HomeMy WebLinkAbout1990-04-10; City Council; Resolution 90-970 0
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RESOLUTION NO. 90-9 7
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA, APPOINTING SMITH BARNEY TO ACT AS THE CITY'S UNDERWRITER ON THE ALGA ROAD ASSESSMENT DISTRICT (ASSESSMENT DISTRICT NO. 88-1)
WHEREAS, the City of Carlsbad intends to issue bonds for tl
6 improvement of a portion of Alga Road; and
7 WHEREAS, the City require the services of an underwriter for tt
8 issue of said bonds; and
9 WHEREAS, the City has selected Smith Barney to act as the City'
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competitive pricing structure; 11
underwriter in the above transactio because of their excellent staff ar
12 NOW, THEREFORE BE IT RESOLVED by the City Council of the City c
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1. That the above recitations are true and correct. 14
Carl sbad, Cal ifornia as follows:
transaction. 16
2. That Smith Barney shall act as underwriter in the abov 15
17 3. That the fees and compensation for said services shall be E
18 described in the attached proposals which are incorporated herein t
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I1 reference, and are contingent on the sale of
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bonds.
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4. That the City Council reserves the right to remove Smith Barn€
from this project at any time.
PASSED, APPROVED, AND ADOPTED at a regular meeting of the Carlsb;
City Counci 1 held on the 10th day of April , 1990.
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AYES: Council Members Lewis, Kulchin, Pettine, Mamaux and Larson
NOES: None
ABSENT : None
11 11 ATTEST:
12 11 AL~LFRA~ESA~+~~~~
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S#MITH BARNEY
~ " March 29, 1990
Mr. James F. Elliott
Finance Director
City of Carlsbad
1200 Elm Avenue
Carlsbad, CA 92008
Dear Mr. Elliot
On behalf of Smith Barney, we are pleased to present an update of our qualification! serve as managing underwriter to the City of Carlsbad for its proposed Alga R
Assessment District financing. We consider the City of Carlsbad to be an important
valued client, and we are excited about the prospects of working with you again on
upcoming financing. As we have previously stated perhaps the best indication of
ability to serve the City can be found in our exceptional pricing performance, for
City's previous 1915 Act bond issue, as highlighted below.
Relevant Financing Experience - Since our proposal submitted in September, Smith Barney has continued to demonstrate leadership on
both the competitive and negotiated 1915 Act financings. A finance
team lead by myself and Paul McDonnell is in the process of closing a
two stage 1915 Act financing for Redwood City which includes
refunding three outstanding issues totaling $17 million plus the addition
of $1,100,000 new improvements. We have also been hired to structure
the first phase for a $40 million Simi Valley assessment district. In the
last 18 months, Smith Barney has senior managed ten 1915 Act
financings totaling over $67 million. These financings were consistently
priced with interest rates significantly below other 1915 Act
financings. To achieve this level of performance, we have not only
consistently outperformed the entire California bond community, but
also those firms which have traditionally specialized in 1915 Act
f inancings.
Below is a brief list of our most recent 1915 Act financings:
City of Carlsbad City of Redwood City
City of San Diego City of Chula Vista
City of Fresno City of Oceanside
Carpinteria Sanitary District County of San Bernardino
Eastern Municipal Water District City of San Fernando
City of Simi Valley City of Upland
Marketing and Distribution Capabilities - No other firm can match Smith Barney's knowledge of and relationship with investors in the California municipal market. This is most clearly demonstrated by Smith Barney's dominance of the competitive debt market, where low interest cost is the sole factor in determining the underwriter. In the
SMl7 H HAKNEY. #-I&? IJI'HAM & CO INC.
333 SOUlH GRAND AVENIIT
E . _. FARGO CENTER
SUITE 52~1
1.0s ANGELES. CA 90071
213-486-881 I
Mr. James F. Elliott e
City of Carlsbad
Page Two
negotiated market Smith Barney was California's second leading underwriter for 1989, with only $27 million'less in volume than the firm
ranked above us. This level of underwriting activity, together with our
strengths in both the retail and institutional markets, allows us to
successfully distribute new issues as buying interest shifts between the
two sectors. Moreover, as the industry's number one secondary market
maker for California tax-exempt bonds, Smith Barney provides
unsurpassed leadership in post-sale issuance support for its California clients.
Leadership in California Non-Rated Debt Market - Given the City's issue will be non-rated, Carlsbad must be certain of its underwriter's
ability to penetrate all market sectors and familiarize investors with
the underlying security for the City's bonds. Smith Barney has
demonstrated this ability as the leading underwriter of non-rated
California securities. From 1985 through 1988, Smith Barney senior
managed 78 California non-rated issues totaling $1.42 billion, more than
any other firm.
Competitive Fee Structure - We have revised our underwriter's
discount, based on current market conditions. We feel that the fee is
aggressive and yet adequately compensates us for providing quality
services to the City and provides sufficient sales incentive to place the
bonds. Furthermore, we have provided a realistic estimate of fees. We
have suggested that a total spread of $11.95 per $1,000 of bonds would
be sufficient for the underwriting group and assures the City of the
lowest possible borrowing cost. Our revised schedule is included as an
attachment.
We believe that the resources and experience discussed herein make Smith Barney
nently qualified to serve the City of Carlsbad for its proposed Alga Road Assess]
District financing. Our financing team stands ready to provide the highest lev€
value-added, quality service for this transaction and to respond quickly to the C
needs in order to facilitate its completion. We again look forward to making
resources and capabilities further available to you and to the City.
Sincerely,
Christopher W. Romer Vice President
cc: Paul McDonnell, Jr.
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CR-087
e a
Exhibit A
City of Carlsbad, California
Alga Road Assessment District Project
Revised Fee Schedule
March 29,1990
We believe the following spread to be aggressive, but one which does not preclude
City from benefiting from a complete marketing of its bonds. Further, Smith Barn(
willing to negotiate this spread and commit to fees in advance and cap all of the exp
amounts listed below (based on an assumed $18.2 million unrated 1915 Act bond issue:
Table 1
Gross Spread (per $1,000 of bonds)
Managem nt Fee
Expenses f
Underwriting Risk
Average Takedown
Total
$ .75
1.20
0.00
10.00
$11.95 or (1.195%)
lSee Table 2 for details.
Table 2
Estimated Underwriter's Expenses*
Expense
Underwriter's Counsel**
Out-of-Pocket (Travel, Meals, etc.)
Miscellaneous (Communications, Postage, etc.)
Fed Funds
California Debt Advisory Commission
MSRB/PSA
Dalnet Communications
Total
*Assumes City will pay for printing of Official Statements and Bonds.
**Estimate based upon recent bids.
Amoun
$16,a4 l,oo l,oo
1,50 l,oo
30
20 $21,84
CR-087
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SMITH BA
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$19,195,00 Clty of San Diego, 1915 Act Bonds
0 Smith Barney priced its must recent assessment district Issue in
July of last year. Smith Barney was able to auah an NIC of 70
basis points or more below other similarly priced assessment district issues as illustrated in the followhg graph.
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SMITH BAI
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$35,080,000 Fontana Redevelopment Agency, Tax Allocation Bonds
in June of 1988, Smith Barney sold the Fontana Redevelopment
Agency's Bonds at an NiC of 50 BASK POiNTS less than other
comparably rated issues sold wncumntly.
I
8-80 4. .......................................... 4 ........ -. ....................... - ...... I
8.70 -. ........................................ .,I ........................................... 3 1
g 8.60 - .. 1 ........................................... .........................................
W
u 8-50 -, .... -a ~~~&y~~gbrr~., ........ ..i ........ -, .............. -, .............. 3
g ........................... ...A 1- & co.. ............................
................ -, ............. .-i ... .A.m,Stcm 8r co.., ........... U M.L. Stem & Co.
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3 3 8.20 - ............................................ ! .......................................... g u 8-10 { ........................................... .; ....................................... I
8.00 -
7.8011,*,1,,,;1,.,,,,-
......................................... .,&.sma BARNEY,, ................ 7.90 -.
......................................................................................
5/26/8 8 6/1/88
* $35,000,000 Fontana Redevelopment Agency, Tax Allocation Bonds A $187,000 Coaling4 Califamia, Improvement Assessment Bonds
& $11,770,000 Stockon, California, 1915 Act Bonds 0 $1 1,625,000 Tracy Area Public Facility, Special Tax Bonds
$314,000 County of Calavera Water District, Assessment Water Bonds
I *Saucr:BadBr)rtfSaclribuhGupny. NIC~~raaUiuuu.
~~~~
SMITH BAI
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