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HomeMy WebLinkAboutRDA 03 TOWN CTR REFI 06-01-98DATE: May 27, 1998 Inter-Com RDA NO. 3 6-1-98 TO: FROM: SUBJECT: William A. HustOn, Executive Director Ronald A. Nault, Finance Director PROPOSAL TO REFINANCE OUTSTANDING 1987 AND 1991' TOWN CENTER PROJECT AREA TAX ALLOCATION BONDS SUMMARY: We have received an unsolicited proposal from John Nuveen and Company, Incorporated, Investment Bankers, to refund certain portions of the outstanding 1991 Tax Allocation Bonds for a present value savings of 8.36%, $1,057,000. We have reviewed the proposal with Bond Counsel and the City's Financial Advisors, and we feel the proposed savings is achievable. The refunding will free up additional working capital to the Town Center Project Area for the duration of the outstanding bonds. RECOMMENDATION' 1. Authorize staff to proceed with the proposal for refunding the outstanding 1987 and 1991 Tax Allocation Bonds. 2. Authorize the Finance Director to enter into an agreement with Public Financial Management, Inc. to provide services outlined in the attached proposal. 3. Select Quint & Thimmig, LLP as Bond Counsel/Disclosure Counsel and to provide services as outlined in their letter dated May 21, 1998, attached. o Authorize staff and the Agency's consultants to negotiate directly with John Nuveen and Company, Incorporated, Investment Bankers, to refinance the referenced bonds. If we cannot come to an agreement on price, we will proceed with alternatives as recommended by members of the financing team and will report back to the Agency at the first available meeting. DISCUSSION' John Nuveen and Company are one of the major holders of the Agency's 1991 Tax Allocation Bonds. Each year we complete an extensive questionnaire they send us that keeps them informed of any significant events that may impact their investment. They do have an Underwriting Division independent from the Mutual Fund side that shares this information. Their underwriting staff have submitted a proposal to refinance the callable portion of the Agency's outstanding 1991 bonds. Their analysis indicates the present value savings is 8.36%, or approximately $84,000 per year for the remaining life of the bonds. This is a very strong analysis for refinancing. We typically would look seriously at a three to five percent savings. Staff has reviewed the proposal with several agents and there are no impediments to the Nuveen proposal. Further analysis indicates that savings can also be achieved by refinancing the remaining portion of the Agency's 1987 bonds, which is included in our recommendation. We have requested proposals from Public Financial Management, Inc. to act as Financial Advisors, and Quint & Thimmig, LLP to act as Bond and Disclosure Counsel. We have worked with both firms in the past and have found them to be very knowledgeable, timely and competitive in their cost. The John Nuveen Investors have indicated they are happy to work with both firms and are anxious and willing to complete this refinancing on an aggressive schedule. In anticipation of the Agency's approval we have begun to prepare documents and contacted the current Bond Insurer, MBIA. MBIA is highly motivated to insure the refunded issue. Attached is the proposed refunding schedule indicating pricing to take place during the week of June 22 and closing on Thursday, July 16. This is a very positive move for the Town Center Project Area. New legislation has placed limitations on the ability of Redevelopment Agencies to issue new debt, especially, older project areas such as Town Center. Refunding the outstanding issues within their existing maturity schedules will generate additional working capital to the project area and remain safely within the parameters of current legislation. Finance Director RAN:ts Attachments Nault:RDA Bond Proposal.Agenda.doc PUBLIC FINANC G , INC. Financial and Investment Advisors 660 Newport Center Drive, Suite 750 Newport Beach, California, 92660-6408 714-721-9422 (Fax) 714-721-9437 RECEIVEI May 13,1998 Mr. Ronald A. Nault Finance Director City of Tustin 300 Centenial Way Tustin, CA 92680 Dear Ron: Public Financial Management ("PFM"), Inc. appreciates the opportunity to serve the City as financial advisor on the upcoming financing. Per your request, we have prepared a scope of services in letter form for your review. We have outlined below the services we expect to provide as well as fees. PFM 'will assist the City throughout the transaction process, as outlined below: Prepare Presentations for the City.. PFM strongly believes that a successful financing requires the support of City staff, City departments, and other City constituencies. To that end, PFM will be available throughout the transaction' to brief and educate these critical City participants. . Assist in the