) 829-3434 FAX (415) 829.4056
RE: Selecting an Underwriter for Ranch0 Santa Fe
Dear Jim:
Under normal times, there would be several underwriters who
should be considered as potential purchasers for the assessment
district to finance Ranch0 Santa Fe. However, as you know, the
deflated economy has resulted in something of a rush to quality
that causes bonds with lien ratios of less than 4:l to be very
difficult to market. This problem becomes even worse with bond
issues that are over $5 or $10 million in size because that is
beyond the discretion of all of the New York based firms.
We feel strongly that the only active underwriter for this size
of an issue at the quality assumed would be Stone & Youngberg.
Accordingly, we recommend that they be appointed directly rather
than putting the other underwriters through the process of an
interview when the outcome is known.
If you or your City Council have any questions with respect to
this recommendation, please feel free to call on us.
ours very t ly
@e a'rl 4fLL adie
CK:bt JN:8905-04
Charter Member: National Association of Independent Public Finance Advisors