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5.g Engagement letters for Northland Securities to act as underwriter and placement agents for future debt issuancesSCANDIA Sta�Report Date of Meeting: June 20, 2017 To: City Council From: Neil Soltis, City Administrator Re: Engaging Northland Securities to act as underwriter and placement agent for future debt issues Background: In the wake of the 2008 financial crisis, the Dodd—Frank Wall Street Reform and Consumer Protection Act, which among other provisions imposed registration requirements and a fiduciary duty on municipal advisors, was enacted. In 2014 under the provisions of Dodd -Frank, the SEC and MSRB have recently put forth new regulations, including the Municipal Advisor ("MA") rule. The MA rule defines the term, "municipal advisor," and requires both financial advisors and broker-dealers (i.e., those firms serving as underwriter, financial advisor or both) who provide municipal advisory services to register as municipal advisors. By requiring financial advisors to adhere to the same standards and behavior as broker-dealers have in the past, the MA rule provides oversight to all roles in a municipal advisory relationship. Previously broker-dealers, such as Northland, could provide requested and unsolicited advice on the issuer's specific needs, objectives or circumstances. Since the effective date in 2014 broker-dealers can NO LONGER provide advice to a municipal issuer on any deal they wish to underwrite UNLESS they meet certain exceptions, one of which is the municipal issuer engages the broker-dealer firm as underwriter for specific/future issuance(s) In looking at planning for future debt issuance including the equipment certificate to be issued for the 2017 Plow Truck purchase and potentially a debt issuance in 2018 — 2019 for road improvements, it is highly desirable to engage an advisor with planning the debt structure and placement. The engagement letters that follow do not compel the City of Scandia to issue debt and can be terminated at any time. The purpose of the engagement is to allow Northland to provide the City with advice regarding timing, structuring, and market conditions. Issue: Should the City engage Northland Securities to provide advice on these 2 specific debt issuances. Options: 1. Approve the engagement agreements 2. Modify the engagement agreements 3. Begin an RFP process to engage a municipal advisor Recommendation: Option 1— Northland has previously advised the City on debt issues. # 406.... 1 NORTHLAND SECURITIES June 14, 2017 Neil Soltis, City Administrator City of Scandia 14727 209th St. N. Scandia, MN 55073 RE: Engagement of Northland Securities as Placement Agent Dear Neil: The purpose of this letter is to comply with federal regulations. Federal security regulations require you to affirmatively engage Northland Securities before we can provide you with advice on the issuance of municipal securities acting in the capacity of placement agent. This letter establishes the engagement. The City of Scandia (the "City") seeks to engage Northland Securities to serve as placement agent for the issuance of General Obligation Equipment Certificates, Series 2017A (the "Issue"). This engagement applies solely to the Issue. The engagement is nonbinding. The City is under no obligation to undertake the Issue. The City may determine not to undertake a private placement and to engage Northland in a role other than a placement agent. The City desires Northland to provide all of the services needed to create and execute a plan to privately place the Issue, including: 1. Advice regarding the structure, timing, terms, and other similar matters (including actions needed to authorize the issuance) of the Issue. 2. Assistance in the preparation of a placement term sheet. 3. Assistance with the closing of the Issue, including discussion with respect to all documents, certificates, and opinions needed for such closing. 4. Coordination with respect to obtaining CUSIP numbers and the registration of the Issue as typewritten bonds. 5. Preparation of post -sale reports for such municipal securities. In acting as placement agent, Northland has a duty under rules of the Municipal Securities Rulemaking Board (MSRB) to make certain disclosures to the City concerning its role, its compensation, and actual or potential material conflicts of interest. In engaging Northland in this capacity, the Issuer should be aware of the following: 1. Acting as placement agent for the Issue, Northland will provide advice to the City with respect to the structure, timing, terms, and other similar matters concerning the Issue. The City is responsible for understanding and assessing the implications of the Issue. 2. Northland will arrange for the placement of the Issue in an arm's-length commercial transaction with the City. In this process, Northland is required to deal fairly at all times Main 612-851-5900 I Toll Free 800-851-2920 45 South 7th Street, Suite 2000 I Minneapolis, MN 55402 NorthlandSecurities.com I Member FINRA and SIPC City of Scandia, Minnesota Page 2 with both the City and the purchaser of the Issue (the "Purchaser'). Northland has a duty to place the Issue with a Purchaser who will purchase the Issue from the City at a fair and reasonable price, but must balance that duty with its duty to place municipal securities with the Purchaser at a price that is fair and reasonable. 3. Under federal securities laws Northland does not have a legal fiduciary duty to the City (unlike a municipal advisor) and is, therefore, not required by federal law to act in the best interests of the City without regard to its own financial or other interests. Northland has financial and other interests that differ from those of the Issuer. 4. Northland will coordinate the issuance process including closing and delivery of proceeds. 5. Northland will disclose any potential or actual material conflicts related to this engagement. 6. Northland's compensation is based on the size of the Issue and is contingent on the closing of the Issue (see below). The MSRB has identified this means of compensation as presenting a conflict of interest, because it may cause Northland to recommend a transaction that it is unnecessary or to recommend that the size of the transaction be larger than is necessary. For serving as placement agent with respect to the Issue, Northland shall be paid a placement fee based on the total par amount of the Issue. A "not to exceed" amount for the placement fee will be determined when the actual terms of the Issue have been set and therefore compensation is not included as part of this letter The compensation due to Northland shall be deducted from proceeds at closing. Northland agrees to pay the following expenses from its fee: Out-of-pocket expenses such as travel, long distance phone, and copy costs. Preparation of the bond transcript. The City agrees to pay for all other expenses related to the processing of the Issue including, but not limited to, the following: Engineering and/or architectural