Procurement of Required Financinff Services. PFM will assist the City, as needed, in identifying and procuring special financial related services that may be needed over the course of its financing activities. Services needed for many financings will include trustee, verification agent, paying agent, and printing services. o Review of Financing Structure. At the outset of an engagement, PFM will evaluate existing and expected credit market conditions, features of the credit, and the financing time schedule associated with the City's financing. These and other factors will determine the ultimate financing structure to be employed. PFM will review the fiscal consultant's report for reasonableness and ensure that the ultimate financing structure, accurately reflects the fiscal consultant's tax increment projections. . Review of all Necessary Documents. PFM will also coordinate with bond counsel and the underwriters on the preparation and review of all-bond documents and the official statement. We are experienced in making the official statement a reliable, thorough and effective legal and marketing document. PFM is also very familiar with the trends concerning additional, on-going and secondary market disclosure. We will work closely with the City to maximize the information available to the investment community while minimizing the additional work required by the City. .. .. o Coordinate Presentations to Rating Agencies and Insurers.. PFM has developed considerable experience working with the major national rating agencies and municipal bond insurers. We have developed a clear understanding of the analytical methods employed by both in their analyses of municipal credits. PFM conducts in-depth credit analyses comparable to the rating agencies' and insurers' own analyses so that both credit stren~hs and weaknesses of a project can be identified prior to the presentation of materials to rating and insurance analysts. Atlanta Boston Fort Myers Memphis New York Orlando Pittsburgh Treman Austin Cleveland Harrisburg Minneapolis Newport Beach Philadelphia San Frandsco Washin=m. on. DC Mr. Ronald A. Nault, Finance Director City of Tustin May 3,1998 Page 2 . . Assist with the Pricing of the Bonds. PFM has continuous exposure to the debt markets through our services to many clients. We bring an informed and critical perspeCtive on the pricing of our clients' bonds. PFM will analyze market conditions relative to the proposed issue and develop its own pricing scale for the proposed issue. We will then, on behalf of the City, establish an appropriate pre-pricing level for the issue one or two days prior to the sale and on the date of the sale will actively monitor the placement of bonds during the order period and negotiate adjustments to bond pricing as appropriate to ensure that the pricing of the bonds is reasonable and fair. Assist with Closing. PFM will work with all parties involved with the closing to complete required . tasks, such as printing and completing the final official statement, .preparing closing documents and arranging for the transfer and investment of funds. Optional Services PFM can provide the City with optional escrow structuring and investment services. Costs for these services will be mutually a~eeable at the time the services are performed. Costs for these services vary depending on the services required. We very much look forward to the opportunity to serve the City as its financial advisor. PFM proposes to charge a fee of $35,000, Plus actual expenses, not-to-exceed $750. PFM looks forward to working with the City to make this a successful transaction. If you have any questions about our scope of services, please feel free to contact me at (714) 721-9422. Sincerely, PUBLIC FINANCIAL MANAGEMENT, INC. Patti Gorczyca Senior Managing Consultant Public Financial Management, Inc. ("PFM") is authorized to provide services outlined above, at the fees stated, subject to termination as provided. _. By: Date: By: Date: For: The City of Tustin 85/21/1998 13:42 4157B5155§ QUINT & THIMMI6 LLP MAO~ Quint & Thhnndg LLP Atto~ey~ at Law 10o ~ S~r~, Suite 2525 San Francisco, CA 94111 Telephtms: 41~ /Y65-1550 Telecopier: 415/765-1555 ~rna~ bquirtt~/~p.com May 21, 1998 Mr. Ronald A. Nault Finance Director/City Treasurer City of Tustin 300 Ce~unial Way Tustin, CA 92680 Re: Proposed Tax Allocation Refimding Bonds Dear Ron: Thank you for asking Quint & 'Ilximmtg LIP to submit a proposal to act as bond counsel and as disclosure counsel in connection with the proposed issuance by the Tustin Community Redevelopment Agency (the "Agency") of its tax allocation refunding bonds (the "B0.nds") to refund its outstanding Town Center Area Redevelopment Project Subordi~_ te Tax Allocation Bonds, Series 1991, and its Town Center Area Redevelopment Project Tax Allocation Refunding Bonds, Series 1987. General Background. Quint & Thimmig LLP was established in March, 1997, by Brian Quint and Paul Thimmig, each a former shareholder of Jones Hall Hill & White. Mr. Quint and Mr. Thimmig are recognized in the public finance community as two of the leading bond attorneys in California and have worked as bond counsel for more than thirty-two years combined. Their individual resumls are attached as Appendix A. The firm's entire business effort is directed toward the delivery of the highest quality bond counsel, disclosure counsel and underwriter's counsel services. The firm's practice is limited exclusively to ~ area of municipal finance inc. luding taxable and tax..