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HomeMy WebLinkAboutPre-approved List of Underwriters-Placing Agents - Debt Issuance-RfundingCITY OF PALM DESERT/SUCCESSOR AGENCY TO THE PALM DESERT REDEVELOPMENT AGENCY/PALM DESERT HOUSING AUTHORITY/ PALM DESERT FINANCING AUTHORITY MEETING DATE: SUBMITTED BY: REQUEST: Recommendation STAFF REPORT September 27, 2018 Veronica Tapia, Senior Management Analyst APPROVE THE RECOMMENDED FIRMS TO BE PLACED ON A PRE -APPROVED LIST OF UNDERWRITERS/PLACING AGENTS FOR POTENTIAL FUTURE DEBT ISSUANCE OR REFUNDINGS By minute motion that the City Council, Successor Agency to the Palm Desert Redevelopment Agency (SARDA) Board, Housing Authority Board, and Financing Authority Board approve the recommended firms to be included in a pre -approved list to provide underwriting and placement agent services for future debt issuance or refundings. Strateaic Plan Approval of the pre -approved Underwriters/Placing Agents list (List) will make the process of debt issuance more efficient (and thus potentially save time and cost) in the future, if (and when) the Council or Boards decide it appropriate to issue debt to finance projects in furtherance of one or more of the goals listed in the strategic plan or to refund existing debt. This action supports the City's objectives under strategic plan as a whole. Executive Summary Palm Desert last approved a list of eligible investment banking firms to provide underwriter or placement agent services in 2005. The 2005 list is outdated as many of the firms on the 2005 list have either changed their priorities or market focus, merged, or no longer exist. This item will go before the Audit, Investment and Finance Committee on September 25th An oral report on the Committee's action will be provided at the Council Meeting. Staff recommends approval of this item to replace the 2005 list. Background The economic downturn which started in the mid -to -late 2000's had ripple effects for communities throughout California, including Palm Desert. The effects were exacerbated by the dissolution of redevelopment agencies in 2011. The issuance of debt for new projects diminished significantly throughout California, as communities tried to find a way to recover. STAFF REPORT APPROVAL OF LIST OF UNDERWRITERS/PLACEMENT AGENTS SEPTEMBER 27, 2018 PAGE 2 As a result of the downturn, property values dropped, delaying many new construction plans and the development of supporting public infrastructure. Through this difficult time, the City of Palm Desert sought to balance, on the one hand, managing its debt portfolio and, on the other hand, capitalizing on opportunities to support economic development and the community with infrastructure projects in the City. By 2017, while the effects of the redevelopment dissolution continued, the economic recovery was making significant progress. Palm Desert took on the challenge of refunding over $250 million of SARDA debt in order to save the taxing entities (including the City) money over the lifetime of most of the SARDA's remaining bonds. Issuing or refunding debt, as the case may be, is never an easy task. The successful completion of a bond issuance transaction requires hours of scrutiny and critical thinking by all parties (including staff and other financing professionals) to ensure the best outcome. Among the challenges of the 2017 SARDA refunding was the selection of an underwriter for the bond refunding. The eligible investment banking firms list approved by the City and the redevelopment agency in 2005 was outdated in light of the changes in the municipal financing world during the interim years. Ultimately, the firm of Stifel, Nicolaus & Company, Incorporated, was chosen and the refunding was completed successfully. Now with the housing market and economy in a more stable position, there may be some opportunities to issue new and/or refund existing debt when the City Council (or Board) decides it appropriate to do so. In anticipation of these opportunities, on May 4, 2018 staff issued a Request for Qualifications (RFQ) to firms interested in being pre -approved for future Underwriter/Placing Agent services. The RFQ was published, as well as shared with firms and/or underwriters that were part of the prior approved list. On June 4, 2018, the City Clerk received six (6) Statements of Qualifications (SOQ). The following firms submitted SOQs: Firm Piper Jaffray Ziegler Stifel Hilltop UBS Ramirez Lead Office Laguna Beach, CA Altadena, CA San Francisco, CA Cardiff, CA Los Angeles, CA Los Angeles, CA *While the firm has not lad direct experience with Palm Desert debt, the lead s aff person has participated with a prior listed firm. Underwriter Services Yes Yes Yes Yes Yes Yes Placement Agent Service Yes Yes Yes Yes No Yes Prior PD Bond Issue No Staff* Yes Staff* No Staff* Each firm submitted complete responses meeting the minimum qualifications included in the RFQ. A review panel comprised of the Municipal