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HomeMy WebLinkAbout2019-09-03 - Martin Nelson & Company - General Agreements / General Service AgreementsDated: apt' 03, 2019 City of East Wenatchee A Pacific Northwest MEMA Martin 271 9th Street NE Financial Services nFL» Nelson & East Wenatchee, WA 98802 Company,A... Company Est. 1954 BOND FINANCING UNDERWRITER'S AGREEMENT THIS AGREEMENT is entered into as of the date referenced below by and between City of East Wenatchee, Washington, a political subdivision of the State of Washington, (the "City"), and Martin Nelson & Co., Inc., (herein called the "Underwriter" and "MNCO"). WHEREAS, the City now wishes to borrow money for capital purposes related to the construction of public works and public safety facilities (the "Projects") and wishes to hire the Underwriter to provide bond financing analysis, and potentially, bond financing for the anticipated Projects. The City anticipates this potential need will be funded by Limited Tax General Obligation Bonds (the "Financing" or the "Bonds") upon approval of the City Council. It is understood that this Financing is commonly referred to as a negotiated bond offering and represents a process by which the Underwriter bargains with public bond investors on behalf of the City to ultimately establish the lowest possible interest rate for the Financing. In its capacity as Underwriter therefore, Martin Nelson and Company, Inc. will not be acting as a Municipal Advisor. WHEREAS, it is the desire of MNCO to provide positive, productive and community supportive financing solutions in Washington State and, as a matter of standard conduct, we have demonstrated — and continue to demonstrate - a competitive balance between the lowest cost objectives of our issuer clients and the interest rate demands of bond investors who purchase our clients bonds. Our 60+ year history reflects this commitment. With the attached Exhibit A at the back of this document, MNCO is notifying the City that the interest rate negotiation process may potentially create a conflict between a borrower (such as the City), the Underwriter, and bond investors (the "Bond Buyers"), together the "Interested Parties". Conflicts can develop as the Underwriter bids with Bond Buyers (on behalf of the City) who can be wealth management clients of MNCO or institutions looking to purchase inventory of municipal bonds for their client investors. Under federal law, a bond underwriter does not have a fiduciary duty to a bond issuer and is therefore not required to place the issuer's goals above its own as it relates to fixing the interest rate on a financing. However, as a matter of best business practice, MNCO makes every effort to minimize any potential risk of conflict by using comparable bond sale information (the "Pricing Comparables" or "Comparable Sales") to guide the interest rates offered to the City. Such Pricing Comparables, or other bond issues the City chooses to examine separately, are independently accessible by the City through internet based portals (such as "EMMA", the "Electronic Municipal Market Access" system) without charge. These Pricing Comparables act as market competitive benchmarks and form the basis of the City's decision to accept or reject the Underwriter's BOND FINANCING UNDERWRITER'S AGREEMENT Dated: recommended final interest rates for the City's Financing after MNCO has negotiated with Bond Buyers. In addition, MNCO follows the usual and customary practice of bond underwriters to pool bond investors for the purpose of widening competition for an issuer's bonds and to award a sale of the issuer's bonds to pool participants willing to offer the lowest interest rate. NOW, THEREFORE BE IT AGREED: 1. The City hereby appoints Martin Nelson & Co., Inc. as Underwriter for the offering of any financing required to accomplish the Financing described above. Upon completion of the sale of a publicly sold bond issue, the Underwriter shall submit a Bond Purchase Agreement to purchase the Bonds. 2. The Underwriter, at their expense, will undertake a review and take such action as necessary to determine the marketability of the Bonds, and, subject to such satisfaction, will perform all of the functions customarily performed by investment bankers for which are reasonably required to accomplish the sale of the Bonds, including, but not limited to: A. Financial Services, including Financial Analysis, Debt Structuring Services, Rating Acquisition Services, Continuing Disclosure Review, Marketing Services, and assistance with meetings and presentations related to preparing for the issuance of the Bonds. B. Advise the City as to maturities, interest rates, repayment structure, timing of the Marketing Plan for the Bonds, and financing amount needed to implement the City's proposed Financing. C. Review and make comments with respect to the Bond Ordinance and other underlying documents relating to the Bonds. D. Prepare the Preliminary and final Official Statements to be issued by the City relating to the Bonds and consult with the City and its Bond Counsel regarding the same. E. Prepare the City to present to one of the Nationally Recognized Statistical Rating Organizations and otherwise assist the City to secure a bond rating. F. Distribute the Preliminary and final Official Statements to a broad list of prospective investors. G. Demonstrate that our interest rates are commensurate with, or better than, market rates of comparable issues being sold at the time of the City's bond sale. H. Prepare the City for a rating presentation to pursue underlying bond rating goals. I. Provide a final payment schedule for the Bonds. J. Assist the City and its Bond Counsel in registering, executing, and delivering the Bonds and the investment of Bond proceeds. 