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: