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04-27-84SpMtg APRIL 27, 1984 A Special Heeting of the City Council of the City of Delray Beach, Florida, was called to order by Mayor Doak S. Campbell in the Council Chambers at City Hall at 4:10 P.M., Friday, April 27, 1984. 1. Roll call showed: Present - Council Member Malcolm T. Bird (arrived 4:12 P.M.) Council Member Marie Horenburger Council Member Arthur Jackel Council Member Jimmy Weatherspoon ~yor Doak S. Campbell Absent - None Also present were - City Manager James L. Pennington, and City Attorney Herbert W.A. Thiele. Mayor Campbell called the meeting to order and announced that this meeting has been called for the purpose of (1) considering presentation from Bond Underwriters and selection of Underwriters for negotiations. 1. Mayor Campbell explained that Mr. Huddleston, Finance Direc- tor, will bring in the five applicants, one at a time, to make their presentations. Mr. Stanley Ross, Financial Consultant, stated that he has provided Council with worksheets which he has prepared. 1.a. Mr. Bill Hill, Prudential Bache, made a presentation. He discussed the firm's experience and qualifications and introduced Mr. Jim Corbett, head of Municipal Sales, Trading and Underwriting in their Delray Beach office. Mr. Corbett discussed three deals which his firm has done; a Palm Beach County solid waste deal, a Pinellas County solid waste deal and the Palm Beach County road deal. Further, he discussed the impor- tance of timing and pricing, noting that they price their deals very competitively and aggressively and he cited some examples. Mr. Corbett added that they bought 7 out of 10 competitive deals last year in the State of Florida; they have 30 offices, 400 salesmen, and are located right here in Delray Beach. He discussed other deals coming up in the next few weeks, noting that it is very important Delray Beach make its decision as soon as possible. Mr. Hill added that they have done bonds in Florida without validation and can sell bonds either way, validated or nonvalidated. On this particular issue, they believe that eliminating the validation procedure, with its 30 day appeal period, might significantly improve the City's ability to act quickly and get into the market at the most advantageous time. They would be willing to limit their management fee to a cap of $2.00 per bond. They would also be willing to negotiate the takedowns to levels that would approximate a competitive issue in the market at that same time. In summary, Mr. Hill noted that they are experienced in the area of water and sewer financing and they were ranked as 2nd in the Institutional Investor in 1983. Since 1979, Pru- dential Bache has managed or co-managed 95 negotiated and competitive deals at over 2.8 billion. 1.b. Mr. Jack Seaman, H.G. Nix, introduced Joe Luby with M.G. Lewis and advised that M.G. Lewis & H.G. Nix will be making a joint proposal. He outlined his and Mr. Luby's experience in this area, noting that Mr. Luby's office is in Pompano and his is in Tampa. They have done many underwritings together in the State of Florida. He further outlined the experience and qualifications of the two firms. They feel that jointly they could do a very good job for Delray Beach. He outlined some ideas which they feel could be used in their approach to this. Although the City could move faster without validation, his- torically in Florida everything has been done with validation. He feels that City Council should choose a firm they trust and that, in a negoti- ated situation, the City has a better chance to hit the market as it is at the time of the sale. Mr. Luby, M.G. Lewis, stated that they have tried to keep their presentation brief and to the point. They are anxious to work for the City and they feel they can do a good job in structuring, under- writing and selling. They are the largest issuer of water and sewer revenue bonds in the State and he and Mr. Seaman are the ones who would be doing the actual work. Upon question by Mr. Ross, Mr Seaman advised that their management fees are competitive and they are willing to work with some of the local bond attorneys as underwriters' counsel that are much more reasonable than the New York firms. 1.c. Mr. George Bland, Arch W. Roberts & Co., made a presentation and presented some charts. He advised that Arch Roberts is the largest underwriter of Florida municipal bonds in the State. He outlined their experience and qualifications and advised that their main office is in St. Petersburg. They place emphasis on time with a thorough analysis of all viable options. Mr. Bland introduced Mr. Arnold Schneider of Arch Roberts. Mr. Schneider advised that their firm offers a full service approach, the financing of new money projects which is the City's most serious emphasis, also creative alternatives for temporary, short-term, interim financings, and innovative financings attuned to the current market. Mr. Schneider outlined the program they have developed to achieve the City's objectives and presented graphs. He outlined the three ways they see the City could proceed and stated that they are prepared to be immediately responsible to whatever the City's require- ments are. Their approach is to show the City all of the alternatives so the City can feel they have made the right decision. Mr. Tom Kerwin, Vice-President and Senior Representative, Arch W. Roberts & Co., discussed their marketing strengths and how they see their management job for the City. Mr. Bland advised that they are prepared to handle, from a structuring standpoint, even the most complex type of financing. Upon question by Mr. Ross, Mr. Kerwin advised that if the market is strong at the time the bonds come to market, the amount of money they would have to pay the salesmen could be reduced. Right now it is about $17.50 for the longest term insured bonds. 