Advisor, Legal Counsel, Director of Finance, and staff reviewed the six SOQ's. The review panel evaluated the SOQ's based upon a number of factors, including: • Experience of the firm • Experience of its assigned personnel G vdaNcronica Tapia Word Files Staff Reperts,SR UNDERWRITER PLACING AGENT POOL 8-23-18 rev jm 8-13-18 Mac STAFF REPORT APPROVAL OF LIST OF UNDERWRITERS/PLACEMENT AGENTS SEPTEMBER 27, 2018 PAGE 3 • Professionalism of firm and assigned personnel • Service to the issuer • Approach • Cost • Other factors considered to be important to the financing goals of Palm Desert. The review panel considered the strengths and weaknesses of each firm in terms of how they matched up with Palm Desert's needs. Each firm demonstrated individual merits based on the size and/or type of debt to be issued. The review panel concluded that all firms were capable at varying levels, and should be included in the pre -approved list of qualified firms as options to be utilized for any potential future debt issuance. Therefore, staff recommends that the City Council and the Boards approve the recommended firms to be included in the pre -approved list of Underwriters/Placement Agents. Approval will only provide a list of qualified firms to select from in the event the City Council/Boards desire to issue debt in the future. Selection, based on the same criteria of the pre -approval and the needs of the City, will be conducted at the time of financing based on the information provided in the SOQ's as well as any information requested relative to the proposed projects to be financed. Fiscal Analysis Approval of the list does not incur any immediate cost. If a need for financing is identified, the firm selected to handle the transaction will be paid through the cost of issuance from proceeds. Ultimately those costs will be borne by the source of funds identified for repayment of the debt. LEGAL REVIEW DEPT. REVIEW FINANCIAL REVIEW CITY MANAGER N /6( k Robert W. �la t Moore t Moore Hargreaves Director of Finance Director of Finance City Attorney CONTENTS: RFQ for Underwriter/Placement Agent Services Lauri Aylaian City Manager G irda Veronica Tape \kind Files StatrRepons\SR LNDCR\VRI Ih.R I'1 ACING:\GGVT P001. 11-2t_I8 re, Im s-I -IS doc CITY OF PALM DESERT FINANCE DEPARTMENT REQUEST FOR QUALIFICATIONS FOR UNDERWRITING AND PLACEMENT AGENT SERVICES G \RDA\Veronica Tapia\Word Files\Bond Issues\Underwnter RFO 2018\Underwater and Placement Agent RFQ 3-15-18 doc 1 NOTICE REQUEST FOR QUALIFICATIONS ("RFQ") FOR UNDERWRITING AND PLACEMENT AGENT SERVICES PUBLIC NOTICE IS HEREBY GIVEN that the City will receive sealed qualification statements for: UNDERWRITING AND PLACEMENT AGENT SERVICES. The City is interested in establishing a pool of firms to provide underwriting and placement agent services to the City and its related public entities over the next five years. It is the City's intent that all firms obtain the full content of the RFQ and any addenda via the City's website located at www.cityofpalmdesert.org. Statement of Qualifications must be submitted in accordance with the instructions. An email must be sent to Veronica Tapia at vtapiacityofpalmdesert.orq acknowledging receipt of the RFQ in order for the City to add the firm to its notification list. Please include the Contact Person, the name of the firm, address, phone number, and e-mail address. City reserves the right to cancel this RFQ or to reject any and all responses and Qualification Statements if it determines, in its sole discretion, that such cancellation or rejection is in the best interest of City. Firms interested in responding to this RFQ are welcome to submit specific questions seeking clarification of the RFQ requirements. Questions shall be submitted in writing and emailed to: vtapia( citvofpalmdesert.ora , not later than 5:00 p.m., Pacific, on May 21, 2018. Questions may also be submitted to the City's municipal advisor kdieker@delrioadvisors.com. Respondents may e-mail their Qualification Statements by May 25, 2018 by 5:00 P.M. for consideration. Upon receipt of any e-mailed qualifications, Respondents will have two business days to deliver the required hard copies to Palm Desert. Postmarks will not be accepted. City reserves the right to waive minor irregularities and omissions in the information contained in a Qualification Statement submittal and to make all final determinations. City may refuse to accept any submission where the requested information and materials are not provided. There is no appeal from City's decision not to prequalify a firm due to an incomplete or late application. The RFQ, its completion and submission by the firm, and its use by City, shall not give rise to any liability on the part of City to the firm or any third party or person. This is a request for Statement of Qualification for inclusion in a pool pertaining to possible future City financings. This is not a request for proposal for any definitive pending transaction. No guarantees are made or implied that any services are to be rendered, either in part or whole. The firm accepts all risk and cost associated with the completion of the RFQ without financial guarantee. Sealed qualification statements will be accepted at the City Clerk's office, Palm Desert City Hall, 73510 Fred Waring Drive, Palm Desert, CA, until 2:00 p.m., Monday, June 4, 2018, at which time they will be opened and given to the City's Finance Department to evaluate each of the qualification statements. Dated this 4 th day of May, 2018 RACHELLE D. KLASSEN, CITY CLERK CITY OF PALM DESERT, CALIFORNIA 73-510 Fred Waring Drive Palm Desert, California 92260 (760) 346-0611 CITY OF PALM DESERT REQUEST FOR QUALIFICATIONS FOR UNDERWRITING AND PLACEMENT AGENT SERVICES The City of Palm Desert is interested in establishing a pool of firms to provide underwriting and placement agent services to the City and its related public entities over the next five years. If your firm is interested in responding to this Request for Qualifications (RFQ), please review the RFQ and fully respond to each question and request for information. Please pay particular attention to the qualifications submission and presentation requirements listed below: 1. RFQ REQUIREMENTS AND QUESTIONS A. General Minimum Qualification Reauirements Firms must have a minimum of five years of satisfactory experience in providing underwriting and placement agent services to California entities and have at least one office located in California. If the firm has been in business for less than five years, the experience of its principals may be used to meet this requirement. Please provide detailed information regarding the experience of the firm and the professional staff to be assigned to Palm Desert. B. General Scope of Services From time to time, Palm Desert may require underwriting or placement agent services from firms who are members of the pool established as a result of this RFQ. The members may be selected for a particular transaction on any basis. Members may be asked to submit specific qualifications and a fee proposal for a specific transaction. All fees will be contingent upon the successful closing of the transaction. Firms for individual transactions may be selected on a rotating basis. Any firm selected may be called upon to: Provide customary underwriter or placement agent services in connection with a transaction; including preparation and implementation of rating agency and insurance company presentations or direct placement term sheets. ii. Review and comment upon transaction documents. iii. Review and comment upon the structure, alternative, and feasibility of any proposed transaction. G 1RDA\Veronica Tapia\Word Fdes\Bond issues\ Underwriter RFQ 2018\Underwriter and Placement Agent RFQ 3-15-18 doc iv. Provide analysis regarding the size and timing of transactions and issuance of additional obligations, redemption prior to maturity and call premiums. v. Participate in meetings with and presentations to the City Council or governing board, staff, consultants, rating agencies, and insurance companies. vi. Provide other underwriting or placement agent services upon request. C. Submission Questions i. In a table, list the last three years of California debt experience (new money and refunding) broken out by Lease Revenue, Enterprise Revenue, Installment Sales Revenue, Mello Roos, Assessment District, Successor Agency, and General Obligation. Include the agency name, par amount, closing date, title of issue, and rating. For each transaction, indicate whether your firm acted as senior manager, co- manager or placement agent. ii. List all Palm Desert transactions in which your firm has participated. iii. Describe your firm's technical capability and what software your firm utilizes in structuring bond issues. iv. Describe your firm's capabilities and strategies to market and sell Palm Desert bonds and other obligations. Include a discussion of your firm's retail and institutional distribution capabilities in California and a description of the number of personnel in the sales force, both nationally and in California. v. Describe your firm's capability and describe the process to market a direct placement transaction. vi. Name one to three financings that the firm, and preferably your key personnel, has been involved in during the last three years that demonstrate the firm's creativity or those which you believe are noteworthy. What were some of the challenges you encountered and how did you overcome them? vii. Describe how your firm distinguishes itself from other firms. List any issues or challenges you see concerning the G \RDA\Veronica Tapia\Word Fdes\Bond Issues\Underwnter RFQ 2018\Underwnter and placement Agent RFQ 3-15-18 doc 3 marketing and sales of Palm Desert bonds or other obligations. viii. Describe the experience, qualification and other vital information, including relevant experience on previous similar financings, of all key individuals who may be assigned to a transaction. Key personnel include all professional staff that will perform work and/or services. Include the functions to be performed by the key individuals. ix. What is your maximum underwriting liability pursuant to SEC guidelines? Please explain how you derived this figure. During the last three years, describe any situation where you underwrote unsold bonds for a client, including the amount you underwrote and the client. x. Describe your secondary market activities. xi. Describe any other experience in structures other than fixed rate financings and any other structures you wish to discuss. xii. Please disclose whether the firm, or any of its professional staff within the last five years been convicted of any crime or offense arising directly or indirectly from the conduct of the firm's business, or otherwise involving financial misconduct or fraud. If so, please describe any such convictions and surrounding circumstances in detail. xiii. Please disclose whether the firm, or any of its professional staff have ever been indicted or otherwise charged in connection with any criminal matter arising directly or indirectly from the conduct or the firm's business or otherwise involving financial misconduct or fraud, which is still pending. If so, please describe any such indictments or charges and surrounding circumstances in detail. Please disclose whether the firm has been sued by an issuer and disclose the outcome of such litigation. xiv. Please indicate your firm's gross spread and expenses for the following ranges and credit types (non -rated, rated, and insured): Size Range Less than $5 million $5 million to $10 million $10 million to $25 million $25 million to $50 million Over $50 million G \RDA\Veronica Tapia\Word Files\Bond Issues\Underwriter RFQ 2018\Underwriter and Placement Agent RFQ 3-15-18 doc 4 Please indicate the same for your firm's fees and expenses as placement agent. Please also describe any adjustments to fees and expenses as underwriter or placement agent depending on type (ie. General Obligation, Lease Revenue, Installment Sale, Enterprise Revenue, Mello Roos Community Facilities District, Assessment District, Successor Agency, short term borrowing, etc). Please note that for specific transactions, Palm Desert may solicit a detailed cost proposal from a number of pool members. The range of compensation asked for at this time is to provide general information to assist in selecting firms to participate in the pool. xv. Supplemental Information - Any additional information your firm wishes to include. Please provide the following specifics as an attachment, as they relate to your firm. Firm Description (Please provide the following): a) Brief history; b) Headquarters location; c) Ownership structure of the firm; d) Briefly list all significant lines of business beside public finance and municipal securities, in which the firm is active; and e) Please state your firm's (or parent company's) long term and short-term ratings as of January 1, 2017 and 2018. Business in California (Please provide the following): • How many full-time employees does the firm currently employ nationwide and in California? Please provide a number for the entity applying to the pool and a separate number for any related entities (if applicable). • Provide a table showing the total number and breakdown of professionals dedicated exclusively to public finance (i.e., public finance investment banking, underwriting, placement agent, remarketing, sales, and trading) working in both California and outside of California. G \ROA\Veronica Tapia \Word Files\Bond Issues\Underwnter RFQ 2018\Underwnter and Placement Agent RFQ 3-15-18 doc 5 • How many offices does your firm have in California? Municipal Bond Department (Please provide the following): • Description of the municipal bond department's position and level of importance in the firm. • Has the firm's municipal bond department experienced any significant staffing changes over the past five years? If so, please briefly describe. Capital Commitment (Please provide the following): • Description of the firm's capital commitment to its public finance activities. • Average daily inventory of municipal bonds (tax- exempt fixed rate only) for 2016 and 2017. Retail (Please provide the following): • Please provide the dollar amount of all California (State and local) municipal securities currently held in retail accounts at your firm. xvi. Please submit five references from other California public agencies for which underwriter or placement agent services have been performed within the last three years. 