-~ .e~p.,t issues,for local government entities. This specialization allows the firm ~ orient i~ Era. c'ace to requirements of public finance, without the need to suit other, unretateo areas ot me business. The firm maintains one office in gan Francisco. The two partners are supported by an eight person staff. Of these, two experienced Project Managers (both of whom served as "closers" at Jones Hall Hill & White), together with a full-time paralegal assistant, aid the an pr do post os gu qu, .to flexibility and efficiency in dealing with financing partiapants greatly auevmtes the stress and strain which is typical of many bond closings. Public agencies and investment bankers have confirmed that Mr. Quint and Mr. Thimmig have been retained to provide legal services on specific matters because of the knowledge and experience that they bring to each transaction on which they work. In the complex area of Mr. Ron~ld A. Nault MaY 21, 1998 Page 2 municipal finance, the involvement of an experienced, diligent and careful lawyer is essential to the proper structuring, documentation and completion of each issue. Firm Experience. Quint & Thimmig LLP has proven that a sn~;di law firm can successfully compete with the big names in the bond counsel business. By the end of December 199~, after only nine months in operation, Quint & Thimmig LLP had acted as bond counsel or underwriter's counsel for 156 long, term bond issues (including general and spedal fiind certificates of participation and multi family housing, tax alloeation, lease revenue, district hospital revenue, nonprofit hospital revenue, Mello-Roos and Marks-Roos bonds), and 29 short-term note financings. Quint & Thimmig LLP ranked fifth among all law firms in the State of California based upon the number of long term bond issues for which it acted as bond counsel in 1997 relative to the total number of such flnane~gs completed by other firms in such capacity. All of the financings completed by Quint & Thimmig LLP were staffed by either or both Brian Quint and/or PaUl Thimmig. A full list of these issues, as well as 1998 issues to date, is available upon request. Prior Experience. During the last five years while partners at Jones Hall, Mr. Quint and Mr. 22fimmig acted as .the prindpal representatives of their prior firm for a total of over 250 long-term debt finanangs and over 230 short-term note financings. A summary'of their experience while shareholders of Jones Hall Hill & White is available upon request. As you can see by the foregoing, Mr. Quint and Mr. Thimmig are two of the most highly skilled and experienced bond attorneys in California, with extensive experience in all types of financings. While the firm serves as bond counsel for numerous transactions at any given time, it provides the highest level of service to all of its clients. Tax Support. Quint & Thimmig LLP has established a relationship with the law firm of Chapman and Cutler, a firm with nationally recognized tax expertise, to provide tax counsel services as needed for any particular financing. This relationship provides the firm with a depth of tax support that is unmatched for a firm of its size. However, since the firm's relationship with Chapman and Cutler is not exclusive, it has the ability to consult with and obtain the expert advise of other, tax counsel as may be required with regard to any particular transaction. Personnel. The attorney directly responsible for the issue would be Brian D. Quint. Paul Thimmig would be fully available as required to assist Mr. Quint. Services. As bond counsel, we would provide the following services in connection with the Bonds: · . (a) Consultation and cooperation with officials of the Agency, Agency legal counsel, finandng consultants, underwriters and other consultants, staff and employees of the Ager~, and assisting such consultants, staff and employees in the formulation of a coordinated finandal and legal Bond issuance; Co) Preparation.of all legal proceedings for the authorization, issuance and delivery of Bonds by the Agency; including preparation of the resolution authorizing the issuance of such Bonds, fixing the