fees. Publication of legal notices. Bond counsel and local attorney fees. Fees for various debt certificates. City staff expenses. Accounting and other related fees. It is expressly understood that there is no obligation on the part of the City under the terms of this engagement to undertake the Issue. If not issued, Northland agrees to pay its own expenses and receive no fee for any services it has rendered. To engage Northland Securities as placement agent for the Issue as described in this letter, please sign and return this letter. In signing this letter, the City acknowledges and accepts the representations made in this letter. We look forward to working with you on this Issue. I would be happy to discuss this letter, our relationship with the City for the Issue, or other aspects of applicable federal securities regulations. City of Scandia, Minnesota Page 3 Sincerely, Jessica Green Vice President Engagement of Northland Securities as placement agent and receipt of related disclosures acknowledged by the City of Scandia. Date: Name: Title: NORTHLAND SECURITIES June 14, 2017 Neil Soltis, City Administrator City of Scandia 14727 209th St. N. Scandia, MN 55073 RE: Engagement of Northland Securities as Underwriter Dear Neil: The purpose of this letter is to comply with federal regulations. Federal security regulations require you to affirmatively engage Northland Securities before we can provide you with advice on the issuance of municipal securities acting in the capacity of underwriter. This letter establishes the engagement. The City of Scandia (the "City") seeks to engage Northland Securities to serve as underwriter for the issuance of General Obligation Street Reconstruction Bonds, Series 2018 (the "Issue"). This engagement applies solely to the Issue. The engagement is nonbinding. The City is under no obligation to undertake the Issue. The City may determine not to undertake a negotiated financing and to engage Northland in a role other than an underwriter. The City desires Northland to provide all of the services needed to create and execute a plan to underwrite the Issue, including: 1. Advice regarding the structure, timing, terms, and other similar matters (including actions needed to authorize the issuance) of the Issue. 2. Preparation of rating strategies and presentations related to the Issue. 3. Assistance in the preparation of the preliminary and final official statements. 4. Assistance with the closing of the Issue, including negotiation and discussion with respect to all documents, certificates, and opinions needed for such closing. 5. Coordination with respect to obtaining CUSIP numbers and the registration of the Issue with the book -entry only system of the Depository Trust Company. 6. Preparation of post -sale reports for such municipal securities. In acting as underwriter, Northland has a duty under rules of the Municipal Securities Rulemaking Board (MSRB) to make certain disclosures to the City concerning its role, its compensation, and actual or potential material conflicts of interest. In engaging Northland in this capacity, the Issuer should be aware of the following: 1. Acting as underwriter for the Issue, Northland will provide advice to the City with respect to the structure, timing, terms, and other similar matters concerning the Issue. The City is responsible for understanding and assessing the implications of the Issue. 2. Northland will purchase, or arrange for the placement of, the Issue in an arm's-length commercial transaction with the City. In this process, Northland is required to deal fairly at all times with both the City and investors. Northland has a duty to purchase the Issue from Main 612-851-5900 I Toll Free 800-851-2920 45 South 7th Street, Suite 2000 I Minneapolis, MN 55402 NorthlandSecurities.com I Member FINRA and SIPC City of Scandia, Minnesota Page 2 the City at a fair and reasonable price, but must balance that duty with its duty to sell municipal securities to investors at prices that are fair and reasonable. 3. Under federal securities laws Northland does not have a legal fiduciary duty to the City (unlike a municipal advisor) and is, therefore, not required by federal law to act in the best interests of the City without regard to its own financial or other interests. Northland has financial and other interests that differ from those of the Issuer. 4. Northland will coordinate the issuance process including closing and delivery of proceeds. Northland will review the official statement for the Issue in accordance with, and as part of, its responsibilities to investors under the federal securities laws, as applied to the facts and circumstances of the transaction. 5. Northland will disclose any potential or actual material conflicts related to this engagement. 6. Northland's compensation is based on the size of the Issue and is contingent on the closing of the Issue (see below). The MSRB has identified this means of compensation as presenting a conflict of interest, because it may cause Northland to recommend a transaction that it is unnecessary or to recommend that the size of the transaction be larger than is necessary. For serving as underwriter with respect to the Issue, Northland shall be paid an underwriter's discount based on a percentage of the total par amount of the Issue. A "not to exceed" percentage for underwriter's discount will be determined when the actual terms of the Issue have been set and therefore compensation is not included as part of this letter. The compensation due to Northland shall be deducted from proceeds at closing. Northland agrees to pay the following expenses from its fee: Out-of-pocket expenses such as travel, long distance phone, and copy costs. Preparation of the bond transcript. The City agrees to pay for all other expenses related to the processing of the Issue including, but not limited to, the following: Engineering and/or architectural fees. Publication of legal notices. Bond counsel and local attorney fees. Fees for various debt certificates. The cost of printing Official Statements, if any. City staff expenses. Rating agency fees, if any. Bond insurance fees, if any. Accounting and other related fees. It is expressly understood that there is no obligation on the part of the City under the terms of this engagement to undertake the Issue. If not issued, Northland agrees to pay its own expenses and receive no fee for any services it has rendered. To engage Northland Securities as underwriter for the Issue as described in this letter, please sign and return this letter. In signing this letter, the City acknowledges and accepts the representations made in this letter. We look forward to working with you on this Issue. I would be happy to discuss this letter, our relationship with the City for the Issue, or other aspects of applicable federal securities regulations. City of Scandia, Minnesota Page 3 Sincerely, Jessica Green Vice President Engagement of Northland Securities as underwriter and receipt of related disclosures acknowledged by the City of Scandia. Date: Name: Title: