HomeMy WebLinkAboutR-1995-126 Northwest Securities CorporationRESOLUTION NO. R- 9
A RESOLUTION authorizing and directing the City Manager and City Clerk of the City of
Yakima to execute a managing Underwriting Agreement with Seattle
Northwest Securities Corporation.
WHEREAS, in accordance with the formal Request for Proposal issued by the City
and issuance of bonds for Fire Department Capital Improvement Program, it is necessary
to engage a firm to provide management underwriting services.
WHEREAS, Seattle Northwest Securities Corporation has offered to perform those
professional services in accordance with the terms and conditions of the attached
Managing Underwriting Agreement; and
WHEARAS, the City Council of the City of Yakima deems it to be in the best
interests of the City that the offer be accepted, and that Seattle Northwest Securities
^orporation be engaged in accordance with the terms and conditions of the attached
ianaging Underwriting Agreement to perform those services, now, therefore,
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF YAKIMA:
The City Manager and City Clerk of the City of Yakima are hereby authorized and
directed to execute the managing underwriting agreement with Seattle Northwest
Securities Corporation, for professional services referred to above, a copy of which is
attached hereto and by reference made a part hereof.
ADOPTED BY THE CITY COUNCIL this 6 day of L 1995.
ATTEST:
CITY CLERK
legal/BD
JH
MAYOR
SEATTLE- NORTHWEST
SECURITIES CORPORATION
EXHIBIT III
1420 Fifth Avenue
Suite 4300
Seattle, Washington 98101
(206)628-2882
Managing Underwriter's Agreement
This Agreement is entered into as of the /5 day of /"1,66.41.r.1995 by and
between the City of Yakima, a political subdivision of the State of ashington (the "City"),
and Seattle -Northwest Securities Corporation (herein called the "Underwriter").
WHEREAS, the City anticipates the sale of bonds including but not limited to
Unlimited Tax General Obligation Bonds, Limited Tax General Obligation Bonds,
Local Improvement District Bonds, and Revenue Bonds (the "Bonds"), and
WHEREAS, the City has reviewed the Underwriter's written proposal dated June 14,
1995, and the Underwriter's presentation dated July 14, 1995;
NOW, THEREFORE, BE IT AGREED:
1. The City hereby appoints the Underwriter as Managing Underwriter for the
purpose of underwriting the Bonds. The Underwriter shall submit a proposal to
purchase each issue of Bonds for its own account or the account of a group of
investment banking firms managed by it.
2. The Underwriter, at its expense, will make such investigations and take such
action as it considers necessary or appropriate to satisfy itself as to the market-
ability of each issue of Bonds, and, subject to such satisfaction, will perform all of
the functions customarily performed by investment bankers and which are rea-
sonably required to accomplish the sale of each issue of the Bonds, including, but
not limited to:
A. Develop a financing plan for issuing each issue of the Bonds and assist the
City in determining the economic impact of such a bond issue.
B. Advise the City as to maturities, interest rates, structure, timing, and
amount of bond sales needed to implement the City's financing plans consis-
tent with overall debt service and City goals.
C. Study and make comments with respect to Bond Ordinances and other
underlying documents relating to the Bonds.
D. Prepare the preliminary and final Official Statements to be issued by the
City relating to each issue of the Bonds and consult with the City and its
bond counsel regarding same.
E. Distribute the preliminary and final Official Statements and other docu-
ments to a broad list of institutions, banks, trusts, insurance companies,
investment counselors, and other prospective investors in Bonds.
F. Form, if deemed appropriate by the Underwriter and the City, an under-
writing group for the purpose of underwriting the Bonds, and inform the
City as to the membership of any group so formed.
G. At the request of the City, assist in making presentations to rating agencies.
H. Evaluate and advise the City concerning bond insurance and any other
available credit enhancements.
I. Provide a final schedule of debt service payments for each issue of the
Bonds.
J. Assist the City and their bond counsel in registering, executing, delivering,
paying for and investing the proceeds of each issue of the Bonds.
K. Monitor the market after the bond sales and notify the City, of opportunities
to refinance Bonds to reduce interest costs.
L. Respond to inquiries after each bond sale pertaining to bond issues and
services covered under this Agreement.
In conducting the foregoing activities, it is understood and agreed, and the City
hereby recognizes, that the Underwriter is acting solely in its own behalf as a
prospective underwriter or as the prospective manager of an underwriting group
which plans to submit to the City a proposal to purchase the Bonds for resale to
investors.
3. At such time as pertinent ordinances, the preliminary Official Statement and all
other necessary documents and proceedings have been determined by the City
and Underwriter to be satisfactory in all respects for financing purposes, the
Underwriter will submit to the City a proposal for the purchase of each issue of
the Bonds. The Underwriter will indicate to the City the interest rates, purchase
price, and the public offering prices of each issue of the Bonds.
4. In carrying out this Agreement, the Underwriter will make available the full
experience of its organization and will employ its prestige so as to represent the
City with maximum effectiveness in its relations with the financial community
and with potential investors.
5. The Underwriter, and any underwriting group organized by it, shall receive
compensation solely from the difference between the price at which the Bonds
are to be resold to investors and the price paid to the City for each issue of the
Bonds by the Underwriter or any such underwriting group. The City is not obli-
gated to make any other payment as, or incur any obligation for, compensation
to the Underwriter, or any underwriting group. The City will consider the pur-
chase proposal submitted by the Underwriter for each series of Bonds, but it will
not be obligated to accept the same and may reject the same. The City reserves
the right to terminate this Agreement upon written notice to the Underwriter.
6. The City shall pay the cost of bond counsel, bond printing, Official Statement
printing and mailing, bond registration, rating agency fees, financial advisor,
and its travel as applicable. The Underwriter shall pay all costs incurred by it,
including, but not limited to, fees of its counsel, advertising expenses, Blue Sky
and legal investment memoranda expenses, travel expenses, and communication
expenses.
7. The Underwriter reserves the right to employ, at its own expense, legal counsel
to act as counsel to the Underwriter.
8. This Agreement shall extend through August 1, 1998. The term of this Agree-
ment may be extended for such time as the parties shall mutually agree in
writing. This Agreement may be terminated by the City or the Underwriter at
any time with written notice provided at least 15 days prior to the date of termi-
nation.
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IN WITNESS WHEREOF, the parties hereto have caused these presents to be executed
by their duly authorized officers and representatives as of the day and year first above
written.
SEATTLE -NORTHWEST SECURITIES CORPORATION
By:
Alan K. Gra-rib-erg, Assistant Vice President
CITY OF YAKIMA, WASHINGTON
By:
ATTEST:
City Manager
>‘('
City Clerk
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Proposal to
Serve as Managing Underwriter
City of Yakima
June 14, 1995
SEATTLE- NORTHWEST
SECURITIES CORPORATION
1420 Fifth Avenue, Suite 4300
Seattle, Washington 98101
John M. Rose
(206) 628-2869
1
• Introduction to Seattle -Northwest
Regional Orientation
Seattle -Northwest Securities Corporation maintains a
distinctive reputation among investment banking firms:
We specialize in Pacific Northwest and Alaska
municipal bonds.
We have demonstrated the ability to sell large
volumes of Pacific Northwest and Alaska
municipal bond issues.
We are entirely employee -owned, with local
control of our company.
We have demonstrated a strong commitment
to improving local finance and economic
development opportunities.
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Seattle -Northwest was formed in 1970 as a specialist in
Pacific Northwest and Alaska public finance, and today
we are the largest locally -owned municipal investment
banking firm in the region. The company maintains
three offices, one in Seattle, Washington employing
about 60 individuals, one in Portland, Oregon employing
17 individuals, and one in Boise, Idaho employing three
individuals. In the face of numerous acquisitions in our
industry which have resulted in fewer regional firms,
we have renewed our commitment to maintaining our
independence and our specialization. Employee
ownership gives us greater flexibility in serving the
needs of our clients and keeps the control of our
company in the region we serve. Our long-standing
personal and professional ties to the Northwest work to
the benefit of our clients in the planning, structuring and
marketing of municipal bond issues.
Seattle -Northwest's dual commitment to this region's
issuers and local ownership gives us a strong competitive
advantage over national firms and other regional firms.
For example, because of our unique positioning:
SEATTLE-. NORTHWEST
SECURITIES CORPORATION
CITY OF YAKIMA
Seattle -Northwest Securities
Paces Northwest Focus
Seattle Office
16 Public Finance
27 Siiii
les & Trading
l Employees
rtland Office
6 Public Finance
8 Sales & Trading
7 Total Employees
Boise Office
1 Public Finance
1 Sales & Trading
3 Total Employees
No national firm can match Seattle -
Northwest's accessibility to our clients, the
service we provide, our knowledge of state
laws governing municipal finance, and our
experience with the needs of Northwest
issuers, and
No other regional firm approaches our size,
success and reputation as the expert in
Northwest public finance.
Answers to questions in Request for Proposal:
1. Scope of Services
Detailed below are the services we will provide the City
of Yakima in its financing.
Planning
• Provide alternatives for structuring the City's
debt, including tax rate analyses and debt service
fund cash flow analyses
• Advise the City regarding innovative financing
techniques which may be of benefit
• Above all else, we will listen to your needs and
priorities and work with you to develop
financing plans which best meet your needs
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Rating/Bond Insurance
Our recent rating presentations to Moody's for Yakima
S.D. helped the District succeed in maintaining its
"Al" credit rating for a tax base that is very similar to
the City. We can use our experience of credit ratings in
the Yakima area to do the following for the City:
Analyze the City's existing "A" credit rating
Evaluate the benefit of purchasing bond
insurance
Advise you on the desirability of making a
personal presentation to the rating agency
and/or bond insurance companies
Prepare and submit the information that the
rating agency/bond insurance companies require
Work with you in developing a presentation
and take responsibility for creating a
presentation booklet, should a presentation be
decided upon
Work with you in identifying and addressing
potential areas of concern
Participate in any rating agency or bond
insurance company presentation
Marketing
• Research and write an Official Statement which
will provide relevant and complete information
about the City in order for potential investors to
make informed investment decisions and to
provide information to the rating agency and
insurance companies
Work with Preston Gates & Ellis, the City's
bond counsel, to develop legal documents
Distribute the Official Statement so as to
stimulate as much demand as possible for the
City's bonds
Evaluate the potential benefits of selling mini-
SEATTLE- NORTHWEST
SECURITIES CORPORATION
CITY OF YAKIMA
bonds. These would be small denomination
bonds sold directly by the City to its residents
Evaluate market impact of alternative call
provisions and issue structures
Market bonds efficiently, at the lowest
possible interest rates
Maximize the proceeds to the City's construction
fund
Work with bond counsel and others to assure a
trouble-free closing of the transaction
Ongoing Services
We can analyze the city's water and sewer reserve fund
to determine whether it may be advantageous to the City
to substitute a surety policy for cash. This may provide
low cost money for the water and sewer utility's capital
needs. In addition to this, we can provide the following
services:
Monitor outstanding debt and market conditions
for possible refunding savings
Complete other projects as requested
2. Personnel Assigned to the City
Mr. John Rose will serve the City of Yakima as the
primary banker for the City's bond issue. John Rose has
handled all of the City of Yakima's financing over the
past 10 years. Alan Granberg will provide additional
support for structuring ideas. Elizabeth Pollack will
write the City's official statement to insure that it meets
all of the new municipal disclosure requirements.