date, denominations, numbers, maturity and interest rates, providing the form of the Bonds and authorizing their execution, authentication and registration; certifying the terms and conditions upon which the same ar~ to be issued; providing for the setting up of 05/21/1998 13:42 4157651555 QUINT & THIHHIG LLP PAGE 84 Mr. Ronald A. Nault May 21, 1998 Page 3 special/unds for. the disposition of proceeds of the sale. of the Bonds' including creation of reserve/unds, ff any, and such other funds as may be advisable, and providing all other details in connection therewith, including special covenants and clauses for the protection of the interests of the Bond holders; preparation of the resolution selling all or any par~ of the autho.rized Bond/ssue; preparation of all documents required for Bond delivery, including cumulative cash flow deficit ce .r~i~tes required by federal tax law, and supervising such delivery; preparation oi ali other proceedings incidental to or in connection wihh the issuance, sale and delivery, of (he Bonds; (c) Application for any Internal Revenue Service or other r~,lings necessary to assure tax- exempt status of the Bonds, or as required by the purchasers of the Bonds; (d) Upon completion of proceedings to our satisfaction, providing a legal opinion approving in all regards the legali~ of all proceedings for the authorization, issuance and delivery of Bonds, and stating hhat interest on the Bonds is excluded/rom gross income for purposes of federal income taxes and is exempt from State of California personal income taxation, which opinion sh~il inure ~o the benefit of the purchasers of the Bonds; (e) Any and all legal consultation requested by the Agency concerning the Bonds at any time after delivery of the Bonds; and (0 Such other and further services as are normally performed by bond counsel in connection with the issuance of the Bonds. As disclosure counsel, we would provide the following services in connection with the Bonds: (a) Prepare the official statement (both preliminary and final) or other disclosure documents in connection with the offering of the Notes; (b) Confer and consult with the officers and administrative staff of the Agency as to matters relating to the official statement; (c) Attend all meetings of the Agency and any administrative meetings at which the official statement is to be discussed, deemed necessary by us for the proper exercise of our due diligence with respect to the offidal statement, or when specifically requested bythe Agency to attend; (d) On behalf of the Agem3r, prepare the bond purchase contract pursuant to which the Notes will be sold to the underwriter of the Notes; and (e) Subject to the completion of proceedings to our satisfaction, provide_ a letter addressed to the underwriter of-the Notes that, although we have not undertaken to determine independently or assume any responsibility for the accuracy, completeness or fairness of the statements contained in the official statement, in the course of our partidpation in the preparation of the official statement, we have been in contact with representatives of the Agency and others concerning the contents of the official statement and related matters, and based upon the foregoing, nothing has come to our attention to lead us to believe that the official statement (except for any £mancial or statistical data or forecasts, numbers, charts, estimates, projections, assumptions or expressions of opinion included therein~ and information lVlr~ Ronald A. Nault May 21, 1998 Page 4 relating to The Depository Trust Company and its book-entry system, as to which we need express no view) as of the date of the official statement or tim date of the dosing contains any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. Fees and Expenses. In general, our fees are based upon factors such as the anticipated an~ount of the work involved and the size of the financing. Our fees include all reasonable follow-up work done at the request of the client, so that the client pays only once, at dosing of the financing. We typically do not bill by the hour. Our fees are charged on a strictly contingent basis. If the financing is not dosed, we receive no compensation: Our standard fees for tax allocation bond financings are computed as follows: · 1% of the first $1,000,000 principal amount; · 1/2% of the next $5,000,000 prindpal amount; · 1/4% of the next $15,000,000 principal amount; and · 1/8% of the principal amount in excess of $21,000,000. In addition, we normally seek reimbursement for actual out-of-pocket expeaxses incurred by us for shipping, delivery and courier service, photocopying, official transcript duplication a_nd travel expenses for travel .o. utside of California, if any, but specifically exducling travel expense within the state of California; however, such reimbursable