2 BOND FINANCING UNDERWRITER'S AGREEMENT Dated: d 9 �b3� 10l9 3. At such time as the applicable Ordinances, the Preliminary Official Statement and all other necessary documents and proceedings have been determined by the City, Bond Counsel and the Underwriter to be satisfactory in all material respects for financing purposes, the Underwriter will submit to the City a Bond Purchase Agreement for the purchase of the Bonds, which will detail the interest rates, purchase price, and the public offering prices of the Bonds. The acceptance of the purchase agreement by the City will be at the sole option of the City, and the City shall not be obligated to accept an offer made by the Underwriter in the purchase contract. If the City does not accept the offer of the Underwriter, the City shall be under no further obligation to the Underwriter with respect to the payment of any fees or compensation to the Underwriter. The City, however, may owe fees for the professional services provided to the City by its Bond Counsel and the rating agency. 4. In carrying out this agreement the Underwriter will make available the full experience of their organization and will employ their expertise so as to represent the City with maximum effectiveness in its relations with the financial community and with potential investors. 5. The Underwriter shall receive its sole compensation from the difference between the price at which the Bonds are to be resold to investors and the price paid to the City for the Bonds by the Underwriter. The rate at which this compensation will be paid shall not exceed .525% of the principal dollar amount borrowed. Stated in a different fashion, the compensation quoted shall not exceed $5.25 per $1,000 of Bonds offered for purchase. For example, for a $5,000,000 bond issue, the Underwriter fee would be $26,250.00 ($5,000,000 X .525%). Until such time as the purchase agreement is submitted and accepted or rejected, the City appoints the Underwriter as its exclusive and sole investment banker for the purpose of submitting a purchase agreement for the Bonds. 6. The City shall also be responsible for paying the costs of issuance outside of the underwriter's fee such as: bond counsel fee, fiscal agent fees, document costs, and the bond rating fee. Bond document costs such as for the preparation, printing and distribution of the Preliminary and Final Official Statements and the Underwriter's out-of-pocket expenses shall be outside the fees negotiated in item 5, but are capped at a maximum rate of $2,500 per underwriting. Bond financing issuance costs are customarily paid from bond proceeds. 7. The City's signature on this Agreement acknowledges receipt of the Underwriter's disclosure in Exhibit A. 8. This Agreement may be terminated by the City at any time with written notice sent through U.S. mail with return receipt requested. 9. This Agreement shall be governed by Washington State law. 3 BOND FINANCING UNDERWRITER'S AGREEMENT Dated: 01103 1 Z019 IN WITNESS WHEREOF, the parties hereto cause this document to be executed by their duly authorized officers and representatives this 03 day of D 9 , 2019 ACCEPTED BY AND FOR: THE CITY OF EAST WENATCHEE 271 9th STREET NE EAST WENATCHEE, WA 98802 WE Prin Nat It's l�g t�0r we 4 MARTIN NELSON & CO., INC. 1500 WESTLAKE AVE. NORTH SUITE 200 SEATTLE, WA 98109 JAMES BLUMENTHAL VICE PRESIDENT AND SENIOR MUNICIPAL UNDERWRITER BOND FINANCING UNDERWRITER'S AGREEMENT Dated: 09log /`l0/7 Exhibit A I. Disclosures Concerning the Underwriter's Role: (i) Municipal Securities Rulemaking Board Rule G-17 requires an underwriter to deal fairly at all times with both municipal issuers and investors; (ii) the underwriter's primary role is to purchase securities with a view to distribution in an arm's-length commercial transaction with the issuer and it has financial and other interests that differ from those of the issuer; (iii) the underwriter does not have a fiduciary duty to the issuer under the federal securities laws and is, therefore, not required by federal law to act in the best interests of the issuer without regard to its own financial or other interests; (iv) the underwriter has a duty to purchase securities from the issuer at a fair and reasonable price, but must balance that duty with its duty to sell municipal securities to investors at prices that are fair and reasonable; and (v) the underwriter will review the official statement for the issuer's securities in accordance with, and as part of, its responsibilities to investors under the