Finally, Gary Dohrn will be the senior underwriter
responsible for pricing and marketing the bonds. The
City can expect full commitment from all of our team
members for the City's proposed financing.
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John M. Rose, Vice President
Mr. Rose is experienced in all phases of the financing
process from the development of specialized computer
models to the preparation of official statements and
rating agency presentations. Prior to joining Seattle -
Northwest, Mr. Rose served as the Budget Director of
King County, Washington where he was responsible
for the development and management of the County's
$300 million combined capital and operating budget,
including budgets for the County's enterprise funds.
Mr. Rose's recent assignments have included serving as
lead on the Renton School District sale of $72,000,000
Unlimited Tax General Obligation Bonds. Mr. Rose is
a magna cum laude graduate of Princeton University.
He pursued graduate studies at the University ofChicago.
He recently served as Chairman of the King County
Council's Ad Hoc Committee on the King County
Comprehensive Plan and as Chairman of the County's
School Impact Mitigation Task Force.
Alan K. Granberg, Assistant Vice President
Mr. Granberg joined Seattle -Northwest in 1992.
Previously, Mr. Granberg worked more than four years
at Standard & Poor's (S&P) Corporation in New York,
where he analyzed municipal credit ratings including
public utility, health care, higher education, general
obligation, and special revenue issues. Mr. Granberg
organized and led the development of the secondary
market section of S&P's CreditWeek-Municipal
publication, which was S&P's spearhead into greater
disclosure of credit information of issuers with bonds
trading in the secondary market. He brings considerable
experience in rating presentations and in knowledge of
what factors will change a credit rating.
Mr. Granberg graduated from the University of
Washington with a B.A. degree in business
administration with a concentration in finance. He
received an M.B.A. in finance from New York
SEATTLE- NORTHWEST
SECURITIES CORPORATION
CITY OF YAKIMA
University's Leonard N. Stern School of Business,
under corporate sponsorship in the two-year Executive
M.B.A. Program.
Gary Dohrn, Vice President
Mr. Dohrn has been with Seattle -Northwest since 1985.
He manages the underwriting of both competitive and
negotiated issues in which Seattle -Northwest is lead
manager. He also coordinates participation in syndicates
managed by other firms. Prior to underwriting, Mr.
Dohrn worked in taxable fixed income sales. Mr.
Dohrn holds a Bachelor of Science in chemistry from
the University of Washington.
Elizabeth H. Pollack, Public Finance Associate
Ms. Pollack joined Seattle -Northwest Securities in
1994. She is responsible for the preparation of official
statements which accompany each municipal bond sale
and the research and analyses related thereto. She
serves as the primary coordinator with rating agencies
and bond insurance companies and supervises a staff
responsible for the printing and distribution of official
statements. Prior to joining Seattle -Northwest, Ms.
Pollack worked in the investments and operations group
of a mutual fund sponsor. Ms. Pollack holds a Bachelor's
degree in English from the University of California,
Berkeley. She has completed the third of three exams
of the Chartered Financial Analyst program and is
currently awaiting the results.
3. Experience and Marketing Plan
By using Seattle -Northwest, the City of Yakima will
gain the resources of the most experienced firm in the
State of Washington for originating, rating, and
marketing general obligation bonds. Seattle -Northwest
consistently ranks number one in the region for
underwriting general obligation bonds.
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CITY OF YAKIMA
Seattle -Northwest has built an unequaled system to Likely Investors for the Bonds
market Washington general obligation bonds.
1994 Northwest Underwriter Rankings
General Obligation •Bond Issues
/ashingt n, Idaho and Alaska
Ranking Issuer
Amount (Mil) Issues
1 Seattle -Northwest $ 806.9
2 Goldman Sachs 347.3
3 George K. Baum 214.1
4 Lehman Brothers 153.8
5 Seafirst Bank 1 10.8
6 US National Bank of Oregon 109.7
7 Piper Jaffray 59.4
8 Dain Bosworth 45.4
9 Smith Barney 35.0
10 Merrill Lynch 28.7
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Negotiated Bond Issues only Source: Securities Data Co.
No one can match Seattle -Northwest's experience in
helping issuers maximize the benefits of their credit
rating. In the past 6 years, Seattle -Northwest has helped
22 issuers obtain rating upgrades out of a total of 25
issuers who have obtain rating upgrades, in the State.
For example, in June 1995 Seattle -Northwest helped
Alderwood Water District obtain an upgrade to "Al"
from "A" on its Water Revenue Bonds and established
an "A 1" rating on its previously non -rated ("NR")
Sewer Revenue bonds. As a result, Seattle -Northwest
helped Alderwood Water District become the first
water district in the state to obtain an "A 1 ".
Seattle -Northwest's sales professionals are unique in
that they work exclusively with municipal bonds. They
do not sell other investments (stocks, corporate bonds,
insurance products, certificates of deposits, mutual
funds, etc.), many of which pay higher sales
commissions than municipal bonds. Thus you can be
assured that our sales force will be tightly focused on the
City of Yakima bonds when your issues come to
market.
SEATTLE -NORTHWEST
SECURITIES CORPORATION
Three types ofbuyers will want to buy the City's bonds.
These three groups include banks (primarily out of
State or small local banks), bond dealers, and some
individual investors. Banks will actively pursue the
City's bonds. Seattle -Northwest will encourage other
dealers to market the City's issue to guarantee full
exposure to all potential investors.
Bank Qualified Bonds
The City maintains a unique advantage in that it's bonds
will be "Bank Qualified". Bank Qualified bonds carry
a lower interest rate because banks receive a greater tax
incentive to purchase these bonds. The benefit of bank
qualification typically varies from 0.10% to 0.50%,
depending on the maturities.
Seattle -Northwest is the premier dealer of Bank
Qualified bonds in the Pacific Northwest. We offer
the largest distribution for the City.
1994 Northwest Underwriter Rankings
Bank -Qualified" Issues
ashingtutif mon. Idaho and Alaska
Ranking Issuer
Amount (Mil) Issues
1 Seattle -Northwest $282.5
2 Piper Jaffray 50.8
3 Seafirst Bank 46.4
4 Dain Bosworth 30.1
5 U.S. Bank of Washington 26.2
6 U.S. National Bank of Oregon 22.0
7 Kemper Securities 12.2
8 B.A. Securities 12.1
9 Nuveen 8.6
10 Lehman Brothers 6.0
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Negotiated Bond Issues only Source: Securities Data Co.
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4. Retail Distribution
Due to the "Bank Qualification" nature of the City's
bonds, commercial banks will accept the lowest interest
rate on the bonds. As a result, individuals could obtain
better, higher yielding, municipal bonds by purchasing
bonds from other issuers that are non-bank qualified.
Though the City should certainly make bonds available
to local citizens, the City may not want to make a
substantial sales effort to local citizens. Otherwise, the
City may be trying to sell investments to local citizens,
when much better alternative investments exist for the
City's citizens.
Seattle -Northwest is prepared to take extraordinary
steps to sell the bonds to City residents, at the City's
request.
We are prepared to work with the City to advertise the
bond sale, and we could post a representative in the
City's offices to assist potential local buyers. The bonds
would be offered locally the day before they are offered
to institutional investors. We would invite all of the
firms with retail outlets in the area to participate in the
underwriting as members of the "selling group."
Seattle -Northwest has taken several steps in other cities
to maximize local sales. Additional methods that may
be appropriate include:
• Prepare mail inserts announcing the sale,
prepared for inclusion in the City's newsletter
• Publish public service announcements in The
Yakima Herald/Republic
• Staff a "1-800" toll-free line to allow citizens
to order bonds, or just have their questions
answered about the issue
Local residents may purchase bonds directly from
Seattle -Northwest or through their local broker. The
local broker may obtain bonds from Seattle -Northwest
for "firm orders". The local brokers will pay the net
SEATTLE- NORTHWEST
SECURITIES CORPORATION
CITY OF YAKIMA
price for the bonds, less the "takedown" (sales
commission). This way, a local resident has the
opportunity to pay the same price for the bonds as if
buying them directly from Seattle -Northwest, but may
purchase bonds through their existing local broker.
Seattle -Northwest will share the takedown with the
local broker to ensure that the broker is paid a sales
commission.
Seattle -Northwest can also maximize retail distribution
ofthe City's bonds by attracting other dealers. Individual
investors often prefer to use their personal broker to
purchase bonds. As a result, no single dealer can reach
all of these potential individual investors.
We encourage the marketing of the bonds to several
dealers to guarantee full exposure of the City's bonds to
all potential investors. This is accomplished through
the formation of a selling group of local firms.
Seattle -Northwest offers the City access to a number of
dealers. By choosing Seattle -Northwest the City can
ensure that a maximum number of its local dealers have
access to bonds, not just a single local firm. The list of
brokerage firms that could have access to the bonds
includes the following:
Yakima Valley Bond Brokerages --
American Investment Services
Dain Bosworth
Edward D. Jones
Freeman Welwood
IDS Financial
Kidder Peabody
Merrill Lynch
Murphy Favre
Paulson Investment Company
Schaeffer Swaze & Associates
Seafirst Investment Service
Smith Barney
U.S. Bancorp
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Banks that may have brokerage services --
Central Valley Bank
First Interstate Bank of Washington
First Savings Bank of Washington
Key Bank of Washington
Pioneer National Bank
Washington Mutual
West One Bank
By using Seattle -Northwest, the City will maximize
availability of bonds to local citizens. The exact
number of bonds sold locally cannot be estimated very
accurately in advance of the sale. However, it is
reasonable to expect that at least 10 to 20 percent of the
bonds may be sold locally, without the city paying more
than required for traditional non -"bank qualified"
customers.
5. Underwriting Spread
The following represents the City's underwriting spread.
This underwriting spread reflects a $3.7 million bank
qualified unlimited tax general obligation bond with
individual maturities greater than $100,000 and few
unsold bonds at the end of the underwriting period.
