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HomeMy WebLinkAbout211-04 RESOLUTIONRESOLUTION NO. 211-04 A RESOLUTION ACCEPTING CREWS AND ASSOCIATES AS BOND UNDERWRITER FOR ANY TAX INCREMENT FINANCING BONDS ISSUED THROUGH DECEMBER 31, 2005 WHEREAS, after soliciting requests for proposals, the City of Fayetteville Debt Committee selected Crews and Associates in March 2003 as a bond underwriter if said proposed bond was within their expertise; and WHEREAS, Crews and Associates has substantial state-wide experience in TIF bonds authorized by the recently passed Amendment 78 and state statutes. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF FAYETTEVILLE, ARKANSAS: Section 1: That the City Council of the City of Fayetteville, Arkansas hereby approves the selection of and accepts Crews and Associates as bond underwriter for any tax increment financing bonds issued through December 31, 2005. PASSED and APPROVED this 215t day of December, 2004. ATTEST: By: zusizsd SONDRA SMITH, 1ty Clerk By APPROILED. DAN COODY, Mayor NAME OF FILE: CROSS REFERENCE: Item # Date • Resolution No. 211-04 Document e 1 12/02/04 memo to mayor & City Council 2 draft resolution 3 copy of Crews & Associates letter 4 copy of Investment Banking Fee proposal 5 Staff Review Form 6 memo to Steve Davis 7 8 9 10 11 12 13 14 15 16 NOTES: FAYETTEfILLE THE CITY OF FAYETTEVILLE. ARKANSAS DEPARTMENTAL CORRESPONDENCE • ,e6S /Z/zl�o¢ i/ &t&s w 4,556C Miry &i s undirwriter TO: Mayor Coody and Fayetteville City Council FROM: Stephen Davis, Finance & [menial Services Directot7 DATE: DL Lc nbcr 2, 2004 SUBJECT: Bond Underwriter Services — Highway 71 East Square Redevelopment District Recommendation Staff recommends approval (tithe Bond Underwriter agccmcnt with Crews and Associates for the City of Fayetteville, Arkansas Highway 71 East Square Redevelopment District — Series 2004. Background On November 7, 2002 the City of Fayetteville advertised and solicited requests for qualifications (RFQ) for Bond Counsel Services and solicited requests for proposals (RFP) for Underwriter Services and Leasing Services. The City of Fayetteville Debt Committee (established by Resolution 173-02) received the responses to the request for qualifications and request for proposals in January, 2003. The Debt Committee selected Gordon Wilboum of Kutak Rock as Bond Counsel, Dennis Bunt of Stephens, Inc and Crews and Associates as Bond Undenvriter(s) and Bank of America (BOA) Leasing for leasing services. Agreements with each ofthesc service providers have now been developed and submitted to City Council for consideration and approval. This agreement represents the last ofthc series and is presented at this time because the Highway 71 East Square Redevelopment District was fomicd earlier this year and is now ready to issue the first series of bonds to fund improvements identified in the project plan. Discussion Fhe selection committee met, during March 2003, and selected Crews and Associates as an underwriter thr bond issues that the City envisioned over the next few years Crews and Associates, in the opinion ofthc selection committee, were selected for their experience in developing financing packages for TIF districts around the country. Budget Impact Crews and Associates fees will be paid from bond proceeds. The Highway 71 East Square Redevelopment District bonds will be repaid from mil lage tax rwun t. growth on property located within the redevelopment district. 1:\Debt Financing\TIfEast Squ; re_BonJ Underwriter Services Council Memo.doc • • RESOLUTION NO. A RESOLUTION ACCEPTING CREWS AND ASSOCIATES AS BOND UNDERWRITER FOR ANY TAX INCREMENT FINANCING BONDS ISSUED THROUGH DECEMBER 31, 2005 WHEREAS, after soliciting requests for proposals, the City of Fayetteville Debt Committee selected Crews and Associates in March 2003 as a bond underwriter if said proposed bond was within their expertise; and WHEREAS, Crews and Associates has substantial state-wide experience in TIF bonds authorized by the recently passed Amendment 78 and state statutes. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF FAYETTEVILLE, ARKANSAS: Section 1: That the City Council of the City of Fayetteville, Arkansas hereby approves the selection of and accepts Crews and Associates as bond underwriter for any tax increment financing bonds issued through December 31, 2005. PASSED and APPROVED this 215' day of December, 2004. ATTEST: By: SONDRA SMITH, City Clerk APPROVED: By: O DAN COODY, Mayor • • fri Crews&Associates Voinun 1 P•.:: r:ry Ganacrp 1-tRELY6.