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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. 2 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 3 1 1 1 1 1 • 1 1 1 1 1 • 1 1 1 1 1 1 1 1 1 • 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. 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 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 1 1 1 1 1 1 1 1 1 1 1 • 1 1 1 1 1 1 1 1 1 • 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. 2 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. 3 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 28.7 111 4 1 5 10 17 16 7 1 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 6.0 100 21 15 12 13 9 4 2 1 1 Negotiated Bond Issues only Source: Securities Data Co. 4 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 5 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 I • 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. 6 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 2 1 1 1 1 1 1 1 • 1 1 1 1 1 1 1 1 1 • 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 3 1 1 1 1 1 1 1 1 1 1. 1 1 1 1 1 1 1 1 1 CITY OF YAKIMA Services Provided Bond Ratings Marketing and Pricing Bonds -NORTHWEST SECURITIES CORPORATION! SEATTLE -NORTHWEST SECURITIES CORPORATION Financial Planning Technical Advice 4 1 1 I. 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 1 1 1 1 1 1 • 1 1 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 1 1 1 1 1 1 1 1 1 1 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 1• 1 1 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 8 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 • • • 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 10 1 1 1 1 CITY OF YAKIMA Annual Debt Service Requirements 1 Revenue Bonds 1 1 1 1 1 1 1 1 1 1 1 1 1 1 • $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 11 • 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 1 1 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 12 • 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 13 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 • CITY OF YAKIMA 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 14 I • • 1 CITY OF YAKIMA 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 15 1 1 • CITY OF YAKIMA 1 Results of Refunding 11 1 1 1 1 • 1 1 1 1 1 • 1 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 16 1 1 1 1 1 1 1 1 1 1 • 1 1 1 1 1 1 1 1 1 CITY OF YAKIMA 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% 17 • 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 18 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 • • CITY OF YAKIMA 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 19 1 1 1 1 Reference Cities 11 • CITY OF YAKIMA 1 1 1 I • 1 1 1 1 1 1 1 1 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 20