expermes would also be ~ entirely contingent upon the successful dosing. Our fee for bond COunsel services, based upon the above f~ schedule, will be $70,000, plus a~ml all out-of-pocket expenses, not to exceed $5,000. Our fee for Disclosure counsel services, if we also act as bond counsel, will be $12,500, ~clusive of all out-of-pocket expenses. We believe that such fee quotation should be extremely competitive. If, however, such fee quotation is not competitive, we would appreciate the opportunity to negotiate with the Agency so that we are not disqualitled by reason of fee alone. We are available on a continuing basis after dosing, at no additional cost to the Agency, to answer questions about the financing; however, special post-closing services (such as litigation and arbitrage administration) would be provided pursuant to a separate m~gagement agreement on terms mutually acceptable to the Agency and us. We believe that Quint & Thlmmig LLP is the best q-alified law firm tO serve as bond counsel for the Bonds. We Would provide the Agency with a depth of experience and expertise that is second to none, together with an unmatched level of service delivered in a timely and cost effective manner. We are prepared to meet any schedule set by the Agency. We are prepared to comply with all other requirements of the Agency in connection with our services .as bond counseL 85/21/1998 13:42 4157651555 QUINT & THIMMIG LLP PAGE .. ~. Ro~8 A. Nault May 21, 1998 Page 5 If you have any question or require any additional information, please call me. Very t~.y y~urs, Brian D. Quint BDO:Ida Enclosure 85/21/1998 13:42 4157651555 QUINT & THIMMIG LLP PAGE APPENDIX A RESUMES OF BRIAN D. QUINT AND PAUL J. THIMMIG ~ ..... , ,,, .~. neaim care nnance aha m casn-',.low borrowings. Prior to establishing Quint & Thimmig LLP, Mr. Quint was a partner at the law firm of Jones Hall Hill & White in San Frandseo, California, for twelve years, and before that was an attorney at Mudge Rose Guthrie Alexander & Ferdon in New York, New York. Throughout his legal career, Mr. Quint has practiced exclusively in the area of municipal finance. He is recognized in the public finance community as one of the leading bond attorneys in California. Mr. Quint attended Clark University where he received his A.B. degree in 1976 and New York Law School where he received hi~ J.D, degree in 1980, He was admitted to the New York Bar in 1981 and the C~li~ornia Bar in 1985. He is a member of the American Bar Association and the National Association ot Bond Lawyers. Paul J. Thlmmig has over 16 years of murdcipal bond experience in all types of municipal finance, with a focus on housing, redevelopment and land secured ~tancings. Mr. Thimmig also has extensive experience as counsel to governmental entities with respect to troubled bond issues. Prior to establishing Quint & Thimmig LLP, Mr. 'Ilximmtg was a partner at the law firm of Jones Hall Hill & White in San Francisco, California for twelve years, and before that was an attorney at O'Melveny & Myers in Los Angeles, California. Throughout his legal career, Mr. Thimmig has practiced almost exdusively in the area of municipal finance. He is recognized Irt the public finance community.as one of the leading bond attorneys in oall/tornia. lV~. Thita~ig attended Marquette University where he received his B,S.B.A. degree in 1977 and the University oI Southern California where he received his J.D. degree in 1981. He was admitted to the California Bar in 1981. He is a member of the American Bar Association and the National Association of Bond Lawyers. Mr. Thimmig is also a Certified Public Accountant. 05/22/96 FRI 10:54 FAX 312 917 7996 JOHN NUVEEN ~UUl TUSTIN COMMUNITY REDEVELOPMENT AGENCY Series 1998 Refunding Bonds May S M TW T F S I 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 Date Transaction Timetable Matter June SM TW T F S 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17'18 19 20 21 22 23 24 25 26 27 28 29 30 Party Week of May 18 Send Credit Package to Insurers Monday, May 26 Agenda Package due date All required documentation due to City Monday, June 1 Distribute first draf~ of Bond Documents and Preliminary Official Statement Receive Insurance Bids Friday, June 5 Comments on first draft of Bond Documents and Official Statement Due Week of June 8 Distribute second drai~ of Bond Documents and Preliminax), Official Statement Monday, June 8 Agenda package due date All required documentation due to City Monday, June 15 Board Approval Tuesday, June 16 Print and Mail Preliminary Official Statement Week of June'22 Pricing, Underwriting and Commitmem Wednesday, July 15 Pre Closing Thursday, July 16 Closing BC- PFM., YN- City of Tustin Quint & Thimmig L.L.P Public Financial Management John Nuveen & Co. JN/PFM PFM BC JN/PFM. All BC City/PFM All BC JN/PFM All All