-8 A660CIATE6imINc='T''. }fr -r2D00 llnlon,Nefonai pIazaahtTh) x`124+Wert Capitol Avaniia,: _' a; c j j W e l It e e k,,- A R -.722 01 w47 LOCAL (501)807=2000''-'3_.,. t TOLE FREE (600)766;2y00; 0 t, E Member SIPC , December 6, 2004 Mr. Steve Davis Finance and Internal Services Director 113 West Mountain Street Fayetteville, Ar 72701 Re: Fayetteville Mountain Inn TIF Project Dear Steve, As per our recent conversation regarding our services as Financial Advisor / Underwriter for the above referenced project, Crews & Associates was retained through the City's RFP process in 2003 to being qualified to act in this capacity for any and all City of Fayetteville financing projects. Having been retained in the same capacity for the three other major TIF projects currently in Arkansas, Rogers, Jonesboro and North Little Rock is a direct result of our experience and abilities to deliver the most effective financing package available. As we discussed early in the process, and as 1 confirmed to the Council last week, Crews & Associates is not charging an advisory fee in assisting in implementing this TIF project. Crews & Associates would act as undenvriter for the TIF bonds only when we all agree as to the viability and fiscal effectiveness of the project. If you have any questions, please feel free to call me. Respectfully submitted Robert D. Wright III, Vice Preside Crews & Associates, Inc. INVESTMENT BANKING FEE PROPOSAL The City of Fayetteville Management Fee $ 2.13 / $1000 Average Takedown $ 4.65 / $1000 Underwriters' Expenses $ 1.12 / $1000 r TOTAL — UNDERWRITER SPREAD $ 7.90/ $1000 Gross Spread ExperlisesBreakdovnirolina own Clearance Computer Travel Syndication Advertising U/W Printing Transaction Fees (MSRB, PSA, etc.) Freight & Communications Closing Expenses Underwriter's Counsel Cost* Other (please specify) ((Mmunum not.to. be exceeded) » .' $ 0.050 / $1000 $ 0.000 /$1000 $ 0.000 /$1000 $ 0.025 / $1000 $ 0.000 / $1000 $ 0.000 / $1000 $ 0.100/$1000 $ 0.000 / $1000 $ 0.045 / $1000 $ 0.900 / $1000 $ 0.000 / $1000 TOTAL $ 1.120 / $1000 *Crews & Associates will work with the selected Bond Counsel on a transaction by transaction basis to determine the level of participation required, if any, by a separate Underwriter's Counsel. M a result, this fee will be negotiated per transaction. *This fee proposal assumes an Insured, AAA rated financing and is subject to negotiation. Ciews&Associates NEST 4erOa Fru Ss:u" y Bancorp • Services - ----- /n the course of our engagement, Crews & Associates and Arvest will work closely with the with the officials and all members of the financing team to ensure that all aspects of the proposed financing are handled efficiently. Our bankers are prepared to coordinate all aspects of the financing in a manner that accomplishes the goals of the organization under the most efficient terms and conditions. We will initiate this process by listening to your goals and then developing a plan. To facilitate a successful financing, the finance team will: ► Provide advice on market conditions and timing of sale Since our sales force and our bankers interact with investors and issuers on a daily basis, part of our engagement will include advising members of the financing team on timing issues that could adversely or favorably impact the sale of the bonds. Our recommendations as to a desirable date of sale will be based on various market indicators, including (a) the status of recently sold bond issues, (b) bond issues coming to market (particular attention will be directed toward similar issues), and (c) general conditions of the capital markets. ► Assist in determining the term and amortization schedule, call provisions, and other factors which are relevant to marketing the bonds. This shall include preparation of maturity schedules and debt service projections, which represent effective marketing structures for the company's bonds Because investor demand can and does change on a daily basis, only an active market participant in both the new and secondary markets can effectively evaluate and recommend the optimal combinations of coupons, call features, discounts, premiums, serial and term bonds that will produce the lowest borrowing cost. As an active market participant in both new issues and secondary market trading, we can effectively evaluate and make recommendations regarding the structure that will optimize investor demand, resulting in the lowest possible borrowing cost. In the course of our engagement, we will evaluate all relevant data including the general conditions of the capital markets to examine the feasibility of all factors that could serve to enhance the marketability of bonds. We will utilize our advanced computer hardware and software and our daily feedback from investors to model various alternatives to assist in identifying the structure that provides the greatest cost -benefits. ► Present and evaluate alternate and/ or innovative financing mechanisms While there are several ways to address the refunding characteristics, based on our preliminary analysis and discussions with Bond Counsel, there are some critical IRS tax issues that will need to be determined — particularly with reference to whether this transaction will be viewed as a refunding or an acquisition. These interpretations will have a significant impact on the structure of the refunding escrow and the structure of the bond issue including whether or not all of the bonds can be initially issued as tax-exempt. ► Work to obtain the best possible bond rating including attendance at any presentation to the rating agencies or insurers. We will evaluate the feasibility of bond insurance and other credit enhancement alternatives for the purpose of determining the option that provides the most efficient financing altemative. Our bankers arc experienced in this process and have assisted numerous