2. QUALIFICATIONS A. General Firms are invited to submit a response (a Statement of Qualifications) for consideration. Submission of a response indicates that your firm has read and understands this entire RFQ and all of its attachments and all concerns regarding this RFQ have been satisfied. ii. Qualifications must be submitted in the format described below. Qualifications are to be prepared in such a way as to provide a straightforward, concise description of capabilities to respond to this RFQ. Expensive bindings, colored displays or promotional materials, are neither necessary nor desired. Emphasis should be on conformance to the RFQ questions and instructions, responsiveness, and completeness and clarity of content. iii. Responses may not be considered if they are conditional or incomplete. G \RDA\Veronica Tapa\Word Fdes\Bond Issues\Underwater RFO 2018\Underwriter and Placement Agent RFC! 3-15-18 doc 6 iv. All materials submitted become the property of Palm Desert. All responses received are subject to the "California Public Records Act". v. Firms selected as members of the pool are required to immediately notify Palm Desert regarding any changes to the firm's ability to meet the minimum qualifications, the disclosure information submitted in the firm's response to this RFQ, and any contact information changes. If a firm fails to notify Palm Desert within 30- days of a change that necessitates notification, the firm may be suspended from the pool, be ineligible for appointments, and be required to request reinstatement. Palm Desert reserves the right to request additional information from time to time. B. Qualification Statement Presentation All responses must be submitted on 8 1/2" x 11" paper, typed in 12 pt. font, double -sided, with normal (1-inch) margins, single-spaced, and limited to 15 pages of writing (including the cover letter, any attachments and/or exhibits). Each page, including attachments and exhibits, must be clearly and consecutively numbered at the bottom center of the page. Failure to provide all requested information or deviation from the required format may result in disqualification. A cover letter must be included and signed by a person authorized to commit the firm to the terms and conditions of the response. One (1) marked as RFQ original and four (4) copies (total of 5 hard copies) plus one (1) electronic version of the complete RFQ must be received by the deadline below for receipt of qualification statements. The original and all copies must be in a sealed envelope or container and submitted to Palm Desert: G \RDA\Veronica Tapia\Word Files\Bond Issues\Underwnter RFQ 2018\Underwriter and Placement Agent RFQ 3-15-18 doc 7 Due Date: June 4, 2018 at 2:OOPM Place: City of Palm Desert Attn: Veronica Tapia Title: Senior Management Analyst 73-510 Fred Waring Dr. Palm Desert, CA 92260 (760) 346-0611 x. 344 Phone (760) 341-6372 Fax vtapiacitvofpalmdesert.orq Questions regarding the RFQ may be addressed via email, phone or to the staff or the City's Municipal Advisor no later than 5:OOPM on May 21, 2018: Del Rio Advisors, LLC Kenneth L. Dieker, Principal 1325 Country Club Drive Modesto, CA 95356 (209) 543-8704 Phone (209) 554-0427 Fax kdieker(a�delrioadvisors.com Hand -carried qualification statements may be delivered to the City address above ONLY between the hours of 8:00 a.m. to 5:00 p.m., Monday through Friday, excluding holidays observed by the City of Palm Desert. Respondents are responsible for informing any commercial delivery service, if used, of all delivery requirements, and for ensuring that the address information appears on the outer wrapper or envelope used by such service. Respondents are solely responsible for ensuring that the responses are delivered in a timely manner. Palm Desert is not responsible for any incorrect or late deliveries. Respondents may e-mail their qualifications by May 25, 2018 by 5:00 P.M. for consideration. Upon receipt of any e-mailed qualifications, Respondents will have two business days to deliver the required hard copies to Palm Desert. Postmarks will not be accepted. 3. EVALUATION / SELECTION PROCESS A. Introduction Following the opening of the qualification statement packages, the qualification statements will be evaluated. G \ROA\Veronica Tapia\Word Files\Bond Issues\Underwnter RFQ 2018\Underwater and Placement Agent RFC) 3-15-18 doc 8 B. Qualification Statement Evaluation i. Initial Review If a qualification statement does not respond adequately to this RFQ, it may be rejected and will not be further evaluated. ii. Technical Review Responses to this RFQ will be evaluated based upon a number of factors, including: experience of the firm, experience of its assigned personnel, professionalism of firm and assigned personnel, service ethic, approach, cost, and other factors considered to be important to the financing goals of Palm Desert. Upon completion of the initial and technical evaluation certain respondents may be requested to provide oral presentation(s). C. Placement on Pool List Following the evaluation of the responses, the firms recommended for admittance to the Pool will be submitted to the City Council for its approval. G \RDA\Veronica Tapia\Word Files\Bond Issues\Underwriter RFC) 2018\Underwriter and Placement Agent RFQ 3-15-18 doc 9