Average Takedown
Management
Expenses
Underwriting
Total Spread
$ 4.85
2.00
0.75
0.00
$ 7.60
Takedown Schedule
Year
1996
1997
1998 to 2015
CITY OF YAKIMA
$ per $1,000
2.50
3.75
5.00
This spread remains the same, even if the City decides
to use a selling group. In addition, this spread remains
the same if the City decides to use a co -manager.
However, if the City decides to use a co -manager, then
Seattle -Northwest still keeps the $2.00 management
fee for acting as lead manager.
6. Experience for the City's Future
Financings
Seattle -Northwest is a full service firm that has been
offering a full range of services for 25 years. For
example, we have been showing the City of Yakima
refunding potentials for its outstanding bonds for years.
We will continue to do this on all of the City's outstanding
bonds. As a another example, when we underwrote the
1991 water and sewer issue for the City of Yakima, we
helped the City create new bond covenants. These bond
covenants enhanced the City's future financing options,
while keeping the City's current credit rating intact and
without increasing borrowing costs. In addition, we
have analyzed financing options for the City that have
included an office building financing, golf course
financing, and local improvement district financing.
Seattle -Northwest under-
writes and offers financial
advice on numerous types of
bonds. A sample of the
various bonds we work on is
shown to the left.
Amount
(millions)
Issuer
Type
$ 13.7
5.4
20.0
5.78
7.70
2.01
0.86
1.99
22.2
335.0
Bellevue Convention
Univ. of WA
City of Tacoma
WSHFC
City of Spokane
City of Oak Harbor
City of Bandon, OR
City of Stanwood
City of Tacoma
State of WA
Special Obligation Rev. & Rfdg, S. 1994
Parking Sys. Rev., S. 1995
Refuse Utility Rev. BANs, 1994
Nonprofit Housing Rev. Bonds, Ser. 1995
Lease Rev. Bonds (Multi -Purpose Arena Project)
Marina Rev. & Rfdg, 1994
Elec. Utility Sys. Rev., S. 1994
LID No. 92-1
Conservation Sys. Project Rev., 1994
GO and Motor Vehicle Fuel Tax
SEATTLE- NORTHWEST
SECURITIES CORPORATION
Seattle -Northwest offers
service after the bond sale in
the form of analyzing future
City of Yakima financings.
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For example, we recently helped the City of Mountlake
Terrace analyze the best way for it to make improvements
to its municipal golf course. The City considered using
traditional revenue bonds for the improvements.
However after analysis of the size of the improvement
project and of the City's available debt capacity, the
City realized it could make the improvements with
councilmanic bonds rather than revenue bonds. As a
result, the City estimates that it will be able to keep
green fees approximately 23% lower than previously
expected.
7. Additional Questions
What opportunities may the City take advantage of in
restructuring some of its existing debt?
The City's outstanding debt is as follows:
Outstanding Bonds -- As of April 1, 1995
Water and Sewer Revenue Bonds
W&S Rev., 1968 Series B $ 2,030,000
W&S Rev., 1978 3,500,000
Second Lien W&S Rev., 1991 6,900,000
Total W&S Revenue Bonds $ 12,430,000
Limited Tax General Obligation Bonds
LTGO Bonds, 1975
LTGO Bonds, 1976
LTGO Bonds, 1976A
LTGO Bonds, 1985
LTGO Bonds, 1994
Total LTGO Bonds
$ 55,000
105,000
45,000
245,000
6,635,000
$ 7,085,000
CITY OF YAKIMA
Unlimited Tax General Obligation Bonds
UTGO Bonds, 1986 $
UTGO Bonds, 1988
2,905,000
1,850,000
Total UTGO Bonds $ 4,755,000
Local Improvement District Bonds
Consolidated LID No. 2, 1987 $ 55,000
Consolidated LID No. 3, 1989 165,000
Total LID Bonds $ 220,000
Of the City's outstanding debt, four issues may be able
to be refunded to save the City money. Those issues and
their refunding results are listed at the bottom of the
page.
Each of the issues presents a good possible refunding
for the City. We would like to talk with the City further
about the benefits and considerations ofrefunding these
bond issues.
How can the bond sale schedule be adjusted to maximize
the benefit to the City?
Based on the City's current estimated bond sale schedule,
the city may be able to make some modifications that
could help the City obtain better demand for its bonds.
For example, the City currently plans to sell bonds
during the last week of August. However, this time
period traditionally has a lack of interest by potential
investors, as many of them are taking advantage of the
final vacation days of summer.
Seattle -Northwest is prepared to have the City's bonds
ready for sale as soon as July 10, based on an underwriter
selection decision on June 19. The bond market remains
88 & 86
UTGO Bonds
88 & 86 UTGO Bonds
Sold with 95 New
Money Issue
78 W&S
Revenue
Bonds
91 W&S
2nd Lien
Rev. Bonds
Total Savings
Annual Savings
$191,460
$23,933
Present Value Savings $163,657
Present Value Savings As a % 4.57%
$223,308
$27,914
$189,598
5.29%
$152,406
$10,886
$110,794
3.2%
$205,369
$12,081
$139,048
3.2%
SEATTLE- NORTHWEST
SECURITIES CORPORATION
7
CITY OF YAKIMA
favorable now. As a result, the City benefits by having
its bonds ready for sale sooner, rather than later. Seattle -
Northwest is prepared to help the City achieve this goal.
What are some examples of other Washington cities
where Seattle -Northwest serves either as underwriter
or financial advisor?
The City may obtain the best information on Seattle -
Northwest's ability to serve by calling some of our other
City clients. A few references are listed below.