issuers in navigating this process as well as calculating and understanding the cost benefit of these options. ► Coordinate the preparation of the Preliminary Official Statement and the Final Official Statement and other related documents and materials with selected bond counsel and school officials. Our bankers take an active role in the coordination of the various legal and marketing documents, including the Preliminary Official Statement and the Official Statement. This coordination between all members of the financing team and the investor community provides assistance in expediting the pricing of the bonds and the closing. This allows us to secure commitments while market conditions are considered advantageous. Crews&Associates Meads fw4 Stain, Bancor 'WEST • • • - --- Services cont... ► Calculate the cost/benefit of credit enhancement on the issue and to provide advice for the selection of a bond insurance firm should insurance be desirable. We would expect to solicit competitive bids regarding the cost of bond insurance including the potential benefit of marketing the bonds with an underlying rating. Part of the process will include the preparation of cost benefit reports as well as the evaluation of certain other restrictive covenants that may be imposed by potential insurance providers. ► Ability to arrange for selection of trustee/paying agent/registrar services for the bond issue if required. Crews&Associates Ms,t Fool Security Bancorp 'WEST 1 1 1 1 1 1 1 1 1 1 1 • • Marketing Plan With more than 90 salespersons specializing in the distribution of municipal bonds, particularly those of Arkansas municipalities, Crews & Associates has the balanced distribution network to provide the lowest cost of borrowing. Likewise, Arvest Asset Management is an active participant in the fixed income investment market. Since they have experience in purchasing these high quality securities in volume, Arvest has distribution capabilities that offer the issuer competitive prices. We will utilize our network of clients in order to access retail and institutional clients. We can prioritize our marketing efforts in order to respectively serve local, statewide and regional/national investors. It is important for the City to have an underwriter with a balanced distribution of retail and institutional clients. This balance creates a more beneficial marketing approach, especially in times of market volatility. Retail Distribution Based on our strong Arkansas -based pool of clientele, we expect to generate strong retail demand. Due to our local presence and established investor relationships, Crews & Associates can maximize retail distribution to investors. Typically, these investors arc not as interest -rate sensitive as other investor groups. Consequently, they are often willing to accept lower interest rates. We believe that by targeting this investor group first, the City will enjoy lower interest rates. Institutional Distribution Our network and trading relationships with small and medium size institutional investors will benefit us significantly in achieving the lowest possible borrowing cost. Companies like Crcws & Associates and Arvest that utilize retail distribution have an established record of building local relationships; a natural extension of this marketing is the group of small to medium size institutional investors that is often missed by firms without a strong retail distribution network. This mid -market distribution strategy, coupled with our retail network, should ultimately achieve the most aggressive cost of borrowing. In addition to our strong retail, mid -market and large institutional clients, Crews & Associates will capitalize on its affiliate relationship with financial institutions owned by First Security Bancorp. Arvest will also capitalize on.its experience as a financial institution to the issuer. Each bank has a strong community presence; thus, we expect to capitalize on its community investment objectives; this will further the ability to obtain aggressive interest rates. We build our approach to marketing upon a proven strategy of extensive pre -marketing to selected investors; this generates maximum demand and valuable feedback. We will utilize, among other items, this feedback, the status of recently sold bond issues, and the general conditions of the capital markets to revise and implement a suitable strategy. The implementation of the marketing plan is designed to increase investor acceptance and demand, thus lowering the overall borrowing cost to the City. • Crews8Associates Mints hist Scurry Baro, AWEST 1 1 1 1 1 1 1 1 1 1 1 1 1 S 1 1 1 • Experience Crows & Associates, a wholly owned subsidiary of First Security Bancorp, is an Arkansas -based, full- service investment banking firm founded in 1979. We specialize in fixed-income products that include municipal and corporate bonds, lease financings, government agency bonds, U.S. Treasury bonds, mortgage- backed securities and mutual funds. In the past 12 months we have traded more than $6.0 billion of these types of securities. As shown in the chart below, our organization includes more than 140 professionals. Public Finance/Municipal Management Retail/Institutional Sales Operations/Administrative Underwriting If ntplcre c> ,; (Some employees overlap into more than one category. Some categories are omitted Total number of employees 140+ of which S% are minority and 31% are female) Our parent company, First Security Bancorp, is a $1.4 billion Arkansas -based bank holding company headquartered in Searcy. Our partnership with First Security Bancorp enhances our company's management team, our access to capital, and our access to the highest technology. This alliance provides Crews & Associates with the resources to be an even more valuable funding source for our clients. Crews & Associates, Inc. and First Security Bancorp are committed to serving the communities of Arkansas. Through Crews' Little Rock headquarters, the Public Finance Group's primary focus is to provide a funding source for municipal borrowers including cities and counties of all sizes. Since its initial bank charter in 1932, First Security Bancorp now serves the state through more than 36 bank locations throughout Arkansas. The chart below details our organizational structure. 1 HrstSecurity Bancorp • Crews&Associates 1 Fust Secu'ty Bancorp HrstSecurity FirstSecurity Venpals Capital teasing • Crews&Associates Mats Frosi Scanty Bent= • FirstSecurity Community pi Bank Farmers ma Bank ly (1p) PEOPLES BANK & TRUST COMPANY INVEST II Experience Coni. 1 1 1 1 1 1 1 1 1 1 1 1 The firm's sales and trading personnel work from our Little Rock headquarters; this dedicated team is recognized for the trading, underwriting and selling of fixed-income products. As a strong marketing force, the sales team provides a stable, respected distribution network for retail and institutional markets on a local, regional and national level. This network of professionals utilizes products developed by the Public Finance Group - as well as secondary market support - to meet clients' objectives. The firm's investor clients include individuals, banks and trust departments, public investment and retirement systems, foundations, insurance companies, investment advisors, and mutual funds. Access to a substantial client base equips the firm to offer clients a variety of financing options. Additionally, these resources help assure that clients benefit from maximum market penetration and aggressive interest rates. Crews & Associates typically maintains a daily bond inventory between $15 and $30 million, which enables us to provide an efficient liquid market in municipal securities. By creating goodwill with investors in the secondary market, we assist issuers in obtaining favorable borrowing costs when entering the market for new funds. PUBLIC FINANCE As evidenced by the financial and human resources devoted to our underwriting activities, the Public Finance Group is a critical component of the company. Initially, Crews relied upon secondary market activity to provide a supply of municipal bonds for distribution to clients in the retail and institutional sector. However, in 1990, Crews & Associates established a Public Finance Group to serve issuers in the development and distribution of new bond issues. The purpose of the Group was to increase the supply of municipal bonds available to the firm for its growing customer base. The Public Finance Group has successfully grown to include public finance specialists here in our Little Rock, Arkansas headquarters—with additional public finance information offices in Fayetteville, Arkansas; Charleston, West Virginia and Columbia, Maryland. Through various underwriting services, these professionals assist in providing taxable and tax-exempt bonds to the more than 95 Crews & Associates sales professionals and their respective clients. The Public Finance Group, when working for clients, holds to a simple strategy that centers around these two objectives: • Provide the most efficient possible structure for each client's needs. • Continue to serve clients long after their transaction is complete. The Group serves issuers in a variety of areas: • water & sewer • healthcare • airport • retirement • higher education • government & non -profits • housing • correctional facilities • solid waste/resource recovery • industrial, commercial & economic development • lease financings C,rews&Associates Manta First Security Bacup • - -- - • — —Experience Cont. In serving clients' needs, our public finance professionals take advantage of state-of-the-art analytical and research technology and utilize the firm's substantial marketing, distribution and capital resources. Throughout all activities, public finance professionals provide clients with integrity, honesty and professionalism. THE CREWS ADVANTAGE We believe that some of the tangible characteristics that distinguish our firm from other respondents to this proposal are: • Arkansas based investment banking company • Arkansas based bank holding company • Business strategy is entirely focused on fixed income products such as municipal bonds • One of the largest centralized fixed income sales groups in Arkansas • Significant growth in public finance during a period of time when many firms are downsizing in this area • COMMITMENT TO THE STATE OF ARKANSAS CAPITAL POSITION (in accordance with SEC standards) The City can take comfort in our firm's strong capital position. As of September 30, 2002, the Company had a net capital position of more than $8,900,000. As a result, we have the capacity to underwrite bond issues of over $100 million in size. The recent acquisition of Crews by First Security Bancorp gives us the even stronger capital resource of a $1.4 billion Arkansas bank holding group with a net capital of more than $150 million. We are willing to commit this capital as necessary in order to underwrite unsold balances of bonds. RECENT CLIENTS $2,850,000 Washington County Jail Crews8Associates Mn•pr Fos/ Security BsCap $42,985,000 University of Arkansas $4,790,000 Grand Prairie Water $59,415,000 State of Arkansas Community Water System $890,000 City of Arkadelphia Water & Sewer • Please .see Appendix A for further information concerning these issuances. AIWEST I ri -- • •RVEST Arvest Asset Management is a financial subsidiary of Arvest Bank Group, owned by the Walton family of Bentonville, AR. ARVEST Bank Group has over $2.5 billion in client deposits in Arkansas and over 50,000 household relationships in Arkansas. ARVEST Asset Management consists of a NASD licensed broker / dealer, ARVEST Trust Company and ARVEST Insurance, Inc. ARVEST Asset Management's broker / dealer arm has been consulting ARVEST Bank clients with regard to alternative investments to bank products since 1985. AAM's broker / dealer focuses almost exclusively on individual investors in Washinton and Benton Counties with over 25 registered representatives located in area ARVEST banks. AAM is uniquely positioned to deliver its retails clients with investment products and services in a bank environment. AAM has over 50,000 retail investment accounts, which also include accounts from its banks in Oklahoma and Missouri. AAM is the only investment firm represented in Washington or Benton county with its fixed income trading desk located in northwest Arkansas. This allows AAM's trading desk an excellent opportunity to know the clients purchasing the securities. AAM has more local expertise and client base to successfully distribute new issue municipal securities to a broader segment of the local market than any other firm. ARVEST Trust is an active participant in investing money for local clients in the Arkansas municipal bond market. We believe AAM's local market share and marketing expertise to individual investors, combined with Crews & Associates, Inc. excellent underwriting track record and ability to service institutional accounts, gives this group the unique ability to successfully market any Arkansas municipal bond offering more quickly and efficiently than any other organization. C,rews&Associates u.,w rrn Secvriry B.caa }WEST • • • • Legal Issues FIRM'S SECURITIES VIOLATIONS Crews & Associates, Inc. nor any professionals employed by Crews & Associates has been subject to any formal or informal regulatory action by a Federal or State agency. FIRM'S REGULATORY VIOLATIONS Crews & Associates, Inc. is not involved in any current or pending litigation regarding any aspect of a municipal bond issue in which we have participated. Crews does not have any history of such investigations or litigation within the past three years, nor any since its inception. Further, we have no conflicts that would impede our ability to begin immediately on the proposed bond issue. • Crews8Associates M�rtw Fni S c,sity Srcuo AIZVEST • City of Fayetteville • Staff Review Form City Council Agenda Items Contracts Stephen Davis Submitted By 21 -Dec -04 City Council Meeting Date FIS Director Division Action Required: Finance & Internal Services Department Approval of a resolution accepting Crews and Associates as bond underwriter for Highway 71 East Square Redevelopment District Bonds- Series 2004. Crews and Associates is compensated from bond proceeds as each TIF bond. TIF bonds are paid from increases in property taxes within the TIF boundary. $0.00 Cost of this request Account Number Project Number Budgeted Item Category/Project Budget Funds Used to Date Remaining Balance Budget Adjustment Attached Program Category / Project Name Program / Project Category Name General Fund Fund Name Department Director Previous Ordinance or Resolution # /2 -)--af Date Original Contract Date: City Attorn Date lLChie Ad istrativAmyl r Date Mayor G Date Comments: 4 Original Contract Number: Received in Mayor's Office Received in City Clerk's Office Wtte ARKANSAS • City Clerk Division 113 West Mountain Fayetteville, AR 72701 Telephone: (479) 575-8323 Fax: (479) 718-7695 city_c lerk©ci.fayetteville.ar.us DEPARTMENTAL CORRESPONDENCE To: Steve Davis Finance & Internal Services Q From: Clarice Buffalohead-Pearman fP' City Clerk Division Date: January 7, 2005 Re: Res. No. 211-04 The City Council approved the above resolution on December 21, 2004. Attached is a copy of the resolution accepting the bond underwriter as Crews & Associates for the TIF. I'm sorry for the delay in returning this resolution, I've been out of the office and trying to play catch this week. If anything else is needed please let the clerk's office know. Thanks. /cbp attachments cc: Internal Auditor