1.d. Mr. Alan Aschner, Matthews & Wright, Inc., stated that Council has already been provided with their written proposal. He discussed his firm's experience and qualifications, noting that last year, as managers, they were underwriters for approximately 1.2 billion dollars worth of financing. They have a presence nation-wide; however, they are a Florida firm with an office in Boca Raton. Mr. Aschner stated that he is Senior Vice-President and Board Member and he would undertake to personally supervise the work on this transaction and Mr. Bill Marlin, President and Board Member, would personally supervise the marketing phase. In addition, the Manager of their Florida office, Jim Hawkins, would be involved in the transaction as well as his Florida staff. He further discussed their experience in water & sewer under- writing and their objectives. He discussed the water and sewer issue they did for the City of Bradenton in Manatee County and outlined the savings and safety factors involved. Also, he outlined the water and sewer bond issue they did for Key West, Florida, and the water and sewer note issue they did for Plantation, Florida. Mr. Bill Marlin, President of Matthews & Wright, Inc., outlined the background of their staff and discussed the distribution and marketing phase. He feels his reputation for marketing bonds is second to none in the industry. They have never had a deal that wasn't received well in the marketplace, getting the best price at any given time. Mr. Jim Hawkins, who recently joined them after many years with another Florida firm, has the background and knowledge in water, sewer and most types of financing. Having Mr. Hawkin's available at a mo- ment's notice will be important to the issuance of the City's bonds. - 2 - 04/27/84 Upon question by Mr. Ross, Mr. Marlin replied that the normal spread in today's marketplace would probably be somewhere between $22.00 and $24.00. They purposely left it out of their presentation because it depends on market conditions. Upon further question, he advised that the average on the issue of the takedown by the underwriter would probably be about $14.00. 1.e. Mr. Worth Blackwell, William R. Hough & Co., advised that he is Senior Vice-President in charge of the Public Finance Department. Their firm has served as Senior Manager, Co-Manager or underwriter on more Florida bond issues that any other firm. Mr. Blackwell outlined their experience and qualifications. He advised that they have the largest public finance staff in Florida of anyone in the country and carry the largest inventory of bonds in the State. His firm believes in the team concept, not only in terms of their own staff but also the City staff, the City Financial Advisor, and the Bond Attorneys as well as local counsel. Mr. Blackwell introduced Mr. Tony Soviero. Mr. Tony Soviero, William R. Hough & Co., stated that as the City is considering a new construction project, the expansion to the water and sewer system, he would stress that they have a former engineer working with their firm. This helps them, as investment bankers, inter- face with engineers which makes for a smoother overall program. His firm has undertaken a preliminary analysis of the City's outstanding debt and proposed new debt and there are some items relative to that in the written proposal. Upon question by Mr. Ross, Mr. Soviero advised that for a 20 year bond, at this point he would have to say it would be $11.00 to $12.00 for takedown. In today's market the risk on a 20 year would probably be 75¢ to $1.00, keeping in mind that those two components vary directly with the rating of the bonds, the maturity of the bonds and the market conditions. Management fee depends slightly upon the number of managers, but also upon the size of the issue and the level of involve- ment. If most of the work is done by the Financial Advisor, that would mitigate the fee. In this instance, he would say the average management fee is probably in the area of $3.00 to $5.00. Upon further question, Mr. Soviero advised that they try to use Florida Underwriters counsel firms and personally have no great preference for any one particular firm. In this instance, the underwriters counsel fee should probably be about $1.00 per bond. Mr. Ross stated that they have five good presentations by people who are all obviously interested in doing the job. From what he knows of these people, any one of them would do a good job. He feels the success of the issue is for Council to select the firm they would be most comfortable with. He has no one firm in particular to recommend to Council. Mr. Huddleston stated he feels their staff could work well with any one of the five firms. The City Manager concurred. Mayor Campbell stated that they have already decided that the negotiated sale route is beneficial because it is faster and he suggests they select someone at this time. Mrs. Horenburger moved to consider a negotiated sale with William R. Hough & Co. as their underwriter, seconded by Mr. Bird. Upon roll call Council voted as follows: Mr. Bird - Yes; Mrs. Horenburger - Yes; Mr. Jackel - No; Mr. Weatherspoon - Yes; Mayor Campbell - Yes. Said motion passed with a 4 to 1 vote. Before roll call the following discussion was had: Mrs. Horenburger stated that all the firms' presentations were good, but Hough's extensive Florida experience and the fact that they have an engineer on staff impressed her. Mr. Jackel stated that he thought this was an informal meeting and did not think a motion would be made at this time. He gave the following three firms a B rating: Hough & Co., Arch Roberts and H.G. Nix. He gave Prudential Bache a B+ and Matthews & Wright an A. He did these ratings based on what he heard - 3 - 04/27/84 today. He felt the best presentation by far was from Matthews and Wright. Mr. Bird stated that he feels if they are going to rate on a regional basis, strength in the Florida market, Hough is probably the forerunner. Given that most Florida bonds tend to sell in Florida, he thinks a regional firm is acceptable. Mr. Weatherspoon stated that he felt all the firms were good, but he rated the other four a little higher than H.G. Nix. Mayor Campbell stated that at this point he is leaning toward Hough & Co. because of their experience in the Florida market, although he would commend ~tthews & Wright as being an up and coming firm. Mr. Jackel suggested the possibility of having two co- managers. Mr. Bird opposed the suggestion as well as Mr. Ross. At this point the roll was called to the motion. The City Attorney stated that he assumes the motion is instructing staff to begin the negotiation process with Hough & Co. and proceed down that line. Mayor Campbell declared the meeting adjourned at 5:35 P.M. j City Clerk ATTEST: MAYOR The undersigned is the City Clerk of the City of Delray Beach and that the information provided herein is the minutes of the meeting of said City Council of April 27, 1984 which minutes were for- mally approved and adopted by the City Council on ~'~ ~/ /~P~. NOTE TO READER: If the minutes that you have received are not completed as indicated above, then this means that these are not the official minutes of City Council. They will become the official minutes only after they have been reviewed and approved which may involve some amendments, additions, or deletions to the minutes as set forth above. - 4 - 04/27/84