federal securities laws, as applied to the facts and circumstances of the transactions. Il. Disclosures Concerning the Underwriters' Compensation: The underwriter will be compensated by a fee (also known as an underwriting discount) that will be set forth in the bond purchase agreement with the issuance of the Bonds. Payment or receipt of the underwriting fee will be contingent on the closing of the transaction and the amount of the fee may be based, in whole or in part, on a percentage of the principal amount of the Bonds. While this form of compensation is customary in the municipal securities market, it may present a conflict of interest since the underwriter is paid only after a financing is implemented. III. Additional Conflicts Disclosures: The underwriter has not identified any additional potential or actual material conflicts that require disclosure. ' Under federal securities law, an issuer of securities has the primary responsibility for disclosure to investors. The review of the official statement by the underwriters is solely for purposes of satisfying the underwriters' obligations under the federal securities laws and such review should not be construed by an issuer as a guarantee of the accuracy or completeness of the information in the official statement. CITY OF EAST WENATCHEE DOUGLAS COUNTY, WA LIMITED TAX GENERAL OBLIGATION BONDS, 2020 As of July 25, 2019 FINANCE TEAM CONTACT LIST Issuer City of East Wenatchee Josh Delay, Finance Director: jdelay@east-wenatchee.com Mailing Address: 2719th Street N E East Wenatchee, WA 98802 Phone: (509) 886-4507; Fax: (S09) 884-6233 Bond Counsel TBD Rating Agency Standard and Poor's Corporation TBD One California Street, 31st Floor, San Francisco, CA 94111 Phone: (415) TBD Responsible Party TENTATIVE FINANCING SCHEDULE UW UW /SR BC UW ISR/UW ISR/BC ISR/UW/R ISR/UW/BC UW ISR/UW/BC Bond Registrar & Fiscal Agent U.S. Bank National Association, Corporate Trust Services Carolyn Morrison, Vice President: carolyn.morrison@usbank.com Aaron Fong, Asst. Vice President: aaron.fong@usbank.com 1420 Sth Avenue, 7th Floor, PD-WA-T7CT Seattle, WA 98101 Phone: (206) 344-4678; Fax: (206) 344-4632 - Carolyn Phone: (206) 344-4609; Fax: (206) 344-4630 - Aaron Underwriter Martin Nelson and Company, Inc. Jim Blumenthal, Vice President: jblumenthal@martinnelsonco.com 1S00 Westlake Avenue North, Suite 200, Seattle, WA 98109 Phone: (206) 695-7116; Fax: (206) 447-9849 2-Oct-19 Draft "Preliminary Official Statement" ("POS") templates sent to City for completion 16-Oct-19 POS templates returned to Martin Nelson & Company by City 12-Nov-19 Draft Delegating Bond Resolution distributed to Finance Team 13-Nov-19 1st draft of Preliminary Official Statement distributed to Finance Team 11/14,28 & 12/5 Rating call practice sessions 3-Dec-19 Delegating Bond Resolution signed by the Council at regular meeting 10-Dec-19 Rating call with Standard and Poor's at 2:00 PM (Pacific) 14-Jan-20 POS document review session via conference call at loam (TENTATIVE) 21-Jan-20 Verbal rating award received 22-Jan-20 Release Preliminary Official Statement to public market investors 29-Jan-20 Pricing (7am to 12pm at UW offices) Present Purchase Contract for City Representative signature by 4:30pm UW/BC 12-Feb-20 Bond closing - Bonds delivered to investors and financing proceeds transferred to City 'City Council meetings are held on the 1st and 3rd Tuesdays of each month at 6pm in the City Council chambers at: 2719th Street N.E., East Wenatchee, WA 98801 BOND TERMS Principal Borrowing Amount: $5,000,000 (could be subject to change) Interest payment: Interest payments begin June 1, 2020 and paid each June 1 and December 1 thereafter until 2039 Day Count Basis: 30/360 Principal repayment: Principal payments begin December 1, 2020 and are paid each December 1 thereafter until 2039 Tax Exemption: Tax -Exempt, Bank Qualified, Fixed Rate Security: Limited Tax General Obligation pledge to levy taxes on all taxable property within the City annually Bond Registrar, Fiscal Agent: U.S. Bank National Association Call Feature: 06/01/2030 Par Call Credit Rating: To Be Determined Bond Insurance: Not beneficial Debt structure: Level principal and interest ("level debt service"), without regard for outstanding prior issued Limited Tax General Obligation debt of the City. Bond Resolution Type: Delegating Bond Resolution Delegating Parameters: Max All -In -TIC tax-exempt bonds = 4.50%; delegating authority max term = December 31, 2020, max interest rate per maturity 5.00%, max and min purchase prices of 130% and 97%, respectively. Purpose: Construction of public works and public safety facilities. Abbreviation Legend: ISR = City of East Wenatchee, WA; BC = : UW = Martin Nelson and Co.; R = Standard & Poor's Corporation ov-19 Dec-19 ■ERII Martin Q. 1 2 2 3{ 5 6 VKAMM Nelson $L { 5 6 7 8 9 S 9 10 11 12 13 14 -1 10 11 12 13 1{ 13 16 15 16 17 18 19 20 2t jAi■W Company 1% 38 19 20 21 22 23 22 23 24 25 26 27 '_S 21 25 26 27 28 29 30 9 30 31 Jan-20 1 2 3 4 5 6 1 8 9 10 11 1= 13 1{ 15 16 17 IS 19 20 21 22 23 24 25 26 27 29 29 30 31 Feb-20 1 2 3 { 5 6 7 S 9 10 11 11 13 11 15 16 17 18 19 20 21 _� 24 25 26 27 29 29