Yakima
Bellevue
Bothell
Cheney
Clarkston
Des Moines
Edmonds
Everett
Fircrest
Kelso
Kennewick
Longview
Millwood
Mountlake Terrace
Oak Harbor
Pasco
Pateros
Port Townsend
Redmond
Richland
Seattle
Sequim
Snohomish
Spokane
Tacoma
What is the projected levy rate for the new bonds? How
will that be affected if the bonds are combined with a
refunding issue?
As can be seen from the chart at the bottom of the page,
the City may lower its future levy rate by combining this
upcoming new money issue with a refunding of the
1988 and 1986 general obligation bonds. If the City
wishes to pursue a refunding of its prior issues, then the
best time to accomplish the refunding is to do it
simultaneously with the new money issue.
Levy Rate Projections
Assumptions: Rating:
Interest Rate:
Issue Structure:
Issue:
Current
Level Debt Service
Estimated 1996 Assessed Value:
Projected Assessed Value Growth:
Projected Levy Rates:
1995
1996
1997
1998
1999
2000
Issue Date:
Issue Size:
Final Maturity:
$2,036,254,000
2.0% growth 1995-2019
Option A
New Money Only
$0.47
0.61
0.62
0.61
0.60
0.35
August 1, 1995
$3,700,000
2014
Option B
New Money & Refunding
$0.47
0.59
0.60
0.60
0.59
0.34
SEATTLE- NORTHWEST
SECURITIES CORPORATION
8
Bond Financing
City of Yakima
July 14, 1995
Prepared by
SEATTLE- NORTHWEST
SECURITIES CORPORATION
CITY OF YAKIMA
Introduction to Seattle -Northwest Securities
• Seattle -Northwest, founded in 1970, has become the largest Public Finance
and bond underwriting operation in the Pacific Northwest.
• Seattle -Northwest underwrote 183 bond issues in 1994, with a par value of
approximately $1.2 billion.
• Seattle -Northwest is locally owned by its more than 75 employees
Seattle -Northwest Securities
Pacific Northwest Focus
Seattle Office
17 Public Finance
31 Sales & Trading
59 Total Employees
Portland Office
6 Public Finance
8 Sales & Trading
17 Total Employees
Boise Office
1 Public Finance
1 Sales & Trading
3 Total Employees
• Seattle -Northwest underwrites more General Obligation issues in the
Pacific Northwest than any other firm.
SEATTLE -NORTHWEST
SECURITIES CORPORATION
1
CITY OF YAKIMA
'1994 Northwest Underwriter Rankings
Negotiated Bond Issues
Washington, Oregon, Idaho and Alaska
Ranking Issuer
Amount (Mil) Issues
1 Seattle -Northwest $1,038.7 156
2 First Boston 957.9 4
3 Goldman Sachs 759.1 29
4 Lehman Brothers 625.4 15
5 Smith Barney 569.0 9
6 George K. Baum 218.4 2
7 Paine Webber 196.8 10
8 Piper Jaffray 156.8 35
9 Seafirst Bank 151.9 33
10 Dean Witter 143.8 1
Source: Securities Data Co.
1994 Northwest Underwriter Rankings
General Obligation Bond Issues
Washington, Oregon, Idaho and Alaska
Ranking Issuer
Amount (Mil) Issues
1 Seattle -Northwest $ 806.9 1 1 1
2 Goldman Sachs 347.3 4
3 George K. Baum 214.1 1
4 Lehman Brothers 153.8 5
5 Seafirst Bank 110.8 10
6 US National Bank of Oregon 109.7 17
7 Piper Jaffray 59.4 16
8 Dain Bosworth 45.4 7
9 Smith Barney 35.0 1
10 Merrill Lynch 28.7 1
Negotiated Bond Issues only Source: Securities Data Co.
SEATTLE- NORTHWEST
SECURITIES CORPORATION
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CITY OF YAKIMA
1994 Northwest Underwriter Rankings
Bank -Qualified Issues
Washington, Oregon. Idaho and Alaska
Ranking Issuer
Amount (Mil) Issues
1 Seattle -Northwest $282.5 100
2 Piper Jaffray 50.8 21
3 Seafirst Bank 46.4 15
4 Dain Bosworth 30.1 12
5 U.S. Bank of Washington 26.2 13
6 U.S. National Bank of Oregon 22.0 9
7 Kemper Securities 12.2 4
8 B.A. Securities 12.1 2
9 Nuveen 8.6 1
10 Lehman Brothers 6.0 1
Negotiated Bond Issues only Source: Securities Data Co.
SEATTLE- NORTHWEST
SECURITIES CORPORATION
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CITY OF YAKIMA
Services Provided
Bond Ratings
Marketing and Pricing Bonds
-NORTHWEST
SECURITIES CORPORATION!
SEATTLE -NORTHWEST
SECURITIES CORPORATION
Financial Planning
Technical Advice
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Bond RatingConsiderations
1 Yakima's A rating is secure.
1 Care should be taken in communicating Moody's.
Mood 's.
1 1. Items for Discussion
a. Future borrowing plans
1 b. Status of City's finances
2. Modes of communication
1 a. In person
b. Telephone
1 c. Letter
CITY OF YAKIMA
1
• Consider adding a Standard & Poor's rating
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SEATTLE- NORTHWEST 5
SECURITIES CORPORATION
CITY OF YAKIMA
Market Conditions and Schedule
Current Market Trends
1. Volatility
2. Flat -tax considerations
3. Value of bank qualification
4. Competing bond sales
5. Federal Reserve actions
6. Value of bond insurance
Potential Schedule
Date Activity Responsibility
July 19 Complete information for POS Staff
July 25 Brief Council on Bond Sale Plan (regular meeting) SNW, Staff
July 25 Complete POS SNW
July 31 Rating discussion SNW, Staff, Moody's
July 31 Local advertisement SNW
August 7 Preliminary pricing SNW
August 8 Board action on Bond Resolution Board, SNW, Staff, Bond Counsel
August 29 Bond closing SNW, Staff, Bond Counsel
JULY 1995
SMTW T FS
1
2 3 4 5 6 7 8
9 10 11 12 13 14 15
16 17 18 19 2021 22
23 24 25 26 27 2829
30 31
AUGUST 1995
SMTW T FS
1 2 3 4 5
6 7 8 9 10 11 12
13 14 15 16 17 18 19
2021 22 23 24 25 26
27 2829 30 31
SEATTLE- NORTHWEST 6
SECURITIES CORPORATION
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CITY OF YAKIMA
Market Conditions
1 -Year Interest Rate Trend
7
7.
6.
6.
Rates
(%)
6.
6.
5.
5.
Weekly Bond Buyer Index
General Obligation Bond Interest Rate Trends
LJ
00
75
50
25
00
75
50
1
1 1
1 1 1 1
1 1
1 1
1 1
1 1
1
1 1 1
1 1
1 1 1
1 1
1 1
1 1
1 1
1
1 1
1 1
1 1
1 1 1
1 1
1 1
1 1
1 1
1 1
1 1
1
6/9/94
8/4/94
9/29/94
11/24/94
1/19/95
3/16/95
5/11/95
7/6/95
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SEATTLE -NORTHWEST 7
SECURITIES CORPORATION
10 -Year Interest Rate Trend
Rates
(%)
10.00
9.00
8.00
7.00
6.00
5.00
CITY OF YAKIMA
10 Year Bond Buyer Index
General Obligation Bond Interest Rate Trends
Jul -85
Jul -86 Jul -87
SEATTLE- NORTHWEST
SECURITIES CORPORATION
Jul -88 Jul -89
Jul -90 Jul -91
Jul -92 Jul -93
Jul -94 Jul -95
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CITY OF YAKIMA
Local Sales
Local Sales may have public relations value for the City
Seattle -Northwest has demonstrated our willingness to work with a selling
group and a co -manager
Many firms have local offices
American Investment Services
Central Valley Bank
Dain Bosworth
Edward D. Jones
First Interstate Bank of Washington
First Savings Bank of Washington
Freeman Welwood
IDS Financial
Key Bank of Washington
Kidder Peabody
Merrill Lynch
Murphy Favre
Paulson Investment Company
Pioneer National Bank
Schaeffer Swaze & Associates
Seafirst Investment Service
Smith Barney
U.S. Bancorp
Washington Mutual
West One Bank
SEATTLE- NORTHWEST 9
SECURITIES CORPORATION
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CITY OF YAKIMA
Outstanding Bonds
As of April 1, 1995
Water and Sewer Revenue Bonds Currently Outstanding
Water and Sewer Revenue Bonds, 1968 Series B $ 2,030,000
Water and Sewer Revenue Bonds, 1978 3,500,000
Second Lien W&S Revenue Bonds, 1991 6,900,000
Total Water and Sewer Revenue Bonds $ 12,430,000
Limited Tax General Obligation Bonds
Limited Tax General Obligation Bonds, 1975 $ 55,000
Limited Tax General Obligation Bonds, 1976 105,000
Limited Tax General Obligation Bonds, 1976A 45,000
Limited Tax General Obligation Bonds, 1985 245,000
Limited Tax General Obligation Bonds, 1994 6,635,000
Total Limited Tax General Obligation Bonds $ 7,085,000
Unlimited Tax General Obligation Bonds
Unlimited Tax General Obligation Bonds, 1986 $ 2,905,000
Unlimited Tax General Obligation Bonds, 1988 1,850,000
Total Unlimited Tax General Obligation Bonds $ 4,755,000
Local Improvement District Bonds
Consolidated Local Improvement District No. 2, 1987 $ 55,000
Consolidated Local Improvement District No. 3, 1989 165,000
Total Local Improvement District Bonds $ 220,000
SEATTLE -NORTHWEST
SECURITIES CORPORATION
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CITY OF YAKIMA
Annual Debt Service Requirements
1 Revenue Bonds
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$1,500,000
$1,200,000
$900,000
$600,000
$300,0
Water and Sewer Revenue Bonds
Annual Debt Service
00
$0 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013
IN 1991 Bonds ■ 1978 Bonds ■ 1968 Bonds
•
SEATTLE- NORTHWEST
SECURITIES CORPORATION
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CITY OF YAKIMA
Annual Debt Service Requirements
LTGO Bonds
$1,500,000
$1,200,000
$900,000
$600,000
$300,000
$0
LTGO Bonds
Annual Debt Service
1995 1997 1999
1
,Il
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1
IIIIIIII
1 1 1 1 1 1 1 1
2011 2013
2001 2003 2005 2007 2009
■ 1994 Bonds ■ 1985 Bonds ■ 1976A Bonds ❑ 1976 Bonds ■ 1975 Bonds
SEATTLE- NORTHWEST
SECURITIES CORPORATION
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CITY OF YAKIMA
Annual Debt Service Requirements
UTGO Bonds
$1,500,000
$1,200,000
$900,000
$600,000
$300,000
UTGO Bonds
Annual Debt Service
$0—I—I—I—IIII—I I I 1 1 1 I 1 1
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013
• 1988 Bonds ■ 1986 Bonds
SEATTLE- NORTHWEST
SECURITIES CORPORATION
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Annual Debt Service Requirements
LID Bonds
$120,000
$100,000
$80,000
$60,000
$40,000
$20,000
$0
LID Bonds
Annual Debt Service
ISI
1
1995 1997
I l l l l l i 111111111
1999 2001 2003 2005 2007 2009 2011 2013
■ 1987 Bonds • 1989 Guaranty Fund Bonds
5R'4H6[##� 55.555:5555#t'6###9YS#R�bfffk65`SfSSiK'S<S6ffLT.9555'SK.TIa['6#Zfc30'S•�'f'r{fs.9•s%tx'Sff'5ASD'+�:.#5fx5fYsiYstxFEftfxniaW?#Fsttfuxxsxuc�.n ux x3gaa*x�.#aunuavuzaxwfzxutraaauauaattttcttu
SEATTLE- NORTHWEST
SECUR!TlES CORPORATION
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Effect of Refunding
SEATTLE- NORTHWEST
SECURITIES CORPORATION
OWES
ISSUES
Debt Service on
Outstanding Bonds
TO BUY
New Refunding
Bonds
Old
Issue
New
Bonds
TO PAY
Special U.S. Government
Obligations and T -Bills
(SLGS)
OWES
Debt Service on
Outstanding Bonds
Debt Service on
Refunding Bonds
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1 Results of Refunding
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UTGO Bonds
Refunded Bonds
Issues
Refunded (Callable) Bond Amount
Call Date
Average Coupon on Refunded Bonds
Assumptions
Interest Rate Scale
Rating
Evaluation Date
Summary of Results (if Refunded)
New Issue Size
True Interest Cost
Total Savings
Approximate Annual Savings
Present Value Savings
1988 UTGO
1986 UTGO
$3,585,000
December 1, 1996
7.50%
Bank Qualified G.O. Bond
A
April 21, 1995
Refunding and
Refunding Alone New Money
$3,775,000 $3,780,000
5.33% 5.35%
$191,460 $223,308
$23,933 $27,914
$163,657 $189,598
Present Value Savings as a % of Old Bonds
4.57% 5.29%
SEATTLE -NORTHWEST
SECURITIES CORPORATION
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Results of Refunding
Water and Sewer Revenue Bonds
Refunded Bonds
Issue 1978 Water & Sewer
Refunded (Callable) Bond Amount $3,340,000
Call Date December 1, 1995
Average Coupon on Refunded Bonds 6.31%
Assumptions
Interest Rate Scale
Rating
Evaluation Date
Summary of Results (if Refunded)
New Issue Size
True Interest Cost
Total Savings
Approximate Annual Savings
Present Value Savings
Bank Qualified Revenue Bond
A
April 24, 1995
$3,420,000
5.64%
$152,406
$10,886
$110,794
Present Value Savings as a % of Old Bonds 3.32%
Historical Refunding Results
March 2, 1993
April 21, 1993
June 9, 1993
August 30, 1993
April 24, 1995
SEATTLE- NORTHWEST
SECURITIES CORPORATION
8.08%
5.80%
3.87%
6.80%
3.32%
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CITY OF YAKIMA
Results of Refunding
Water and Sewer Revenue Bonds
Refunded Bonds
Issue 1991 Water & Sewer Junior Lien
Refunded (Callable) Bond Amount $4,370,000
Call Date December 1, 1995
Average Coupon on Refunded Bonds 6.31%
Assumptions
Interest Rate Scale
Rating
Evaluation Date
Summary of Results (if Refunded)
New Issue Size
True Interest Cost
Total Savings
Approximate Annual Savings
Present Value Savings
Bank Qualified Revenue Bond
A
June 13, 1995
$4,875,000
5.55%
$205,369
$12,081
$139,048
Present Value Savings as a % of Old Bonds
3.18%
SEATTLE- NORTHWEST
SECURITIES CORPORATION
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Levy Projections
Projections
Assumptions:
Rating: "A "
Interest Rate: Current
Estimated 1996 Assessed Value: $2,036,254,000
Projected Assessed Value Growth: 2.0% growth 1995-2019
Issue Date: August 1, 1995
Issue Size: $3,700,000
Issue:
Issue Structure:
Final Maturity:
Option A
New Money Only
Level Debt
Service
2014
Option B
New Money & Refunding
Level Debt
Service
2014
Projected Levy Rates:
1995 $0.47 $0.47
1996 0.61 0.59
1997 0.62 0.60
1998 0.61 0.60
1999 0.60 0.59
2000 0.35 0.34
Total Interest Cost:
SEATTLE- NORTHWEST
SECURITIES CORPORATION
$2,620,000
$2,620,000
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1 Reference Cities
11
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CITY OF YAKIMA
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1
Yakima Kelso Port Townsend
Bellevue Kennewick Redmond
Bothell Longview Richland
Cheney Millwood Seattle
Clarkston Mountlake Terrace Sequim
Des Moines Oak Harbor Snohomish
Edmonds Pasco Spokane
Everett Pateros Tacoma
Fircrest
SEATTLE- NORTHWEST
SECURITIES CORPORATION
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